Archive for the ‘Legal’ Category
Icelandic banker Sigurdur “Siggi” Einarsson, who ran Kaupthing bank from offices in Mayfair until its collapse five years ago, is among nine former senior staff who have been variously charged in Reykjavik with orchestrating five large-scale market manipulation conspiracies.
Further details, to be released by the courts later this week, are expected to allege a conspiracy by Kaupthing executive chairman Einarsson and other bosses at Iceland’s largest bank, claiming they secretly used the bank’s funds to indirectly buy Kaupthing shares in the hope of propping up its share price.
Gee, and this comes after the UK “significant fraud” office couldn’t find a violation of the law.
Now about those banksters here in the United States… oh wait, we’ve been told they’re “too big to jail”, right?
WASHINGTON — Bank regulators got a sense Thursday of how their lives will be slightly different now that Elizabeth Warren sits on a Senate committee overseeing their agencies.
At her first Banking, Housing and Urban Affairs Committee hearing, Warren questioned top regulators from the alphabet soup that is the nation’s financial regulatory structure: the FDIC, SEC, OCC, CFPB, CFTC, Fed and Treasury.
The Democratic senator from Massachusetts had a straightforward question for them: When was the last time you took a Wall Street bank to trial? It was a harder question than it seemed. – Huffington Post
Discussion (registration required to post)
Fraudclosure Fail | ROMAN PINO vs THE BANK OF NEW YORK – Florida Supreme Court: We Can’t Stop the Fraud
Homeowners Lose in Landmark Foreclosure Decision
From the PB POST…
A Florida Supreme Court ruling involving a Greenacres foreclosure allows banks to get away with fraud, as long as they voluntarily dismiss the case, attorneys said today.
The case, Roman Pino v. the Bank of New York, was the first significant foreclosure complaint heard by the high court since the state’s legendary housing collapse.
At issue was whether a bank can escape punishment for filing flawed or fraudulent documents in a case by voluntarily dismissing it. A voluntary dismissal allows the bank to refile at a later date.
Royal Palm Beach-based foreclosure defense attorney Tom Ice, who represented Pino, had challenged a document created by the former Law Offices of David J. Stern and sought to question employees about its veracity. On the eve of those depositions, the bank moved to dismiss the case, blocking the court’s ability to address any sanctions.
“I would say the Supreme Court has spoken loud and clear that it doesn’t care about litigants that abuse the court system and that fraud is OK,” Ice said about the ruling. “There are no ramifications if you get caught defrauding the court. Just take a voluntary dismissal and start over.”
The case was unusual because the Supreme Court decided to pass judgment on the case even after Ice had negotiated a settlement with the bank that allowed his client to keep his house.
Florida law professors said the case, which was heard by the Supreme Court in May, was significant because it speaks to the integrity of Florida’s judiciary.
The 4th District Court of Appeal had previously agreed that a voluntary dismissal couldn’t be reversed, but said it wanted the high court to weigh in because “many, many mortgage foreclosures appear tainted with suspect documents.”
Banks warned of a “widespread financial crisis” if the Supreme Court rules in favor of Pino.
They argued banks will cut back on awarding home loans and be discouraged from filing legitimate claims if, when they find a paperwork error, they can’t voluntarily dismiss the case, correct the error and refile.
“With large numbers of defaulted loans in their portfolios, members of the Mortgage Bankers Association and Florida Bankers Association no doubt occasionally will make clerical errors, lose promissory notes, or discover other deficiencies in their foreclosure complaints that mandate correction in the interest of fairness,” the brief states.
Ice made headlines with the Pino case in 2010 when he was featured in a national magazine article about Florida’s so-called “foreclosure mills” and the discovery of allegedly fraudulent documents.
The robo-signing scandal was just breaking at the time, Florida’s foreclosure “rocket dockets” were full speed ahead, and David J. Stern’s Plantation-based firm was a foreclosure empire handling more than 100,000 cases statewide. It has since closed after losing most of its clients in the wake of the scandal.
Lenders halted home repossessions to revamp and rework cases. Beginning last year, foreclosures ramped up again.
“The banks won again, and like everything else in this state, we missed the chance to just say ‘stop,’” said St. Petersburg defense attorney Matt Weidner about the Pino ruling. “This is the final piece, we have legalized bank fraud and we now have a court system, an entire judicial system, that supports fraud.”
CONCLUSION FROM THE FL SUPREME COURT OPINION
Based on the above, we answer the certified question in the negative. We hold that when a defendant alleges fraud on the court as a basis for seeking to set aside a plaintiff’s voluntary dismissal, the trial court has jurisdiction to reinstate the dismissed action only when the fraud, if proven, resulted in the plaintiff securing affirmative relief to the detriment of the defendant and, upon obtaining that relief, voluntarily dismissing the case to prevent the trial court from remedying the effects of the fraudulent conduct. Any affirmative relief the plaintiff obtained against the defendant as a result of the fraudulent conduct would clearly have an adverse impact on the defendant, thereby entitling the defendant to seek relief to set aside the voluntary dismissal pursuant to Florida Rule of Civil Procedure 1.540(b)(3).
