Chris Lehmann,  August 13, 2013

The Fraud That Failed

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It was a stirring demonstration of the Obama White House’s determination to safeguard the battered livelihoods of the real victims of the 2008 mortgage meltdown: an ambitious sweep of the mortgage-fraud racket by federal law enforcement. Attorney General Eric Holder announced last October that, in a coordinated burst of G-men productivity, federal prosecutors had successfully completed 285 mortgage-fraud cases against 530 suspects. Here, on the eve of the 2012 presidential balloting, was empirical evidence to back the Obama administration’s fervid efforts to brand itself as the tribune of the ordinary Americans, working hard and playing by the rules, while the no-account investment class–people just like GOP nominee/retired equity fund manager Mitt Romney–preyed on their nest eggs.

There was just one problem with the hotly touted campaign, known as the Distressed Homeowner Initiative: It was largely a work of fraud in its own right. While Holder claimed that all the prosecutions were completed during the initiative’s year-long run from September 30 2011 to September 30, 2012, many of them were actually in play well before then. One case, involving 102 counts of mortgage fraud in Chicago, dated from 2006–nearly three years before Holder took office. Now, 10 months after all the breathless ballyhooing of the White House’s aggressive pursuit of mortgage fraudsters –and some fine watchdogging of Holder’s bogus claims by Bloomberg reporters Phil Mattingly and Tom Schoenberg–the FBI has issued a revised, red-faced correction to the Distressed Homeowner Initiative’s final talley, and it turns out that the number of keelholed perps was inflated by, oh, a factor of five or so–with the financial exaggerations running up to, you know, 1,000 percent. Per Bloomberg:

The FBI restated the number of people criminally charged to 107 from 530. Agencies were asked to correct victims’ total losses to $95 million from an estimated $1 billion, and the number of victims found to 17,185 from more than 73,000.
“This targeted approach resulted in the successful filing of many criminal and civil cases around the country, but regrettably, the statistics reported in October included cases that fell outside the specific parameters of the initiative,” the FBI, which co-chairs the mortgage group, said in the memo.

More remarkably still, this is the second time that Holder’s Justice Department has been caught out for touting nonexistent achievements to try to gin up positive press coverage for its distinctly lackluster record in pursuing financial wrongdoing. As another Bloomberg writer, Jonathan Weil, notes, an earlier big-ticket roster of cases, supposedly targeting fraudulent financial deals under the authority of the president’s Fraud Enforcement Task Force, proved to be nothing more than smoke and mirrors. One defendant on that eagerly advertised roster of cases had been placed on probation before the Task Force had purportedly swung into action; another hadn’t faced criminal charges of any kind. This cluster of cases, Weil writes, “wasn’t actually a sweep. All the Justice Department did was lump together a bunch of small-fry, penny-ante cases that had nothing to do with each other. Then it held a press gathering.” And as Weil further notes, the Justice Department neither bothered to supply him with a complete breakdown of alleged prosecutions or the program, nor to update its official numbers once they were shown to be cooked.

At least that PR mirage, unlike the Distressed Homeowner initiative, had an honest name. It was called Operation Broken Trust.

(h/t Columbia Journalism Review)

Chris Lehmann is editor in chief of The Baffler and author of Rich People Things. His latest book, The Money Cult, is out now from Melville House.

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