Former U.S. Attorney Preet Bharara said politics weren’t the reason just one Wall Street executive faced criminal prosecution in the wake of the 2008 financial crisis.
It was lack of evidence of criminal intent.
In his new book “Doing Justice: A Prosecutor’s Thoughts on Crime, Punishment, and the Rule of Law,” Bharara denied that federal prosecutors were too scared or motivated by political considerations to go after individual bank officials. President Barack Obama appointed him in 2009 to be U.S. attorney for the Southern District of New York, making him a prime candidate to target financial wrongdoing that contributed to the crisis.
“Conduct can appear criminal at first blush, but upon further analysis no provable crime has been committed,” Bharara wrote, according to a copy of “Doing Justice” obtained by the Washington Examiner. “That is not to say that there weren’t people at very high levels who did not engage in criminal conduct. That may very well be, but in the system that we have, you can’t proceed without proof of particular people engaging in particular conduct with a particular mental intent. The bar to prove intent is high.”
“Accident is not enough,” he continued. “Negligence is not enough. Mistake is not enough. Even recklessness is not enough.”
Bharara, who drew widespread praise for prosecuting corruption in the New York state government and insider trading on Wall Street, acknowledged that big banks engaged in “bad practices that led to the financial crisis,” including repackaging and selling risky subprime mortgages to other banks. Why so few charges for those who sold mortgage-backed securities?
“Generally, the buyers were forewarned about the potential lack of quality of their purchase in the small print and footnotes of lengthy prospectuses,” he wrote.
Financial institutions protected themselves, in part, by getting clearance from accountants and lawyers, giving them the appearance of trying to follow the rules.
Political considerations weren’t the problem, he claimed. “The most aggressive prosecutors, the ones who bag the biggest scalps … are not pariahs to the private sector,” he wrote. “They are the hottest recruits.”
Neither was fear an issue for prosecutors, according to Bharara. Lawyers in his office went after violent criminals and terrorists. Would a bank executive be more threatening than a mobster?
[Also read: Bharara sharply criticizes former FBI Director James Comey in new book]
The U.S. attorney’s office did successfully pursue civil cases against some banks and bank executives, like Countrywide, Bank of America, and former Countrywide executive Rebecca Mairone.
The one criminal conviction his office secured was against former Credit Suisse managing director Kareem Serageldin, on charges that he fraudulently manipulated bond prices. ProPublica called Serageldin a “mid-level banker.”
“The feeling that people with power and money are harder to hold accountable, are more able to hurt people with impunity, is not wrong,” Bharara said. “But when we shift basic standards of proof because of singular events, there are consequences for the equal application of law and due process for everyone.”
“If we decree that proof of knowledge and intent are no longer necessary because there is a certain kind of fraud that is intolerable, if the law is not carefully drawn, we risk finding ourselves in an ever more intolerable legal system, where prosecutors have even more power than they have now, where people can be imprisoned on trifling circumstantial evidence with no direct proof of their state of mind,” he continued.
Bharara warned against pitchforks-and-torches-style justice.
“In the real world, for good reason, where the rule of law matters and where actual liberty is at stake, we don’t have the therapeutic luxury of bringing cases whenever we’re angry,” he said. “We can only bring cases when the facts and the law lend support to an indictment.”
“Doing Justice” is set to be published March 19 by Knopf.