In this case, because BNY Mellon did not obtain affirmative relief before taking the voluntary dismissal, the trial court did not have jurisdiction to reinstate the dismissed foreclosure action for the purpose of dismissing the action with prejudice. We also conclude that the trial court did not have the inherent authority to strike the notice of voluntary dismissal. Because Pino sought no other available sanctions, and the case has since been resolved between the parties, we need not reach the question of whether the trial court should be able to award monetary sanctions under the circumstances of this case. We therefore approve the result reached by the Fourth District affirming the trial court’s denial of Pino’s motion.
While affirming the decision of the Fourth District, we also understand the concerns of those who discuss the multiple abuses that can occur from fraudulent pleadings being filed with the trial courts in this state. While rule 1.420(a)(1) has well served the litigants and courts of this state, we request the Civil Procedure Rules Committee review this concern and make a recommendation to this Court regarding whether (a) explicit sanction authority should be provided to a trial court pursuant to rule 1.110(b), even after a case is voluntarily dismissed, (b) rule 1.420(a)(1) should be amended to expressly allow the trial court to retain jurisdiction to rule on any pending sanction motions that seek monetary sanctions for abuses committed by either party during the litigation process, or to allow the trial court explicit authority to include attorney’s fees in any award to a party when the dismissed action is reinstated, or (c) to adopt a rule similar to Federal Rule 11 to provide explicit authority for the trial court to impose sanctions.
It is so ordered.
LEWIS, QUINCE, LABARGA, and PERRY, JJ., concur.
POLSTON, C.J., and CANADY, J., concur in result only.
Florida Supreme Court Oral Arguments
(A MUST VIEW)
The Lie that Prosecuting Bank Fraud Will Destabilize the Economy Is What Is REALLY Destroying the Economy
Failing to Prosecute White Collar Crime Guarantees a Weak and Unstable Economy … and Future Financial Crashes
The Departments of Justice and Treasury are pretending that criminally prosecuting criminal banksters will destabilize the economy.
The exact opposite is true.
Failing to prosecute criminal fraud has been destabilizing the economy since at least 2007 … and will cause huge crashes in the future.
After all, the main driver of economic growth is a strong rule of law.
Nobel prize winning economist Joseph Stiglitz says that we have to prosecute fraud or else the economy won’t recover:
The legal system is supposed to be the codification of our norms and beliefs, things that we need to make our system work. If the legal system is seen as exploitative, then confidence in our whole system starts eroding. And that’s really the problem that’s going on.
I think we ought to go do what we did in the S&L [crisis] and actually put many of these guys in prison. Absolutely. These are not just white-collar crimes or little accidents. There were victims. That’s the point. There were victims all over the world.
Economists focus on the whole notion of incentives. People have an incentive sometimes to behave badly, because they can make more money if they can cheat. If our economic system is going to work then we have to make sure that what they gain when they cheat is offset by a system of penalties.
Nobel prize winning economist George Akerlof has demonstrated that failure to punish white collar criminals – and instead bailing them out- creates incentives for more economic crimes and further destruction of the economy in the future.
(Review of the data on accounting fraud confirms that fraud goes up as criminal prosecutions go down.)
The Director of the Securities and Exchange Commission’s enforcement division told Congress:
Recovery from the fallout of the financial crisis requires important efforts on various fronts, and vigorous enforcement is an essential component, as aggressive and even-handed enforcement will meet the public’s fair expectation that those whose violations of the law caused severe loss and hardship will be held accountable. And vigorous law enforcement efforts will help vindicate the principles that are fundamental to the fair and proper functioning of our markets: that no one should have an unjust advantage in our markets; that investors have a right to disclosure that complies with the federal securities laws; and that there is a level playing field for all investors.
Paul Zak (Professor of Economics and Department Chair, as well as the founding Director of the Center for Neuroeconomics Studies at Claremont Graduate University, Professor of Neurology at Loma Linda University Medical Center, and a senior researcher at UCLA) and Stephen Knack (a Lead Economist in the World Bank’s Research Department and Public Sector Governance Department) wrote a paper called Trust and Growth, showing that enforcing the rule of law – i.e. prosecuting white collar fraud – is necessary for a healthy economy.
