A tip of the cap to 60 Minutes for an excellent report Sunday asking about the lack of criminal prosecutions on Wall Street in the wake of the financial crisis.
Steve Kroft gets a half hour of TV time primarily to talk to two whistleblowers from Countrywide and Citigroup who say they witnessed crimes by management at their respective firms.
Kroft speaks first to Eileen Foster, whom we met a few months ago via Michael Hudson’s reporting at the Center for Public Integrity. Foster was a senior executive at Countrywide in charge of their fraud investigations and won a million-dollar whistleblower-retaliation judgment against Bank of America for firing her in 2008.
Back in September, I wrote this about Hudson’s report, which found thirty former Countrywide employees to say that executives there “encouraged or condoned fraud”:
You have to marvel at how a reporter can put this stuff together but the SEC/Department of Justice/FTC/FHA etc. can’t.
Kroft reports that the Justice Department has never talked to Foster. This would remarkable even if she hadn’t won a whistleblowing case against BofA/Countrywide and gone public in the CPI report. But as Kroft notes, incredulously, the most glaring reason is that she was head of fraud investigations at Countrywide. If you were at all interested in finding fraud at Countrywide, the head of fraud investigations would be one of the first people you would want to talk to. None of the implications of this omission are good for prosecutors.
I’m going to put a reminder in my calendar for February 6 to call up Foster and see if any of the authorities have since bothered to ask her questions. She’s practically waving her arms and shooting off flares here:
Steve Kroft: Do you believe that there are people at Countrywide who belong behind bars?
Eileen Foster: Yes.
Kroft: Do you want to give me their names?
Foster: No.
Kroft: Would you give their names to a grand jury if you were asked?
Foster: Yes.
Watch the actual video of her interview and try not to believe her:
Foster comes off as the perfect source/witness: honest, smart, and credible. Let’s add this: Brave. We don’t think enough about the courage it takes for sources like Foster to go on the record, but it’s worth applauding. It takes no small amount of nerve to go on national television and say that you could testify about the crimes of former colleagues and “systemic” fraud at her company. Would that more people in positions of power had this kind of steel.
In the second half of Kroft’s package, he talks to Richard Bowen, a former vice president at Citigroup, who raised serious concerns about wrongdoing in 2006 and was ignored and ostracized.
Bowen learned that 60 percent of the loans his unit was processing were defective, and he started raising the alarm:
I did everything I could, from the way— in the way of e-mail, weekly reports, meetings, presentations, individual conversations, yes.
The next year, Citigroup’s defective-mortgage rate had risen to 80 percent. Bowen wrote to a group of executives that included Robert Rubin, the CFO, the chief risk officer, and the top auditor to tell them of a “breakdown of internal controls.” It’s unclear whether they responded, but the next day CEO Chuck Prince signed a Sarbanes-Oxley certification standing behind the company’s internal controls.
Kroft zeroes in on the Sarbox certification angle as a possible way to get at the plausible-deniability defense of senior executives, and he puts tough questions to the Justice Department in the person of assistant attorney general Lanny Breuer about why so few cases have been forthcoming.
Has anybody at Treasury or— or the Federal Reserve or the White House come to you and said, ‘Look, we need to go easy on the banks. That— there are collateral consequences if you bring prosecutions…
The perception. I mean, it doesn’t seem like you’re trying. It doesn’t seem like you’re making an effort. That the Justice Department does not have the will to take on these big Wall Street banks.
Wait for it . . .
#1 Posted by edward ericson jr., CJR on Tue 6 Dec 2011 at 08:38 PM
Steve Kroft and 60 Minutes did the country a great service when they confronted the DOJ about their failure to collect the debt of justice that is owed to the American public. The fire seen in Steve Kroft's eyes during the interview has been burning in my heart for sometime. That is why I wrote MAIN AND WALL a song that can be heard on YouTube:
http://www.youtube.com/watch?v=Mq9xUPSPW7U
I'd also recommend INSIDE JOB an excellent documentary going into detail about the layers of corruption that are destroying our beloved country.
#2 Posted by Laverne Barton, CJR on Tue 6 Dec 2011 at 09:50 PM
You know what's stopping Eileen Foster from walking into a U.S. Attorney's office and filing a sworn complaint? Nothing.
You know what's stopping Steve Kroft and Ryan Chittum from asking Eileen Foster why she hasn't walked into the U.S. Attorney's office to swear out a criminal complaint? Politics. Sickening bias. And nothing else.
