William K. Black notes the lack of prosecutions regarding financial fraud, and offers a solution

January 1, 2011 | By | 3 Replies More

William K. Black previously worked as an investigator of financial institutions during the S&L crisis. In a detailed article at Huffpo, Black laments the almost total lack of criminal prosecutions related to our recent financial meltdown. Here’s the problem in a nutshell: “What has gone so catastrophically wrong with DOJ, and why has it continued so long? The fundamental flaw is that DOJ’s senior leadership cannot conceive of elite bankers as criminals.”

Here’s what we need to do about it:

Our best bet is to continue to win the scholarly disputes and to continue to push media representatives to take fraud seriously. If the media demands for prosecution of the elite banking frauds expand there is a chance to create a bipartisan coalition in Congress and the administration supporting prosecutions. In the S&L debacle, Representative Annunzio was one of the leading opponents of reregulation and leading supporters of Charles Keating. After we brought several hundred successful prosecutions he began wearing a huge button: “Jail the S&L Crooks!” Bringing many hundreds of enforcement actions, civil suits, and prosecutions causes huge changes in the way a crisis is perceived. It makes tens of thousands of documents detailing the frauds public. It generates thousands of national and local news stories discussing the nature of the frauds and how wealthy the senior officers became through the frauds. All of this increases the saliency of fraud and increases demands for serious reforms, adequate resources for the regulators and criminal justice bodies, and makes clear that elite fraud poses a severe danger. Collectively, this creates the political space for real reform, vigorous regulators, and real prosecutors.


Category: Economy, Fraud, law and order

About the Author ()

Erich Vieth is an attorney focusing on consumer law litigation and appellate practice. He is also a working musician and a writer, having founded Dangerous Intersection in 2006. Erich lives in the Shaw Neighborhood of St. Louis, Missouri, where he lives half-time with his two extraordinary daughters.

Comments (3)

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  1. Erich Vieth says:

    "Wall Street's largest firms will undergo scrutiny by the Federal Reserve in the coming months, as they submit to a new round of "stress tests," designed to gauge their financial health, the Financial Times reports.

    Like the earlier set of tests, completed in 2009, these will attempt to determine whether financial companies are able to withstand another crisis. But while the results of the first tests were made public in an effort to reassure taxpayers and investors, the results of the new analysis — which will also test whether banks are able to increase the dividends they pay to shareholders — will be kept secret."


  2. Tom D says:

    I have heard from Black and others that the difficulty in persuing criminal charges was the ability to prove intent. However, I thought that DeFacto Fraud does not need to prove intent, particularly when a corporation is involved. Is this true?

    • Erich Vieth says:

      Tom D: Here's a pretty good summary of the ways of establishing intent in a fraud case. http://www.journalofaccountancy.com/Issues/2004/O

      The Feds need to pretend that they are trying a Middle Eastern man for fraud. In that case, they would use lots of vigor and creativity. They would find a way to make the case (just watch the hoops through which they will jump to create a case against Julian Assange). Bill Black is right, I suspect, that the main problem is that many people cannot fathom how a bank executive, a guy who wears a fancy suit and who attends the local church, could be a criminal.

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