Justice Department Knowingly Misinformed Public by Drastically Overstating Its Focus on Mortgage Fraud
Democracy Now recently reported on an internal report auditing the Department of Justice (DOJ), which found the following:
“[DOJ] massively overstated its successes in targeting mortgage fraud while in fact ranking it as a low priority for investigation. [DOJ]’s inspector general says despite playing a central role in the nation’s financial crisis, mortgage fraud was deemed either a low priority or not a priority at all. In one instance, Attorney General Eric Holder claimed to have filed lawsuits on behalf of homeowner victims for losses totaling more than $1 billion, but the actual amount was 91 percent less, around $95 million.
DOJ’s internal audit conducted by the Audit Division of DOJ's Office of the Inspector General contained the following critique of claims made to the American people by the DOJ-led Financial Fraud Enforcement Task Force (FFETF):
On October 9, 2012, the FFETF held a press conference to publicize the results of the [Distressed Homeowner Initiative]. During this press conference, the Attorney General announced that the initiative resulted in 530 criminal defendants being charged, including 172 executives, in 285 criminal indictments or informations filed in federal courts throughout the United States during the previous 12 months. The Attorney General also announced that 110 federal civil cases were filed against over 150 defendants for losses totaling at least $37 million, and involving more than 15,000 victims. According to statements made at the press conference, these cases involved more than 73,000 homeowner victims and total losses estimated at more than $1 billion.
Shortly after this press conference, we requested documentation that supported the statistics presented. In November 2012, in response to our request, DOJ officials informed us that shortly after the press conference concluded they became concerned with the accuracy of the statistics. Based on a review of the case list that was the basis for the figures, the then-Executive Director of the FFETF told us that numerous significant errors and inaccuracies existed with the information. For example, multiple cases were included in the reported statistics that were not distressed homeowner-related fraud. Also, a significant number of the included cases were brought prior to the FY 2012 timeframe.
Over the following months, we repeatedly asked the Department about its efforts to correct the statistics. We learned that, on August 9, 2013, the FBI provided a memorandum to the FFETF concluding that several of the statistics announced during the October 2012 press conference were substantially overstated. Specifically, the number of criminal defendants charged as part of the initiative was 107, not 530 as originally reported; and the total estimated losses associated with true Distressed Homeowners cases were $95 million, 91 percent less than the $1 billion reported at the October 2012 press conference. The Department’s October 9, 2012, press release and the press conference transcript of the Attorney General’s remarks, both available on the Department’s website, now include disclosures citing the inaccuracy of the originally reported statistics, and the language in each has revised wording and statistics based on the FBI’s August 2013 memorandum.
Despite being aware of the serious flaws in these statistics since at least November 2012, we found that the Department continued to cite them in mortgage fraud press releases that it issued in the ensuing 10 months. We believe the Department should not have continued to issue press releases with these statistics once it became aware of the serious flaws. We also found that neither DOJ nor the FFETF had an established methodology for obtaining and verifying the criminal mortgage fraud statistics announced during the press conference on October 9, 2012. We found this process to be disturbing, and it led the Department to report inaccurate information to the public.