One of the leading business schools in America – the Wharton School of Business – published an essay by a psychologist on the causes and solutions to the economic crisis. Wharton points out that restoring trust is the key to recovery, and that trust cannot be restored until wrongdoers are held accountable:
According to David M. Sachs, a training and supervision analyst at the Psychoanalytic Center of Philadelphia, the crisis today is not one of confidence, but one of trust. “Abusive financial practices were unchecked by personal moral controls that prohibit individual criminal behavior, as in the case of [Bernard] Madoff, and by complex financial manipulations, as in the case of AIG.” The public, expecting to be protected from such abuse, has suffered a trauma of loss similar to that after 9/11. “Normal expectations of what is safe and dependable were abruptly shattered,” Sachs noted. “As is typical of post-traumatic states, planning for the future could not be based on old assumptions about what is safe and what is dangerous. A radical reversal of how to be gratified occurred.”
People now feel more gratified saving money than spending it, Sachs suggested. They have trouble trusting promises from the government because they feel the government has let them down.
He framed his argument with a fictional patient named Betty Q. Public, a librarian with two teenage children and a husband, John, who had recently lost his job. “She felt betrayed because she and her husband had invested conservatively and were double-crossed by dishonest, greedy businessmen, and now she distrusted the government that had failed to protect them from corporate dishonesty. Not only that, but she had little trust in things turning around soon enough to enable her and her husband to accomplish their previous goals.
“By no means a sophisticated economist, she knew … that some people had become fantastically wealthy by misusing other people’s money — hers included,” Sachs said. “In short, John and Betty had done everything right and were being punished, while the dishonest people were going unpunished.”
Helping an individual recover from a traumatic experience provides a useful analogy for understanding how to help the economy recover from its own traumatic experience, Sachs pointed out. The public will need to “hold the perpetrators of the economic disaster responsible and take what actions they can to prevent them from harming the economy again.” In addition, the public will have to see proof that government and business leaders can behave responsibly before they will trust them again, he argued.
Note that Sachs urges “hold[ing] the perpetrators of the economic disaster responsible.” In other words, just “looking forward” and promising to do things differently isn’t enough.
Shiller said the danger of foreclosuregate — the scandal in which it has come to light that the biggest banks have routinely mishandled homeownership documents, putting the legality of foreclosures and related sales in doubt — is a replay of the 1930s, when Americans lost faith that institutions such as business and government were dealing fairly.
Indeed, it is beyond dispute that bank fraud was one of the main causes of the Great Depression.
Economist James K. Galbraith wrote in the introduction to his father, John Kenneth Galbraith’s, definitive study of the Great Depression, The Great Crash, 1929:
The main relevance of The Great Crash, 1929 to the great crisis of 2008 is surely here. In both cases, the government knew what it should do. Both times, it declined to do it. In the summer of 1929 a few stern words from on high, a rise in the discount rate, a tough investigation into the pyramid schemes of the day, and the house of cards on Wall Street would have tumbled before its fall destroyed the whole economy.
In 2004, the FBI warned publicly of “an epidemic of mortgage fraud.” But the government did nothing, and less than nothing, delivering instead low interest rates, deregulation and clear signals that laws would not be enforced. The signals were not subtle: on one occasion the director of the Office of Thrift Supervision came to a conference with copies of the Federal Register and a chainsaw. There followed every manner of scheme to fleece the unsuspecting ….
This was fraud, perpetrated in the first instance by the government on the population, and by the rich on the poor.
The government that permits this to happen is complicit in a vast crime.
Galbraith also says:
There will have to be full-scale investigation and cleaning up of the residue of that, before you can have, I think, a return of confidence in the financial sector. And that’s a process which needs to get underway.
Galbraith recently said that “at the root of the crisis we find the largest financial swindle in world history”, where “counterfeit” mortgages were “laundered” by the banks.
As he has repeatedly noted, the economy will not recover until the perpetrators of the frauds which caused our current economic crisis are held accountable, so that trust can be restored. See this, this andthis.
No wonder Galbraith has said economists should move into the background, and “criminologists to the forefront.”
The bottom line is that the government has it exactly backwards. By failing to prosecute criminal fraud, the government is destabilizing the economy … and ensuring future crashes.
I’ll get the obvious out of the way first and then turn in future columns to the aspects of the Department of Justice’s (DOJ) civil suit against Bank of America (B of A)/Countrywide that are vital to understand but are more subtle. The obvious issue arises from the facts that the DOJ alleges that its investigation has found. The complaint and the DOJ press release state that elite financial criminals committed tens of thousands of “brazen” frauds targeting U.S. government funds. We are on the hook for all the resultant losses because Fannie and Freddie were systemically dangerous institutions (SDIs) that the Bush administration concluded had to have their creditors bailed out to prevent a far graver global systemic crisis.
