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U.S. Attorney General Reviving Efforts to Pursue Bankers over 2008 Financial Crisis

| Feb 21, 2015 | Criminal Law |

2008 Financial Crisis – Action against Execs

The 2008 financial crisis goes down in history as a ubiquitous event that crushed the national and world economy. In August 2014, Bank of America paid a record $16.65 billion fine to settle government allegations that it had knowledge of selling pestilent mortgages to investors. JPMorgan Chase & Co agreed to a $13 billion settlement in November 2013 and Citigroup Inc. signed a $7 billion settlement in July 2014. Through the issuance of bad subprime loans, many scholars argue that banks helped cultivate a housing bubble that eventually burst in late 2007. Attorney General Eric Holder acclaimed that the Bank of America settlement would “hold accountable those whose actions threatened the integrity of our financial markets and undermined the stability of our economy.” 

As Holder prepares to resign from his position as U.S. Attorney, he is proposing new efforts to develop cases against individuals at the banking firms that played a role in the subprime mortgage crisis. U.S. attorneys who are involved in residential mortgage-backed securities cases are to report in 90 days on the viability of bringing civil or criminal cases against select persons.

President Obama organized a task force – the Residential Mortgage Back Securities Working Group — in 2012 to investigate misconduct that contributed to the financial crisis. To date, no bank executives have been charged with a crime. Holder has received criticism from lawmakers claiming the Justice Department has failed to hold bank executives accountable for their contribution to the financial crisis. Many view financial settlements paid in lieu of criminal charges as the easy way out for bankers.

Making an Example

A former chief operating officer of United Commercial Bank in San Francisco faces criminal prosecution connected to the government’s bank bailout. Ebrahim Shabudin is charged with securities fraud among other crimes for concealing the losses of United Commercial Bank. The FBI broadly defines securities fraud as “a wide range of illegal activities, all of which involve the deception of investors or the manipulation of financial markets.”

United Commercial received nearly $300 million from the Troubled Asset Relief Program at the height of the financial meltdown in 2008. The U.S. Treasury established programs under TARP to help stabilize the United States financial system, to jumpstart economic growth, and to prevent foreclosures. Congress authorized approximately $250 billion to stabilize banking institutions.

Shabudin faces accusations of concealing information that showed the bank’s assets and loan collateral had declined in value, lying to auditors, and the delay of downgrading risk ratings on certain loans. Shabudin settled Securities and Exchange Commission claims without admitting to wrongdoing, and paid a $175,000 civil penalty in 2013. According to Reuters, former senior vice president Thomas Yu pleaded guilty last year to conspiracy to commit false bank entries.

With a revival in government effort to prosecute bankers, executives, and white collar crime — one thing is certain – having a competent and experienced criminal defense attorney to represent you through dubious times is imperative.

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