Insight- Top Justice Officials Connected to Mortgage Banks

8/3/2019 Insight- Top Justice Officials Connected to Mortgage Banks

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1/26/12 1:nsight: Top Justice officials connected to mortgage banks | Reuters

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Insight: Top Justice officials connected tomortgage banks

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By Scot J. Paltrow

Fri Jan 20, 2012 9:31am EST

(Reuters) - U.S. Attorney General Eric Holder and

Lanny Breuer, head of the Justice Department's

criminal division, were partners for years at a

Washington law firm that represented a Who's Who

of big banks and other companies at the center of

alleged foreclosure fraud, a Reuters inquiry shows.

The firm, Covington & Burling, is one of Washington's biggest white shoe

law firms. Law professors and other federal ethics experts said that federal

conflict of interest rules required Holder and Breuer to recuse themselves

from any Justice Department decisions relating to law firm clients they

personally had done work for.

Both the Justice Department and Covington declined to say if either official

had personally worked on matters for the big mortgage industry clients.

Justice Department spokeswoman Tracy Schmaler said Holder and Breuer

had complied fully with conflict of interest regulations, but she declined to

say if they had recused themselves from any matters related to the former

clients.

Reuters reported in December that under Holder and Breuer, the Justice

Department hasn't brought any criminal cases against big banks or other

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companies involved in mortgage servicing, even though copious evidence

has surfaced of apparent criminal violations in foreclosure cases.

The evidence, including records from federal and state courts and local

clerks' offices around the country, shows widespread forgery, perjury, obstruction of justice, and

illegal foreclosures on the homes of thousands of active-duty military personnel.

In recent weeks the Justice Department has come under renewed pressure from members of

Congress, state and local officials and homeowners' lawyers to open a wide-ranging criminal

investigation of mortgage servicers, the biggest of which have been Covington clients. So farJustice officials haven't responded publicly to any of the requests.

While Holder and Breuer were partners at Covington, the firm's clients included the four largest U.S

banks - Bank of America, Citigroup, JP Morgan Chase and Wells Fargo & Co - as well as at least

one other bank that is among the 10 largest mortgage servicers.

DEFENDER OF FREDDIE

Servicers perform routine mortgage maintenance tasks, including filing foreclosures, on behalf of

mortgage owners, usually groups of investors who bought mortgage-backed securities.

Covington represented Freddie Mac, one of the nation's biggest issuers of mortgage backed

securities, in enforcement investigations by federal financial regulators.

A particular concern by those pressing for an investigation is Covington's involvement with Virginia

based MERS Corp, which runs a vast computerized registry of mortgages. Little known before the

mortgage crisis hit, MERS, which stands for Mortgage Electronic Registration Systems, has been

the center of complaints about false or erroneous mortgage documents.

Court records show that Covington, in the late 1990s, provided legal opinion letters needed to

create MERS on behalf of Fannie Mae, Freddie Mac, Bank of America, JP Morgan Chase and

several other large banks. It was meant to speed up registration and transfers of mortgages. By

2010, MERS claimed to own about half of all mortgages in the U.S. -- roughly 60 million loans.

But evidence in numerous state and federal court cases around the country has shown that MERS

authorized thousands of bank employees to sign their names as MERS officials. The banks

allegedly drew up fake mortgage assignments, making it appear falsely that they had standing to f

foreclosures, and then had their own employees sign the documents as MERS "vice presidents" o

"assistant secretaries."

Covington in 2004 also wrote a crucial opinion letter commissioned by MERS, providing legal

justification for its electronic registry. MERS spokeswoman Karmela Lejarde declined to comment

on Covington legal work done for MERS.

It isn't known to what extent if any Covington has continued to represent the banks and other

mortgage firms since Holder and Breuer left. Covington declined to respond to questions from

Reuters. A Covington spokeswoman said the firm had no comment.

Several lawyers for homeowners have said that even if Holder and Breuer haven't violated any

ethics rules, their ties to Covington create an impression of bias toward the firms' clients, especiall

in the absence of any prosecutions by the Justice Department.

O. Max Gardner III, a lawyer who trains other attorneys to represent homeowners in bankruptcy

court foreclosure actions, said he attributes the Justice Department's reluctance to prosecute the

banks or their executives to the Obama White House's view that it might harm the economy.

But he said that the background of Holder and Breuer at Covington -- and their failure to act on

foreclosure fraud or publicly recuse themselves -- "doesn't pass the smell test."

Federal ethics regulations generally require new government officials to recuse themselves for one

year from involvement in matters involving clients they personally had represented at their former

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President Obama imposed additional restrictions on appointees that essentially extended the ban

two years. For Holder, that ban would have expired in February 2011, and in April for Breuer. Rule

also require officials to avoid creating the appearance of a conflict.

Schmaler, the Justice Department spokeswoman, said in an e-mail that "The Attorney General and

Assistant Attorney General Breuer have conformed with all financial, legal and ethical obligations

under law as well as additional ethical standards set by the Obama Administration."

