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 In a speech before New York University School of Law, Holder made
some of his most extensive comments yet on improving the prosecution
of white-collar crime. He called on Congress to boost rewards for
Wall Street whistleblowers and fund more FBI agents with forensic
accounting expertise.
The Justice Department has faced years of criticism for a dearth of
marquee prosecutions against Wall Street executives for conduct that
contributed to the 2007-2009 financial crisis.
It has reached multibillion-dollar settlements with institutions
including JPMorgan Chase & Co, Bank of America Corp and Citigroup
Inc, for misrepresenting risks of shoddy mortgage bonds sold before
the crisis. But no individuals have faced related charges.
At the speech, students passed around flyers criticizing Holder's
appearance as a "whitewash," saying he had "provided impunity" to
banks for selling toxic assets and had "refused to prosecute" them
for other misdeeds.
"When it comes to financial fraud, the department recognizes the
inherent value of bringing enforcement actions against individuals,
as opposed to simply the companies that employ them," Holder said.
 But he said prosecutors could not always establish that high-ranking
executives far removed from day-to-day operations knew about a
particular scheme. He said blurred lines of authority often make it
hard to name the person responsible for individual business
decisions.
Holder suggested lawmakers consider a rule in the Sarbanes-Oxley Act
of 2002 that requires a single executive to sign accounting forms
and bear liability for misrepresentations, and examine whether it
could be applied to other areas of corporate wrongdoing.
"We need not tolerate a system that permits top executives to enjoy
all of the rewards of excessively risky activity while bearing none
of the responsibility," he said, before an audience that included
Manhattan U.S. Attorney Preet Bharara and U.S. District Judge Jed
Rakoff.
Rakoff in the past has criticized U.S. authorities for not pursuing
more individuals. The judge has asked why prosecutors did not use
"willful blindness" theories to go after senior executives who may
not have been involved in day-to-day operations but had reason to
suspect wrongdoing.
COOPERATORS
Also on Wednesday, another top Justice Department official said
prosecutors have put individuals at the center of probes into
corporate misconduct.
"If you want full cooperation credit, make your extensive efforts to
secure evidence of individual culpability the first thing you talk
about when you walk in the door to make your presentation," Marshall
Miller, the No. 2 official in the Criminal Division told an audience
of lawyers who conduct corporate investigations.
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Reuters reported last week that prosecutors in cases of foreign
bribery and other white-collar crimes have used more investigative
tools such as body wires and search warrants and also improved
relationships with counterparts overseas to build stronger cases
against individuals. [id:nL1N0R52RE]
Since the financial crisis, prosecutors have stepped up efforts to
pursue bankers, traders and others in finance for other types of
fraud including insider trading and manipulation of interest rate
benchmarks and foreign exchange rates.
Holder confirmed that the department had obtained undercover
cooperators as part of its probe into the manipulation of foreign
exchange rates, and expected to bring charges against individuals in
financial fraud cases in the "coming months."
But the law caps rewards for potential whistleblowers in cases that
do not involve fraud against government programs and hurts the
ability of prosecutors to get Wall Street executives to cooperate,
Holder said in his speech.
"We should seek to better equip investigators to obtain this often
elusive evidence," Holder said.
In one recent case in which a federal judge ordered Bank of America
to pay $1.27 billion for fraud at its Countrywide unit, a
whistleblower who served as the government's star witness is
entitled to $1.6 million. Holder described that amount as a "paltry
sum" for an industry in which the collective bonus pool stood above
$26 billion last year and median executive pay was $15 million.
In addition to cooperators, Holder said prosecuting white-collar
crime also requires FBI agents sophisticated enough to know what
questions to ask and what to look for when those witnesses do come
forward. He called on Congress to consider more resources for the
FBI to sustain efforts to investigate financial crime.
(Reporting by Aruna Viswanatha in Washington and Nate Raymond in New
York; Editing by Karey Van Hall, Chizu Nomiyama, Steve Orlofsky and
David Gregorio)
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