[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
WHO IS TOO BIG TO FAIL: ARE
LARGE FINANCIAL INSTITUTIONS
IMMUNE FROM FEDERAL PROSECUTION?
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT
AND INVESTIGATIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
MAY 22, 2013
__________
Printed for the use of the Committee on Financial Services
Serial No. 113-25
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81-760 WASHINGTON : 2013
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HOUSE COMMITTEE ON FINANCIAL SERVICES
JEB HENSARLING, Texas, Chairman
GARY G. MILLER, California, Vice MAXINE WATERS, California, Ranking
Chairman Member
SPENCER BACHUS, Alabama, Chairman CAROLYN B. MALONEY, New York
Emeritus NYDIA M. VELAZQUEZ, New York
PETER T. KING, New York MELVIN L. WATT, North Carolina
EDWARD R. ROYCE, California BRAD SHERMAN, California
FRANK D. LUCAS, Oklahoma GREGORY W. MEEKS, New York
SHELLEY MOORE CAPITO, West Virginia MICHAEL E. CAPUANO, Massachusetts
SCOTT GARRETT, New Jersey RUBEN HINOJOSA, Texas
RANDY NEUGEBAUER, Texas WM. LACY CLAY, Missouri
PATRICK T. McHENRY, North Carolina CAROLYN McCARTHY, New York
JOHN CAMPBELL, California STEPHEN F. LYNCH, Massachusetts
MICHELE BACHMANN, Minnesota DAVID SCOTT, Georgia
KEVIN McCARTHY, California AL GREEN, Texas
STEVAN PEARCE, New Mexico EMANUEL CLEAVER, Missouri
BILL POSEY, Florida GWEN MOORE, Wisconsin
MICHAEL G. FITZPATRICK, KEITH ELLISON, Minnesota
Pennsylvania ED PERLMUTTER, Colorado
LYNN A. WESTMORELAND, Georgia JAMES A. HIMES, Connecticut
BLAINE LUETKEMEYER, Missouri GARY C. PETERS, Michigan
BILL HUIZENGA, Michigan JOHN C. CARNEY, Jr., Delaware
SEAN P. DUFFY, Wisconsin TERRI A. SEWELL, Alabama
ROBERT HURT, Virginia BILL FOSTER, Illinois
MICHAEL G. GRIMM, New York DANIEL T. KILDEE, Michigan
STEVE STIVERS, Ohio PATRICK MURPHY, Florida
STEPHEN LEE FINCHER, Tennessee JOHN K. DELANEY, Maryland
MARLIN A. STUTZMAN, Indiana KYRSTEN SINEMA, Arizona
MICK MULVANEY, South Carolina JOYCE BEATTY, Ohio
RANDY HULTGREN, Illinois DENNY HECK, Washington
DENNIS A. ROSS, Florida
ROBERT PITTENGER, North Carolina
ANN WAGNER, Missouri
ANDY BARR, Kentucky
TOM COTTON, Arkansas
KEITH J. ROTHFUS, Pennsylvania
Shannon McGahn, Staff Director
James H. Clinger, Chief Counsel
Subcommittee on Oversight and Investigations
PATRICK T. McHENRY, North Carolina, Chairman
MICHAEL G. FITZPATRICK, AL GREEN, Texas, Ranking Member
Pennsylvania, Vice Chairman EMANUEL CLEAVER, Missouri
PETER T. KING, New York KEITH ELLISON, Minnesota
MICHELE BACHMANN, Minnesota ED PERLMUTTER, Colorado
SEAN P. DUFFY, Wisconsin CAROLYN B. MALONEY, New York
MICHAEL G. GRIMM, New York JOHN K. DELANEY, Maryland
STEPHEN LEE FINCHER, Tennessee KYRSTEN SINEMA, Arizona
RANDY HULTGREN, Illinois JOYCE BEATTY, Ohio
DENNIS A. ROSS, Florida DENNY HECK, Washington
ANN WAGNER, Missouri
ANDY BARR, Kentucky
KEITH J. ROTHFUS, Pennsylvania
C O N T E N T S
----------
Page
Hearing held on:
May 22, 2013................................................. 1
Appendix:
May 22, 2013................................................. 45
WITNESSES
Wednesday, May 22, 2013
Raman, Mythili, Acting Assistant Attorney General, Criminal
Division, U.S. Department of Justice........................... 5
APPENDIX
Prepared statements:
Raman, Mythili............................................... 46
Additional Material Submitted for the Record
McHenry, Hon. Patrick:
Letter to Attorney General Eric Holder from Senator Jeffrey
A. Merkley, dated December 13, 2012........................ 50
Letter to Attorney General Eric Holder from Senators Sherrod
Brown and Charles E. Grassley, dated January 29, 2013...... 53
Letter to Senator Sherrod Brown from Judith C. Appelbaum,
Principal Deputy Assistant Attorney General, received
February 27, 2013.......................................... 55
Letter to Attorney General Eric Holder from Financial
Services Committee Ranking Member Maxine Waters, dated
February 6, 2013........................................... 58
Letter to Treasury Secretary Jacob Lew and Attorney General
Eric Holder from Financial Services Committee Chairman Jeb
Hensarling and Oversight and Investigations Subcommittee
Chairman Patrick McHenry, dated March 8, 2013.............. 60
Letter to Financial Services Committee Chairman Jeb
Hensarling from Alastair M. Fitzpayne, Assistant Secretary
for Legislative Affairs, U.S. Department of the Treasury,
dated March 28, 2013....................................... 63
Letter to Treasury Secretary Jacob Lew from Oversight and
Investigations Subcommittee Chairman Patrick McHenry, dated
March 20, 2013............................................. 65
Letter to Oversight and Investigations Subcommittee Chairman
Patrick McHenry from Alastair M. Fitzpayne, Assistant
Secretary for Legislative Affairs, U.S. Department of the
Treasury, dated May 10, 2013............................... 68
Letter to Federal Reserve Chairman Ben Bernanke from
Oversight and Investigations Subcommittee Chairman Patrick
McHenry, dated March 20, 2013.............................. 70
Letter to Oversight and Investigations Subcommittee Chairman
Patrick McHenry from Federal Reserve Chairman Ben Bernanke,
dated April 22, 2013....................................... 72
Letter to Comptroller of the Currency Thomas J. Curry from
Oversight and Investigations Subcommittee Chairman Patrick
McHenry, dated March 20, 2013.............................. 74
Letter to Oversight and Investigations Subcommittee Chairman
Patrick McHenry from Comptroller of the Currency Thomas J.
Curry, dated April 8, 2013................................. 76
Letter to Attorney General Eric Holder from Oversight and
Investigations Subcommittee Chairman Patrick McHenry, dated
April 3, 2013.............................................. 77
Letter to Attorney General Eric Holder from Oversight and
Investigations Subcommittee Chairman Patrick McHenry, dated
April 26, 2013............................................. 78
Letter to Oversight and Investigations Subcommittee Chairman
Patrick McHenry from Peter J. Kadzik, Principal Deputy
Assistant Attorney General, dated May 16, 2013............. 81
Green, Hon. Al:
List of persons who have been prosecuted by the Justice
Department................................................. 83
WHO IS TOO BIG TO FAIL: ARE
LARGE FINANCIAL INSTITUTIONS
IMMUNE FROM FEDERAL PROSECUTION?
----------
Wednesday, May 22, 2013
U.S. House of Representatives,
Subcommittee on Oversight
and Investigations,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:19 p.m., in
room 2128, Rayburn House Office Building, Hon. Patrick McHenry
[chairman of the subcommittee] presiding.
Members present: Representatives McHenry, Fitzpatrick,
Grimm, Fincher, Hultgren, Wagner, Barr, Rothfus; Green,
Cleaver, Maloney, Delaney, Sinema, Beatty, and Heck.
Ex officio present: Representatives Bachus and Waters.
Also present: Representative Sherman.
Chairman McHenry. The subcommittee will come to order.
Today's hearing of the Oversight and Investigations
Subcommittee of the Financial Services Committee is entitled,
``Who is Too Big To Fail: Are Large Financial Institutions
Immune from Federal Prosecution?'' There is a question mark at
the end of that, which is not as common for most of our
hearings, but we are trying to learn something here.
Without objection, the Chair is authorized to declare a
recess of the subcommittee at any time.
Before we begin, I would like to recognize our newest
member of the subcommittee for his first hearing, Mr. Keith
Rothfus from Pennsylvania. Thank you, Mr. Rothfus, for being
here.
And with prior agreement with the ranking member, we will
limit opening statements to 6 minutes per side. Without
objection, it is so ordered.
I will now recognize myself for the purpose of an opening
statement. Almost 3 years ago, the Dodd-Frank Act was signed by
President Obama. Upon enactment, the President declared an end
to too-big-to-fail; this phenomenon would be ended. Among other
things, Dodd-Frank authorized regulators to take certain
actions to reduce both the likelihood that a large financial
company would fail, and the impact of any such failure were it
to occur. Thus, an elaborate new bureaucracy was formed.
Within it, the new Financial Stability Oversight Council
(FSOC) is authorized to designate certain financial
institutions for enhanced prudential supervision by the Federal
Reserve, and to monitor risks to the financial stability of the
United States in conjunction with the newly created Office of
Financial Research (OFR). In addition, Title II establishes the
Orderly Liquidation Authority (OLA), which putatively provides
the means to safely resolve firms that are so complex or
important that their failure and subsequent bankruptcy would
significantly disrupt the system, or so says those who proposed
it and supported it.
Separate from this new regime, the Justice Department has
the authority to prosecute a business organization, including
financial institutions, for violations of Federal law and
individuals within those institutions. Any resulting criminal
liability may give rise to non-penal sanctions that,
individually or collectively, impose significant cost to the
organization, and potentially impact its ability to continue as
a going concern. Standards adopted by the Justice Department
call on prosecutors to consider the collective consequences of
prosecuting a business organization.
However, in recent testimony before the Senate Judiciary
Committee, Attorney General Eric Holder stated that some
financial institutions are so large or complex and consequences
to innocent third parties from holding them criminally liable
so great, that the Justice Department is hindered from bringing
prosecutions.
Rather than me say it, let's let Eric Holder say it for
himself.
[no sound]
While I certainly appreciate the Attorney General in
``mute,'' it doesn't help with the presentation we are trying
to make.
All right, we will try it this way. I will actually read
what he said. So much for technology, right? ``I am concerned
that the size of some of these institutions has become so large
that it does become difficult for us to prosecute them when we
are hit with indications that if you do prosecute, if you do
bring a criminal charge, it will have a negative impact on the
national economy, perhaps even the world economy. And I think
that is a function of the fact that some of these institutions
have become too large. I think it has an inhibiting influence
and impact on our ability to bring resolutions that I think
would be more appropriate.'' That is the quote from Attorney
General Eric Holder. We were at least able to see a visual
representation of that.
In addition, the Attorney General has previously stated
that the Justice Department relies on ``outside experts'' when
assessing the economic harm associated with prosecuting larger
financial institutions. To better understand the Justice
Department's decisions not to seek convictions in cases
involving large final institutions, including the Department's
assessment of collateral consequences as called for under its
policies, this subcommittee has sought to determine the
identities of the outside experts referred to by the Attorney
General in his December 2012 statement.
The subcommittee has contacted the Justice Department and
the Treasury Department, as well as the Federal Reserve and the
OCC, in addition to questioning representatives of the FSOC and
the OFR at our March 14th hearing in this subcommittee. And so
without objection, I would submit those letters and
corresponding responses for the record.
To date, the subcommittee's investigation has indicated
that the Justice Department has not received any material
information from outside experts when making prosecutorial
decisions in cases involving large financial institutions. It
should be noted that in January, Senators Grassley and Brown
made a similar inquiry to the Attorney General requesting he
disclose the identity of these outside experts with whom
prosecutors consulted about the appropriate level of penalties
for large financial institutions. After receiving the DOJ's
response, the Senators described DOJ's response as
``aggressively evasive.'' On a bipartisan basis, they said
this.
And I have to agree with their summation. The DOJ is
providing nothing material to explain the comments made by the
Attorney General. This is disconcerting. They have been
resisting this hearing since we sent the invitation request to
the Deputy Attorney General to testify. That request was made 4
weeks ago. Only this past Friday afternoon did the Department
of Justice inform us that the Deputy Attorney General would not
be available to testify. I find this obfuscation very
troubling.
Last week, in testimony before the House Judiciary
Committee, the Attorney General appeared to contradict his
earlier remarks to the Senate, stating, ``There is no bank,
there is no institution, there is no individual that cannot be
prosecuted by the U.S. Department of Justice.'' However, the
Attorney General's contradicting comments do not explain
whether the Department's view of the collateral harm of
convicting a financial institution has changed, or if the
Department's view has not changed. The circumstances in which a
party's criminal conduct is so egregious that prosecution is
appropriate even in the face of significant harm to innocent
parties has not been made clearer by the Attorney General's
comments.
