The investigation into widespread fraud on Wall Street leading up to the financial crisis will now have a proseucting attorney to help the effort. Virginia Chavez Romano,a former assistant US attorney in New York, was hired by Eric Schneiderman, the New York attorney general and co-chair of the task force. She is not an official hire of the working group, but rather will assist Schneiderman in his efforts as co-chair.
Romano participated in the criminal indictments of Credit Suisse employees earlier this year for falsifying prices tied to collateralized debt obligations. This is just the sort of fraud the working group wants to go after, though you can look at Romano’s case history in two different ways.
While it’s terrific to go after mispricing CDOs—this is really at the heart of the crisis—Credit Suisse itself was not charged in that case, but rather relatively lower-level employees were indicted. If the working group is now interested in actually going after institutions for this behavior and Romano can help, great. If we’re just going to see indictments of folks on the trading desk, that’s generally not the sort of prosecutions that force systemic change on Wall Street.
But Romano’s hiring is no doubt another step forward, and it shouldn’t go unnoted that she has experience prosecuting criminal cases of financial fraud. The addition of Romano comes after Matthew Stegman was hired as coordinator in May and also on the heels of an all–working group meeting in Washington late last week.
That meeting drew over 250 agents, analysts and investigators from several states and law enforcement agencies to the Securities and Exchange Commission headquarters.
I spoke with Acting Associate Attorney General Tony West during the meetings, and he said there is definitely forward momentum. “We’ve been discussing a number of cases that are ongoing, a number of investigations that have been going on for some time, as well as new targets, new areas of opportunity, new legal theories that we want to bring to bear to certain specific factual scenarios, specific targets—and it’s proving to be quite a productive meeting,” he said.
I asked West if criminal prosecutions were being discussed at the meetings, and he said they are “very much a part of this working group” and added that “we will not be deterred from pursuing wrongoing by individuals or insitutions.” But he also sounded cautious notes about the difficulty of actually winning.
“I sometimes wish that we could do what you see on TV in terms of these courtroom dramas and just say ‘something is wrong’ and then get a conviction,” West said. “If you’re talking about these cases, you’re talking about fraud that you have to prove in a criminal case beyond a reasonable doubt, you have to prove criminal intent—that someone intended to mislead someone, you have to prove there was a misrepresentation, a lie, that someone lied and that lie mattered, it was material, and they intended to deceive whoever it was they were deceiving.