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Why the checks are not in the mail

By David S. Hilzenrath
Washington Post Staff Writer
Friday, November 19, 2010; G08

Ordering lawbreakers to pay fines is one thing. Getting them to pay is a different matter.

The vast majority of penalties imposed in enforcement cases brought by the top cop on the commodities trading beat have gone uncollected.

Over a period of 15 fiscal years, courts and administrative law judges imposed fines of more than $1.8 billion in cases brought by the Commodity Futures Trading Commission. Over the same period, the government collected only one third as much - $606.7 million, according to the CFTC.

The gap has varied widely from year to year. In fiscal 2009, the most recent year for which the commission provided data, penalties imposed totaled $99.5 million and penalties collected totaled $17.4 million, less than one-fifth as much.

CFTC enforcement actions typically allege that brokers or other industry professionals lured clients with misleading claims, engaged in Ponzi schemes, churned accounts to extract unwarranted commissions or otherwise misappropriated clients' funds. The penalties collected go to the U.S. Treasury.

The commission's news releases generally trumpet the amount that malefactors are told to pay.

But the amounts ordered can be little more than notional - even if the government is diligent in its efforts. Often there is little money left to recover, because scammers have spent it.

The fines may be symbolic, like a 150-year prison sentence, and they can establish a claim to any money the wrongdoers might amass in the future.

For government enforcers, fines can also be a way of keeping score, or pumping up the score.

"I think a lot of it is, they sort of like the headlines," said Jeffrey D. Barclay, a Chicago lawyer who defends clients charged in commodities cases.

CFTC officials seem undeterred if the accused has too little money to pay, Barclay said, adding that their posture appears to be, " 'To the extent he has some money someday, we'll come knocking.' "

A spokesman for the CTFC, speaking on the condition of anonymity because of an agency policy that prohibits employees from speaking on the record, said in an e-mail that the commission "is not a collection agency."

"Collections are done by the DOJ. Justice is the only agency that can actually do collections," the spokesman said.

A Justice spokesman gave a different explanation. "Federal agencies, including CFTC, are expected to aggressively try to collect monies due," spokesman Jessica A. Smith said. "If a problem with collection exists, the federal agency has two paths of recourse - it can turn to the Treasury Department for administrative collection or the Justice Department if litigation is required to obtain the collection."

When asked, the CFTC would not disclose who owes the money and how much they owe.

The numbers the commission provided include fines that parties agreed to pay when they settled with the government.

They do not include restitution, the amounts wrongdoers were supposed to pay to compensate victims. The CFTC ostensibly won $1.5 billion of restitution in fiscal years 2002 through 2010, but the agency could not readily say how much of that has been paid, according to the commission's spokesman.

The Government Accountability Office, a federal watchdog, looked at CFTC collection rates in 2005. It reported that, for fiscal 2003 and 2004, the rate for penalties was 46 percent.

The GAO's numbers for those years differ somewhat from the data the CFTC provided for this story; it is not clear whether there were differences in the manner of measuring.

As for restitution, the GAO found that the commission's collection rate was much lower - only 6 percent.

Research director Lucy Shackleford contributed to this report.

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