Accordingly, this hearing will examine the following: the
identities of the outside experts consulted and relied upon by
the Justice Department in such cases; any additional analysis
used by the Department when making prosecutorial decisions in
such cases; and whether the Attorney General's statement
suggested that too-big-to-fail institutions persist despite the
fact of enactment of the Dodd-Frank Act.
Finally, this hearing will enable the subcommittee to begin
examining whether more aggressive enforcement of existing
criminal laws will cause persons and entities to avoid engaging
in unreasonably risky economic behavior, thus lessening the
need for proscriptive policy from Congress on these agencies
and whether such behavior will be remedied through basic
enforcement of existing laws. And so, I thank our witness for
being here today.
And with that, I will now recognize the ranking member for
6 minutes.
Mr. Green. Thank you, Mr. Chairman. I thank the witness for
appearing today. And if I may, I would like to take just a
moment to again express my concern for the persons in Oklahoma,
our sister State. I am from Texas, of course, and I do want to
make it very clear to them that at an appropriate time, if I am
permitted to cast a vote, I assure you I will be voting to
render aid and do all that I can to help them restore their
lives. My sympathies and my prayers are with them.
I would like to repeat something that the chairman said. He
said it correctly, but some things bear repeating. The Attorney
General has sought to clarify the statement made earlier. In
fact, it was on May 15th of this year that he gave clarity. And
he did indicate that there is no institution, and there is no
individual that cannot be prosecuted by the U.S. Justice
Department. I believe that the U.S. Justice Department and the
many men and women who work there seek to make sure no person
is above the law and no person is beneath the law, which is the
way it ought to be in our country.
And I do want to share this thought with reference to the
entirety of the Justice Department. While I think it is
appropriate for us to critique and to criticize and to ask
difficult questions, there are a good many persons who work in
the Justice Department, hard-working public servants who have
little, if anything, to do with much of what will be discussed
today. And my hope is that what we say will not have an adverse
impact upon what they do at the Justice Department. They are
hard-working public servants, and I want to acknowledge their
hard work.
I would also like to let the record reflect that there are
persons in the Justice Department who have been prosecuting
individuals as well as corporations. And I will submit a
document for the record that we have compiled in my office. But
I would like to just make sure that the record is very clear on
these prosecutions.
Hence, I will read some of the list that I have of persons
who have been prosecuted. I will be careful not to call their
names, but I will mention their business entities: Goldman,
Sachs, a member of the board was sentenced to 2 years in prison
on October 14, 2012; Credit Suisse, the global head of
structured credit pleaded guilty April 12, 2013; Credit Suisse,
the managing director pleaded guilty February 1, 2012; Credit
Suisse, the vice president pleaded guilty February 1, 2012; UBS
senior trader charged December 19, 2012; UBS senior trader
charged--these are separate persons--December 19, 2012; Morgan
Stanley managing director sentenced to prison August 16, 2012;
Galleon Management LLC managing director sentenced to prison
for 11 years, October 13, 2011; Stanford International Bank
chairman of the board of directors sentenced to prison for 110
years, June 14, 2012; Stanford International Bank chief
financial officer sentenced to prison for 5 years, January 22,
2013; Stanford International Bank chief investment officer
sentenced to prison for 3 years, September 13, 2012; Colonial
Bank senior vice president sentenced to prison for 8 years,
June 17, 2011. And there is more to be added and said.
The point is, while we will have our discussion today and
ask our questions, I think we should not omit the fact that the
Justice Department is still in the business of prosecuting
those who commit crimes, offenses with malice aforethought. If
it is a penal action, they are in the business of prosecuting.
This does not include the list of entities that have been
prosecuted. And many of them have sought to settle. Just a few:
the Deutsche Bank, $202 million settlement, May 2012; National
Mortgage Settlement, $25 billion, February 2012; Countrywide--
this was a discrimination case--$355 million, December 2011.
And this list goes on and on.
I welcome the witness. I trust that the witness is prepared
to answer the very difficult questions. But I do trust that the
witness will also have an opportunity to answer the difficult
questions as we go through this process. And with that, Mr.
Chairman, I will yield back the balance of my time.
Chairman McHenry. I thank the ranking member.
And we will now recognize our witness today. We have before
us today Ms. Mythili Raman, who is the Acting Assistant
Attorney General for the Criminal Division of the U.S.
Department of Justice. Before that, she held a number of
positions in the Department of Justice, including serving as
Chief of Staff for the Criminal Division for many years. She
has a distinguished career of service in our government. And
she is a graduate of Yale University and the University of
Chicago law school, both fine institutions.
So thank you so much for being here. This is your first
time testifying before the House. We have a very simple
lighting system which is slightly different than the Senate, in
that we try to abide by it. I have to make a little Senator
jab. May I? It is bipartisan.
But green means go, yellow means hurry up, and red means
stop. And you will have 5 minutes to summarize your opening
statement. Our microphones are a bit directionally sensitive,
so if you will pull it close and direct it towards you, that
would help significantly. And without objection, the witness'
written statement will be made a part of the record.
Ms. Raman?
STATEMENT OF MYTHILI RAMAN, ACTING ASSISTANT ATTORNEY GENERAL,
CRIMINAL DIVISION, U.S. DEPARTMENT OF JUSTICE
Ms. Raman. Chairman McHenry, Ranking Member Green, and
distinguished members of the subcommittee, thank you for
inviting the Department of Justice to appear today to discuss
our efforts to combat financial crime. I am pleased to be here
and I am privileged to oversee the important work of the
Criminal Division.
The Justice Department is committed to vigorously
investigating allegations of wrongdoing at financial
institutions and, along with our many law enforcement partners,
holding individuals and corporations accountable for their
misconduct. Our track record in recent years shows our
commitment to pursuing the most challenging and complex
financial crime investigations in the country. Over the last 3
fiscal years alone, the Department has filed nearly 10,000
financial fraud cases against nearly 14,500 defendants.
These prosecutions have led to stiff prison sentences for
many defendants. Last year, for example, the Criminal Division
and the U.S. Attorney's Office in Houston secured a 110-year
sentence for Robert Allen Stanford for orchestrating a 20-year,
$7 billion investment fraud scheme; just one of numerous
investment fraud schemes the Department has prosecuted in
recent years. We have been just as aggressive in bringing
prosecutions involving the manipulation of the markets, as seen
by the extraordinary success of the U.S. Attorney's Office in
Manhattan in an unprecedented string of insider trading cases
over the last several years.
Our prosecutors and agents also continue to doggedly pursue
health care fraudsters. Our Medicare fraud strike force has
convicted over 1,000 defendants of felony health care fraud
offenses since the strike force's inception. And the average
sentence for the strike force cases is approximately 45 months
in prison. Our fight against foreign bribery, too, is as robust
as it has ever been. In just the past 2 months, we have
announced charges against 11 individuals, including corporate
executives and employees and one foreign official, in active
Foreign Corrupt Practices Act investigations.
Similarly, our investigation of the manipulation at various
banks of interbank lending rates, including LIBOR, has had
reverberations across the globe. As detailed in my written
statement, the consequences thus far for several multinational
banks have been far-reaching, ranging from the replacement of
senior leaders at Barclays, to criminal charges against traders
at UBS, to detailed admissions of criminal wrongdoing and the
payment of substantial penalties by three global banks, to
felony guilty plea agreements by Japanese subsidiaries of UBS
and RBS.
As is evident from this track record, we are deeply
committed to holding wrongdoers, whether individuals or
business entities, accountable for their crimes. In our
investigations of business entities in particular, we are
guided by firmly rooted Department of Justice policy, set out
in the U.S. Attorneys' Manual, which requires our prosecutors
to consider a number of factors in determining how, and
whether, to bring charges, including: the seriousness of the
entity's conduct; the pervasiveness of the criminal misconduct;
the extent of the entity's cooperation with our investigations;
and the remedial actions taken by the company.
There has been some discussion in recent months about one
of those factors: the potential collateral consequences of
charging a corporate entity. And we appreciate your interest in
better understanding the extent to which the Department may
consider possible collateral consequences of criminal
prosecutions against large, complex financial institutions. The
consideration of collateral consequences on innocent third
parties, like the other factors we must consider when
determining how and whether to proceed against a corporation,
has been required by the U.S. Attorneys' Manual since 2008.
But the basic principles underlying that policy have a much
longer history at the Department. The first Department-wide
guidance on this subject was issued in 1999, and those basic
principles have been reaffirmed multiple times since then--
including in 2003, 2006, and 2008. As more fully explained in
my written statement, although the factors set forth in the
U.S. Attorneys' Manual, for good reason, inform our
prosecutorial decisions, none of those factors, including
potential collateral consequences, acts as a bar to prosecution
or has prevented the Justice Department from pursuing
investigations and seeking criminal penalties in cases
involving large, complex financial institutions.
No individual and no institution is immune from
prosecution. And we intend to continue our aggressive pursuit
of financial fraud with the same strong commitment with which
we pursue other criminal matters of national and international
significance.
Thank you for the opportunity to provide the subcommittee
with this overview of our financial fraud efforts, and I look
forward to answering your questions.
[The prepared statement of Acting Assistant Attorney
General Raman can be found on page 46 of the appendix.]
Chairman McHenry. Thank you for your testimony. I now
recognize myself for 5 minutes for questions.
On March 6th, the Attorney General testified, as I said in
my opening statement, ``It does become difficult for us to
prosecute when we are hit with indications that if you do
prosecute, if you do bring a criminal charge, it will have a
negative impact on the national economy, perhaps even the
world's economy.'' Are these decisions that affect prosecution
decisions?
Ms. Raman. I should start by saying, Mr. Chairman, the
Attorney General, as he said, was clear that no institution and
no individual is immune from prosecution because of its size.
Of course, there are complexities that come along with the size
of an institution. But the complexities do not equal immunity,
as seen by our--
Chairman McHenry. Does size mean immunity?
Ms. Raman. Size does not equal immunity. Because although
complexities certainly accompany investigations of large
financial institutions, as you might expect they would, those
complexities do not result in immunity for the corporation. In
fact, our track record is clear on that. We have--
Chairman McHenry. Right. The track record is not as clear
as on this side for viewing this. But in testifying that the
DOJ is having difficulty prosecuting large financial
institutions because ``it will have a negative impact on the
national economy, perhaps even the world economy,'' isn't the
Attorney General implying that some of these institutions are
so large that it is very difficult to make a decision to
prosecute them?
Ms. Raman. I don't think that is what the Attorney General
was saying, Mr. Chairman. I think that what the Attorney
General was saying--I believe it to be so--is that complexity
does accompany our investigations of large financial
institutions. And that, of course, does not--that is not
specific as to large institutions. We see complexities in lots
of our large investigations.
Chairman McHenry. Okay, sure. Has the size of an
institution ever been a meaningful element in whether or not
you prosecute?
Ms. Raman. As I alluded to in my written testimony and in
my oral testimony, when we look at prosecution of business
entities--putting individuals aside for a moment, where
collateral consequences never enter into the equation--when we
look at the prosecution of business entities, we are guided by
long-established Department policy, which sets out a number of
factors.
Chairman McHenry. Certainly.
Ms. Raman. And those factors include the seriousness of the
misconduct, the pervasiveness of the misconduct, cooperation,
and collateral consequences on innocent third parties.
Chairman McHenry. In a separate statement the Attorney
General made in March, he referenced that some of these large
institutions have ``an impact on our ability to bring
resolutions that I think would be more appropriate.'' He refers
to perhaps a different way, rather than prosecution, criminal
prosecution. What are those other avenues, those other ways
that he says are more appropriate?
Ms. Raman. The U.S. Attorneys' Manual sets out a number of
different types of resolutions that a prosecutor can reach with
a business entity following an investigation. Just to step back
for a moment and to give you an overview of what we do, when
we--
Chairman McHenry. Right, I understand. But the Attorney
General sets policy, the U.S. Attorneys' Manual determines
procedure, right? So when he lays this out, and says these
large financial institutions are very difficult to prosecute,
is that not true?
Ms. Raman. I--
Chairman McHenry. So they are--is that not true?
Ms. Raman. There are complexities and difficulties with any
large investigation. But our prosecutors are well-prepared for
that.
Chairman McHenry. Okay, so a larger institution would be
more difficult, is what he is implying, than a smaller
institution?
Ms. Raman. The larger investigations are always more
challenging.
Chairman McHenry. Right.
Ms. Raman. And they are challenging for the--
Chairman McHenry. My time is short here. Last week, the
Attorney General testified that banks are not ``too-big-to-
jail.'' That was his quote. Does this mean that the DOJ is
preparing to prosecute a case, even if it determines that a
conviction would cause harm to domestic or international
economy?
Ms. Raman. We have, in recent months, prosecuted a number
of multinational banks, as I am sure the chairman is aware,
including RBS and UBS subsidiaries in Japan, and achieved
resolutions against large multinational banks involving
significant criminal misconduct. The factor that you are
referring to is one of nine factors that we consider, but it is
never the dispositive factor. It can be, in certain
circumstances, an important factor. But none of those nine
factors set out in Department policy ultimately drives the
decision on its own.
