Holder Warns of Charges Against Bankers, Seeks Informants

U.S. Attorney General Eric Holder is bearing down on Wall Street, warning of charges against individual bankers and pushing for bigger rewards for executives who come forward with evidence of financial crime.

“A corporation may enter a guilty plea and still see its stock price rise the next day. But an individual who is found guilty of a serious fraud crime is most likely going to prison,” Holder said in a speech today in New York.

Holder called for a new law to boost rewards for whistleblowers who provide evidence of wrongdoing. He also said that the Federal Bureau of Investigation needs more forensic accountants to pursue misconduct.

Holder’s Justice Department is still fighting criticism it didn’t do enough to punish Wall Street executives who helped fuel the 2008 financial crisis. Prosecutors have active investigations into individuals at major banks and could file criminal charges against them in the coming months, he said. While regulators and prosecutors have repeatedly cited the need to sanction individuals, executives have been largely absent from recent major cases.

Under the Financial Institutions Reform, Recovery and Enforcement Act -- a law that has been used against banks that sold faulty mortgages -- whistleblowers can receive a maximum of $1.6 million. That amount is insufficient to persuade bankers to risk their careers, Holder said.

Currency Investigation

Prosecutors have targeted individuals in an investigation of possible manipulation of foreign-exchange benchmarks. They are preparing to file charges as soon as next month against currency traders at some of the world’s biggest banks, two people familiar with the matter have said. Another person said charges will probably not be filed until next year.

Holder said that “undercover cooperators” have helped prosecutors build the currency manipulation case. Banks could settle with U.S. and U.K regulators as soon as November, people familiar with the matter have said.

Cooperators often provide “smoking gun” evidence of intent to commit fraud, an element needed to make criminal cases against financial executives, Holder said. Informants aided the department’s investigations into the rigging of benchmark interest rates and insider trading, he said.

Information Windfall

Holder echoed recent comments made by criminal division chief, Leslie Caldwell, who said charging individuals can deter criminal conduct in ways that charging a company cannot.

Existing cooperation agreements between the Justice Department and several of the banks under investigation have also provided a windfall of information to federal prosecutors. The agreements were put in place when UBS AG, Barclays Plc and Royal Bank of Scotland Group Plc resolved a Justice Department investigation into how the London interbank offered rate, or Libor, was set.

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