A clutch of Obama administration bigwigs — Attorney General Eric Holder, Treasury Secretary Timothy Geithner, Housing Department Secretary Shawn Donovan and Securities and Exchange Commission enforcement chief Robert Khuzami — gathered round on Tuesday to announce the formation of a new interagency effort to fight financial fraud. According to the DOJ watchers at Main Justice, the new group, which is to be called the Financial Fraud Enforcement Task Force, “will comprise senior-level officials from more than 20 departments, agencies, and offices” and will “target financial crimes that played a role in the financial crisis and try to deter future fraud.”
But wait. Didn’t the Bush administration do the exact same thing (albeit with a different cast of characters) after the Enron and WorldCom scandals? The old interagency group, founded by executive order in 2002, was called the Corporate Fraud Task Force. It was supposed to restore investor confidence by prosecuting those who’d already committed business crimes and by scaring off future corporate criminals.
As the American Lawyer chronicled in a special 2007 issue devoted to corporate fraud litigation, the Corporate Fraud Task Force did have some important wins. On the fifth anniversary of the group’s formation, then-Attorney General Alberto Gonzales announced that the task force had won 1,236 corporate fraud convictions, including the convictions of 214 chief executive officers and presidents, 53 chief financial officers, 23 corporate lawyers and 129 vice presidents.
The Am Law special report noted, however, that most of the task force’s prosecutions were launched in its early days. Prosecutions dropped off sharply after 2004, which was the last year that DOJ issued a detailed report on the task force’s work. “That decline raises a critical question,” wrote reporter Daphne Eviatar, with prescient skepticism. “Has the problem of corporate fraud really been solved, as Gonzales suggested at his celebration in July? Or has the Justice Department simply stopped trying as hard to prosecute it?”
As we now know, the Corporate Fraud Task Force didn’t exactly accomplish its mission of deterring financial fraud. The Obama administration promises in its press release announcing the new group — which replaces the still-alive-but-no-one-knew-it CFTF — that the Financial Fraud Enforcement Task Force will be even more ambitious than the old group, drawing on the expertise of more than twice as many state and federal agencies.
The FFETF, said Attorney General Holder, “will wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. We will marshal the criminal and civil enforcement resources of the executive branch to investigate and prosecute financial fraud cases; recover stolen funds for victims; address discrimination in lending and financial markets; and enhance coordination and cooperation among federal, state, local, tribal, and territorial authorities responsible for investigating and prosecuting significant financial crimes and violations.”
We’re sure the new group will have some splashy press conferences in coming months; as white-collar defense lawyer David Zornow of Skadden, Arps, Slate, Meagher & Flom told the Lit Daily’s Andrew Longstreth, when you gather a bunch of prosecutors together, you’re bound to generate criminal and civil cases. But we hope that this task force, unlike the old one, also effects some lasting changes.
This article first appeared on The Am Law Litigation Daily blog on AmericanLawyer.com.