Like with any case, our prosecutors need to look at all of
the facts, apply it to the policy of the Department of Justice,
and apply the law that is applicable in that particular
circumstance. And in each of those circumstances, after
assessing those considerations, we do assess what the
appropriate resolution is. Of course if there is no evidence of
crime in the first place, that is an easy call; we don't
prosecute at all.
Where there is evidence of criminal misconduct, we have a
number of different tools that we have available to us to
extract the kind of punishment and deterrence and cooperation
and--
Chairman McHenry. Like a fine, for instance.
Ms. Raman. --that we need. Sometimes there is a guilty
plea, sometimes there are charges resulting in trials,
sometimes there are deferred prosecution agreements, sometimes
there are non-prosecution agreements.
Chairman McHenry. And sometimes, there are huge fines. So
with that, my time has expired.
Mr. Cleaver will be recognized for 5 minutes.
Mr. Cleaver. Thank you, Mr. Chairman. Ms. Raman, not long
ago, one of the larger banks was charged with mortgage fraud.
Are you familiar with the case? Bank of America?
Ms. Raman. I may not be thinking of the specific case you
are, Congressman, but you may be referring to the Lee Farkas
Colonial Bank case?
Mr. Cleaver. Well, either one. That is not the one, but it
is the same arena. How was that case resolved, adjudicated?
Ms. Raman. In the case that I am thinking about, this was a
massive prosecution of executives of Colonial Bank and Taylor,
Bean & Whitaker for an almost $3 billion fraud that eventually
led--ended up resulting in the failure of Colonial Bank. In
that case, we prosecuted a number of top executives there, all
of whom are serving time. The chairman of Taylor, Bean &
Whitaker, Lee Farkas, is serving 30 years in prison.
The senior vice president of Colonial Bank, Cathie Kissick,
is serving 8 years in prison. TBW's CEO is serving more than 3
years in prison. TBW's CFO is serving 5 years in prison. TBW's
president is serving 2\1/2\ years in prison. And its treasurer
is serving 6 years in prison. So those are the types of
resolutions we have been able to get to after aggressive and
tenacious investigation.
Mr. Cleaver. Thank you. Before the hearing is over, I will
get the name of the bank that I am talking about. Would you
agree that for some of the larger banks, they simply build into
their budget fines for violating the law as a regular course of
doing business?
Ms. Raman. I can't speculate about how each bank may set
aside money to pay fines. But what I can tell you, Congressman,
is our penalties are driven by an assessment under the
sentencing guidelines or pursuant to forfeiture law about what
the appropriate monetary penalty should be in any particular
case. When the penalty is driven by the sentencing guidelines,
we look at issues such as loss to investors and intended loss.
When our penalty is driven by forfeiture laws, we look at how
much criminal proceeds may have flowed through a bank and seek
to forfeit that money and take it away from that bank.
And so, we have a number of different statutory and
regulatory regimes under which we can assess monetary
penalties, and we always approach that analysis aggressively
and responsibly to ensure that the maximum deterrent effect is
achieved.
Mr. Cleaver. I think there is a general view out in the
world from which I come that the banks are now larger than they
were when the economic crisis began. And that they are simply
fined when they are caught in violation of the law. Then, when
we hear that none of the Wall Street culprits have gone to
trial, it contributes to this feeling out here that if you have
money, you can get off.
If you rob a convenience store, you are going to go to
jail. If you rob the Nation, you just get richer, and you pay a
fine. It is difficult to justify that to my constituents at
town hall meetings. So what would you suggest I say at a town
hall meeting, as this issue surfaces?
Ms. Raman. I can assure you, Congressman, that our career
prosecutors and our investigative agents are absolutely
tenacious about getting to the bottom of criminal wrongdoing at
any entity, including large financial institutions. And I think
our experience over the last several years shows that we use
all of the tools that are at our disposal. First and foremost,
individual prosecutions against culpable executives and
employees of business entities, which can have the biggest
deterrent effect one can hope to have on criminal wrongdoing in
the future.
We also, on separate tracks but sometimes as part of a
comprehensive approach to our law enforcement efforts, look at
wrongdoing as a general matter within a business entity and
decide whether the entity itself, separate and apart from the
employees or executives, should also have to pay a significant
monetary penalty and, among other things, agree to cooperate
with the government in ongoing investigations and engage in
remedial efforts. So you can assure your constituents that our
career prosecutors and agents are absolutely dedicated to
ensuring that we root out criminal wrongdoing at these
institutes.
Chairman McHenry. The gentleman's time has expired.
Mr. Fitzpatrick, the vice chairman of the subcommittee, is
recognized for 5 minutes.
Mr. Fitzpatrick. I thank the chairman. And Ms. Raman, I
appreciate your service to the Department of Justice and,
certainly, your statement here today. I listened to the few
prosecutions that you outlined in your opening statement,
including the Allen Stafford Ponzi scheme prosecution. And
there were a couple of others, but with all due respect, they
are not really what brings us here today.
With all the misconduct that has been alleged and all of
the significant losses that our constituents have suffered as a
result of the 2008 mortgage and real estate meltdown, it is
true, is it not, that nobody has gone to jail since then?
Ms. Raman. I don't think that is true. We have prosecuted a
number of executives at large financial institutions since
2008. And the numbers actually speak for themselves. In terms
of executives, we have had, as I said, UBS traders, a
boardmember of Goldman Sachs, a--
Mr. Fitzpatrick. Ms. Raman, are they laid out in your
testimony?
Ms. Raman. I am sorry?
Mr. Fitzpatrick. Are they laid out in your testimony? Are
any of those related to the mortgage foreclosure crisis of
2008?
Ms. Raman. I think it is hard to describe what is or is not
related specifically to the mortgage foreclosure crisis. And I
can't--
Mr. Fitzpatrick. Why is it hard?
Ms. Raman. What I can tell you is that as with all
Americans, the employees at the Justice Department understood
the gravity of the 2008 mortgage foreclosure crisis. We have
investigated, and continue to investigate, any conduct that may
have led to that mortgage foreclosure crisis. And--
Mr. Fitzpatrick. Can you, as the acting AG in charge,
identify any prosecution and subsequent incarceration related
directly to the mortgage foreclosure crisis? Is there one?
Ms. Raman. Without speaking to any ongoing investigations,
into the ongoing work of our mortgage--
Mr. Fitzpatrick. In the past.
Ms. Raman. --we have had several prosecutions, including
most recently in Manhattan of executives of Credit Suisse and
the global head of structured credit at Credit Suisse, who have
all pleaded guilty, which related to hiding of profits from
residential mortgage-backed securities.
Mr. Fitzpatrick. Yes. I want to get to a separate issue,
Ms. Raman. In a May 16, 2013, letter the Justice Department
wrote that it has from time to time contacted relevant
government agencies, including domestic and foreign regulators,
to discuss the potential collateral consequences of
prosecutorial actions that the Justice Department might take
with respect to large, complex financial institutions. What are
the identities of those domestic and foreign regulators
consulted by the Justice Department, as identified in your May
16th letter?
Ms. Raman. As an initial matter, and to be clear, contacts
with regulatory partners can occur at different times during an
investigation and at certain periods of an investigation. And,
frankly, in only certain types of investigations. Many of our
bank prosecutions are ones that we do hand-in-glove with a
regulatory partner. And so there are many times that they will
take civil enforcement actions at the same time we take
criminal enforcement actions. And many of our partners, such as
the Treasury Department, the OCC, the Federal Reserve, and
foreign regulators are ones that we work with closely in
connection with many of those investigations.
There are other times where--in the few--without going into
open cases or matters that are currently in litigation, it is
correct that as a matter of policy, whenever we do need to
assess broader collateral consequences--and, again, I have to
emphasize this is in a very small series of cases, we have been
able to reach out to our regulatory partners, partners such as
those, to get feedback on what regulatory actions may or may
not be taken as a result of a conviction. And so, those are the
types of interactions that we are--
Mr. Fitzpatrick. Ms. Raman, when it is measuring how much
damage a prosecution could cause to an institution, does the
Department assume that regulators will impose sanctions if the
company is convicted?
Ms. Raman. We never assume that a particular action will
necessarily be taken. But it is absolutely correct that
convictions trigger a number of regulatory actions. And that,
in fact, regulatory actions and criminal actions, when brought
together, can sometimes have the best impact that we need to
have--
Mr. Fitzpatrick. But it is not assumed, as part of a
prosecutorial decision?
Ms. Raman. It is not assumed, meaning none of these things
are ever--
Mr. Fitzpatrick. Is it ever factored into the decision as
to whether to prosecute that a regulator may issue or impose
sanctions?
Ms. Raman. Yes. As in any type of fraud case, such as
defense procurement fraud cases where we consult with debarment
officials from time to time to understand what a conviction may
trigger, we do understand fully that convictions of banks--
Mr. Fitzpatrick. So it is weighed into the prosecutorial
decision whether to prosecute or not, whether sanctions would
be imposed by a regulator.
Ms. Raman. The collateral consequences of a conviction is a
factor that we can and do consider from time to time, in
certain cases when we decide to pursue an investigation. But it
is never the reason we don't bring a case. Indeed, we recognize
that sometimes civil and criminal enforcement actions, when
taken together, can be the most powerful response that the
government can have.
Chairman McHenry. The gentleman's time has expired.
We will now go to Mr. Ellison for 5 minutes.
Mr. Ellison. Thank you, Mr. Chairman. And let me thank the
ranking member, as well, for this hearing.
Ms. Raman, thank you for your testimony and your
willingness to be here and answer questions. My question is, I
don't know anecdotally, I don't have it here in my notes, but I
do know that during the S&L crisis, DOJ had a significantly
larger number of lawyers in a position to bring accountability.
I don't know if they were civil or criminal, but in general a
larger number of lawyers compared to today. Do you know what
the difference is? Because I don't, and I know that is kind of
an unfair question.
But given that they are--and do you agree that there is a
difference? And if so, do you think that there is any--do you
think that you could prosecute more cases if you had more
lawyers?
Ms. Raman. I don't have the exact numbers, although I am
happy to go back to the Justice Department and provide those
numbers to you if we are able to get those. As a general
matter, of course we can always do more with more. And, in
fact, the recent sequestration has had significant effects on
how we deploy our resources and where we deploy our resources.
It has caused us to have to make hard choices about our
enforcement priorities. But putting that aside, I don't think
there is a prosecutor or agent in the Department of Justice who
isn't as committed as they were before to--
Mr. Ellison. Of course not. Yes, of course not. And I don't
mean to imply--the position that you are in is, you are going
to say we are going to do the best we can every time no matter
what. And I know that because I know that is true. But there
are budgetary realities you are dealing with. And another
reality is that in the aftermath of 9/11, it was incredibly
appropriate for the United States to turn its attention to
protecting the American people from terrorism.
But did that decision that needed to be made have an effect
on the ability to, say, prosecute white collar crime or
mortgage fraud?
Ms. Raman. I can't speculate about whether the diversion of
resources to national security impacted actual numbers of fraud
prosecutions. But as I think I tried to make clear during my
oral testimony and written testimony, the numbers of fraud
prosecutions are still very, very high. And that is because
financial fraud will always be a top priority of the Justice
Department. It is the kind of case that if Federal prosecutors
don't bring them, sometimes they will never be brought at all.
And so I do not expect that the Department's commitment to
prosecuting financial crime will ever diminish. It is a core
mission of ours.
Mr. Ellison. Yes. Since 2010, according to our numbers,
there have been about 24 significant fraud cases that were
settled through agreements. And I think that is a significant
number. In 2012, there were 7 major cases resulting in over $30
billion in fines. And so, you all have been active. But, of
course, given all the pain and suffering that so many American
homeowners have faced, I think many of them have just been
shocked that they haven't seen more folks on television being
``perp-walked,'' as they say.
That is just a comment. You don't need to respond to that.
I also have a question that is not exactly on the issue of too-
big-to-fail, but is important in my district. And that is--
under the Bank Secrecy Act, there are significant penalties for
noncompliance. I have had bankers in my district tell me that
they have to hire highly paid professionals in order to make
sure that they comply. And then, they have told me, as a
result, it has made it difficult for them, from an expense
standpoint, to be able to facilitate transactions, particularly
ones that involve wiring money overseas, particularly to East
Africa.
Have you all thought about this issue? And have you ever
reflected on how the Bank Secrecy Act may be adjusted, since it
has been in force for so many years, to be more tailored? Of
course, we want to go after the terrorist financers, but I can
tell you from my experience in representing the largest Somali-
American community in the country that there are a lot of
people who have seen the number of banks that will even
facilitate these transactions go down.
And a lot of folks seem to think that it is because the
Bank Secrecy Act and other things that you all are--and other
sort of laws in place. Can you respond to that at all?
Ms. Raman. I think, Congressman, that it is important for
me to note that there are both civil and criminal enforcement
authorities under the Bank Secrecy Act. And, of course, I am
here in the capacity of the criminal prosecutor. I can tell you
that we always deploy our resources and bring charges only when
the evidence supports it and when the law supports it. The Bank
Secrecy Act is a powerful tool. And it is one that has caused
the compliance culture at financial institutions to improve in
a way that is helpful to this country and protects our
financial system.
