Justice Delayed is Justice Denied: The Case Against Big Banks

09 Mar Justice Delayed is Justice Denied: The Case Against Big Banks


I’ve seen lots of funny men; Some will rob you with a six-gun
And some with a fountain pen.
~ Woody Guthrie (Pretty Boy Floyd)

Last month, Elizabeth Warren asked a pointed question of senior treasury department officials regarding why no enforcement action had ever been taken against a large financial institution.”Can you identify when you last took (one of) the Wall Street banks to trial?” she asked the regulators.None could.

(from the article by Andrew Mega, Huffington Post, March 8, 2013).

There were other enforcement actions which were more important. Against individuals. For example, on February 11, 2013, the Oregon United States’ Attorney’s Office released a press release regarding the conviction of David Ovist, an Oregon mortgage broker. Mr. Ovist was convicted of the crimes of bank fraud and wire fraud following a 10-day jury trial. Mr. Ovist owned Oregon Mortgage Services, Inc. in the northern part of Oregon (near Portland). Mr. Ovist was convicted due to eight borrowers’ loan applications containing false information about the borrowers’ financial qualifications. The maximum penalty on each of the three fraud convictions is 30 years in prison and a $1,000,000 fine. The nine convictions for wire fraud carry 20 years in prison and maximum fine of $250,00.

Another case that was scrutinized by the national media (Mr. Ovist’s case didn’t make national news) was that of Aaron Swartz, a man accused of felony counts, including wire fraud, computer fraud, theft of information from a computer and recklessly damaging a computer. After Mr. Swartz pled not guilty, additional charges were added over a year later, with an additional 13 felonies charged. Mr. Swartz committed suicide three months after the additional charges were filed.

Senator Warren pointed out last week that large financial institutions, such as HSBC, had been involved in money laundering and had agreed to a forfeiture and penalty of $1.9 billion in order to avoid charges that it helped Mexican drug traffickers, Iran and Libya move money all around the world. Senator Warren asked how much would HSBC have to launder before the Banking Committee took action. TheDepartment of the Treasury explained that it was theDepartment of Justice which would file charges, not the Treasury.

It appears that the Department of Justice has been too busy to worry about big banks.

One might ask: “What on earth does this have to do with bankruptcy?”. Everything.

The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act was implemented, after 8-9 years of pressure and lobbying by the credit card industry. Soon thereafter the subprime mortgages began to descend the slippery slope with an inevitable and non-escapable crash dueas the average “Joe” paid the credit cards rather than their mortgages which had been securitized (asexplained here in aJustice Action Center article) and thenand sold to investors. Thosefailed mortgages resulted in a bigger financial crisis, which created the unemployment crisis — as businesses began closing their doors. That cycle then led to the prime mortgage crisis, which led toconstruction industry halting, again leading to more job loss andgreater financial instability for the country.Some banks agreed to settlements with the Securities and Exchange Commission for their roles in this crisis.

According to a November 2012 New York Times article, ” In 2010, the S.E.C. secured $550 million from Goldman Sachs. In that case, the agency focused on a single mortgage security created in 2007, just as fissures spread through the housing market. Goldman allowed a hedge fund manager, the S.E.C. claimed, to help construct the security, then bet against it, but never alerted investors.” The head of the SEC acknowledged that charging individuals was a challenge.

Why isn’t the CEO of HSBC being threatened with 30 years of prison? Why isn’t the CEO of Citi being threated with additional counts for reckless behavior? Aaron Swartz was charged. David Ovist is headed to prison.

My clients are affected more by the actions of the big banks than by Mr. Swartz. While I am not taking a position on whether the DOJ should be charging individuals or these individuals (their criminal charges are warranted perhaps); I would just like to know why the individuals with the big banks standing behind them or paying them, aren’t being charged. Where’s the Justice for those most affected by HSBC’s corporate decisions and JPMorgan’s corporate decisions? Justice delayed is justice denied….and it’s time to call the big banks accountable.


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I'm a consumer protection lawyer in Oregon, working with people in Klamath; Lake; Jackson; Josephine; Curry; and Deschutes County. I speak regularly on bankruptcy and consumer protection issues nationwide.
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