The Special Inspector General (SIG) for
the Toxic Asset Relief Program (TARP) just released its January 2014 Quarterly
Report to Congress on the status of TARP.
SIGTARP is the lead law enforcement agency investigating rescue fraud
which includes bank, mortgage, and securities fraud and money laundering as
well as crimes that prey upon people or institutions seeking help from TARP’s
recue program. More than six years after
TARP was implemented in the wake of the financial crisis SIGTARP says it is
still investigating fraud and in fact has ratcheted up enforcement over the
last two years.
The investigative agency says that in
2012-2013 it nearly doubled the number of defendants that were criminally
charged from the numbers in 2009-2011 and also more than doubled the number who
were convicted. As of the end of 2013
its investigations have resulted in criminal charges against 174 defendants,
112 of which were senior officers of companies.
Already 122 of these have been convicted and others are awaiting
trial. Seventy-two have received prison
sentences with 37 receiving those sentences in 2013 compared with 13 in
Because the financial crisis was caused
by toxic mortgage assets and TARP’s original purpose was to remove those assets
from bank balance sheets, SIGTARP said it is not surprising that most of the
fraud it investigates is mortgage related.
The mortgage process is complicated with many participants and multiple moving
parts the report says, and fraud can seep into the process at each stage.
SIGTARPS investigations have detected fraud at origination, during the life of
risky mortgages, and at the sale of defective mortgages on the secondary
SIGTARP mentions as one of its recent
signal achievements the October 2013 conviction of Bank of America/Countrywide
Financial for defrauding the U.S. Government through a process known as
High-Speed Swim Lane or “Hustle.”
Another was the multiple year prison
sentences handed down on Jun 28, 2013 to the CEO and a vice president of
American Mortgage Specialists for defrauding TARP recipient BNC National
SIGTARP said it is focusing on several types
of crime. The two prosecutions listed
above are examples of rescue fraud cases involving TARP banks. It is also targeting rescue fraud involving
mortgage modification schemes targeting homeowners including Internet-based scams
and those that target victims either through the Internet, radio, or direct
mail. Other types of fraud attempt to
take advantage of TARP by manipulating bankruptcy laws or charging homeowners
for phony foreclosure prevention assistance.
SIGTARP says it currently has more than
150 open investigations and that “Treasury’s current status in recovering TARP
funds has no bearing on SIGTARP’s enforcing the law for TARP related crime. A company’s repayment of TARP must not serve
as a shield to criminal liability.” It
will continue, the report says, to open new investigations of ongoing suspected
rescue fraud and to detect other rescue fraud by or against TARP institutions
that had been hidden.