ZCZC
BCN-11
US-BANKING-FRAUD-JUSTICE-ECONOMY,FOCUS
Failure of justice in 2008 crash eroded public trust: inquiry chief
WASHINGTON, Sept 9, 2018 (BSS/AFP) – Phil Angelides pointed the finger at
some of the world’s most powerful men — leaders of an industry that crashed
the global economy and drove untold millions into despair, unleashing the raw
emotions now dominating American politics.
The targets of Angelides’s ire included a former Secretary of the Treasury
and key Citigroup executive, top brass at the century-old investment house
Merrill Lynch, and the former chiefs of the globe-spanning insurance giant
AIG.
All of them, according to the Financial Crisis Inquiry Commission, which
Angelides led, should have been investigated. Evidence suggested they had
misled investors about their exposure to the toxic investments at the heart
of the meltdown on Wall Street.
The commission confidentially passed the evidence to the US Department of
Justice in 2010, according to records released years later, expecting
prosecutors to pick up the ball and run with it.
But they did not. No big fish were held responsible.
“Not one person who drove the conduct, condoned the conduct, oversaw the
conduct, was held criminally or civilly liable for that conduct,” Angelides,
a former California state treasurer, told AFP.
Indeed, after 10 years and hundreds of billions in corporate penalties
imposed on bank shareholders, perhaps the most enduring legacy of the
financial crisis is — unlike the scandals of prior decades — no one of
consequence was arrested, tried or convicted.
It was as if the banks “engaged in systemic, massive wrongdoing but
apparently no bankers were involved,” he added, and the consequences of that
reverberate today.
“I don’t think there’s any question that the lack of accountability in the
wake of the financial crisis has roiled the politics of our country.”
A Wall Street Journal review in 2016 found that of 156 civil and criminal
cases against 10 of the largest Wall Street banks in the aftermath of the
crisis, responsible individuals were identified only 19 percent of the time –
– and of those only one of 47 was even boardroom level.
MORE/HR/1036
ZCZC
BCN-12
US-BANKING-FRAUD-JUSTICE-ECONOMY,FOCUS 2 WASHINGTON
– Eroding public trust –
Investigators identified former Treasury secretary Robert Rubin, who
served on the board of Citigroup for 10 years, briefly taking over as acting
chairman. But a representative for Rubin told AFP the Justice Department
investigators had never contacted him.
“Mr Rubin acted appropriately at all times. Any suggestion to the contrary
is false,” the spokesperson said.
Former top AIG executives Martin Sullivan and Steven Bensinger, as well as
Merrill Lynch leaders Stanley O’Neal and Jeffrey Edwards, did not respond to
requests for comment.
Angelides said investigators found “hard evidence” on the officials
identified in millions of pages of documents and hundreds of interviews. But
the commission did not take a position on whether these men were in fact
guilty.
“The Justice Department has investigated and held accountable those
responsible for financial fraud,” a department spokesperson said in a
statement.
The spokesperson pointed to a string of smaller cases tied to interest
rate rigging, accounting fraud and other cases — unrelated to the largest
financial crisis-era cases.
Pollsters say the crisis, the bailout and lack of individual prosecutions
scarred the national psyche, eroding public trust in government and leaving
voters polarized and enraged.
Washington mobilized trillions of dollars to rescue the very industry that
had caused the crisis. But outside Wall Street, the rest of America was riven
by economic pain.
Suicide rates mounted as foreclosures blanketed the nation. About 10
million Americans lost their jobs. The size of the labor force as a share of
the population fell sharply, as many workers simply gave up, and it still has
not recovered.
In recent election cycles, candidates on the right and left have lampooned
each other for ties to investment banking and Goldman Sachs in particular.
MORE/HR/1038
ZCZC
BCN-13
US-BANKING-FRAUD-JUSTICE-ECONOMY,FOCUS 3 LAST WASHINGTON
President Donald Trump capitalized on those feelings in the 2016
presidential campaign, vowing to wrest control away from Democratic elites to
help working Americans, often using xenophobic and racist language.
“The American public just does not trust in any way the establishment,”
said Chris Jackson, head of US polling at Ipsos.
– America needs a ‘strong leader’? –
Two thirds of Americans now believe the United States needs “a strong
leader” to “take the country back” from the rich and the powerful, Jackson
said.
Paul Pelletier, a former top white-collar prosecutor at the Justice
Department who pursued AIG executives for years, said Washington suffered a
collapse of political will to prosecute tough fraud cases.
“What went wrong is 100 percent a question of competence and courage,” he
told AFP.
In the savings-and-loan crisis of the late 1980s and the Enron-era
securities fraud scandals of the early 2000s, prosecutors were empowered and
given resources nationwide to take risks and pursue hundreds of powerful
defendants, come what may.
But a change of leadership early in President Barack Obama’s tenure,
combined with some high-profile courtroom failures, left officials more
concerned with avoiding losses, and opting instead for huge settlements.
Prosecutors learned courtroom mistakes could end their careers, Pelletier
said.
In the years after the crisis, probes targeting executives from Goldman
Sachs and Lehman Brothers — whose collapse remains the symbol of the crisis
— and others fizzled out and died.
Pelletier said Assistant Attorney General Lanny Breuer felt a conviction
was not guaranteed in a case against AIG executive Joseph Cassano and dropped
it.
Breuer did not respond to a request for comment.
But Pelletier, who recently made an unsuccessful run for Congress as a
Virginia Democrat, said the public was understandably angry and
disillusioned.
“One righteous prosecution would have gone a long way to ameliorating some
of that,” he said.
BSS/AFP/HR/1040