She said they "routinely consult" the department's ethics officials for guidance. Without offering

specifics, Schmaler said they "have recused themselves from matters as required by the law."

Senior government officials often move to big Washington law firms, and lawyers from those firms

often move into government posts. But records show that in recent years the traffic between the

Justice Department and Covington & Burling has been particularly heavy. In 2010, Holder's deputy

chief of staff, John Garland, returned to Covington, as did Steven Fagell, who was Breuer's deputy

chief of staff in the criminal division.

The firm has on its web site a page listing its attorneys who are former federal government officials

Covington lists 22 from the Justice Department, and 12 from U.S. Attorneys offices, the Justice

Department's local federal prosecutors' offices around the country.

As Reuters reported in 2011, public records show large numbers of mortgage promissory notes wiapparently forged endorsements that were submitted as evidence to courts.

There also is evidence of almost routine manufacturing of false mortgage assignments, document

that transfer ownership of mortgages between banks or to groups of investors. In foreclosure

actions in courts mortgage assignments are required to show that a bank has the legal r ight to

foreclose.

In an interview in late 2011, Raymond Brescia, a visiting professor at Yale Law School who has

written about foreclosure practices said, "I think it's difficult to find a fraud of this size on the U.S.

court system in U.S. history."

Holder has resisted calls for a criminal investigation since October 2010, when evidence of

widespread "robo-signing" first surfaced. That involved mortgage servicer employees falsely signin

and swearing to massive numbers of affidavits and other foreclosure documents that they had nev

read or checked for accuracy.

Recent calls for a wide-ranging criminal investigation of the mortgage servicing industry have com

from members of Congress, including Senator Maria Cantwell, D-Wash., state officials, and county

clerks. In recent months clerks from around the country have examined mortgage and foreclosure

records filed with them and reported finding high percentages of apparently fraudulent documents

On Wednesday, John O'Brien Jr., register of deeds in Salem, Mass., announced that he had sent

31,897 allegedly fraudulent foreclosure-related documents to Holder. O'Brien said he asked for a

criminal investigation of servicers and their law firms that had filed the documents because they

"show a pattern of fraud," forgery and false notarizations.

(Reporting By Scot J. Paltrow, editing by Blake Morrison)


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Comments (28)

AbigailCField wrote:

hen I wrote about this last week, I also pointed out the connection between Covington & Burling and theFinancial Fraud Enforcement Task Force, which was supposed to target the perpetrators of the FinancialMeltdown:

James Garland, who joined Justice with Holder but left in 2010: At Justice, Garland

advised Attorney General Eric Holder on a range of enforcement issues, with an emphasis on criminal!matters, and helped to spearhead the Departments response to the ongoing economic crisis. He wasdeeply involved in the creation of President Obamas Financial Fraud Enforcement Task Force! Heworked closely with senior officials at the White House, Main Justice, the U.S. Attorneys Offices, and othefederal, state, and local enforcement agencies. [Bold added]

NOTE: the bolded language is no longer in Covingtons bio of Garland. But it was when I wrote the piecelast February.

Steve Fagell, who joined Justice with Holder but also left in 2010:

a member of the Criminal Divisions senior leadership team, [and] a key advisor to Assistant AttorneyGeneral Lanny A. Breuer![Fagell] was integrally involved, for example, in the formulation andcommunication of Division policy in connection with

!

corporate and securities fraud, and other forms offinancial fraud.!Mr. Fagell also coordinated the Divisions work with the Financial Fraud Enforcement TasForce and the Financial Crisis Inquiry Commission![Bold added]

And thats just a piece of the connections between top Justice folks and Covington.

See, our top prosecutor, his top criminal enforcement deputy, and two key architects of Justices approacho Financial Meltdown enforcement all worked or now again work for the very people and companies Justiis failing to prosecute. How much of a coincidence can that be?

My full piece is at http://abigailcfield.com/?p=686

Jan 20, 2012 7:48am EST -- Report as abuse

breezinthru wrote:

At last! For several years, I have been railing about Eric Holder and the Justice Departments refusal to usRICO laws to prosecute the largest financial fraud in the history of the world. I couldnt understand how thawas possible. A few modest fines by the SEC in this situation was not only a non-punishment; it was aninsult to the intelligence of the American public and an insult to the concept of the rule of law in America.

Since 1972, the only time I ever cast a vote for a Republican presidential candidate was in 2008 andObama had my vote until he and McCain both voted to bail out Wall Street. I ended up voting for Ron Paul

Obama must demand the resignation of his Attorney General immediately and bring in someone whointends to restore justice and the rule of law to America! If he does, Obama will get my enthusiastic vote. Ifnot, Obama is as culpable for what has been going on as is Dimon and Blankfein.


AZWarriorwrote:

Its the Chicago Way.


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