In our previous post, we began speaking about the FBI’s efforts to prosecute financial crimes in connection to the financial crisis. As we mentioned, federal officials have apparently found that pursuing firms and individual executives for criminal charges has been more difficult since probes have began.
Some lawmakers have criticized the FBI for its allegedly lax pursuit of mortgage fraud. But according to the Justice Department, hundreds of criminal cases for mortgage fraud, investment fraud, and other white-collar crimes have been brought, and federal officials pursue criminal charges whenever they feel there is enough evidence to convict them.
At present, the FBI is reportedly still investigating over 2,800 mortgage-fraud cases, but the Department of Justice is reportedly engaging in a more deliberate targeting of cases before criminal investigations are launched.
Part of the problem with criminal prosecution in the context of the events leading up to the financial crisis is that criminal intent is difficult to prove in many cases, since much of the behavior in question was actually the result of poor business judgment.
Many of the criminal cases pursued by the Justice Department revolve around the issue of disclosure. It isn’t always easy, though, to determine whether disclosure was adequate, and juries often have trouble determining such questions. In addition, federal officials have been hesitant to allow juries to determine whether losses were due to poor judgment or the conditions of the market.
Many of the criminal charges will likely end up being pursued on civil charges. Indeed, the SEC is still actively engaged in such investigations.
Source: Wall Street Journal, “Financial Crimes Bedevil Prosecutors,” Jean Eaglesham, December 6, 2011.