RMBS Group Plans Both Criminal Prosecution and Civil Sanctions

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Both criminal prosecution and civil sanctions will be used to go after those responsible for securitization abuses, U.S. Attorney General Eric Holder said Friday as government officials involved in the Residential Mortgage-Backed Securities Working Group under President Obama's Financial Fraud Enforcement Task Force formally met for the first time.

“Over the past three years, we have been aggressively investigating the causes of the financial crisis. And we have learned that much of the conduct that led to the crisis was–as the President has said–unethical, and, in many instances, extremely reckless. We also have learned that behavior that is unethical or reckless may not necessarily be criminal,” said Holder in a prepared speech. “When we find evidence of criminal wrongdoing, we bring criminal prosecutions. When we don't, we endeavor to use other tools available to us–such as civil sanctions–to seek justice.”

The President's working group includes the Department of Justice, several state attorneys general and other federal entities. It aims to “to investigate those responsible for misconduct contributing to the financial crisis through the pooling and sale of residential mortgage-backed securities.” 

The group will be in coordination with and in addition to the ongoing efforts and investigations by the Justice Department, FFETF members and state and federal law enforcement investigating and prosecuting other types of financial fraud.

In addition to Holder, among members of the group are director of enforcement for the U.S. Securities and Exchange Commission, Robert Khuzami; HUD Secretary Shaun Donovan; New York AG Eric Schneiderman; United States Attorney for the District of Colorado, John Walsh; and assistant AG for the Justice Department's Civil Division, Tony West.

Co-chairs of the group include Khuzami, Walsh, West and Lanny Breuer, assistant AG, Criminal Division, DOJ.

The new Working Group will consist of at least 55 Department of Justice attorneys, analysts, agents and investigators from around the country.  Currently, 15 civil and criminal attorneys are part of the Working Group, along with 10 FBI agents and analysts who will be assigned to the Working Group efforts.  An additional 30 attorneys, investigators and other staff around the country will join the Working Group efforts in coming weeks.

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