The Big Bank Backlash Begins

Last week, I visited an alternate universe. The real world sees a pandemic of bank misconduct, but to the white-collar defense lawyers of Washington, the banks are the victims as they bow beneath the weight of regulators’ remarkably harsh punishments.

I was attending the Securities Enforcement Forum, a gathering of top regulators and white-collar defense worthies. The marquee section was a panel that included Andrew Ceresney, the current S.E.C. enforcement director, and five of his predecessors. Four of those former S.E.C. officials represent corporations at prominent white-collar law firms: Robert S. Khuzami, President Obama’s first enforcement director who now plies his trade at Kirkland & Ellis; Linda Chatman Thomsen, who served at the George W. Bush-era S.E.C. and now works for Davis Polk & Wardwell; William R. McLucas, the longest-serving agency enforcement director who is now at WilmerHale; and George S. Canellos, who just left the Obama S.E.C. to work for Milbank Tweed. (The well-known Stanley Sporkin, who served in the agency in the 1970s, rounded the panel out.)

The conference turned into a free-for-all of high-powered and influential white-collar defense lawyers hammering regulators on how unfair they have been to their clients, some of America’s largest financial companies.

The critics have multiple complaints about the S.E.C.

Mr. McLucas and Ms. Thomsen assailed the S.E.C. for applying the “broken windows” theory to corporate crime. Indeed, in a nice bit of message-discipline, one of the Republican commissioners of the agency attacked the practice in a speech at the conference earlier in the morning. This theory, borrowed from the urban policing tactic, argues that crime is deterred when law enforcement agencies arrest people for minor infractions, like riding public transportation without paying the fare. The lawyers argued that the commission has focused too much on smaller infractions, like minor misrepresentations in corporate filings. The lonely Mr. Ceresney explained patiently that the agency was only going to go after patterns of real violations, even if they were small. Not allowing small violations to slide puts companies on notice that the S.E.C. is vigilant, he argued.

Mr. Khuzami and Ms. Thomsen raised questions about whether it was fair for the agency to use administrative proceedings to push its cases. Administrative hearings happen before a specialized court without the usual rules and checks of a true proceeding in the courts. The critics liken it to getting a hometown judge instead of putting the cases up to the test of judges and juries. Banks send their disputes to arbitration rather than the courts. When the government does it, they scream foul.

Read on.

Senator Tom Coburn’s Wastebook 2014: What Washington doesn’t want you to read


Unbelievable, the people involved in this wasteful spending should be fired.

Voodoo Dolls, Gambling Monkeys, Zombies in Love and Paid Vacations for Misbehaving Bureaucrats Top List of the Most Outlandish Government Spending in Wastebook 2014

Examples of wasteful spending highlighted in “Wastebook 2014” include:

  • Coast guard party patrols – $100,000
  • Watching grass grow – $10,000
  • State department tweets @ terrorists – $3 million
  • Swedish massages for rabbits – $387,000
  • Paid vacations for bureaucrats gone wild – $20 million
  • Mountain lions on a treadmill – $856,000
  • Synchronized swimming for sea monkeys – $50,000
  • Pentagon to destroy $16 billion in unused ammunition — $1 billion
  • Scientists hope monkey gambling unlocks secrets of free will –$171,000
  • Rich and famous rent out their luxury pads tax free – $10 million
  • Studying “hangry” spouses stabbing voodoo dolls – $331,000
  • Promoting U.S. culture around the globe with nose flutists – $90 million

Read Senator Coburn’s full report here.

MA AG Martha Coakley’s foreclosure suit against Freddie Mac, Fannie Mae dismissed by judge

BOSTON — A federal judge has dismissed a lawsuit filed by Attorney General MarthaCoakley against the Federal Housing Finance Agency and mortgage giants Fannie Mae andFreddie Mac, saying the court doesn’t have oversight of the matter.

Coakley sued the agencies earlier this year for refusing to comply with a state law designed to ease the tide of foreclosures in Massachusetts.