This is the same Black Helicopter Kookiness we get from the leftist "professional journalists" all the time.
Look. If somebody forged mortgage applications at Countrywide... Prosecute the hell out of them. Somebody falsified a certification and you can prove it? Same thing.
But taking the word of a couple of disgruntled, shitcanned employees as the gospel truth is more than little irresponsible.
#3 Posted by padikiller, CJR on Tue 6 Dec 2011 at 11:07 PM
Maybe, Padi, because of crap like this:
http://www.iwatchnews.org/2011/11/22/7461/whistleblowers-ignored-punished-lenders-dozens-former-employees-say
"One former CitiFinancial employee, Steve Toomey, agreed to go on the record, signing a statement that said managers pushed workers to mislead borrowers about the costs of their loans and to falsify information in borrowers’ files. Lee filed Toomey’s affidavit and other documents with banking regulators at the Federal Reserve.
CitiFinancial immediately denied the allegations against the company, asserting, for example, that Toomey had only raised questions after “he concluded that the company would not pay him monies that he demanded to resolve an employment dispute.”
With the pressure building, Citigroup went out of its way to warn other current and former employees to keep quiet about what went on at CitiFinancial, according to Reuters news service.
Citigroup, Reuters said, hired a famed litigator “to help fight allegations of illegal lending practices and prevent former employees from bad-mouthing the financial services giant.” Mitchell Ettinger, one of Bill Clinton’s lawyers in the Paula Jones case, met with at least 15 current or former employees, reminding the ex-employees that Citigroup would enforce the “non-disparagement clauses” in their severance agreements with the company, Reuters said.
Lee charged that this was an attempt to paper over evidence of misconduct inside CitiFinancial. Why, he argued, would Citigroup dispatch a partner from Skadden Arps, described by Forbes magazine as “Wall Street’s most powerful law firm,” to talk with low-level employees?
Citigroup told Reuters the bank had acted properly. It added that the standard non-disparagement clause in the bank’s severance agreements wouldn’t prevent ex-employees from reporting illegalities."
Any bets that "the standard non-disparagement clause in the bank’s severance agreements wouldn’t prevent ex-employees from reporting illegalities," wasn't what was communicated to the the ex-employees? And what would the signed affidavit get you other than trouble in your career and through legal intimidation?
We have already seen how wallstreet enforcement agencies would rather throw out good officers and cases than upset Wall street.
http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-jail-20110216
We've already seen how the Sec is willing to destroy official records of matters under inquiry and how the fed is more willing to give 1.2 trillion to the banks in a day than it is do to its job regulating them. They are captured regulators within a captured government. The only way to beat back the banks is through exposure, shame, and then enforcement.
#4 Posted by Thimbles, CJR on Wed 7 Dec 2011 at 03:18 AM
As I wrote earlier...
The ONLY thing stopping the "professional journalists" of Chittumland from asking Eileen Foster why she hasn't walked into an FBI office or a U.S. Attorney's office and sworn out a criminal complaint is their plain anti-corporate bias.
Pitiful.
#5 Posted by padikiller, CJR on Wed 7 Dec 2011 at 07:29 AM
Damn those journalists with their bias against the bailed out, bonus hungry criminals who destroyed much of the global economy!
Don't they realize the real villans are people like Eileen Foster?
You are so desperate to distract, Padi. It's kind of despicable really.
The fact is they have made sworn testimony, they are on the record with the government. If the FBI wanted tomorrow they could request case files from the Department of Labor and pursue investigations. There's literally tons of evidence laying around of fraud to look at, but outside Shneiderman and Masto, nobody really wants to look at it.
To them it's a matter of "what's done is done". Well, the government has had five fricken years to do something, and it's done nothing but run out the statue of limitations clock for securities crimes.
Foster isn't the problem here. "Anticorporate criminal bias" isn't either, you whiner. Criminal banks and the people you call "socialists", who bail out the criminal bankers and refuse to prosecute them, are.
#6 Posted by Thimbles, CJR on Wed 7 Dec 2011 at 10:43 AM
Thimbles....
There are two ways that criminal prosecutions arise.
1. A cop sees the crime occur and makes an arrest.
2. Somebody swears a criminal complaint.
Cops don't troll through civil testimony from disgruntled employees looking for evidence - furthermore there is no indication that this woman has EVER provided any actual names of any actual human beings to anyone.
