Obama Creates Task Force Targeting Fraud Linked to Financial Crisis

Park Sae-jin Reporter() | Posted : November 18, 2009, 14:23 | Updated : November 18, 2009, 14:23

The Obama administration announced a government-wide task force to combat financial fraud after the U.S. recession led to an increase in economic crimes.

The task force of top federal officials will work with state and local authorities to pursue financial fraud cases stemming from the crash of the housing market and the Wall Street meltdown, administration officials said Tuesday.

The Financial Fraud Enforcement Task Force will attack what Holder called "unscrupulous executives, Ponzi scheme operators and common criminals" in much the same way that a similar task force created in 2002 by former President George W. Bush went after corporate malfeasance following the accounting scandals at Enron Corp. and WorldCom Inc.

Obama's task force will take advantage of new anti-fraud powers and funding enacted by Congress last spring. The Fraud Enforcement and Recovery Act authorized $245 million annually in 2010 and 2011 to hire hundreds of prosecutors, agents and other federal officials to pursue financial fraud. It also strengthened and expanded money laundering laws and other statutes to apply to fraud committed by private mortgage lenders.

"It's great news that they've created another task force, but we think they really could have gotten out of the gate much quicker in terms of going after the leading perpetrators of fraud," said George Goehl, executive director of National People's Action, a network of community organizations that works on housing and banking issues. "We've got more than enough data to start going after people and start putting people behind bars."

The scope of the financial crisis was clear when Obama took office in January, but Holder said it took time to coordinate an effort spread across numerous agencies and states. In the meantime, federal authorities have been vigorously pursuing financial fraud cases, which the task force would build on, he said.

"We've all been doing things in the interim," Holder said. "But we thought that by putting our forces together, that we can be even more effective than we have been."

The new task force "brings a renewed focus and vigor" to financial fraud investigations, said David Zornow, a former federal prosecutor who heads the white-collar crime group at law firm Skadden, Arps, Slate, Meagher & Flom.

"What it motivates people to do is show results," he said. "When you put a lot of focus, attention and resources on a particular area, you tend to see action."

Zornow cited Bush's task force as an example. It obtained almost 1,300 corporate fraud convictions, including those of more than 200 chief executives, according to its last report, in April 2008.

But Holder said the mandate of that task force wasn't broad enough to go after all the types of crimes involved with the financial crisis. The new task force will include officials from 25 federal agencies who will work with state attorneys general and district attorneys on a variety of cases, including mortgage fraud, securities fraud and misuse of economic stimulus money, he said.

The Justice Department will head the task force, with the Treasury Department, Housing and Urban Development and the Securities and Exchange Commission serving on its steering committee.

"It is a way for us to mount an even better organized and more collaborative response to the pain and losses caused by the financial crisis," said Robert Khuzami, the SEC's enforcement director. "The task force will improve our chances of identifying wrongdoers and thus restoring confidence in our markets."

The SEC, which has been severely criticized for missing warning signals about Bernard L. Madoff's massive Ponzi scheme, has reorganized and streamlined its enforcement efforts and is launching special units to focus on types of financial fraud, Khuzami said.

Compared with 2008, the agency this year has nearly doubled the number of so-called disgorgement orders, which force defendants to give up ill-gotten gains, and it has increased the number of court-ordered emergency restraining orders 82% and asset freezes 78%.

아주경제= 인터넷뉴스팀 news@ajnews.co.kr
(아주경제=ajnews.co.kr) 무단전재 배포금지

© Aju Business Daily & www.ajunews.com Copyright: All materials on this site may not be reproduced, distributed, transmitted, displayed, published or broadcast without the authorization from the Aju News Corporation.