By Zachary A. Goldfarb
Washington Post Staff Writer
Wednesday, November 18, 2009; A15
Top Obama administration officials on Tuesday announced a new federal task force to combat financial fraud after deciding that the number and complexity of investigations linked to the economic crisis require a more coordinated response from government agencies.
Created by executive order, the Financial Fraud Enforcement Task Force targets fraud related to mortgage lending and modification, securities law, stimulus spending and the government's bailout of the financial sector.
"This task force's mission is not just to hold accountable those who helped bring about the last financial meltdown, but to prevent another meltdown from happening," Attorney General Eric H. Holder Jr. said at a news conference at the Justice Department.
The establishment of the new team comes as federal and state authorities investigate a wide array of potential wrongdoing linked to the financial crisis. But there have been few major cases so far. The government was dealt a blow last week when a jury acquitted two Bear Stearns hedge-fund managers of violating securities laws in one of the most prominent federal cases linked to the crisis.
The government has been trying to rebuild its investigative abilities in the financial area after many years of atrophy. The Securities and Exchange Commission has struggled to keep pace with the growth of the financial markets, and only in recent years have the Justice Department and FBI been assigning more investigators back to financial crime after years when resources were focused on counterterrorism initiatives.
"When you have information sharing among federal agencies, the government will be better able to bring enforcement actions," said Alice Fisher, a former top Justice Department official now at Latham Watkins.
The Justice Department will lead the new task force, and officials from the Treasury Department, Securities and Exchange Commission and the Department of Housing and Urban Development will help oversee it. The group is planning to meet in the next 30 days.
"It's not enough to prosecute fraud only after it's become widespread," Treasury Secretary Timothy F. Geithner said at the news conference. "We can't wait for problems to peak before we respond. We're seeking comprehensive financial reform to create a more stable, safer financial system and stepping up our enforcement strategy."
Government officials noted that they had been able to bring a number of cases already this year. The SEC said it had doubled the total value of sanctions last year. Orders to return ill-gotten gains jumped to $2.4 billion as of Sept. 30 from $1.3 billion a year ago.
The fraud task force grew out of efforts dating to earlier this decade when President George W. Bush ordered the creation of a Justice Department task force to investigate wrongdoing at Enron after the energy company failed.
That task force eventually evolved into a Corporate Fraud Task Force, which is being replaced by the task force announced Tuesday.
Officials said the new task force will be more active with a permanent executive director. They said authorities from state and federal agencies will be in frequent contact and will discuss ongoing investigations in the hopes that they will be able to coordinate earlier in investigations.
"We would expect that this will enhance the chances that you will be seeing a significant number of investigations and cases emerging," said David M. Zornow, a former federal prosecutor who now is a partner at Washington law firm Skadden Arps.