Again... WHAT is stopping Ms. Foster from making a criminal complaint? NOTHING.
She couldn't (or wouldn't) substantiate her accusations to Sixty Minutes, but there's nothing stopping her from making a statement to the U.S. Attorney's office or to the FBI.
The obvious question (that the "professional journalists" refuse to ask) is WHY doesn't she walk in and give a sworn statement?
HUH?
#7 Posted by padikiller, CJR on Wed 7 Dec 2011 at 01:50 PM
It's a pity I can't link the internet wayback machine to dead links because of the way web addresses are parsed and the way the machine puts its links, but readers can go to the wayback machine and look up this:
http://biz.yahoo.com/rf/010727/n2534263.html
where you will see this:
"Citigroup's actions are designed to prevent potentially damaging statements like the affidavit filed by a former part-time CitiFinancial branch manager, Gail Kubiniec, Lee said. Kubiniec's affidavit, which surfaced in June, is part of the FTC's case against Citigroup and alleged that CitiFinancial preyed on poor people and minorities.
Citigroup, which has objected vehemently to Kubiniec's allegations, denied its outside counsel did anything improper. The company also said the non-disparagement clauses are standard and don't prevent employees from reporting illegal activities.
``Our outside counsel conducted a proper and thorough review. No one was threatened with criminal action,'' said Citigroup spokeswoman Leah Johnson.
``Our severance agreements, like those of most companies, include a standard non-disparagement clause,'' she added. ``Because of our desire to assure that our stringent standards of conduct are upheld, such clauses at CitiFinancial never apply to employees bringing any concerns about illegal or unethical activity they believe they have witnessed to the appropriate authorities inside and outside the company.''"
They can't threaten criminal, but they can harass with civil and they have every interest to do so with allegations of fraud on the line.
Furthermore, the banks can file motions to dismiss that sworn voluntary testimony based on the information being protected by employee agreements and the disclosure of that information was in violation of contracts.
Both of these approaches are on display in the Marino vs Cross Country Bank litigulag:
http://www.ded.uscourts.gov/MPT/Opinions/Jul2009/07-426.pdf
(google search to see all the documents flying back and forth. If Marino couldn't act as his own representation, he'd most likely be sunk)
And let's see now. Toomey's testimony was submitted in 2001. Gail Kubiniec's testimony was submitted in 2002.
What has happened. Who's gone to jail. At what time did regulatory pressure stop the banks from making predatory products based on their testimonies.
Note the rhetorical nature of my questions.
So without a subpoena, her testimony is vulnerable to litigation, dismissal, and civil suits.
And chances are, corrupt authorities are going to be handling her information and no one will be held accountable.
So why should she? She gains nothing but trouble unless she can volunteer her information under subpoena.
But you should know this. You're a fricken lawyer.
#8 Posted by Thimbles, CJR on Wed 7 Dec 2011 at 03:19 PM
What we're dealing with are the unsupported allegations by two obviously disgruntled former employees. That's where we are, here in Realityland.
One of these disgruntled employees refuses to name names, and the other one testified unimpressively in Congress.
Once again... Not a single name of any actual person who allegedly forged a mortgage contract or who lied on a certification.
And the "professional journalists" expect criminal investigators to intervene in private civil litigation when the party in interest won't swear out a criminal complaint? Seriously?
If this lady can name names,and is willing to do so as she claims... Let her do so! Why hasn't she done so already? You heard the DOJ mouthpiece invite her to do just that. Nothing's stopping her from walking into the U.S. Attorney's office and filling out a complaint or giving a written statement.
The questions that need to be asked, in the context of journalism, are... WHY won't she do it, and WHY won't the "professional journalists" ask her why she hasn't filed a criminal report?
Finally, Thimbles' ranting about the nature of a witness subpoena is nonsense. A subpoena simply orders a person to testify. It gives no other protection to the witness regarding the testimony. It is designed to compel the appearance of reluctant witnesses, but it is irrelevant in the context of the filing of a criminal complain. When you witness a murder or a bank robbery, you don't need a subpoena to go to a police station to file a report.
WHY hasn't this woman reported the crime she claims to have witnessed?
HUH?
THAT is the question!
#9 Posted by padikiller, CJR on Wed 7 Dec 2011 at 03:45 PM
60 Minutes has had some great pieces lately and this is one of them. Probably 60 Minutes finest hour (or hours).
#10 Posted by Bob, CJR on Wed 7 Dec 2011 at 10:43 PM