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Feds highlight successes against investment fraud

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By Zachary A. Goldfarb
Washington Post Staff Writer
Tuesday, December 7, 2010; 12:29 AM

In an effort to bring attention to the problem of investment fraud, federal authorities on Monday highlighted hundreds of cases inwhich defendants accused of financial wrongdoing had been arrested, charged criminally or sentenced to lengthy prison terms.

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At a news conference headlined by Attorney General Eric H. Holder, authorities unveiled "Operation Broken Trust," a collection of unrelated criminal and civil cases involving Ponzi schemes, foreign currency frauds, investment scams and other market cons.

The announcement drew attention to President Obama's Financial Fraud Enforcement Task Force, a group of agencies working to hold accountable people and companies accused of financial wrongdoing during difficult economic times. The task force has struggled to pursue high-profile prosecutions connected to the financial crisis of 2007-09.

Authorities said the operation involved 343 defendants facing criminal charges and 189 facing civil charges, though some will be counted in both categories. The cases represent more than $8.3 billion in investor losses and 120,000 victims.

The statistics cover most types of enforcement action brought in connection with investment fraud in the past 31/2 months. These include arrests, indictments, convictions, sentencings or civil enforcement actions.

Holder said the Justice Department had stepped up efforts against fraud in the past few months. This included asking investigators around the country to speed up cases involving investment scams, said Robb Adkins, executive director of the financial fraud task force.

"With this operation, the Financial Fraud Enforcement Task Force is sending a strong message," Holder said. "To anyone operating or attempting to operate an investment scam: Cheating investors out of their earnings and savings is no longer a safe business plan. We will use every tool at our disposal to find you, to stop you and to bring you to justice."

The schemes often targeted communities, churchgoers and the vulnerable, including the elderly, a blind man and the bereaved family of a recently deceased man, Holder and other law enforcement officials said.

"Fraud by well-known companies or high-profile executives gets the biggest headlines, but other scams are equally devastating to hard-working families and retirees," said Robert Khuzami, enforcement director of the Securities and Exchange Commission. "Victims want justice and don't much care who the fraudster is or how unique the fraud. Today's actions underscore that law enforcement agrees and will pursue fraud in whatever form."

The officials did not discuss the broad insider-trading investigation nearing completion in New York.

Just before Thanksgiving, federal agents made the first arrest as part of this sweeping new probe, detaining a consultant accused of funneling inside information to hedge fund managers. Major hedge funds have been subpoenaed as part of the probe.

Federal authorities are using more sophisticated investigative techniques to prosecute financial crime, such as undercover operations and electronic surveillance. Officials said they have seen an increase in Ponzi schemes and market manipulation scams in the past two years, especially in large cities.


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