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FBI encounters hang-ups in criminal prosecutions for white collar cases, P.1

On Behalf of | Dec 7, 2011 | Firm News, White Collar Crimes |

According to David Cardona, a former top U.S. official who was responsible for investigating the financial crisis, a three-year review of probes at large mortgage lenders and securities firms has caused federal officials to conclude that many financial crimes cannot be successfully prosecuted, and are best pursued for civil charges.

Cardona was formerly a deputy assistant director at the FBI until last month, when he left for a position at the Securities and Exchange Commission. During his time at the FBI, Cardona was charged with monitoring probes of large financial firms. Overall, those probes have not led to any effective prosecutions in connection to the financial crisis. Interestingly, though, the SEC has filed civil-fraud cases against 81 firms and individual, and has won nearly $2 billion in settled cases.

According to Cardona, pursuing these crimes for civil charges will allow defendants to avoid incarceration, but civil cases carry a lower burden of proof, and are more easily won.

As can be expected, federal officials were initially optimistic about probing banks and securities firms and prosecuting wrongdoing, but as time has gone on, there has been difficulties proving criminal intent. In fact, many of the FBI’s criminal probes have accomplished very little. The biggest win has been the sentencing of former Taylor, Bean & Witaker Mortgage Corp chairman Lee Farkas, who was ordered to spend 30 years in prison back in June. Farkas was responsible for a multibillion-dollar fraud scheme which brought down Colonial Bank. That conviction was not, however, related to the financial crisis.

In our next post, we’ll continue looking at this story.

Source: Wall Street Journal, “Financial Crimes Bedevil Prosecutors,” Jean Eaglesham, December 6, 2011.