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The Latest from the FBI on Mortgage Fraud
One day after warning the U.S. Senate about a tremendous surge in the FBI’s mortgage fraud investigations, FBI Director Robert S. Mueller, III, talked in more detailed terms about the growth in both corporate fraud and public corruption cases–including those involving Real Estate and Mortgage Fraud–at the annual conference of the American Bar Association’s Section of Litigation in Washington, D.C.
Despite limited resources, Mueller told conference attendees that the FBI’s corporate fraud cases have grown more than 80% since 2003. Last year, the FBI had more than 490 corporate and securities fraud convictions.
Mueller predicted that the problem will only worsen because of the “ripple effect of the sub-prime crisis and its impact on the credit market.” As Flipping Frenzy reported last Thursday, the FBI has identified 19 companies involved in corporate fraud matters related to the sub-prime lending crisis. According to Mueller, the Bureau is now actively investigating more than 1,300 mortgage fraud matters.
Mueller believes part of the problem is “rampant conflicts of interest in the corporate suites.” He told conference attendees that FBI investigations “further emphasize the need for independent board members, auditors, and outside counsel. Shareholders rely on the board of directors to serve as the corporate watchdog. …[But] board members are often beholden to the executives they are expected to oversee.”
Acknowledging recent FBI missteps resulting from inadequate internal controls–and a new Office of Integrity and Compliance to identify risks before they become problems–Mueller said, “As we all understand, it is better for a company to self-report and remediate its own wrongdoing before the FBI and the Department of Justice become involved. Executives who let the situation escalate to the point of a sudden restatement—and a resulting loss of shareholder confidence–often do greater harm to the companies they are trying to protect than if they had exercised early intervention.”
Mueller added that in his days as a defense attorney, he met a number of executives who could rationalize every bad decision, and warned that “it is a slippery slope from behavior that skirts ethical or legal boundaries to behavior that crosses the line completely.”
As we all know, the FBI works to combat corruption in the public sector–now its top criminal priority–because, as Mueller pointed out in his remarks, “democracy and corruption cannot co-exist.” As of today, the FBI has more than 2,500 open public corruption cases, an increase of more than 50 percent since 2003. During the past two years alone, more than 18,000 public officials have been convicted, according to the FBI’
“The FBI,” Mueller said, “is uniquely situated to address public corruption. We have the skills to conduct sophisticated investigations. But more than that, we are insulated from political pressure. We are able to go where the evidence leads us, without fear of reprisal or recrimination.”
Mueller wrapped up his remarks by adding, “In the end, it does not matter if the corruption is national or local. It does not matter if it is millions of dollars, or merely hundreds. There is no level of acceptable corruption. The violation of trust is the same. The damage to the taxpayers is the same.“
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Mueller states, “The FBI,” Mueller said, “is uniquely situated to address public corruption. We have the skills to conduct sophisticated investigations. But more than that, we are insulated from political pressure. We are able to go where the evidence leads us, without fear of reprisal or recrimination.”
He claims that his agency is “insulated from political pressure”. I don’t see that. In fact, I think they are driven by political pressure.
He further states, “In the end, it does not matter if the corruption is national or local. It does not matter if it is millions of dollars, or merely hundreds. There is no level of acceptable corruption. The violation of trust is the same. The damage to the taxpayers is the same.“
In principal he is correct. The level of corruption matters not. Yet I do not see any actions or investigations at the top levels of the mortgage industry. I have seen no actions being taken against the rating agencies who issued false AAA ratings so that the securitized insturments could be sold to unwary investors around the globe.
Yes, they are catching a lot of the crooks out there and that is a good thing. But that to me is much like catching the street drug dealer while the importer of the product remains free to continue the enterprise.
I believe that justice applies to all including our corporate citizens.
Comment by Larry Rubinoff — April 22, 2008 @ 3:33 pm
I agree w/Larry Rubinoff about lack of prosecution at the top levels in the industry. If smaller less connected companies were doing the same things they’d be prosecuted or put out of business. There are some investigations going on, Beazer, KB Home, and Countrywide has come under fire. But I bet they’ll just pay fines and admit no guilt in exchange for being let off. I can think of only one thing that allows some corporations to have so much corruption and get away with it; lobbying money. E.g. the housing industry should be investigated for the fraud that led to the bubble and bust, and damage to the economy, and some should go to jail. Instead, the industry is so far successfully lobbying congress for bailouts in the multi-billions. IMO this is obscene and if anything eventually wakes up Americans to this problem it may very well be the debacle that is Housing.