And in our prosecutions, we ensure that our use of the Bank
Secrecy Act is targeted and effective.
Chairman McHenry. The gentleman's time has expired.
Mr. Ellison. Thank you.
Chairman McHenry. We will now recognize Mr. Fincher for 5
minutes.
Mr. Fincher. Thank you, Mr. Chairman, and thank you, Ms.
Raman, for coming today. Just going back to Mr. Fitzpatrick's
line of questioning, you mentioned the regulators and the role
that they play, working with the Department of Justice. What
are the identities of the regulators that DOJ is contacting to
provide an economic analysis when you do prosecute or look at
prosecuting? Who are the regulators that you are talking about,
specifically?
Ms. Raman. Just to step back for a second to make sure that
I am clear in my response, our interactions with regulators
often are just organic interactions with regulators in--
Mr. Fincher. Like who?
Ms. Raman. In the course of criminal investigations, we
often announce criminal resolutions in conjunction with FinCEN
or OFAC, the OCC, the Treasury Department, the Federal Reserve,
or foreign regulators. And so, we are often partners with our
regulatory counterparts when we look at banks for either
criminal or other misconduct. I should step back by saying that
is the bread and butter of our interaction with regulators. It
is as partners addressing a common problem.
There is a small sliver of cases--and, again, I can't speak
about open matters or about open investigations or matters in
litigation--where it has been necessary for us to test any
arguments that a subject bank may make about the collateral
consequences that may befall them if we prosecute. And in those
limited cases, it has been our practice to ensure that we reach
out to those types of partners to make sure that we--
Mr. Fincher. So my time, I am--I apologize. But before you
look at prosecuting someone, so you talk to the regulators to
make sure that--no, you just go on and prosecute if that is the
need, and then talk to the regulators. So you are working with
OCC and all these agencies before you make a decision on
whether the systemic risks are too great to prosecute?
Ms. Raman. I just want to emphasize that systemic risk as a
collateral consequence only appears in the smallest sliver of
financial institution cases that we have prosecuted. The bread
and butter collateral consequences that we always look at as
prosecutors include things like harm to innocent employees who
may lose their jobs if a business goes out of business,
shareholders, or customers. That is the kind of collateral
consequence that our fraud prosecutors look at, as one of many
factors, when we prosecute a business entity.
When we are talking about systemic risk, which I think is
the focus of your question, that comes up very, very rarely.
And, again, without speaking to open cases which I can't speak
about, we have, on occasion and from time to time, reached out
to those same regulatory partners to understand whether or not
a criminal proceeding will trigger a regulatory--
Mr. Fincher. So to end this line, and I will start in on
another line, you are working with the regulators to make sure
you are not harming employees, to a certain extent, before you
make the decision to prosecute or not to prosecute if there is
something criminal that has been done. Correct?
Ms. Raman. We consider collateral consequences as one of
several factors. And in some of those cases, we consult
regulators.
Mr. Fincher. Okay. In the first--the chairman was asking
you earlier, and you kept going back to the complexity. And a
lot of these cases are very complex. Can you give me some
examples of what makes them so complex? Because it seemed like
you were using that word a lot, and just--
Ms. Raman. When we talk about multinational banks--and we
have looked at them for a number of different types of
misconduct--what we need to deal with is what we need to deal
with sometimes in other international investigations: evidence
located abroad that might be difficult to get; subjects who are
located abroad that may be hard to extradite; data privacy laws
existing in some of these other countries which may preclude an
entity from providing us with the information that we need in
order to get to the bottom of what we are looking at, the
number of employees of an entity who may or may not be affected
by our criminal proceeding. And so, that is the kind of--
Mr. Fincher. That is what you were talking about with--
Ms. Raman. Those are the kinds of concerns that we need to
look at in any--
Mr. Fincher. My time is almost up. Let me just finish up
with this. And since the DOJ hasn't criminally prosecuted any
large financial institutions, is it fair to say there are still
some financial institutions that are too-big-to-fail, and Dodd-
Frank didn't end too-big-to-fail?
Ms. Raman. I don't know about too-big-to-fail. I do know
there is no institution that is too large to prosecute.
Mr. Fincher. Without talking to the regulators.
Ms. Raman. Only when we talk to--only in the small minority
of cases, when that issue even arises. And I have to emphasize
as much as I can, that issue rarely comes up.
Mr. Fincher. My time has expired. Thank you, Mr. Chairman.
Chairman McHenry. Mrs. Maloney for 5 minutes.
Mrs. Maloney. Thank you very much for yielding. And I thank
the ranking member and the chairman.
I want to try to understand how DOJ initiates
investigations. And when you face a multimillion-dollar,
billion-dollar scheme or another type of large-scale
circumstances, how does the Department decide to settle versus
going to trial? It seems like you settle all the time. What
goes into those decisions? And does the complexity of the case
or the institution involved play a factor in your decision that
you are making whether to prosecute or just settle?
Ms. Raman. First and foremost, we look at the evidence that
we have been able to gather during the course of an
investigation to satisfy ourselves that we could prove beyond a
reasonable doubt that the entity or individual in fact violated
the law. And in white collar crimes, one of the most important
elements of our proof includes whether or not the entity or
person acted willfully, that is, with an intent to violate the
law. So, that is our baseline assessment.
We need to look first at the evidence and the law to see
whether we have a prosecutable case. When we are talking about
business entities as opposed to individuals, we then look at
the nine factors that are set out in long-established
Department policy. And we consider them one by one to
determine, at the end of the day, does the balance sway in
favor of charging, resolution, guilty pleas, or some other
resolution altogether. And some of the factors that obviously
drive our decision the most strongly are seriousness of the
misconduct and pervasiveness of the misconduct, including
whether we are talking about one rogue employee or whether we
are talking about a criminal practice that was sanctioned by
the managers of that particular institution.
And so, the pervasiveness of the wrongdoing is obviously
something that we need to look at closely. We look at, in these
cases, whether the corporation cooperated. Did they come in and
disclose that they had a problem? And if they did, did they
come in and cooperate with us, give us the documents that we
needed, point us to the witnesses, suggest to us who we might
need to interview? Did they give meaningful cooperation? Have
they, on their own, taken remedial action? Is this now a new
company that we are talking about?
Meaning, have they replaced their managers? Have they set
into place a compliance structure that now will ensure, or do
better to ensure, that the same misconduct doesn't reoccur?
Have they made restitution to victims? Would there be
collateral consequences if there was one type of resolution
versus another? There are all of these factors that we look at.
And at the end of the day, it is a balanced decision about
whether or not we sit across from the table from a bank counsel
and say, we are ready to charge you.
And often, when we have that conversation, the response is
that the bank elects to plead guilty, which is, obviously, a
successful resolution for any prosecution. Oftentimes, our
assessment, based on all of those factors, is that one of the
middle-ground resolutions is most appropriate, a deferred
prosecution or a non-prosecution agreement. And even for those,
we require complete admission of wrongdoing. So there is a
stipulated statement of facts in which the entity fully
acknowledges publicly what the misconduct was.
Mrs. Maloney. But may I further ask, I don't know if it is
DOJ or other settlements, I often see settlements in the paper
that ``X, Y, Z firm'' settled for $700 million, a billion
dollars, whatever. And a statement was issued that they did
nothing wrong. And I am asking, why did they pay $700 million
if they did nothing wrong? But that has happened several times.
I am just reading the paper and seeing this.
What is going on there, where they give a huge settlement
and then a statement that they did nothing wrong? It is
confusing to me. I would think, why are you paying a fine if
you didn't do anything wrong?
Ms. Raman. I am glad you asked that question. It is not the
policy of the Department of Justice to allow a company to
neither admit nor deny. In fact, to the contrary, the Criminal
Division's policy has been that regardless of the resolution--
that is a DPA, an NPA, or a guilty plea--the company must fully
acknowledge its criminal wrongdoing and may not retract that
later.
Mrs. Maloney. My time is running out. I really want to know
how you decide between prosecuting an institution versus an
individual? Oftentimes, it is an individual who has committed a
criminal act. And in some cases, the institution doesn't even
know that they did it. So how do you decide whether to
prosecute the individual or prosecute the firm?
Ms. Raman. And there are times that it is not an either/or,
but it is both or neither. And we look at, first, whether or
not--who the culpable individual is. And again, I would say
that it is important to us whether it is a rogue employee or
whether an employee who should be prosecuted and that should be
the end of it. Or whether it is someone who is of a higher
position in the entity who committed the misconduct and that
kind of misconduct ended up profiting the entity.
And in those cases, it may be appropriate to prosecute the
entity, and sometimes--
Chairman McHenry. The gentlelady's time has expired.
With that, we will now go to Mr. Rothfus for 5 minutes.
Mr. Rothfus. Thank you, Mr. Chairman.
A recent Law Review article surveyed 54 public companies
that were convicted of Federal crimes from 2001 to 2010,
finding that no company was charged with a fraud or financial
crimes offense, except in one instance of securities fraud.
Further, the study found that no public company from the
financial sector was convicted of any offense during this
period. DOJ's prosecutorial standards remind prosecutors that
the nature of some crimes may be such that national law
enforcement policies mandate prosecutions.
My question to you is this: Does any national law
enforcement policy mandate prosecution of financial crimes,
despite a company's cooperation or the presence of other
mitigating factors?
Ms. Raman. I don't believe it is fair to say it is
mandated. But I think it is absolutely fair to say that those
factors are never going to be the only factors that drive a
decision. So there, in fact, may be instances in which, no
matter how cooperative an entity has been, they should, and
will be, charged or enter into a resolution. And so, again, it
is one of several factors that we consider.
Mr. Rothfus. Looking again at the financial crisis in 2008,
has DOJ prosecuted any company, any entity, for conduct related
to the financial crisis?
Ms. Raman. I don't think that we can say that there is one
company we have prosecuted which was directly related to the
financial crisis. But I can say that we have looked diligently
and tenaciously since 2008, and we continue to do so through
our residential mortgage-backed securities working group. And
we are committed to ensuring that we look at every fact and
make appropriate decisions. When the evidence--
Mr. Rothfus. But to date, no entity has been prosecuted?
Ms. Raman. When the evidence suggests that a crime has been
committed, and the law allows for it, a prosecution will be
brought. When the evidence is not there, we will not bring a
case.
Mr. Rothfus. In matters related to the 2008 financial
crisis, has the Department of Justice found potential
violations worthy of prosecution?
Ms. Raman. I think, again, I can say this in the most sort
of general terms. When the evidence and the law suggest that a
prosecution is appropriate we have, and will, bring those
prosecutions. When the evidence and the law does not support
such a prosecution we cannot, and will not, bring a
prosecution.
Mr. Rothfus. If I could shift gears a little bit, with
respect to the sliver of cases where you are taking into
account the economic consequences of prosecuting large
institutions, can you please identify the regulators by name
whom you are contacting in this small sliver of cases to which
you are referring?
Ms. Raman. I understand the committee's interest in this.
And I hope that the committee understands that I am extremely
limited in what I can say about open investigations and cases
that are currently in litigation. We have several cases that
are currently in litigation, and so--
Mr. Rothfus. Are there any cases where you have actually
closed the investigation?
Ms. Raman. I know that our staff at the Department, at the
committee's request, has done some good faith searches in
connection with the request of this committee for that kind of
information. And my understanding is that in closed cases, we
have not identified the kinds of documents--in certain--keeping
in mind that the searches were limited, in which systemic risk
was a factor in those decisions.
Mr. Rothfus. Looking at the case, the rate-rigging case
against UBS, wasn't that case structured so that a foreign
subsidiary with no real exposure to the United States was used
to limit the potential consequences to the broader
organization?
Ms. Raman. I don't think it is correct to say that was the
reason that UBS Japan pleaded guilty. Again, we look at a
number of factors, including where the bulk of the misconduct
occurred. And oftentimes, it is absolutely appropriate for a
subsidiary of a company to be the entity that pleads guilty,
with the parent company perhaps entering into another
resolution. And--
Mr. Rothfus. And if the parent company also profited,
wouldn't it be appropriate to also prosecute the parent
company?
Ms. Raman. In certain circumstances. And again, only after
considering all of those factors. It may well be that the
parent company was absolutely cooperative and has engaged in
remedial action, but we nevertheless believe that it is
important to bring a prosecution against a subsidiary. And,
again, it is not a science, it is an art how we come to these
decisions. But we look at each of those factors in good faith
and through the lens of--
Mr. Rothfus. Isn't it true that if UBS Japan was the entity
that you prosecuted, there would be no effect on UBS in the
United States?
Ms. Raman. I can't say that.
Mr. Rothfus. Thank you. I yield back.
Chairman McHenry. Mrs. Beatty is recognized for 5 minutes.
Mrs. Beatty. Thank you, Mr. Chairman, and Mr. Ranking
Member.
Ms. Raman, getting ready for today's hearing I reviewed a
report that is a couple of years old, but I think still very
relevant today. And in that report, the GAO reported regarding
the Department of Justice's monitoring of deferred pension
agreements and non-pension agreements as a tool to respond to
corporate crime. The report was based on the understanding that
because the Department of Justice has recognized that it could
be potentially harmful to criminally prosecute a company if you
didn't look at what the investors or the employees or the
pensioners or the customers who were not involved in that, and
the effect it would have on them.
