Occupy the SEC Once Again Calls for Criminal Prosecution
New York, NY – October 11, 2012
Occupy the SEC applauds the Department of Justice’s (DOJ) pursuit of fraud claims against the largest banks, alleging reckless residential mortgage lending. In the latest action announced, Wells Fargo is alleged to have flouted FHA program rules when underwriting mortgages backed by a government guarantee. Since these loans were not subject to review before entering the FHA Direct Endorsement Lender Program, Wells Fargo was obligated to ensure compliance with explicit underwriting and reporting guidelines. The suit alleges that Wells Fargo not only failed to comply with those guidelines, it did not even follow its own quality control procedures upon the discovery that up to half of the mortgages underwritten in certain months failed to meet FHA standards. In addition, Wells Fargo failed to report these errors to the FHA as required under the program. Finally, when faced with a subpoena, Wells Fargo attempted to fraudulently cover up its failure to follow FHA procedures.
This is the fifth such reckless mortgage lending case pursued by the DOJ’s Civil Fraud Unit. Three of the defendants have settled, including CitiMortgage ($158.3 million), Flagstar Bank ($158.3 million) and Deutsche Bank and Mortgage IT ($202.3 million). The fourth case, against Allied Home Mortgage and two of its officers, remains open.
While Occupy the SEC is encouraged by the DOJ’s efforts in yet another case of big bank fraud, we call on the U.S. Attorney to pursue criminal charges. Just as Occupy the SEC has called for criminal prosecutions pertaining to the LIBOR scandal and Jamie Dimon’s violation of Sarbanes-Oxley after JPMorgan’s CIO Office losses, we believe that such prosecutions are not only warranted here, but are necessary.
Bank fraud and securities violations are all too common and civil settlement of these crimes does not deter the perpetrators’ actions. Until Wall Street sees professionals from the lowest levels to the top office led away in handcuffs, “stretching the rules” for maximum profit will continue. Any penalties paid down the line will just be the cost of doing business, long after such bankers have received their bonuses.
Occupy the SEC is a group of concerned citizens, activists and financial professionals with decades of collective experience working at many of the largest financial firms in the industry. For further information, visit http://www.occupythesec.org or email firstname.lastname@example.org.