SunTrust Gets Non Prosecution Agreement

If a corporation enters into a non prosecution agreement with the Justice Department, but the Department doesn’t mention it in its press release, does anybody know about it?

Barely.

None of the major news outlets that reported on the Justice Department’s agreement with SunTrust last week mentioned the fact that it was resolved with a non prosecution agreement.

The Justice Department’s press release didn’t mention it.

The Associated Press story, which ran in the Washington Post and other papers, didn’t mention the word criminal or prosecution or non prosecution.

The Wall Street Journal story reported that “SunTrust Banks Inc. agreed to pay up to $320 million to end a criminal investigation into its treatment of homeowners trying to receive assistance through a U.S. mortgage-modification program.”

Nothing about the non prosecution agreement.

The New York Times reported that “federal prosecutors and SunTrust Banks reached a settlement on Thursday in a criminal investigation into the bank’s tardiness in approving mortgage modifications.”

Again, nothing about the non prosecution agreement.

SunTrust was represented by Richard Cullen of McGuireWoods in Richmond, Virginia.

When the Justice Department sent out the press release to reporters, it attached four documents — a statement of facts, a victim compensation and restitution plan, a remedial action plan, and what the government called a “restitution and remediation agreement.”

On page five of that “restitution and remediation agreement” is the agreement by the government not to criminally prosecute SunTrust.

“In the wake of the BNP criminal plea, a ‘restitution and remediation agreement’ seems to be a new synonym for a non-prosecution agreement,” said University of Virginia Law Professor Brandon Garrett.  “But a non prosecution by another name is still a non prosecution.”

“I applaud the notion that a company be rewarded for cooperation and changes in leadership in response to misconduct,” Garrett said.  “But in my view, as a minimum, a prosecution agreement should be filed in court — and it should involve a plea unless there is some special justification.”

The Office of Special Inspector General for the Troubled Assets Relief Program (SIGTARP) had no qualms about putting the non prosecution agreement in the headline.

The SIGTARP press release was almost identical to the Justice Department press release.

Except for the title and the opening paragraph.

The SIGTARP press release was titled — $320 Million Non Prosecution Agreement Reached with TARP Recipient SunTrust Bank.

The Justice Department press release was titled – SunTrust Mortgage Agrees to $320 Million Settlement.

The first paragraph of the SIGTARP  press release makes it clear that the issue was resolved with a non prosecution agreement.

The first paragraph of the Justice Department press release says nothing about the non prosecution agreement.

And from the facts laid out by SIGTARP, it’s an open question as to why SunTrust got the benefits of a non prosecution agreement — instead of some tougher alternative, like a deferred prosecution or even a full out criminal prosecution.

Federal officials alleged that SunTrust misled numerous mortgage servicing customers who sought mortgage relief through the Home Affordable Modification Program (HAMP).

SunTrust made material misrepresentations and omissions to borrowers in HAMP solicitations and failed to process HAMP applications in a timely fashion.

As a result of SunTrust’s mismanagement of HAMP, thousands of homeowners who applied for a HAMP modification with SunTrust suffered serious financial harms.

SunTrust will pay a total of $320 million to resolve the criminal investigation into its HAMP program.

SunTrust will pay $179 million in restitution to compensate borrowers for damage caused by its mismanagement of HAMP. That money will be distributed to borrowers in eight pre-determined categories of harm. If more than $179 million is needed, the bank will also guarantee an additional $95 million for additional restitution. SunTrust will also pay $10 million in restitution directly to Fannie Mae and Freddie Mac.

SunTrust will pay $16 million in forfeiture. This money will be available to law enforcement agencies working on mortgage fraud and other matters related to the misuse of TARP funds.

SunTrust will pay $20 million to establish a fund for distribution to organizations providing counseling and other services to distressed homeowners. SunTrust will pay this amount to a grant administrator selected by the government, which funds will in turn be awarded to housing counseling agencies and other non-profits devoted to consumer counseling and advocacy.

SunTrust will also implement certain remedial measures aimed at preventing future problems like those that led to this investigation. SunTrust has agreed to increase loss mitigation staff, monitor its mortgage modification process, and provide semi-annual reports regarding compliance with the agreement.

“HAMP was designed to be a beacon of hope and opportunity for homeowners in dire straits, but TARP recipient SunTrust, rather than assist homeowners in need, financially ruined many through an utter dereliction of its HAMP program,” said Christy Romero, Special Inspector General for TARP (SIGTARP). “This criminal investigation uncovered that SunTrust so bungled its administration of the program, that many homeowners would have been exponentially better off having never applied through the bank in the first place. Unwilling to put resources into HAMP despite holding billions in TARP funds, SunTrust put piles of unopened homeowners’ HAMP applications in a room. SunTrust’s floor actually buckled under the sheer weight of unopened document packages. Documents and paperwork were lost. Homeowners were improperly foreclosed upon. Treasury was lied to. The negligence with which SunTrust administered its HAMP program is appalling, miserable, inexcusable, and repulsive. Real people lost their homes, and many others faced financial ruin. Ending this behavior and, where necessary, forcing institutions to change their culture through law enforcement by SIGTARP and our partners will help begin the process of restoring faith in financial institutions and healing public trust.”

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