A Tale of Two Cases
by Guest Blogger, 3/11/2015
Article reposted with author's permission. Original article appeared on the Huffington Post.
by Bartlett Naylor, Public Citizen
It is the best of times if you're a crook at a mega-bank. It is the worst of times if you're in debt and dare to omit information on your bankruptcy declaration. Consider two federal cases dealing with perjury during bankruptcy.
In case one, a Dallas woman named Estela Martinez, 54, filed for bankruptcy but omitted her Social Security number and the previous times she'd filed for bankruptcy on the form. That's perjury under federal law. She was arrested at her home on July 10, 2014. On July 18, 2014, she was sentenced to 366 days in prison on one count of perjury.
In case two, JPMorgan Chase filed forms in bankruptcy court signed "under penalty of perjury" by "persons who had not reviewed the accuracy" of the forms. It did this not five times nor 50 times nor 500 times but 50,000 times. Not one person at JPMorgan was sentenced to prison.
Why not? It's not that the Department of Justice considers JPMorgan's actions simply an accident, a foot fault, as it were. "It is shocking that the conduct admitted to by Chase in this settlement, including the filing of tens of thousands of documents in court that never had been reviewed by the people who attested to their accuracy, continued as long as it did," said Acting Associate Attorney General Stuart F. Delery. "Such unlawful and abusive banking practices can deprive American homeowners of a fair chance in the bankruptcy system, and we will not tolerate them."
In JPMorgan's case, the government obviously knew the names of those who signed the documents. Their names are on the documents. Their names are printed 50,000 times. If there were truly equal justice, would they not join Ms. Martinez in prison for committing the same crime? Each of these bank employees signing their names must understand that they do so under penalty of perjury. They are professionals; they receive training as bankers, and that includes training in compliance with the law. They must have known that they violated the law. If one or more of those who perjured themselves were sentenced to jail, that would send a chilling message to other low-level (and high-level) bankers.
In a speech on Feb. 17, Attorney General Eric Holder said that he'd instructed his lieutenants to inform him within 90 days if they could develop a case against any Wall Streeters connected to the financial crisis. He wants names. Well, here are 50,000 signatures at JPMorgan.
Perhaps, it might be argued, these signers acted on the instruction of their supervisors. Shouldn't the supervisors go to prison? Or the supervisors' supervisors? Perjury by a major bank might be overlooked by a prosecutor in a few instances, dismissing it as an unintentional clerical error. But if it happens tens of thousands of times, that could only be construed to be intentional. It must be a firm's practice, part of the business model. When the same crime is committed routinely, it's known as organized crime. The Racketeer Influenced Corrupt Organizations Act (RICO) specifically mentions bankruptcy fraud as one of the acts that triggers the RICO act. What's the difference between the Mafia committing fraud 100 times and a bank committing fraud 50,000 times? Michael Milken of Drexel Burnham Lambert was indicted and jailed under RICO.
Instead of its employees going to jail, JPMorgan is paying a fine. The fine works out to $1,000 per offense. Presumably, Ms. Martinez would rather pay $1,000 than spend 366 days in jail. And the JPMorgan fine does not come from the paycheck of those who signed the documents, or from their supervisors. It comes, essentially, from the shareholders of JPMorgan. If the company didn't pay this fine, that would be money it could distribute to shareholders in dividends.
In both cases, the Justice Department issued press releases. Press releases serve as part of the deterrence for any penalty. The Martinez press release reminds the public that bankruptcy forms must be completed accurately or else you'll go to prison. The U.S. Attorney of the Northern District of Texas emphasized this point: "This case is one of several felony prosecutions of bankruptcy-related crimes ... within the Northern District of Texas. Since February 2013, seven debtors have been charged with various felony offenses."
The DOJ also says in its press release that the JPMorgan settlement should serve as a deterrent. "This settlement should signal once again to banks and mortgage servicers that they cannot continue to flout legal requirements, compromise the integrity of the bankruptcy system and abuse their customers in financial distress," said Director Cliff White of the U.S. Trustee Program. "Other servicers should take note that the U.S. Trustee Program will continue to police their practices and will work to ensure that those who do not comply with bankruptcy law protections for homeowners will pay a price, just as Chase has done in this matter."
Yet what really is the message of the JPMorgan settlement? Those "who do not comply" with the law will "pay a price," the DOJ says. But who is who? Not an actual person. There will be no JPMorgan employee in the cell next to Ms. Martinez. The person who is paying the price is the shareholder, and the shareholder did not fail to comply with the law and commit perjury.
Curiously, this press release notes that JPMorgan Chase is a recidivist. That means it has committed violations before. It means that it has been undeterred from committing violations. Explains the DOJ's White, "Years after uncovering improper mortgage servicing practices and entering into court-ordered settlements to fix flawed systems, it is deeply disturbing that a major bank would still make improper court filings and fail to provide adequate and timely notices to homeowners about payments due."
The DOJ should read its own press releases about other JPMorgan violations. JPMorgan has run afoul of the law on numerous occasions.
The DOJ press release might as well say this: Don't be poor and violate the law. Work for a mega-bank and commit crimes with impunity. Lady Justice, the supposedly blindfolded arbiter of the law, is obviously not blind in the presence of crooks working at mega-banks.
The DOJ soon will be overseen by a new attorney general. Congress and the public must hold her accountable for equal justice. There should not be one set of rules for indebted individuals in Dallas and another for crooked lenders in New York.