Comment by CS — April 22, 2008 @ 6:40 pm
Larry & Ralph — There’s an article here which gives me some hope that the mainstream media and general public will finally be figuring out that fraud has been a huge part of the mortgage meltdown: http://www.housingwire.com/2008/04/24/ambac-shocked-to-find-fraud/
Since the SEC and FBI have been doing a pretty half-hearted job of ferreting out fraud, it may take companies like Ambac to finally bring things to light.
Also, there’s an excellent piece in the upcoming New York Times Magazine about the central role of the credit rating agencies in this disaster: http://www.nytimes.com/2008/04/27/magazine/27Credit-t.html
Comment by VacantHomes — April 24, 2008 @ 2:56 pm
Larry and Ralph — There’s an article here which gives me some hope that the mainstream media and general public will soon catch on to how big a problem fraud has been with the whole mortgage crisis: http://www.housingwire.com/2008/04/24/ambac-shocked-to-find-fraud/
Since the FBI and SEC have been rather half-hearted in their attempts to clean things up, maybe companies like Ambac will finally bring the problems out in the open.
Comment by VacantHomes — April 24, 2008 @ 3:29 pm
subject: Mortgage / Foreclosure Fraud, Internal Revenue form 1099-A’s and 1099-C’s
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Using my name and social security number, Wells Fargo filed a falsified form 1099-A –and it could happened to anyone who had or has a mortgage loan! The salient problem about an untrue form1099-A, or 1099-C, is that either forms could cause extensive and NEEDLESS tax consequences for TAX FILERS –especially, if the tax filer is oblivious that a1099-A has been reported!
This past February of 2008, I learned from the IRS that in year 2006, WELLS FARGO filed a 1099-A for my former New Orleans property. (Wells never gave me a copy of that 1099-A.) The year 2005 tax transcript I obtained from the IRS shows that Wells Fargo filed an “acquisition / abandonment” form 1099-A, wherein Wells Fargo represents May 19, 2005 as the date of my home being “abandoned” / “acquired” by Wells Fargo.
Lenders and creditors probably receive undeserved tax write-offs and have distorted Securities Accounting as a result of untrue 1099’s. Also, particularly when real estate is being illegally, fraudulently FLIPPED; and when Investors are being deceived; when foreclosures occur via frauds, after evidence of Wells Fargo filing FALSIFIED 1099’s surfaces, THERE IS CAUSE FOR SWEEPING PROBES INTO the 1099’s that Wells Fargo files with the IRS! In fact, such an investigation is probably warranted nationwide in communities which Wells Fargo does business and reports tax information on 1099-A’s and 1099′C’s.
I am Katrina-displaced from New Orleans. In LOUISIANA, Wells Fargo is among certain mortgage companies involved in REAL ESTATE and MORTGAGE FRAUD schemes. Because scores of people were displaced by the hurricanes of 2005, companies like Wells Fargo have much greater capacities to expand its various frauds and deceptive practices. Emphatically, the fact that thousands of people become displaced via disaster, the conceivability for Wells Fargo (and any other companies) to file false 1099-A’s or 1099-C’s is very easy to carry off.
In fact, any representation by FREDDIE MAC or by WELLS FARGO about its $$$$$ billion dollar losses due to people defaulting on mortgages should be weighed against the fact that Freddie Mac and Wells Fargo needlessly pay DEBT COLLECTION firms outrageous legal fees for lawyers to outmaneuver -and even persecute people who file court proceedings in opposition to fraudulent foreclosures.
FORECLOSURE FRAUD enables mortgage lenders to ILLEGALLY FLIP properties. It is highly common for a debt collector attorney to file a foreclosure: (i) in the name of a DEFUNCT mortgage company;(ii) in the name of a mortgage company which is NO LONGER holder of the security interest (the promissory note); or (iii) file a foreclosure and affix a “ransom” amount (the collector’s fee) far exceeding the promissory note “Acceleration Clause.” And despite a property owner’s entitlement to challenge contrary-to-law loss of his / her home, most property owners lack legal knowledge; the Court System is refractory; and there are limited attorneys with Consumer Law acumen. Further, when borrowers sue for “Unfair Debt Collection Practices,” damages, the collector gets to rakes in even more from prolonged litigation, as co-conspirators enjoy the foreclosure fraud pie, Investors get zero.
*For more info about mortgage and foreclosure fraud, visit: www.lawgrace.org.
** Also, see: Mortgage Mess, Foreclosure Fraud and Impediments to Justice
http://newsblaze.com/story/20071203130614tsop.nb/newsblaze/TOPSTORY/Top-Stories
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Barbara Ann Jackson
Law & Grace, Inc
Comment by Barbara Ann Jackson — April 29, 2008 @ 8:13 pm