So they relied a lot on what we are going to call the DPAs
and the NPAs to avoid harm to the innocent parties. And this
made sense to me. But the GAO report concluded with a
recommendation that the Department of Justice develop
performance measures to evaluate the contribution of the DPAs
and the NPAs towards its strategic objective of combating
public and corporate corruption.
Specifically, the report suggests that the Department of
Justice use two different metrics for such evaluation: one,
whether the company had successfully met all the terms of the
agreement; or two, if the company had re-offended. Given the
significant increase in the use of DPAs over the last few
years, can you tell us what efforts the Department has made
with respect to measuring and tracking the effectiveness of
these deferred prosecution agreements?
Ms. Raman. Congresswoman, I am somewhat familiar with that
GAO report. And I am aware that the Department took a number of
steps in response to the recommendations of the GAO in that
investigation, and that the GAO has since closed out those
recommendations, understanding that the Department, in fact,
followed through. The response to your question, I think, comes
in several parts. One is that we have instituted a tracking
procedure to ensure that we know how many DPAs the Department
enters into, and whether or not those DPAs are favorably
resolved.
We often, as you know, install monitors to oversee the
conduct of a business during the course of a DPA. And during
that period of time, if there is any derogatory information
that comes forth as a result of the monitor's work, we are able
to take a number of steps, including sometimes extending the
period of the DPA, requiring correction, or in some
circumstances, breaching the deferred prosecution agreement and
requiring that the company pleads guilty.
So I think through both the tracking--ensuring that we have
watchful eyes on the company during the course of the DPA,
including through, at some points, monitors--I think we have
done a good job of ensuring that we understand, during the
period of a deferred prosecution agreement, whether or not a
company is living up to the promises that it made when we
entered into a DPA. And, of course, they understand--the
company understands--that the Department can always withdraw
that DPA if the DPA is breached, and require a guilty plea.
Mrs. Beatty. Just to further elaborate, since you have
these tracking mechanisms, can you tell us if there are any
statistics to show us what percentage of those agreements are
meeting the Department objectives?
Ms. Raman. I can get you those statistics. I know that we
track the number of DPAs that we enter into every year, and we
can certainly get that information for you. In terms of being
satisfied that the DPAs are achieving our law enforcement
objectives, I can tell you from simply supervising these cases
and speaking to our prosecutors who are prosecuting these
matters that the matters in which we enter into DPAs have real
beneficial impacts for law enforcement. First and foremost,
because companies are required to cooperate with the government
during the period of the DPA, it is often the case that the
information they provide us during the course of a deferred
prosecution agreement can lead to individual prosecutions.
And we had a recent example of that in the foreign bribery
arena where we entered into a DPA with BizJet, and they were
cooperative. And just about a month ago, we announced the
unsealing of charges against four of its executives. And so,
that is a real benefit that the government and law enforcement
get out of these deferred prosecution agreements when we enter
into them, and where appropriate. Of course, our insistence
during the period of the DPA that the company engage in
remedial action is also a real benefit to law enforcement and,
frankly, sometimes can have cascading benefits to other
companies in the same industry who are able to see that if
company A has instituted a certain remedial program that if
they institute the same compliance program that it can help
them, and--
Chairman McHenry. The gentlelady's time has expired.
With that, Mr. Hultgren is recognized. And I would just
counsel the witness that she does not have to take up the full
5 minutes. You don't have the obligation to do such. With that,
we will recognize Mr. Hultgren for 5 minutes.
Mr. Hultgren. Thank you, Mr. Chairman. Thank you for being
here today.
Standards adopted by the Justice Department call on
prosecutors, I know, to consider collateral consequences of
prosecuting a business organization ``including whether there
is a disproportionate harm to shareholders, pension holders,
employees and others not proven personally culpable, as well as
the impact on the public arising from the prosecution.'' The
Justice Department, I know, consults with outside experts when
seeking to determine the economic impact of prosecuting
financial institutions.
We know this because in announcing the statement with UBS,
the settlement with UBS for manipulation of the LIBOR in
December of 2012, the Attorney General said, ``The impact on
the stability of the financial markets around the world is
something we take into consideration. We reach out to experts
outside the Justice Department to talk about what are the
consequences of actions that we might take. What would be the
impact of those actions if we would want to make particular
prosecutive decisions or determinations with regard to a
particular institution.''
In those small slivers of cases where there is economic
impact or potential economic impact--and I recognize that is
probably a relatively small number of cases--I wondered if you
could just let us know the identities of the domestic and
foreign regulators contacted by the Justice Department to
provide information about that economic impact in determining
whether prosecution will move forward.
Ms. Raman. And, again, recognizing that I am extremely
limited in what I can say about open matters and--
Mr. Hultgren. More the closed ones, I guess.
Ms. Raman. And we have not been able to identify, thus far
at least, any closed cases in which that kind of impact has
been a factor.
Mr. Hultgren. So you think the Attorney General was
referring to open cases, or closed cases? It seems like the
settlement case in the LIBOR case would be closed, so who do
you think he would have been referring to as far as the experts
who were reached out to, either foreign or domestic regulators?
Ms. Raman. The LIBOR investigation is incredibly active and
ongoing. That having been said, I know that the Attorney
General was referring to domestic and foreign regulators and
not third parties outside of the government. He was talking
about--
Mr. Hultgren. Which specific regulators would he have been
referring to? What nations, which specific entities?
Ms. Raman. And, again, because I am limited in what I can
say based on my ethical duties on open investigations, I will
have to rely on what is in the public record. I am aware that
some of those regulators have informed this committee about
contacts made by the Department of Justice.
Mr. Hultgren. So as far as you know, there is none that you
could list today that have been contacted that are not part of
an open, ongoing investigation. Let me move on because my time
is limited. Quick question: The Treasury Department hasn't
provided any information that DOJ has used to determine the
economic impact of prosecuting a large financial institution.
Is that correct?
Ms. Raman. I am sorry, the--
Mr. Hultgren. The Treasury Department hasn't provided any
information that DOJ has used to determine the impact of
prosecuting a large financial firm. Is that correct?
Ms. Raman. And I apologize that I need to continue to say
this, but I can't comment on any--
Mr. Hultgren. Okay. Let me move on to the next one, then.
Has the Treasury Department ever requested that DOJ consider
the economic consequences of prosecuting a large financial
institution?
Ms. Raman. I am not aware of that.
Mr. Hultgren. Has the Justice Department contacted FSOC or
OFR about an economic analysis of prosecuting a large financial
institution? And if so, have FSOC and OFR provided such an
analysis?
Ms. Raman. I am personally not aware of that, but I have
not done a comprehensive--
Mr. Hultgren. Okay. Has DOJ contacted the OCC about the
economic impact of potential prosecution of a large financial
institute? And if so, has the OCC provided such an analysis?
Ms. Raman. And I--again, because the OCC has publicly
stated that contact has been made, I understand that the
committee does have that information that the OCC has been
contacted by the Department of Justice. But again, I am relying
on the public record because I do not want to go outside the
public record in open matters.
Mr. Hultgren. As far as DOJ, has the DOJ contacted the
Federal Reserve about the economic impact of prosecuting a
large financial institution? And has the Federal Reserve
provided such an analysis?
Ms. Raman. Again, based on the public record, I believe
that the Federal Reserve has informed this committee that it
was not contacted.
Mr. Hultgren. It was not contacted? Has DOJ contacted the
Council of Economic Advisors about the economic impact of
prosecuting a large financial institution? And if so, have they
provided such an analysis?
Ms. Raman. Without getting into any open matters, I am
afraid I can't identify particular entities that have not
already provided public information to this committee.
Mr. Hultgren. Last, has the Justice Department ever
determined the economic impact of prosecuting a large financial
institution without using analyses provided by regulators?
Ms. Raman. I am not aware of any circumstance in which a
prosecutor, on their own, made any such determination. But,
again, keeping in mind that we are talking a very small sliver
of cases.
Mr. Hultgren. I see my time has expired. Thank you, Mr.
Chairman.
Chairman McHenry. Mr. Heck is recognized for 5 minutes.
Mr. Heck. Thank you, Mr. Chairman.
Ms. Raman, most of the questions today have been associated
with inquiries regarding prosecuting the big guys. I actually
want to turn this on its head, and ask you about prosecuting
the little guys. As you probably know, the citizens of both
Washington State and Colorado voted last November to legalize
marijuana. But it remains, of course, a Federal crime. One of
the ways that this Federal-State conflict manifests, of course,
is under the Bank Secrecy Act.
Companies that provide banking services that aid in, or
result from, Federal crimes must file suspicious activity
reports. And they face peril, of course, because if they
accumulate too many before the regulators or DOJ, they get in
trouble. Of course, the practical effect of this is that
businesses related to what is, in Washington State and
Colorado, the legal sale of marijuana cannot access the banking
system or won't access the banking system as a matter of
prudent judgment.
And I am not just talking about dispensaries or growers. I
am even talking about informational Web sites which do nothing
more than provide reviews. They can't take credit cards, they
can't write checks, they can't direct deposit payroll. They
can't do any of that. They are basically shot out of the
banking system. And the net effect of that, of course, is that
they will operate entirely in cash. And we are talking about an
industry in Washington State that is projected to grow to
hundreds of millions of dollars.
I am very hard pressed, Ms. Raman, to figure out or divine
how it is society would be better served by that much cash
rattling around in that sector of our economy and all of the
potential damage and ill-doing that could result from that.
Therefore, ma'am, what can or will the Department of Justice do
to help with this problem?
Ms. Raman. I am not familiar, Congressman, with the
specific issue you raised in Colorado or Washington. But I can
tell you that the Bank Secrecy Act has been helpful to us in
ensuring that our financial markets are able to operate without
criminal proceeds flowing through them. And recent prosecutions
that we brought in Los Angeles and Brooklyn under the BSA of
check cashing businesses are a good example of why the use of
the BSA in these circumstances can be very helpful for law
enforcement. Those were matters in which those check cashing
businesses and the individuals who ran them were alleged to
have essentially been accepting, knowingly, the proceeds of
massive health care fraud.
And so we use the BSA where it is appropriate and where we
believe that we will get a real law enforcement impact out of
those. And--
Mr. Heck. Is it your position that it is appropriate to use
the Bank Secrecy Act in pursuing banks that receive deposits
from businesses that are legally engaged in the business of
dispensing or growing or providing information about marijuana
in Washington State?
Ms. Raman. Again, I am not specifically aware of the
circumstances presented in those two States with those
particular businesses. So I am hesitant to opine on whether or
not enforcement is appropriate in those circumstances, but I
understand the concern that you have raised.
Mr. Heck. I am surprised that you are not familiar with the
issue insofar as our governor has spoken directly and in person
with your boss on more than one occasion about this. But I
would make every effort here to impress upon you that we are
all now well-served if the net result of DOJ or the regulators
using the Bank Secrecy Act, in this instance--and I am a fan of
the Bank Secrecy Act--to prosecute people in this regard for an
activity that has been legalized, frankly, by a substantial
majority in Washington State; thus rendering it an entirely a
cash business.
Nobody is going to be better off for that. In fact, you
will incite or induce or prompt or incentivize increased
criminal behavior with that much cash flowing around in the
economy for this. So please go back and take a look at it.
Ms. Raman. I will.
Mr. Heck. Thank you.
I yield back the balance of my time, Mr. Chairman.
Chairman McHenry. I thank the gentleman.
And I will now recognize Mrs. Wagner for 5 minutes.
Mrs. Wagner. Thank you, Mr. Chairman. Ms. Raman, back on
March 8th of this year, the committee sent a letter to Attorney
General Holder requesting that he produce records regarding
DOJ's assessment of the economic impact when prosecuting large
financial institutions. Over the past 10 years, the Department
of Justice has investigated one or more large financial
institutions for violations of Federal law, correct?
Ms. Raman. Yes.
Mrs. Wagner. And am I correct that the Department of
Justice keeps written records of its prosecutorial decisions in
these matters?
Ms. Raman. Every prosecutor in every U.S. Attorney's Office
has very different ways of--
Mrs. Wagner. Do you have written records on these
particular prosecutorial decisions?
Ms. Raman. I am not certain which prosecutorial decisions
in particular, but every--
Mrs. Wagner. You keep no written records?
Ms. Raman. That is not what I said. The 94 U.S. Attorneys'
Offices and each of the litigating components in the Department
of Justice have very different ways of documenting decisions
about whether, and when, they have brought cases.
Mrs. Wagner. Generally speaking, do they keep written
records on their prosecutorial decisions?
Ms. Raman. Many prosecutors do, but I can't speak for the
entire--
Mrs. Wagner. And when making these prosecutorial decisions
involving large financial institutions, am I correct in stating
that the Department of Justice applies the standards of the
U.S. Attorneys' Manual for principles of Federal prosecution of
business organizations?
Ms. Raman. Yes.
Mrs. Wagner. I think you have spoken to that directly
already in your testimony.
