Wall Street’s Worst at Least Know Math: Jonathan Weil

It’s bad enough that there have been no criminal convictions of any of the executives who helped bring the banking system and our economy to its knees. Now the Justice Department is touting trumped-up numbers as it tries to show it’s cracking down on financial fraud.

This week U.S. Attorney General Eric Holder held a news conference to praise the results of “Operation Broken Trust,” which he called “a critical step forward in law enforcement’s work to protect American investors.”

Holder said the sweep by President Barack Obama’s Financial Fraud Enforcement Task Force began Aug. 16 and resulted in 231 cases against 343 criminal defendants as of Dec. 1. All told there were 64 arrests, 158 indictments or complaints, 104 convictions and 87 sentencings, according to the Justice Department’s tally. Holder also credited the operation with 60 civil suits against 189 defendants.

The statistics looked squirrely on their face. Some of these cases began years ago, long before the multiagency task force was formed. It’s obvious what the prosecutors did here, too. First they tracked down every small-fry Ponzi scheme, affinity fraud and penny-stock pump-and-dump they could find that had advanced through the courts since mid-August. Then they totaled them up and called it a sweep, lumping together cases that had nothing to do with each other.

Just out of curiosity, I asked a Justice Department spokeswoman, Alisa Finelli, for the names of the cases. She sent me a 16-page printout of the criminal defendants. (After initially saying the civil defendants’ names weren’t available, she sent me those late last night.) The first page of the criminal list had 20 names, which I figured was as good a sample as any to use for picking cases to look up. It soon became clear that the list wasn’t entirely correct.

Count Early

For instance, the list said a fellow named Lorenzo Altadonna had been convicted in the Western District of New York on Oct. 27. Actually, he was sentenced to three years probation on Aug. 5, court records show. That was 11 days before Operation Broken Trust began, which means the task force shouldn’t have counted him in its results, even by its own loopy methodology. Finelli said Altadonna was included mistakenly.

The first page of the list also showed a Nov. 8 federal conviction in New Jersey of a man whom I won’t name here. There was no record for him on Pacer, which is the government’s online database of federal court proceedings. But I did find an Oct. 13 article in the Daily Record of Parsippany, New Jersey, about a fraud at an insurance agency where a person with the same name had worked. The article said he had not been charged criminally. Finelli declined to comment on why he was included in the task force’s list of defendants.

Justice for All

So of the 20 cases at the top of the government’s defendant list, two of them didn’t check out. Other defendants included a swindler named Lee Anglin, who was sentenced on Nov. 16. Court records show he was arrested in March 2006 and convicted in July 2009. The task force had nothing to do with nabbing him.

Another defendant, Anthony Antonelli, was sentenced Sept. 7. Court records in his case show he struck a plea bargain with prosecutors in January 2009. The lesson here: Justice delayed is justice counted.

I spot-checked a few names on the list’s other pages, too. One was a guy in Illinois named Kevin Carney, who pleaded guilty on Aug. 18 in a Cook County circuit court to fraud and theft charges, according to a press release by the Illinois attorney general’s office, which prosecuted the case. That was just two days after Operation Broken Trust’s start date.

On Message

The task force’s executive director, Robb Adkins, said in an interview that the point of this week’s announcement was to increase public awareness about these types of frauds and “send a message to would-be wrongdoers.” He said “there was a very large detailed effort to track the numbers,” and that he didn’t want anyone to think the task force was trying to take credit for investigations that started before Operation Broken Trust.

When I asked him why the government hadn’t prosecuted any senior executives from companies at the heart of the financial crisis, he said: “Where there is wrongdoing we will bring charges, but beyond that I just can’t comment.”

By all outward appearances, it seems the Justice Department either doesn’t want to prosecute systemically important frauds, or doesn’t know how. Or maybe it’s both.

It wasn’t always this way. More than a thousand felony convictions followed the savings-and-loan scandal of the 1980s and early 1990s. Some of the biggest kingpins, such as Charles Keating of Lincoln Savings & Loan, went to jail. With this latest financial crisis, there’s been no such accountability.

Operation Broken Trust may be a fitting name. Unfortunately it’s for all the wrong reasons. The public already knows not to trust the government. Flimflam P.R. stunts such as this one at least offer us a useful reminder of why.

(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)

Click on “Send Comment” in the sidebar display to send a letter to the editor.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE