U.S. News

Senators question lack of Wall Street prosecutions

WASHINGTON (Reuters) - Senators pressed investigators on a lack of prosecutions of top Wall Street executives in the wake of the most severe financial crisis since the Great Depression.

A bronze sculpture of the New York Stock Exchange Bull is seen at the Museum of American Finance in New York October 2, 2008. REUTERS/Shannon Stapleton

“I will say right now that I’m frustrated,” Sen. Edward Kaufman, a Delaware Democrat on the Judiciary Committee, said on Wednesday.

“We have seen very little in the way of senior officer or boardroom-level prosecutions of the people on Wall Street who brought this country to the brink of financial ruin. Why is that?”

Criminal and civil investigators defended their record, which includes the U.S. Securities and Exchange Commission’s landmark $550 million settlement with investment bank Goldman Sachs Group Inc.

However, there have been few criminal prosecutions of Wall Street figures. Prosecutors have struggled to build cases proving fraudulent behavior or other criminal misconduct, and have dropped high-profile cases such as one against former American International Group Inc executive Joseph Cassano.

Lanny Breuer, assistant attorney general in the Department of Justice’s criminal division, said the DOJ has “put enormous resources” in the most complicated cases.

He stressed those cases take time to come to fruition, with prosecutors reviewing “tens of thousands” of documents to build a case.


Senior officials from the SEC, the Justice Department and the Federal Bureau of Investigation said their agencies are more active and more able to fight such crimes after the passage of fraud enforcement reforms over the last two years.

Kevin Perkins, assistant director of the FBI’s criminal investigative division, said corporate fraud cases are on the rise, with new cases up 111 percent in recent years, he said, while high-yield securities fraud cases are up by more than 200 percent.

The SEC also said it has become a more effective watchdog, but Republican Sen. Chuck Grassley questioned whether it has really fixed problems that led to oversight failures in the run-up to the financial crisis.

Grassley asked SEC enforcement director Robert Khuzami if any personnel had been let go as a result of failures to catch convicted Ponzi schemer Bernard Madoff before his $65 billion fraud collapsed.

Khuzami said the agency’s report on its investigation into Madoff was complete, and “those decisions will be made in the very near future.”

Earlier in the day at a Senate Banking Committee meeting, Khuzami was peppered with similar questions about whether personnel had been fired as a result of the agency’s sluggish pursuit of Allen Stanford’s alleged Ponzi scheme.

Khuzami said the agency, with recent reforms, is more capable of fighting frauds and other financial crime before it grows into an enormous problem for investors.

Reporting by Joe Rauch; Editing by Gerald E. McCormick, Steve Orlofsky and Matthew Lewis