| NEW YORK
NEW YORK Nov 12 The federal judge who oversaw
the recent civil fraud trial against Bank of America Corp
criticized the U.S. Department of Justice on Tuesday for
failing to prosecute high-level executives over the financial
U.S. District Judge Jed Rakoff of Manhattan said while
companies have been prosecuted for causing the 2007-2009
financial meltdown, Wall Street executives have escaped justice.
"The failure of the government to bring to justice those
responsible for such a massive fraud speaks greatly to
weaknesses in our prosecutorial system that need to be
addressed," Rakoff said.
Rakoff, who was appointed by President Bill Clinton in 1996,
blamed the lack of criminal cases on a shortage of investigatory
resources coupled with an over-emphasis on bringing cases
against companies rather than individuals.
Rakoff's critique drew a quick reaction from the Justice
Department, where a spokeswoman said top prosecutors are
"aggressively working" on several ongoing investigations.
"No individual or institution is above the law and we will
continue to follow the evidence where it leads to hold the
appropriate people and institutions accountable," Adora Andy
Jenkins, a department spokeswoman, said in an email.
The Justice Department this year brought two civil fraud
cases against Bank of America in connection with the sale of
In another case, a federal jury in Rakoff's court last month
found Bank of America and a mid-level executive liable for fraud
over defective loans Countrywide Financial Corp sold to Fannie
Mae and Freddie Mac. The Justice Department on Friday asked
Rakoff to penalize the company $863.6 million.
The department also has been engaged in talks with JPMorgan
Chase & Co about a potential $13 billion settlement
resolving mortgage securities probes.
'BRING THE CASES YOU CAN'
Nevertheless, federal authorities remain on the defensive
for not successfully bringing criminal cases against top
executives at the banks that cobbled together the complex
mortgage products at the heart of the crisis.
U.S. Attorney Preet Bharara, asked at another conference in
New York on Tuesday why prosecutors had not brought charges
against executives at Lehman Brothers Holdings Inc after the
bank collapsed in 2008, responded: "You bring the cases you can
based on the evidence you have."
Rakoff has previously tended to direct his criticisms at the
U.S. Securities and Exchange Commission rather than the Justice
Department. In 2011, he rejected a $285 million settlement
between the SEC and Citigroup Inc for being too lenient.
In his speech Tuesday, Rakoff cited remarks in March by
Attorney General Eric Holder, who said he was concerned that
prosecuting some banks "will have a negative impact on the
national economy, perhaps even the world economy."
"I have to say," Rakoff said, "to federal judges who take an
oath to apply the law equally to the rich and the poor, this
excuse, sometimes labeled the 'too big to jail excuse,' is
mindboggling in what it says about the department's disregard of
fundamental legal principles."
Rakoff said the question of whether banks are "too big to
jail" is "entirely irrelevant" to whether individual executives
should be charged.
Rakoff also questioned whether the government's own role in
the events leading up to the financial crisis was a factor. He
cited the federal government's encouragement of lending to
people who previously couldn't qualify for mortgages.
"This could give a prudent prosecutor pause in deciding
whether to indict a CEO who might, with some justice, claim he
was only doing what he fairly believed the government wanted him
to do," Rakoff said.
Rakoff saved some of his strongest criticism for the policy
of pursuing cases not against executives but against the
companies themselves, often through deferred prosecution
"From a moral standpoint, punishing a company and usually or
mostly innocent employees and shareholders for the crime of a
few unprosecuted individuals seems contrary to the elementary
notions of moral responsibility," Rakoff said.