To: Stuart F. Delery
Assistant Attorney General
Through: Maame Ewusi-Mensah Frimpong
Deputy Assistant Attorney General
September 9, 2013
FROM: Michael S. Blume°
Consumer Protection Branch
SUBJECT: Operation Choke Point: Six-Month Status Report
- We principally are pursuing civil, rather than criminal, investigations. Criminal investigations can take considerably longer to complete and generally require a more intensive investigation. Only if an investigation presents particularly egregious criminal conduct are we opening it as a criminal investigation.
- We are targeting banks more than payment processors, and payment processors more than merchants. Any one case, whether against a bank, a processor, or a merchant, takes substantial time and attention from our team. Bank cases will deter other banks, thereby stopping the processing of transactions for fraudulent merchants and the processors with which they work. This may mean filing civil complaints or criminal cases against banks based on transactions with fraudulent merchants and/or processors – but not filing actions against the underlying fraudulent merchants or processors. This practice is not optimal and may present litigation risks. But it may be necessary to prevent the initiative from grinding to a halt due to resources used pursuing the merchants and processors.
The financial institutions we are investigating have not suffered any actual losses, but such actual losses are not necessary under [the Financial Institutions Reform, Recovery and Enforcement Act]. There is only one case interpreting the phrase “affecting a financial institution” in the context of FIRREA, and that case supports our theory.
Although we recognize the possibility that banks may have therefore decided to stop doing business with legitimate lenders, we do not believe that such decisions should alter our investigative plans. Solving that problem – if it exists – should be left to the legitimate lenders themselves who can, through their own dealings with banks, present sufficient information to the banks to convince them that their business model and lending operations are wholly legitimate.