Posted by Sukayna Khalifeh.
According to the New York Times (Peter J. Henning), there are no real findings of liability for violations from the cases arising from the 2008 financial crisis. Henning wrote about two cases in particular that were recently resolved but the top managers in the companies were not held liable. One of them involved fraud charges against Freddie Mac’s former chief executive, Richard F. Syron. This case “concluded only with an acknowledgment that no party is the prevailing party” (Henning). This was concluded because there was “no accepted definition of a subprime mortgage,” so there was no way to prove Syron had intentionally given false accounts of loans. The second case was against Ernst & Young, an auditor of Lehman Brothers. They were charged for accounting fraud but reached a settlement with the government for $10 million instead even though Lehman Brothers set off the financial crisis in September 2008 by going bankrupt. It was the largest bankruptcy in American History according to the New York Times (Henning).
Both of these cases were huge contributors to the financial crisis yet the perpetrators still were not held liable for illegal or dishonest behavior. “Management was aware of accounting maneuvers used to make its finances look stronger than they were,” (Henning) yet the Security Exchange Commission still stopped the investigation on Lehman Brothers in 2012. They were not criminally charged nor was any civil action taken.
Henning also wrote about the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), which is designed to pursue “cases against banks for violations of the mail and wire fraud statutes.” This has been a successful and helpful tool that prosecutors used against JPMorgan Chase, Bank of America and Citigroup. Although this is a powerful tool, it has not been used to hold individuals for violations. Henning implied that the Justice Department should focus more on individuals in the corporation and charge them for misconduct instead of the corporation as a whole. The guilty individuals inside the company should be held liable for wrongdoing.
Sukayna is a double major in finance and management, information and technology (MIT) at Montclair State University, Class of 2017.