Ms. Raman. Yes.
Mrs. Wagner. And the standards in this Manual instruct
prosecutors to consider the collateral consequences, as we have
talked about, of the prosecution, including harm to the public.
Is that correct?
Ms. Raman. That is right.
Mrs. Wagner. And considering the harm to the public, is
this a form of economic analysis? Is that correct?
Ms. Raman. Again, I want to emphasize that the issues I
think that this committee is focused on, which is systemic risk
to the global markets, rarely, if ever, comes up. And so the
collateral consequences that we are ordinarily looking at are
things such as how many employees, innocent employees, may go
out of--may have to leave their jobs if a company goes out of
business; how will pensioners be affected; how will--
Mrs. Wagner. So, harm to the public. This is a form of
economic analysis, correct?
Ms. Raman. Not always. It is not--
Mrs. Wagner. But sometimes?
Ms. Raman. I think we are probably talking about two
different things. When I am talking about collateral
consequences to, for example, innocent employees, that is not
an economic analysis. That is a decision about how many
employees may lose their jobs if a company goes out of
business.
Mrs. Wagner. Ms. Raman, can you commit today, in this
hearing, to providing these records containing this analysis to
the committee, without delay?
Ms. Raman. I know that our staff has been speaking with
your staff and has described in detail the parameters of
searches that have been done in good faith to try to answer the
committee's questions. So I know--
Mrs. Wagner. Thanks. I am glad to hear that. When can we
expect those records to be produced, ma'am?
Ms. Raman. Our staffs have been talking, and I think we
have described to your staff the searches that we have done and
the results of those searches, which have thus far not turned
up any documents that--
Mrs. Wagner. You have no documents on any of these cases,
or records--are--is that your testimony--to provide?
Ms. Raman. I have been informed that the searches that we
did on closed cases did not--certain closed cases in certain
U.S. Attorneys' Offices and litigating components did not yield
information about systemic risk to the global markets. And I am
not talking about other collateral effects, such as loss of
jobs or loss of pensions. I am talking about systemic risks to
the global markets.
Mrs. Wagner. I think what we asked for March 8th was that
you produce records regarding the Department of Justice's
assessment of the economic impact when prosecuting these large
financial institutions. And this would pertain to any and all
records. Now, are you having conversations with the committee
about bringing forth those records?
Ms. Raman. We have been clear that, of course, we cannot
provide records on any ongoing investigations or--
Mrs. Wagner. Absolutely. We are not looking for that. We
are looking for closed cases. And certainly, I guess I would
ask that since 2008, have there been closed cases for which you
are able to provide some kind of record?
Ms. Raman. And as our staffs have been discussing, in the
closed cases that our staff has looked through there is not the
specific information about economic analyses relating to global
systemic risk that this committee had asked about. Of course,
because collateral consequences to employees and others is a
factor that has long been considered, there are many, many
cases in which those issues are likely to have--
Mrs. Wagner. I think my time has expired, I think. Thank
you, Mr. Chairman.
Chairman McHenry. Ms. Waters, the ranking member of the
full committee, is recognized for 5 minutes.
Ms. Waters. Thank you very much. I would like to continue
some discussion about drugs. This testimony was started by my
colleague here, Mr. Heck, but I would like to take a little
different spin on it. This year marks the 40th anniversary of
the war on drugs, a critical time to shine a spotlight on 40
years of failed policy. Since the declaration of a war on drugs
40 years ago, America has spent at least $1 trillion on the
drug war. It cost U.S. taxpayers at least $51 billion in 2009
at the State and Federal levels. That is $169 for every man,
woman, and child in America, and that is not counting
opportunity costs or costs at the local level.
Millions of people have been incarcerated for low-level
drug law violations, resulting in drastic racial disparities in
the prison system. Yet drug overdose, addiction, and misuse are
more prevalent than ever. The number of people behind bars for
drug law violations rose from 50,000 in 1980 to more than a
half-million today, a 1,100 percent increase. Drug arrests have
more than tripled in the last 25 years, totaling more than 1.63
million arrests in 2010. More than 4 out of 5 of these arrests
were for mere possession, and 46 percent of these arrests were
for marijuana possession alone.
Arrest and incarceration for drugs--even for the first-
time, low-level violations--can result in debilitating
collateral consequences for an individual and their family. I
have worked on something called mandatory minimum sentencing
for the last 20 years. I hold workshops every year at the CBC
Legislative Weekend Conference. And we worked on trying to
bring about some justice in the area of mandatory minimum
sentencing, where we had all these young people who were being
incarcerated. Five grams of crack cocaine triggered a 5-year
mandatory minimum sentence; 50 grams of crack cocaine triggered
a 10-year sentence.
And I could go on and on about this. But you can understand
why, when I see that we have some of the biggest banks in the
world who get a slap on the wrist for laundering drug money
from the drug cartels and they are not going to jail. And this
keeps happening year after year after year. I don't believe--it
is hard to believe that we don't understand how they launder
this money. But we know this: If there was no profit, if they
were not able to launder this money, perhaps we wouldn't have
drugs on the street with all of these young people getting
arrested.
And basically some of them not criminals, just stupid,
getting involved with small amounts of cocaine or crack
cocaine. And yet, we have some of the richest, most powerful
banks in the world who are laundering drug money from the drug
cartels. Why don't they go to jail?
Ms. Raman. I think I can respond to your--
Ms. Waters. I can't hear you.
Ms. Raman. I can respond to your question in a couple of
ways. First and foremost, the bank entity, of course, cannot go
to jail. The bank entity, when we are talking about an entity,
a corporate entity, the punishment that we are able to secure
comes in the form of monetary penalties, a period under which
they must engage in remedial action or cooperate with the
United States in its investigation. So in our cases, we are
focused on ensuring that we understand how much of these crime
proceeds that you are referring to have flowed through a bank.
And when we determine that, we seek to forfeit that money
or we seek to find--
Ms. Waters. Excuse me. I don't want to interrupt you or
take too much time. But we know what you do. It is what you do
that we don't like. What you do is, they get fined. It is the
cost of doing business, these fines. And I know maybe you can't
incarcerate a corporate entity. But are you telling me that the
CEOs and those who are responsible for the operations of the
banks, the boards, the presidents, nobody can be--have criminal
violations because of the laundering of drug money in the bank?
Ms. Raman. We, in the Criminal Division, in fact
established a money laundering and bank integrity unit that is
focused on prosecuting precisely these kinds of cases,
including professional money launderers and the entities in
which they work.
Ms. Waters. But you have not sent anybody to jail.
Ms. Raman. We have prosecuted innumerable money laundering
cases involving persons who assist drug and other criminal
organizations in laundering their money. And so--and we are
committed to doing that. And when we have resolved any such
cases with bank entities, those resolutions have not, in the
least, precluded the possibility of individual--
Ms. Waters. Let me just say this, because I guess we could
go on with this conversation--and I appreciate the time here.
But you have not prosecuted anybody, you have not sent anybody
to jail. As a matter of fact, the most shameful case, that I
won't mention, where hundreds of millions of dollars were
laundered through one of the biggest banks in the world and
they got away with a hefty fine. And this goes on and on and
on. It is unacceptable. It is not your fault. It is not a
personal attack on you.
But it is about the system, it is about the Justice
Department. Something needs to be done. These kids, they go to
jail and do 5 years for 5 grams of crack cocaine. You tell me
that they are more guilty than the presidents of banks who have
the responsibility for running that bank don't know that drug
money is going through those banks? I don't think so.
Thank you, Mr. Chairman. I yield back the balance of my
time.
Chairman McHenry. I thank the ranking member.
We will now recognize Mr. Barr for 5 minutes.
Mr. Barr. Thank you, Mr. Chairman. Ms. Raman, thank you for
your testimony today. Thank you for your service. As an
attorney, but not a prosecutor and not a U.S. Attorney, I would
like to kind of ask you a little bit about the background of
the U.S. Attorneys' Manual, how that is put together, how the
collateral consequences analysis entered into that Manual in
1999, and the evolution of that analysis and direction to U.S.
Attorneys.
Who sets the standards? Who writes and drafts the Manual at
the Department?
Ms. Raman. Generally--there are many, many provisions of
the U.S. Attorneys' Manual, covering all manner of procedures
and policies in place at the Department of Justice. And each of
those provisions is likely drafted by a very different group of
people. But at the end of the day, any provision of the U.S.
Attorneys' Manual is drafted with the input of litigating
components, U.S. Attorneys and the leadership of the Department
of Justice.
Mr. Barr. I want to talk about that small sliver of cases
that you talked about involving systemic risk. Since enactment
of the Dodd-Frank law, has there been any discussion within the
Department that you are aware of to modify the Manual in any
way, to eliminate consideration of collateral consequences with
respect to that small sliver of cases that could potentially
involve systemic risk?
Ms. Raman. I am not aware of any such discussions. Because,
in fact, I think that policy exists for a good reason. Any law
enforcement action we take needs to be targeted and effective
and proportional. And that particular provision of the U.S.
Attorneys' Manual ensures that any action we take does not have
disproportionate harm on non-culpable people, like the public
or employees.
Mr. Barr. I am thinking in terms of Title II of the Dodd-
Frank law and OLA. After the codification of this Orderly
Liquidation Authority, has the Justice Department considered
the fact that--or the possibility that--collateral consequences
are no longer needed as a consideration in terms of the
prosecutorial discretion that the Department has?
Ms. Raman. In our bread and butter prosecution of business
entities, collateral consequences will always be--
Mr. Barr. I understand that. I am not talking about bread
and butter. I am talking about that small sliver of cases
involving potential systemic risk. In light of codification of
OLA, Title II of Dodd-Frank, has there been any discussion
about eliminating the collateral consequences analysis from the
Manual?
Ms. Raman. I am not aware of any such discussion, and I
would be surprised if there was such a discussion. Because we
do want to make sure that our prosecutions don't have a
disproportionate effect on the public.
Mr. Barr. If OLAs resolves the too-big-to-fail problem, why
would collateral consequences analysis even be required in that
small sliver of cases?
Ms. Raman. We are still going to want to assess any time we
prosecute a business entity whether, for example, we will have
a disproportionate effect on the employees or the pensioners.
And so, those types of collateral consequences will always be
at play. And the U.S. Attorneys' Manual is drafted relatively
broadly to encompass any such collateral consequences that may
be appropriate to consider, and--
Mr. Barr. Are you aware of any cases in which the Justice
Department has declined prosecution as a result of consultation
with financial regulators?
Ms. Raman. It is never the sole factor in any of our
decisions. All of the nine factors set out in the U.S.
Attorneys' Manual are always considered in combination.
Mr. Barr. Are you aware of any particular cases where where
a decision to prosecute has been withheld as a result of
consultation with regulators, domestic or foreign?
Ms. Raman. Again, it will never--and to my knowledge will
never be the sole factor in determining how we resolve a case.
Mr. Barr. Does the Administration, or does the Department
have the resources necessary to evaluate the economic
consequences that could result from a prosecution of a large
financial institution?
Ms. Raman. Given that these issues arise rarely, I think
that we are equipped to address any arguments that are made by
banks when they face potential indictment. But that having been
said, we can always do more. And, in fact, we have continued to
redouble our efforts to ensure that we engage as robustly as we
can with regulators to best understand these sorts of
circumstances. And we are committed to continuing to do so.
Mr. Barr. Thank you. I yield back.
Chairman McHenry. We will now recognize the ranking member
of the subcommittee, Mr. Green, for 5 minutes.
Mr. Green. Thank you, Mr. Chairman. Attorney Raman, is that
correct?
Ms. Raman. Yes.
Mr. Green. You heard me earlier go over a list of
prosecutions and convictions. Do you agree with what was on the
list, generally speaking? I know that you didn't have a chance
to actually have me hand it to you. And, first, do you agree,
generally speaking?
Ms. Raman. I do.
Mr. Green. And do you also agree that I did ask you, prior
to this hearing, to provide me information on prosecutions so
that I might have this available at the hearing? Is this true?
Ms. Raman. Yes, you did.
Mr. Green. And I appreciate your providing the information
that I requested. Mr. Chairman, if there are no objections, I
would like to have this placed in the record.
Chairman McHenry. Without objection, it is so ordered.
Mr. Green. Thank you, Mr. Chairman.
Now, I would like for you to give a little bit more
information about you. Tell us about the number of years you
have been in the Justice Department, please.
Ms. Raman. I have been a prosecutor with the Justice
Department for almost 17 years. I started in the Criminal
Division in 1996 as a trial attorney in the narcotic and
dangerous drug section in the Criminal Division, and went to
the U.S. Attorney's Office in Maryland for much of my career,
and then returned to the Criminal Division more recently, in
the last 5 years, in various leadership positions.
Mr. Green. Is it fair to say that you have prosecuted many
cases as opposed to a few?
Ms. Raman. Yes.
Mr. Green. Is it fair to say that you have prosecuted a
good number? And would you give just an estimate as to the
number you have been associated with, please?
Ms. Raman. I couldn't even give an estimate. I have
supervised, and myself handled, hundreds of cases over the last
17 years.
