FBI Targets Minority Communities in Mortgage Fraud Investigations

TRANSCRIPT:

SHARMINI PERIES, EXEC. PRODUCER, TRNN: It’s The Real News Network. I’m Sharmini Peries, coming to you from Baltimore. This is the Bill Black report on The Real News Network.

Bill Black is an associate professor of economics and law at the University of Missouri-Kansas City. He is a white-collar criminologist and former financial regulator. He’s the author of The Best Way to Rob a Bank Is to Own One and a regular contributor to The Real News Network.

So thanks for joining us today, Bill.

BILL BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: Good to be back.

PERIES: So, Bill, you’re coming from Kansas City today. I understand you have some recommendations to our attorney general Eric Holder and the DOJ.

BLACK: Right. Indeed, I’m going to have a series of them. But the first column I’ve written is about the fact that they’re engaging in ethnic profiling in their prosecution of mortgage fraud, which is extraordinarily bizarre. And this came when I testified as an expert witness for the defense in this case in Sacramento and learned that the U.S. attorney there who is the most active in bringing these prosecutions is now prosecuting almost entirely Russian Americans. And that was pretty disturbing in itself, but then I did some research, and it turns out the FBI, in its annual report on mortgage fraud, in both 2008 and 2009, says that mortgage fraud is heavily committed by particular ethnic groups, like Russians and Armenians and such and Eurasians, and also by some gangs, you know, like, biker gangs and such.

PERIES: Bill, just tell us what mortgage frauds are.

BLACK: Well, that’s the question, right? So mortgage fraud is supposed to be one of the three big fraud schemes. One was inflating the appraisal, which was done almost entirely by lenders. That’s in the loan origination process—in other words, making the loan. And the second one is through liar’s loans, and that was done primarily by lenders, according to the investigators, who primarily put the lies in liar’s loans. And then the third, there’s no fraud exorcist, so if you originate, make these fraudulent loans, you can only sell them to the secondary market—and overwhelmingly these loans were sold to the secondary market—by making false representations and warranties, or reps and warranties, for short, which is the third kind of fraud. And, again, that was—that type of fraud was—.

PERIES: And now getting back to why the FBI targeted the Russians and the Armenians.

BLACK: Well, there’s no reason. It’s purely insane. So if anything, of course, Russian Americans and Armenian Americans and gangs, biker gangs and such, are particularly unlikely to be the senior officers of a bank and such, who are the folks committing these kinds of frauds.

So it’s a double-wackiness out of the FBI and the Justice Department. First, they’re not prosecuting the lenders at all. And that includes both the institutions that made the fraudulent loans and the officers, who, of course, controlled it and became wealthy through it. And second, they’re saying, don’t look at the senior people that are leading these massive fraud epidemics; look at those little disfavored folks. And, of course, they can only list certain minorities for this to work. Just as a thought exercise, think if they put the word Jew into that list. Right? The list would last less than 24 hours because people would go berserk. But Russians aren’t terribly popular: Armenians, first, there are not many of them; second, they’re not all that popular: etc., so they can get away with this kind of just really crude ethnic profiling.

Anyway, we’ve called the Justice Department on it now. It’s utterly indefensible. The practice of ignoring the elite bankers is indefensible. The practice about prosecuting primarily disfavored minorities—which include American blacks, by the way—is outrageous. And Holder is the guy that claims that he’s the big person against profiling on the basis of ethnicity and race and such. So let him prove it.

PERIES: And have you brought this to the attention of the DOJ? And are they responding to it?

BLACK: Well, we’ve written it and we went right to the belly of the beast in the Eastern District of California, where the U.S. attorney, Mr. Wagner, is the most senior prosecutor on the nationwide mortgage fraud task force. You know, his reaction to losing the cases: we won’t be deterred in bringing mortgage fraud cases. We’re not trying to deter him from bringing mortgage fraud cases; we’re trying to get him to bring the mortgage fraud cases against the elite banksters who caused the crisis and led these fraud epidemics, and stop this obscene, bigoted mythology that it’s a bunch of Russian immigrants or Armenian immigrants or some weird biker gang, you know, like this is Sons of Anarchy somehow made real. This is all fictional nonsense, and it’s crude bigotry, and Holder should stop it tomorrow.

PERIES: So, Bill, I look forward to the DOJ reply. When you hear from them, let us know.

BLACK: Looking forward to it.

PERIES: And thank you for joining us on The Real News Network.