Coakley said Fannie Mae and Freddie Mac violated a 2012 Massachusetts law allowing the sale of homes in foreclosure to nonprofit organizations who intend to restructure the loan and sell the property back to the original homeowner.

U.S. District Court Judge Richard Stearns dismissed the lawsuit, saying federal lawmakers have “expressly removed such conservatorship decisions from the courts’ oversight.”

Read on.

Ocwen’s Backdated Letters May Violate Consent Order By CFPB and 49 state AGs

Revelations that Ocwen Financial Corp. (OCN), the largest U.S. nonbank servicer, backdated thousands of letters tostruggling borrowers may violate the settlement it struck in December with the Consumer Financial Protection Bureau and 49 state attorneys general.

That agreement, reached in December 2013, was intended to resolve mortgage-servicing issues with homeowners at Atlanta-based Ocwen and companies it acquired over the years. Benjamin Lawsky, head of New York’s Department of Financial Services, said in a letter yesterday that Ocwen backdated thousands of loan modification denial notices to borrowers in 2012 and continuing into 2014. The backdating left some borrowers with insufficient time to appeal the denials, according to the letter, “likely causing them significant harm.”

“The existence and pervasiveness of these issues raise critical questions about Ocwen’s ability to perform its core function of servicing loans,” Lawsky wrote.

Read on.

J.P. Morgan was aware of overseas hiring concerns before U.S. probe

Ah, another day, another crime…

Several executives at J.P. Morgan Chase & Co. in New York were warned of potential problems related to the bank’s hiring practices in China more than a year before the program came under scrutiny by the U.S. government, according to people familiar with the matter and documents reviewed by The Wall Street Journal.

A bank official in Asia alerted legal and compliance executives in New York in 2011 of anonymous accusations that the bank’s recruitment of a prominent son or daughter of a senior Chinese official helped it win an investment-banking assignment, according to company emails reviewed by the Journal. J.P. MorganJPM, -0.48%  officials later discussed those accusations, and changes were proposed to the region’s hiring practices, according to the emails.

Read on.

Tennessee Woman sentenced to jail for not mowing her lawn

And how many bankers were sent to jail?? Never mind…

From Yahoo News:

 If you are a resident of Lenoir City, Tennessee, you might want to remember to mow your lawn — otherwise, you will be spending the night in jail.

Karen Holloway just spent six hours in a jail cell for failing to maintain her yard in accordance with the standards set by the city.

The saga began last summer, when Holloway was sent a citation for her overgrown grass and shrubbery. Holloway, who works a full-time job and has two children living at home, a husband in school, and one family vehicle, admits the yard needed some attention but that it just wasn’t feasible to do the work.

“The bushes and trees were overgrown. But that’s certainly not a criminal offense,” she says.

Last week, Judge Terry Vann handed down a five-day jail sentence to Holloway for refusing to comply with the city ordinances regarding yard maintenance, specifically the lack thereof. Holloway feels this was all just too much, saying, “It’s not right. Why would you put me in jail with child molesters and people who’ve done real crimes, because I haven’t maintained my yard.”

In addition to the severity of the sentencing, Holloway say she also feels that she was bullied during the process because she was never read her rights or told that she could have a lawyer present.

Oops! Ocwen admits to faulty letters to borrowers

Having we heard this story before???

October 21, 2014

Ocwen Corrects Earlier Statement in Response to Letter From New York Department of Financial Services

ATLANTA, Oct. 21, 2014 (GLOBE NEWSWIRE) — Ocwen Financial Corporation (NYSE:OCN), the nation’s largest independent mortgage servicer, today issued the following update to its earlier statement addressing a letter it received from the New York Department of Financial Services (“DFS”) related to erroneously dated borrower correspondence:

“Ocwen wishes to correct its statement in a press release earlier today that 283 borrowers in New York received letters with incorrect dates. Ocwen is aware of additional borrowers in New York who received letters with incorrect dates but does not yet know how many such letters there were. Ocwen is continuing its investigation into these matters. We are working with and fully cooperating with DFS and the Monitor to address their concerns.”

Source: Ocwen website