Multi-Agency Task Force to Target Financial Crimes


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Task Force to Target Financial Crimes

White House Forms Multi-Agency Unit

Wednesday, November 18, 2009

By Andrew Ackerman

WASHINGTON — The Obama administration yesterday announced the formation of a multi-agency task force that will investigate and prosecute “significant” financial crimes and civil violations tied to the financial crisis and the government’s economic recovery programs.

The task force, which will convene for the first time within 30 days, was announced at a noon press conference by Attorney General Eric Holder Jr., along with Treasury Secretary Timothy Geithner, Securities and Exchange Commissioner director of enforcement Robert Khuzami, and Housing and Urban Development Secretary Shaun Donovan. It will include senior officials from more than 23 federal departments and agencies, including the Internal Revenue Service’s criminal ­investigation unit, according to the president’s executive order.

“We face unprecedented challenges in responding to the financial crisis that has gripped our economy for the past year,” Holder said. “Mortgage, securities, and corporate fraud schemes have eroded the public’s confidence in the nation’s financial markets and have led to a growing sentiment that Wall Street does not play by the same rules as Main Street.”

Asked if the group’s scope will include the municipal market, a spokesperson said it will be broad.

The task force was formally created by an executive order signed by President Obama that essentially renames and expands upon a corporate fraud task force created by President George W. Bush in 2002, in the wake of several corporate accounting and other scandals.

But Holder said the new task force reflects much broader coordination among various federal agencies as well as state and local law enforcement officials, including state attorneys general and district attorneys.

Geithner said the task force marks a “much more aggressive strategy of enforcement” to be coupled with financial regulatory reform that will give regulators new tools to better manage the failure of large and complex institutions.

The task force’s implications for the muni market were not immediately clear, as the Justice Department and the SEC have already been involved in a multi-year, criminal and civil probe of anti-competitive practices in the market.

The department announced the first criminal charges from that probe in late October, when it filed an indictment against Beverly Hills, Calif.-based CDR Financial Products Inc., its founder ­David Rubin, and a current and a former employee at the firm. The four defendants all pleaded not guilty to criminal antitrust, wire fraud, and other charges stemming from an alleged conspiracy to rig bids for municipal investment agreements and derivatives contracts in exchange for ­kickbacks.

In addition, the SEC has worked with state securities regulators to go after firms that engaged in unfair sales practices and misled investors on auction-rate ­securities.

Paul Maco, a partner at Vinson & Elkins LLP here and the former head of the SEC’s office of municipal securities, said that whenever the commission speaks with an individual as part of an investigation, it informs him ahead of time that the information he provides could be given to Justice officials “as well as a whole host of other agencies.”

“Justice Department officials have [already] shown greater levels of activity in the municipal market than in quite some time, so it’d be interesting to see what, if any, additional activity will come from the task force,” Maco said.

Specifically, the task force will ­“provide advice” to the attorney general for the investigation and prosecution of cases of: bank, mortgage, loan, and lending fraud; securities and commodities fraud; ­retirement plan fraud; mail and wire fraud; tax crimes; money laundering; False Claims Act violation; unfair competition; discrimination; and other financial crimes and violations, the executive order said.

It also will make recommendations for enhancing cooperation among “federal, state, local, tribal, and territorial” authorities that investigate and prosecute financial crimes and violations, the order stated.

Khuzami stressed that the task force will allow for better coordination of civil and criminal cases. In fiscal 2009, which ended Sept. 30, he said that more than 150 of the SEC’s enforcement cases were filed in coordination with criminal charges filed by the Justice Department and others, an increase of 30% over 2008.

“The task force should only increase those numbers, and provide even greater opportunities for close collaboration and information sharing among law enforcement authorities,” he said.

SOURCE The Bond Buyer

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