Jan. 30 (Bloomberg) -- Lanny Breuer, the U.S. Justice Department’s outgoing criminal division chief, said prosecutors have a new paradigm for corporate crime investigations, with wiretaps and insider witnesses becoming core components in the search for fraud convictions.
Breuer, often criticized for his division’s inability to bring criminal cases against Wall Street executives in the wake of the 2008 financial crisis, said he will leave his position March 1 after helping to implement tactics “that simply haven’t been used before.”
“We’re using wiretaps, flipping witnesses, pressuring witnesses -- we’ve been pretty aggressive,” Breuer, 54, said yesterday in an interview. “That has become the hallmark of those kinds of cases, and I think that is going to be the way white-collar case are investigated and prosecuted in the future.”
Breuer’s almost four years as assistant attorney general in charge of the criminal division are the longest tenure in that job in half a century. His division has overseen the largest criminal resolution in U.S. history in the $4 billion settlement with BP Plc over the 2010 Gulf of Mexico oil spill. Its investigation into the rigging of interest rates continues after settlements with two major banks, criminal charges against two traders and a guilty plea from a bank subsidiary.
Yet his critics seize on the shortcomings of his tenure, including an inability to pin cases on high-level Wall Street executives and the refusal to indict some financial institutions. Congressional investigators cited him for failing to notify superiors of problems during a bungled federal gun operation known as Fast and Furious.
Breuer said he understands the frustration with the lack of Wall Street prosecutions and said the industry’s behavior before the crisis was “morally reprehensible.” His difficulty is mirrored by U.S. attorney’s offices around the country, which also have been unable to make cases against illegal behavior by those blamed for the worst financial crisis since the Great Depression.
“I’m a big boy and I understand it,” said Breuer, a lawyer who defended then-President Bill Clinton and former New York Yankees pitcher Roger Clemens.
Still, he said, “all of us, independently and in partnership, at different times came to the same exact decision in these cases. And that’s got to count for something.”
Even when the Justice Department has brought charges against banks, lawmakers have criticized Breuer and Attorney General Eric Holder for caring more about the health of the largest banks than securing the maximum penalty.
“There should not be one set of rules that apply to Wall Street and another set for the rest of us,” Senators Sherrod Brown, an Ohio Democrat and Charles Grassley, an Iowa Republican, wrote yesterday in a letter to Holder.
Grassley, the top Republican on the Senate Judiciary Committee, has been one of Breuer’s most vocal critics. In December 2011, he used an almost-1,800 word Senate floor speech to call for Breuer’s resignation over the botched gun operation. Breuer acknowledged it was a difficult moment for the lawyer who keeps the roll call tally of his 88-0 Senate confirmation in 2009 framed in his office.
Breuer was admonished by Holder after he acknowledged in 2011 that he knew discredited “gun walking” tactics were used in an operation prior to Fast and Furious and didn’t alert his superiors or take steps to prevent them from being used again.
Breuer’s departure “is long overdue,” Representative Darrell Issa, a California Republican who led the congressional investigation into the Fast and Furious operation, which led to the loss of more than 2,000 guns across the Mexican border. Two of the guns were found at the scene of the 2010 murder of U.S. Border Patrol Agent Brian Terry.
“Had Breuer taken any action whatsoever, Fast and Furious would have ended eight months sooner than it did,” said Issa, the chairman of the House Oversight and Government Reform Committee. “This resignation paves the way for needed new leadership in the Criminal Division.”
Breuer said he was exonerated by the Justice Department’s inspector general, who also pointed out Breuer’s failure to notify his superiors in a lengthy report issued last year.
It’s all part of Breuer’s complex legacy. He secured more extraditions from Mexico to the United States in a single year than any of his predecessors and maintained close relationships with Mexican law enforcement authorities even as he became a central figure in the congressional probe into Fast and Furious.
The division’s fraud section secured eight of the 10 largest foreign bribery penalties in history, yet one of its largest cases, a sting operation carried out in Las Vegas, was plagued by the acquittal of some of those indicted in the case.
The department secured the largest forfeiture for money laundering and Bank Secrecy Act violations in history when HSBC Holdings Plc agreed to pay $1.25 billion last year. Breuer was criticized for not indicting the bank and instead settling for a deferred prosecution agreement.
In a statement yesterday, Holder praised Breuer for “accomplishing record penalties in corruption cases at home and abroad and dismantling major organized crime and health care fraud networks around the country while also protecting the integrity of our banking system and fighting financial fraud.”
Breuer, a perpetually in motion New Yorker whose parents fled Nazi-occupied Europe during World War II, repeats over and over that his job leading the criminal division was the best he’s ever had. He said that while he understands the criticism, he bristles at critics who “have become populists because they want to be on TV.”
He speaks proudly of the investigation into the rigging of benchmark interest rates, including the London Interbank Offered Rate, a global probe that has ensnared at least a dozen banks around the world. Breuer says the investigation may become the largest white-collar case in history against financial institutions.
While he declined to talk about ongoing cases, the government has secured two settlements so far and a third, with Royal Bank of Scotland Plc, might come as soon as next week, according to two people familiar with the negotiations who asked to not be named in discussing the matter.
“Libor is going to be with us for quite some time,” Breuer said.
He left the Covington & Burling law firm in 2009 to join the Justice Department. While he hasn’t decided what he plans next, he acknowledged that it probably won’t be difficult for him to find a job.
Breuer said he’s confident in what he’s leaving behind -- a division and a change in prosecutorial tactics that may pose a threat to future wrongdoing on Wall Street.
“The division is going to continue to grow and play bigger role,” Breuer said. “There will be more bank cases and there will be more bank convictions -- there is a trajectory and it’s going to continue.”
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