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As part of efforts of a new inter-agency task force deployed by President Barack Obama to empower investigations into the sale of repackaged mortgages, the Justice Department, in January, sent out civil subpoenas to 11 financial institutions on residential mortgage-backed securities. However, according to lawyers, the subpoenas are so broadly worded that their scope overlaps both with previous requests of the Justice Department as well as with efforts of the Securities and Exchange Council to bring offenders to task.
The neat result would be that the offenders have a sparkling fresh issue backed by DOJ authority to postpone the culmination of proceedings on other fronts.
It is significant that this event comes back-to-back with the three biggest banks, Wells Fargo & Co, Goldman Sachs Group Inc, and JPMorgan Chase & Co having received Wells notices from SEC alerting defendants that SEC lawyers are considering bringing charges against them, and providing essentially a last pre-litigation opportunity to settle or rebut the allegations.
However, quick settlements that would have relieved the taxpayers now seem far off in respect of the new DOJ subpoenas. Lawyers say companies would hardly be likely to go for quick settlements if related charges are still open in other forums.
Citigroup admitted last week of having received one of the DOJ subpoenas. Experts fear that mixing essentially financial criminal acts with processes of civil litigation would significantly delay justice and allow offenders to continue longer outside bars, and allow expected settlement money immediately needed by the public, to continue in private corporate coffers with impunity.
A lawyer representing defendants said, “The government just keeps asking for the same kind of information with a different twist.” Another lawyer representing big banks seemed positively elated, “It’s going to be a full-employment-act for lawyers.”
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We can see where this is headed. And we can see Fannie and Freddie along with a large number of other defendants, all big banks tied up in busting the economy and repackaging mortgage loans, laughing their way to lengthy lawsuits. Laughing, because justice delayed is justice denied.
Adora Andy, spokeswoman for the Justice Department stated that the new agency is creating parallel efforts to collaborate on investigations and streamlining processes for investigating misconduct.
Though Attorney General Eric Holder had announced in January that the subpoenas do not duplicate earlier efforts from the SEC, lawyers say all current efforts would be jeopardized to bring big banks to task, given the generalized nature of the subpoenas. The SEC has declined to make immediate comments on the new developments.