Mr. Green. And you have an understanding of both civil and
criminal prosecution. Is this a fair statement?
Ms. Raman. A better understanding of criminal than civil,
but yes.
Mr. Green. But is it true that in civil prosecutions, from
time to time persons who admit or find themselves paying a fine
or penalty they don't always acknowledge liability in civil
cases, not criminal cases?
Ms. Raman. I think that is fair to say.
Mr. Green. And is it true that--let me just ask you. Will
you prosecute any size, any complexity, any difficulty of case?
Ms. Raman. Where the evidence and the law supports it, we
absolutely will.
Mr. Green. And is it true that you have--you failed to
prosecute any case because of systemic risk?
Ms. Raman. It has never been a sole factor in our decision.
It has--as I mentioned during the course of this hearing,
collateral consequences can be a factor, and have been a
factor, in our decision-making in the past.
Mr. Green. I am going to go back to the list that I talked
to you about earlier and that I called to the attention of the
public earlier. Is it true that the chairperson of the board of
directors of Stanford International Bank received 110 years?
Ms. Raman. He did.
Mr. Green. Is he currently serving time, or is he currently
on appeal?
Ms. Raman. My understanding is that he is currently serving
his sentence.
Mr. Green. And I have another list, and I thank the staff
for providing this information. Much of what I have came from
staff. But I have a list of what appears to be monies that have
been made available to the Justice Department for various
reasons in terms of settlements. And I am just looking at the
numbers: One case, $8.5 billion; another case, $25 billion;
another case, $285 billion; another case, $10.4 billion. And I
just have a long list of cases where you have settled for large
sums of money.
It might be helpful to just mention the types of cases,
rather quickly. You have dealt with mortgage fraud settlements,
mortgage-backed securities settlements, fraudulent practices.
These are the types of cases that you have settled? Is this a
fair statement?
Ms. Raman. It is. And we have secured record penalties and
forfeitures in the last several years.
Mr. Green. Now, I think that there is always more that the
Justice Department can do, and I think that it is fair to
criticize some of the things that have occurred. But I also
want people to know that there are people at the Justice
Department who are busily prosecuting cases, and that the
Justice Department, I don't think, is perfect but I do think
that I will acknowledge that there are some prosecutions taking
place that are very meaningful.
And with this, Mr. Chairman, I think I am going to yield
back the balance of my time.
Chairman McHenry. Thank you.
Mr. Grimm is recognized for 5 minutes.
Mr. Grimm. Thank you, Mr. Chairman, and thank you, Ms.
Raman, for being here today. Thank you for all your many years
of service. It is greatly appreciated and very well-respected
and well-received.
I am concerned. In your earlier testimony, I think we all
pretty much know that the wrongdoers that led to the crisis of
2008 really have not been brought to justice. And I just want
to ask, for the committee's purposes, it is a 5-year statute of
limitations on that, correct, on those crimes?
Ms. Raman. With some statutes. Some statutes trigger a 5-
year statute of limitations. We do have some other statutes
available to us that have longer statutes of limitation.
Mr. Grimm. But most of them would probably fall in the
general 5-year? So--
Ms. Raman. Most criminal laws do have a 5-year statute of
limitations.
Mr. Grimm. So if my math is right, in 2013, we are about at
the end. So a lot of those that led to this big crisis in 2008,
if they haven't been caught by now, they are not going to be.
And a lot of them are going to be protected by the statute of
limitations very soon.
Ms. Raman. I don't think it is fair to say that if they
haven't been caught by now, they won't be caught. As I said, we
still do have some statutes that trigger longer statutes of
limitations. And there are ongoing and active efforts still to
ensure that the Department of Justice and all of our partners
are looking at the conduct.
Mr. Grimm. Okay. I think those statutes with longer than 5
years are far and few between. They are very technical. And the
nature of these criminals, with the lawyers they will be
hiring, based on my experience with the Department of Justice
who--I think my analysis is actually spot on. But you just
mentioned--my friend and colleague, Mr. Green, asked you a
question about prosecuting. And you said absolutely prosecute--
will prosecute any size.
I believe you, and I know that, based on your experience,
is in your heart. But when you look at the actual quote from
the boss, the Attorney General, Eric Holder, it says, ``I am
concerned that the size of some of these institutions becomes
so large that it does become difficult for us to prosecute them
when we are hit with indications that if you do prosecute, if
you do bring a criminal charge, it will have a negative impact
on the national economy, perhaps even the world economy.''
I just have to tell you, it does seem like you may be on a
different page than the Attorney General, based on that quote--
taking it not out of context, but as I read it.
Ms. Raman. He described difficulties with certain
prosecutions. But the Attorney General and all of its
prosecutors are not deterred by difficulty. We have brought
very difficult cases, after long investigations, because we
frankly have a talented corps of prosecutors and agents.
Mr. Grimm. That I agree with 100 percent, as far as you
having a very talented corps and dedicated people. Is it
possible, though, that sometimes it is more than just the size?
Is it possible that there are sometimes political affiliations?
The reason I ask is it brings you to the very curious case of
Jon Corzine. A lot of people on the street, a lot of people in
my very district, in New York City, the financial capital of
the country, believe that because he had a lot of political
clout and had a lot of political ties he walked, he skated.
You think about it. This man was overseeing a company, and
right from under his nose, $1.6 billion vanished. It was
missing, it was gone. And he came before this very committee,
as well as other committees here in Congress, and he said--this
is a quote from Mr. Jon Corzine--``I simply do not know where
the money is. I simply don't know where it is. It was
segregated funds.''
In all the cases I worked on in over 5 years of working
financial fraud, when segregated funds went missing and the
captain of the ship who was in charge said, ``I don't know
where it went,'' they were getting handcuffed 99 percent of the
time. He said, ``I was stunned, when I was told on Sunday,
October 30, 2011, that MF Global could not account for many
hundreds of millions of dollars of client money.'' Then he goes
on to say that, ``I did not, however, generally involve myself
in the mechanics of the clearing and settlement of trades or in
the movement of cash and/or collateral.''
So he has been cleared during the investigation. But I
would ask the Department of Justice, how do they jibe that the
trustees' report is replete that he perjured himself. That he
did--in fact, was notified that the money went to JPMorgan
Chase beforehand, and that he did, in fact, know--because he
got daily reports on cash and where cash was being moved--he
perjured himself. Is the Department of Justice going to look
into this matter of Jon Corzine any further, considering $1.6
billion went missing and he claimed he just didn't know what
happened to it?
Ms. Raman. Without speaking to any particular
investigation, I can tell you that politics never enters into
the calculus. I know that your question started with a concern
that somehow political clout leads to decision-making in the
Department of Justice, and that is simply not the case. I can't
speak to any open investigations but, again, prosecutors and
agents do not take that into consideration.
Mr. Grimm. Thank you for your testimony.
I yield back.
Chairman McHenry. Mr. Sherman is recognized for 5 minutes.
Mr. Sherman. I thank the chairman for allowing me to
participate, even though I am not a member of the--
Chairman McHenry. Oh, I am sorry, sir. I ask unanimous
consent that members of the full committee be allowed to
participate in--if anybody, in the interest of time, wants to
object, well, I am sorry.
Mr. Sherman, you are recognized for 5 minutes.
Mr. Sherman. Thank you.
Thanks for being with us here today. It is an interesting
division of responsibilities. You in the Justice Department,
and the Judiciary Committee around the corner, deal with
enforcing our laws. And if I have understood your testimony as
I have watched it on television, you are going to enforce the
law no matter how big the--or interconnected of systemically
important the company involved might be. Does that summarize it
pretty well?
Ms. Raman. I think I want to be clear that the size of a
corporation will never be a factor in and of itself. And that
no institution is too big to prosecute.
Mr. Sherman. And you don't have economic analysis people in
your division telling you what the effect is going to be on the
stock market if you announce a particular indictment, or
suggesting that the unemployment rate will go up a tenth of a
percent if this or that bank is put in the hot seat? You don't
even have that information?
Ms. Raman. In very rare cases, a bank will make that
argument, of course. And it is our obligation to ensure that we
test those assertions.
Mr. Sherman. Even if the assertions were right and they
said, ``Hey, if you bring this indictment, if you fail to
accept this plea offer, economic growth is going to decline by
a tenth of a point''--and they have 99 economists who all swear
that that is the case--would that cause you not to indict?
Ms. Raman. Again, a single collateral consequence cannot be
the reason we don't charge a case or resolve it in a particular
way. But collateral consequences are issues that we must, and
do, consider.
Mr. Sherman. Okay. The thing is, in this division of
responsibilities, it is really this committee that has the
responsibility of minimizing those consequences. And there are
indeed companies that are so big that if you were to enforce
the law, it would have an effect on the entire economy. That is
why we have to break them up. And this is a problem that arises
because we have punted to the regulators and said they can
break them up, but we haven't said, okay, if you have reached a
certain size, too-big-to-fail is ``too-big-to-exist.''
You, then, have to deal with these very large institutions.
My hope is that you are not looking at collateral consequences
at all. But it is this committee that has to--that realizes
that any one of these giant institutions could be prosecuted,
could run into economic problems and fail. And as long as we
allow those that are too-big-to-fail or ``too-big-to-jail'' to
exist, they may fail, you may jail them, and the economy will
suffer because we haven't done our job.
Do you have any further comments?
Ms. Raman. I want to emphasize that in our prosecutions we
act aggressively and responsibly. And that is one of the
reasons why collateral consequences are even in the equation.
We want our enforcement efforts to be effective and targeted,
but also proportional. And so, of course, we want to be
cognizant if any actions we take might have a disproportionate
impact on non-culpable third parties, including the public at
large. So we are committed, regardless of those difficulties,
to ensure that we come to the resolution that is right and will
lead us to the right--
Mr. Sherman. You have somewhat confused me. Because in real
life, there may be a circumstance where if you do bring a case,
1,000 people or 10,000 people who would otherwise be employed
are not going to have jobs. You can read the sociology reports
as to what 10,000 unemployments means in terms of number of
divorces, adverse impact in school performance, et cetera. And
you seem to be implying that if all that came together, you
might not prosecute somebody who was otherwise culpable. Is
that the case?
Ms. Raman. I have to be clear that we are talking about
business entities and not individuals.
Mr. Sherman. Right.
Ms. Raman. Individuals are--when we prosecute individuals
and make decisions about that, collateral consequences don't
ever get into the equation. When we are talking about business
entities, and specifically those business entities where we
actually have evidence beyond a reasonable doubt that a law was
violated, that is when we need to look at all of the factors,
including collateral consequences. So there may be
circumstances in which that argument is more weighty than in
other circumstances, depending on how it balances with the
seriousness of the misconduct.
Mr. Sherman. I would hope that you would enforce the law,
period. I would hate to think that those who create collateral
consequences are somewhat immune.
Chairman McHenry. The gentleman's time--
Mr. Sherman. And I yield back.
Chairman McHenry. We will now begin a second round of
questions.
We will begin with Mr. Hultgren, from Illinois, for 5
minutes.
Mr. Hultgren. Thank you, Mr. Chairman. Again, thank you for
being here, Ms. Raman. I had a lot of questions first time
around, but I do appreciate your service very much and
appreciate you taking the time and helping us through this.
A couple more questions. I wondered, has the Justice
Department ever contacted the FDIC to understand how the
Orderly Liquidation Authority in the Dodd-Frank Act works?
Ms. Raman. I can't speak about our open litigation matters,
and I am not aware that there has been anything on the public
record about that. So, I am unable to answer that question.
Mr. Hultgren. I think this wouldn't be, really, an open
investigation. But it would really just be more of the
processes of how Dodd-Frank works and, specifically, the
Orderly Liquidation Authority. So the Justice Department
certainly wouldn't be an expert on Dodd-Frank. So there would
be--I think it would be understandable if there would be a
reaching out to ask for an understanding of how it is expected
from the FDIC to understand the Orderly Liquidation Authority.
So apart from any type of open cases, would you know of any
time where there has been a reaching out by Justice to FDIC to
understand this Orderly Liquidation Authority?
Ms. Raman. We always try to educate ourselves on what
collateral consequences might occur from a conviction. And
certainly, the FDIC's authority to revoke deposit insurance is
a collateral consequence that some may raise from time to time.
I am not aware of specific conversations in matters that I can
speak about.
Mr. Hultgren. Okay.
Ms. Raman. But I think it is fair to say that it is a
relevant regulator in these instances.
Mr. Hultgren. Okay, but you are not aware of any
communication that has gone on to understand that further. Let
me ask a different question here. The Department of Justice's
prosecutorial standards remind prosecutors that the government
may charge even the most cooperative corporation: ``Government
may charge even the most cooperative corporation. Put
differently, even the most sincere and thorough effort to
cooperate cannot necessarily absolve a corporation that has,
for example, engaged in egregious, orchestrated and widespread
fraud.''
Within the last 10 years, has any financial institution
ever engaged in such egregious, orchestrated, and widespread
criminal conduct as to merit prosecution, regardless of this
cooperation?
