DEC 2, 2013

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Compliance Matters

TARP Agents Recover $28M Defrauded from U.S. Taxpayers

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Twenty million dollars here, $30 million there, and pretty soon you are talking about real money, to paraphrase former Sen. Everett Dirksen. Perhaps that’s the attitude about recovering funds that drives a couple of award-winning, crime-busting sleuths from the Office of the Special Inspector General for the Troubled Asset Relief Program.

For uncovering and bringing to justice the perpetrators of a $28 million fraud, James Harbin and Charles Mullaly, two special agents of SIGTARP, were awarded the 2013 Award for Excellence in Investigations from the Council of the Inspectors General on Integrity and Efficiency.

SIGTARP is a federal agency that investigates those who waste, steal or abuse TARP funds; CIGIE is composed of inspectors general and government ethics and law enforcement officials.

My first instinct upon hearing the exploits of these two men was to poo-poo the achievement. After all, $28 million hardly makes a dent in all the money lost when the mortgage bubble crashed.

But having read about the work the agency performs and its successes, I realized that I was being too harsh. So I’ve suspended my disbelief, and with a mind as open as a good social worker’s listening to the successes of a patient, once again reviewed SIGTARP’s achievements.

Their work is nothing short of awe inspiring—even if part of the press release announcing their well-deserved honor, reads like the introduction to an episode of the Superman TV show.

“This recognition highlights SIGTARP’s commitment to exposing fraud related to TARP undertaken at the expense of the American public,” said Christy Romero, Special Inspector General for TARP.  “SIGTARP and our law enforcement partners will continue to bring justice to those who seek to exploit and defraud TARP.”

But I digress.

The winners, Harbin and Mullaly, deserve the accolades they’ve received for a job well done.

They earned the award for uncovering a bank fraud conspiracy involving two former senior officers at American Mortgage Specialists, a mortgage lender. Scott Powers, chief executive officer; and David McMaster, vice president of lending operations, conspired to defraud TARP-recipient BNC National Bank out of about $28 million.

As a consequence, BNC National, which had received $20 million in TARP funds, was unable to make its required dividend payments to the Department of the Treasury for three years.

Having been found guilty of fraud, Powers and McMaster were sentenced to a combined 23 years in federal prison. Also, they received $28.6 million in restitution and forfeiture orders. In addition, Lauretta Horton, director of accounting; and David Kaufman, an outside auditor, were convicted for their roles in the fraud.

SIGTARP’s record for putting the guilty behind bars, or otherwise paying for their crimes, has been impressive.

It was responsible for criminal charges filed against 154 people, including 98 senior officers. Criminal convictions of 112 individuals, with 65 sentenced to prison and the rest awaiting sentencing. Fully 60 people were banned from working in finance or banking, as a contractor for the federal government or as an attorney. SIGTARP is working on more than 150 ongoing criminal and civil investigations.

Among the mortgage cases SIGTARP worked on are Taylor, Bean & Whitaker Mortgage Corp. and Colonial Bancgroup; online mortgage modification scams advertised on Google, Yahoo and Bing; Distressed Homeowners Initiative; and the Nations Housing Modification Center.

But there’s more.

Since its 2008 inception, the agency and its law-enforcement partners have been responsible for restitution and forfeiture as well as civil judgments of $4.7 billion.

Even to Senator Dirksen, that’s real money.

Matt Strickberger is the managing partner of OnPoint PR and Consulting LLC, a public relations firm that represents lenders, servicers, technology companies and others. He was editor of Mortgage Technology magazine from 1997-2000. If you have comments or suggestions for future columns, email him at mstrickberger@onpoint-pr.com.

Comments (4)
It's only real money if you actually get it back. Orders to pay $4.7 billion is much different than actually receiving $4.7 billion. I'd like to know how much they have actually collected from these people.
Posted by AL | Monday, December 02 2013 at 3:04PM ET
Good observation. This would be a lot more impressive if these weren't just minnows while the big fish that caused the problems are still free.
Posted by Gguy | Monday, December 02 2013 at 3:37PM ET
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