I am discouraged. Where is the fairness to the American people? And what is wrong with the Justice Department ? Weak? Or are they wow’d by people with big money? Or is there no sense of decency and fairness?
First some background: if you – yes you – are suspected of defrauding a couple hundred thousand dollars or less (even $500!) you will get criminally investigated by the Justice Department and, if charged and convicted, you go to prison. That’s bad. Prison is really lousy. You will also forever have a criminal record which matters if you ever get out of prison. While in prison, you will likely lose everything you have and, if married, your spouse might divorce you. On top of the prison sentence, you could get a financial penalty – which is lousy since chances are you don’t have a lot of money after paying a lawyer – but it is the prison time that really hurts.
But if you individually (or the corporation) are suspected of defrauding in really, really, really big numbers - millions or billions big - the Justice Department only does a civil investigation of you.
Civil is very different from criminal!
If, after the civil investigation, you are found civilly liable, you only pay a penalty — and either you are already rich so a monetary penalty is meaningless or often that gets paid by someone else (your company?) With civil penalties, you can’t go to prison. THERE IS NO PRISON with civil penalties. You also don’t have a criminal record. Chances are even your country club won’t care.
Fair? No..and you know it is not.
I thought when I read the headline below on the NYT article that this was a good thing: S & P getting investigated!! I don’t know if there is a crime or not, or if there is, whether it was committed by S & P or not, but because of the catastrophic consequences of what happened to the housing market, S & P should be investigated. We need to know if 1/ a crime was committed and, if it was, we need to know 2/ the organization or individuals who committed a crime and they should be criminally prosecuted.
As you know from watching ON THE RECORD at 10pm, I was the first (or nearly the first) to cry foul about S & P. I knew that they were up to their eyeballs in giving AAA ratings to the credit default swap that were toxic, ultimately failed causing the housing market to come crashing down on us and ruining our entire nation’s economy. I was reminded of that absurd AAA to the toxic stocks when they came back on the radar screen about our nation’s credit rating. Something about those credit swap AAA just didn’t seem right to me. It seemed like too much money was involved and the consequences so catastrophic. I did not know and I don’t know if a crime was committed but there sure is smoke so I suspected fire.
Now fast forward to the article below. It reveals that the cowardly Justice Department has likewise noticed the smoke and has opened an investigation on S & P…a CIVIL investigation, not a criminal. Can you believe it??? A civil investigation!!
This should be a criminal investigation. Here is how it should work: first there should be a criminal investigation. If there is no crime or it can’t be proven beyond a reasonable doubt, then secondly, the Justice Department should THEN investigate to see if there are civil violations (lower burden of proof.)
What Justice should not do is be so dismissive to not consider that this might be a criminal case at the beginning.
As noted above, I don’t know if S & P or individuals at S & P committed a crime, but why is the Justice Department so cozy with them that they only do a CIVIL investigation?
I am certain if the Justice Department investigate you or me….it would be a CRIMINAL one from the beginning.
It may turn out that S & P did zero wrong but the investigation should start with criminal – they should not get some cozy deal where it is a civil investigation.
This is disgraceful. It just is not right.
Read below…or skip to the blue and red text.
U.S. Inquiry Eyes S.&P. Ratings of Mortgages
By LOUISE STORY
The Justice Department is investigating whether the nation’s largest credit ratings agency, Standard & Poor’s, improperly rated dozens of mortgage securities in the years leading up to the financial crisis, according to two people interviewed by the government and another briefed on such interviews.
The investigation began before Standard & Poor’s cut the United States’ AAA credit rating this month, but it is likely to add fuel to the political firestorm that has surrounded that action. Lawmakers and some administration officials have since questioned the agency’s secretive process, its credibility and the competence of its analysts, claiming to have found an error in its debt calculations.
In the mortgage inquiry, the Justice Department has been asking about instances in which the company’s analysts wanted to award lower ratings on mortgage bonds but may have been overruled by other S.& P. business managers, according to the people with knowledge of the interviews. If the government finds enough evidence to support such a case, which is likely to be a civil case, it could undercut S.& P.’s longstanding claim that its analysts act independently from business concerns.
It is unclear if the Justice Department investigation involves the other two ratings agencies, Moody’s and Fitch, or only S.& P.
During the boom years, S.& P. and other ratings agencies reaped record profits as they bestowed their highest ratings on bundles of troubled mortgage loans, which made the mortgages appear less risky and thus more valuable. They failed to anticipate the deterioration that would come in the housing market and devastate the financial system.
Since the crisis, the agencies’ business practices and models have been criticized from many corners, including in Congressional hearings and reports that have raised questions about whether independent analysis was corrupted by the drive for profits.
The Securities and Exchange Commission has also been investigating possible wrongdoing at S.& P., according to a person interviewed on that matter, and may be looking at the other two major agencies, Moody’s and Fitch Ratings.
Ed Sweeney, a spokesman for S.& P., said in an e-mail: “S.& P. has received several requests from different government agencies over the last few years. We continue to cooperate with these requests. We do not prevent such agencies from speaking with current or former employees.” S.& P. is a unit of the McGraw-Hill Companies, which is under pressure from some investors and has been considering whether to spin off businesses or make other strategic changes this summer.
The people with knowledge of the investigation said it had picked up steam early this summer, well before the debt rating issue reached a high pitch in Washington. Now members of Congress are investigating why S.& P. removed the nation’s AAA rating, which is highly important to financial markets.
Representatives of the Justice Department and the S.E.C. declined to comment, as is customary for those departments, on whether they are investigating the ratings agencies.
Even though the Justice Department has the power to bring criminal charges, witnesses who have been interviewed have been told by investigators that they are pursuing a civil case.
The government has brought CLICK HERE