The DOJ alleges that the fraud persisted for years, that senior officers were warned that the lending program they designed would cause endemic fraud, that the senior officers knew that B of A was selling billions of dollars of fraudulent loans to Fannie and Freddie by making false representations, that B of A’s senior leadership consciously covered up the information that the loans were commonly fraudulent, that the senior leadership created perverse bonus systems for their junior (non-professional employees with the expectation, desire, and actual knowledge that doing so led to the origination (and sale to Fannie and Freddie) of endemically fraudulent loans, and that even when Fannie and Freddie confronted B of A with its violations of its representations and warranties B of A refused to honor it contractual obligation to repurchase the fraudulent loans. DOJ alleges that the frauds persisted for years and continued after B of A purchased Countrywide. The obvious question (not asked by the AP, WSJ, and NYT articles about the lawsuit in the version on line last Wednesday night) is: why the DOJ has refused to bring a criminal prosecution of the senior officers who led this “brazen” fraud?
The only slightly less obvious question (again, not asked by any of the three articles) is: if the DOJ is going to bring only a civil complaint, why did it fail to include the culpable senior executives in that civil lawsuit? It does not appear that the reporters asked the DOJ either of these questions. Our top reporters are so used to DOJ abdicating its responsibility to prosecute elite frauds that they approach the newest example of elite impunity from criminal sanction as not worthy of discussion or even note. The obvious has become unfathomable to our elite media.
William K. Black – Capitalism Without Failure
Glenn Greenwald: Rule-of-Law in America is being Destroyed as Wealth is Used to Co-opt Our Political and Legal Institutions
Brilliant constitutional lawyer Glenn Greenwald discusses how rule-of-law has been destroyed by wealthy elites co-opting our political and legal institutions. This 1-hour video (embedded below) contains significantly more material than what is summarized here.
Why Greenwald transitioned from law to journalism: Initially he had little interest in the political process. He was much more interested in making sure the government did not transgress the framework and limitations laid out by the Constitution. In the wake of 9/11 Greenwald began perceiving extremism and lawlessness. Greenwald sought to have a bigger impact on the broader political context – as opposed to just working on one constitutional case at a time. Hence his move to journalism.
Greenwald’s view of the law: Greenwald sees the highest purpose of law to be to restrain and restrict those in power, on behalf of people who are marginalized.
How a legal background translates into journalism: One obligation for a lawyer to be effective in persuasion, is to think rigorously and in a very structured way. That means understanding the logical premises and the foundations of what you are arguing. And it means constantly identifying the evidence upon which you are basing these assertions, so that no one has to take your word for it. Putting things together in this very transparent way and being abundant in citing sources is rarely done.
Greenwald’s journalistic evolution: When Greenwald started writing about politics, he thought he was a high end consumer of political news. He was reading the New York Times and The Atlantic and the New Yorker and all the media journals that sophisticated consumers of news read. But as a full time journalist he could speak to sources and go to original texts and speak to newsmakers – and look at the evidence firsthand. And he realized that much of what he believed was myth.
How media has changed in America: If you go back 40 or 50 years, anyone that went into journalism was likely to remain poor. They tended to be people who wanted to subvert power. They wanted to be a check on power. They wanted to empower the powerless. They wanted to expose improprieties. What has happened over the past 4 or 5 decades is that media outlets have been purchased by large corporate conglomerates. They are now highly paid employees of major corporations. People who thrive in big corporations tend to be people who are comfortable accommodating power, rather than subverting it or being provocative.
What independent journalism means for us: Independent journalism is a rejuvenation of the resurgent force to check those in power. A lot of it is driven by disposition and personality. Greenwald says that the constitutional law he practiced was representing the powerless and marginalized against the powerful. That is also the kind of journalism he wants to do.
Rule of law was to be the anchor for society – but is disappearing: The Founders anticipated differentials in outcome inequalities – such as in wealth and success. But that society of unequal outcomes was to be anchored by equality in law and politics. The rule of law was to accomplish this – by applying rules and constraints to those who needed it the most. Rule of law was intended to prevent abuse of power. This is a central requirement of a just society. The more wealth and power you have the more transparency, the most safeguards, are ultimately the intent of the law. Now we see the more powerful one is, the more free of restraint one is. Inevitably that power will be abused if it is not safeguarded with all kinds of constraints.
How law is the great equalizer: The central requirement of a just society is that the more power you have, the more checks there are. Abandonment of that principal is dangerous. Whether you think the powerful are magnanimous or malignant, it is vital to retain checks on power. That power will be abused if it is not safeguarded with constraints.
Wealth has been used to co-opt political and legal institutions: We are in danger of losing the legal and political foundation that was envisioned for this country. The idea that financial and wealth inequality would exist in the context of political and legal equality is gone because wealth has been used to co-opt the legal and political institutions. No longer do political and legal institutions exercise power over financial elites. Now the financial elites exercise power.
The turning point in the USA: Greenwald sees Ford’s pardon of Nixon as a turning point in this country away from the supremacy of rule of law and to the supremacy of man. We no longer just violate the principal of rule of law; we repudiate it.