Ms. Raman. The most recent examples of large financial
institutions that we have insisted accept guilty pleas are RBS
Japan and UBS Japan at the end of 2012. And I think it is fair
to say that even though we received cooperation, we determined
that the appropriate prosecutorial response was guilty pleas
from those to entities and various other resolutions as to the
parent companies.
Mr. Hultgren. So, those two. Any others in the last 10
years that you would be aware of that are closed cases?
Ms. Raman. I can certainly get you that information.
Mr. Hultgren. That would be great. If you could get to me,
it would be great. The Attorney General implied in his
testimony before the Senate Judiciary Committee, again on March
6th that absent the size of some financial institutions, some
resolutions ``are more appropriate to particular criminal
matters.'' Does that mean that the Department of Justice was
prepared to prosecute some past matters if the institution was
not so big?
Ms. Raman. I don't think that is what the Attorney General
meant. I do think that what he was trying to convey and what
the Department has said unequivocally is that there are
difficulties, complexities with these kinds--that sometimes a
company--investigations of large, multinational corporations.
But I should also emphasize that the specific collateral
consequence issue is one that is specifically contemplated by
the U.S. Attorneys' Manual as an appropriate factor to ensure
that our resolutions and our law enforcement actions are
aggressive but responsible at the same time.
And I think that is what he was trying to convey is that
there are a number of different enforcement tools that we have
available, and it just may be the case that in certain
circumstances, one tool is more appropriate than the other. And
I think our record has shown that we have used all of those
tools over the last several years.
Mr. Hultgren. I see my time ticking away. One last
question, kind of follow up of--you had mentioned that if there
is other information, you can get that to the committee. I
wonder if I can ask, as well, if you could provide to the
committee--if you could check with your staff, other members of
DOJ--a log of each consultation with domestic and foreign
regulators regarding possible prosecutions of large financial
institutions. Again, these would be closed cases. We have
already talked about how we don't want to go into open cases.
But if there are closed cases where there has been a
consultation, getting back, again, that this is technical. The
Department of Justice has many areas that it has to prosecute
and, certainly, it would be understandable if there was
outreach to regulators, foreign or domestic. If those contacts
have been made with--in that small sliver of cases where it
would potentially have a significant financial impact on our
financial systems. If the DOJ could provide that log to us of
those entities, domestic or foreign, that were contacted, it
would be great.
Ms. Raman. I think we have been talking with the committee
staff about the searches that we have been able to do and what
we haven't been able to do. And we will be happy to continue to
engage with staff.
Mr. Hultgren. And then if you can get that to us in
writing, if there is anything that is found. Thank you.
With that, I yield back.
Mrs. Wagner [presiding]. Thank you. The Chair recognizes
the gentleman from Missouri, Mr. Cleaver, for 5 minutes.
Mr. Cleaver. Thank you, Madam Chairwoman. And thank you,
too, Ms. Raman. You have been, I think, as candid as you could
be, considering the fact that you can't speak about ongoing
cases, which I understand. And there have been prosecutions. I
have a list of them here, and I think most of the Members have
that same list. What I hope to convey is that there is a lot of
concern.
The case I couldn't bring out of my computer when I spoke
first is getting older. It is a case from 2012. It was
categorized by the U.S. Attorney who filed it in Manhattan as
``spectacularly brazen.'' And yet, there were no criminal
charges. It was mortgage fraud, I guess primarily Countrywide-
connected. As you know, they were purchased by Bank of America.
And so, when those huge cases are brought to the public,
and you find that there are no charges, it just doesn't feel
good as a citizen, who realizes that if you do something, you
are going to go to prison. And somebody--even the attorney says
violates the law in a spectacularly brazen way, and nothing was
done, it creates a problem.
Ms. Raman. It sounds like the case that you are referring
to was a civil suit that was brought. And that may explain some
of what you are asking. I am not, myself, familiar with that
particular case. But I do think that it is important for me to
convey that we have different burdens of proof in civil cases
and criminal cases. And that we can only bring criminal cases
when we can prove beyond a reasonable doubt willful intent to
violate the law and an actual violation of the law. And, when
we are able to make that proof, we do bring it.
You mentioned that this particular announcement was by the
U.S. Attorney's Office in Manhattan, which has been, frankly,
one of the most aggressive--
Mr. Cleaver. They have, yes.
Ms. Raman. --offices on bringing financial fraud cases.
Mr. Cleaver. And that is why it is so concerning. He goes
on to call it ``the hustle,'' and no criminal charges were
filed. I am just a Methodist preacher. I don't know a lot about
the law. That is why I am sitting next to the judge. I try to
sit next to him all through the hearings every time we have one
just so osmosis might help me learn something about the law.
But it just creates a problem--no criminal charges. That is
what people see. And then hundreds of million dollars are
involved, and somebody takes a carton of milk out of one of the
convenience stores and they are going to go to jail.
Ms. Raman. On behalf of the entire--
Mr. Cleaver. I understand.
Ms. Raman. --Justice Department, we have many fraudsters in
jail for decades now, as we speak, because we have been able to
make that proof, because we have been able to root out the
evidence of the crime and file those charges. There are
countless such people who have defrauded the public, and we are
committed to continuing to bring those kinds of cases. I think
Allen Stanford, who is serving a 100-year sentence, feels like
he is been appropriately punished.
Mrs. Wagner. I thank the gentleman from Missouri for
yielding back. And a marvelous preacher he is, might I just
say.
[laughter]
I would like to yield myself 5 minutes for our second round
of questioning. Thank you for hanging in there with us, Ms.
Raman. I am interested in what foreign regulators the
Department of Justice has contacted about an economic analysis
of prosecuting large financial institutions, and what
information have any such regulators provided to DOJ.
Ms. Raman. When we are talking about multinational banks,
sometimes the multinational bank's primary prudential regulator
is a foreign regulator. And, again, I can't talk about open
cases or cases that are currently in litigation, but many of
the banks that we have looked at and this committee is aware of
has tentacles in countries all over the globe. And--
Mrs. Wagner. Can you talk about any closed cases, and some
of the foreign regulators that you have been dealing with over
the period of time here the last 5 years?
Ms. Raman. Again, I am not aware that our search has
yielded any evidence that in closed cases there has been that
sort of contact with foreign regulators on economic impact
issues in particular.
Mrs. Wagner. Would you agree, then--let me try and come at
this from a different angle. Would you agree that foreign
regulators have a vested interest in shielding companies
headquartered in, say, their jurisdictions from prosecution in
other countries?
Ms. Raman. Our experience has not shown us that. In fact,
sometimes the biggest impact we can have is when we literally
bring a global resolution; when regulators across the globe or
American regulators and the Justice Department act in concert
or investigate in concert. So I don't think, at least in my
experience, I can say that the regulators have tried to shield
the banks. In fact, they can be of great assistance if they
bring civil enforcement actions. And that can assist us in our
prosecution.
Mrs. Wagner. Then perhaps, Ms. Raman, you can explain how
it is exactly the Department of Justice weighs statements made
by foreign regulators about prosecutions in the United States
of firms headquartered abroad.
Ms. Raman. Because they do have an interest in assisting in
any investigation, and that has been our experience. To the
extent that we consult them, we consult them as we would with
any other partner. That is, engage in a discussion with them,
and make sure we understand what they are saying and that they
understand what we are saying.
Mrs. Wagner. As a matter of course, does the Department of
Justice regularly solicit input from foreign regulators about
whether to pursue prosecutions of foreign firms?
Ms. Raman. I don't think it is fair to say we regularly do
that. In fact, I think it has been rare that we have had to
address specific types of issues that are of concern to this
committee. That is, impacts--systemic impacts on global
markets.
Mrs. Wagner. And you are not able to share with the
committee any of the foreign regulators that you all have
contacted vis-a-vis economic analysis on these prosecutions?
Ms. Raman. Because I can't get into matters that are
currently in litigation or--
Mrs. Wagner. But how about those that are closed?
Ms. Raman. And I have been--I think I have been trying to
explain, but I should be as clear as I can be, that in the
closed cases that we have searched in the parameters that--
under the parameters that we have discussed with committee
staff we have not identified any cases in which those kinds of
conversation--in which economic impact was a factor in those
closed cases. And I haven't--I can't tell you for certain what
other document searches may be possible or may not be possible,
but I am not aware, I am not personally aware, that we have
searched and that search has resulted in any documents that--
Mrs. Wagner. I guess the confusion here, and the
persistence is, one, that the Department of Justice has
indicated that they have received analysis from those foreign
and domestic regulators. Yet you are--there seems to be no
record, no knowledge of records by any of the U.S. Attorneys'
Offices by your own. Nothing that you can share with this
committee to shed some light on these prosecutions.
Ms. Raman. It is not--setting aside the open cases, because
in some ways I think that is what this committee may be
interested in and, unfortunately, I just can't speak about
those, setting those aside, it is not surprising to me that in
our closed cases in past years there has not--our current
searches thus far have not yielded the kinds of economic
analyses that the committee is interested in. And it doesn't
surprise me because these types of arguments come up only
rarely.
And, again, I know that our staffs have been talking about
the parameters--
Mrs. Wagner. And I just have a few more minutes left. And,
the economic analysis was referred to by the Attorney General.
So this is--we would really implore you to continue to work
with the staff to come up with records, with information, with
regulators, with entities that you all have been working with
as, frankly, indicated already by the Department of Justice and
the Attorney General. I think I am out of time.
And I am pleased to recognize the gentleman from
California, Mr. Sherman.
Mr. Sherman. I thank the ranking member for letting me ask
questions at this point. With regard to the closed files, can
you identify and describe any case involving a financial
institution where, due to collateral damage, you didn't assert
the strongest possible charges or impose the maximum possible
penalty?
Ms. Raman. I am not aware, in any closed case, that we
didn't pursue the appropriate response because of any such
argument.
Mr. Sherman. Okay. So we have all this conversation from
the Department of Justice saying that they may look at
collateral consequences. Could you, for the record, ask your
staff to review the closed files and identify any time that
they can find in which a collateral consequence has affected
the prosecutorial actions?
Ms. Raman. We will absolutely continue to work with the
committee to ensure that the committee has the information that
it needs.
Mr. Sherman. This is a question I would like you to respond
to for the record, independent of what the committee staff has
to say to you. Please respond appropriately for the record
whether you have been able to conduct a review and whether
there has ever been a case where economic consequences have
affected prosecutorial action. Since we don't have any
practical cases, I am going to get a little theoretical here.
You may have a small bank, where ordinarily you would
impose a million-dollar penalty. And you are convinced that
will cost dozens of jobs. It could be in a small town, or it
could be dozens of jobs in a big town. Big town people count,
too. Or there could be a big entity you are thinking of
imposing a billion-dollar penalty on, and you know that is
going to cost tens of thousands of jobs with international
implications.
Is the small entity or the large entity more likely to get
reduced prosecution due to collateral consequences? Are you
focused on the national and international collateral
consequences, or is it all kind of proportional?
Ms. Raman. I think it is fair to say that there are
different collateral consequences that are apparent in
different types of prosecutions. And so the--
Mr. Sherman. But I am just posing--in one case you get a
great economic analysis. If we don't cut the penalty by a
million bucks, we are going to lose dozens of jobs. In another
case, you get in an economic analysis if we don't cut the
penalty by a billion dollars, we are going to lose tens of
thousands of jobs. As a matter of fact, assume that the penalty
reduction-job loss ratio is identical. It is $8,000 of penalty
per job, or $18,000 or whatever it is.
Are you more likely to make an adjustment to save 12 jobs
for--by reducing the penalty by a million bucks, or to save
tens of thousands of jobs by reducing the penalty by a billion?
Ms. Raman. Congressman, I am--
Mr. Sherman. Does size matter?
Ms. Raman. Congressman, I am actually not aware that the
size of a penalty has ever been changed because of such
arguments. What we do consider is whether or not a collateral
consequence might suggest that one type of resolution is
superior to another, a deferred prosecution--
Mr. Sherman. These resolutions tend to take the form of a
company writing a check. So you can say it is not--you can't
put a corporation in jail.
Ms. Raman. Whether guilty plea, deferred prosecution, or
nonprosecution agreement, our punitive tool for any corporate
entity is a fine. And, of course, any additional--
Mr. Sherman. Yes. And the lower the--both how much you
charge and what fine you settle for is a matter of money. And I
have given you an example of a dozen jobs for a million-dollar
reduction here, tens of thousands of jobs. And I will ask
again, does size matter? Does being systemically important lead
to a reduction in the penalty?
Ms. Raman. Being systemically important can cause us to
evaluate certain collateral consequences. But again, I am not
aware that the amount of the fine has changed because of that.
We do consider, whenever we consider collateral consequences,
whether a deferred prosecution agreement may be more
appropriate than a guilty plea.
Mr. Sherman. Not only do the big banks save 80 basis
points, as we have heard testified in this room, on their cost
of funds, but they are more likely--apparently, by your
testimony--to get deferred prosecution and other understandings
of the collateral consequences. In any case, you can't assure
me that small bank is--I am trying to understand what the
implications of your answer are, and I think I would rather be
a big bank than a small bank.
Ms. Raman. I can tell you that in our big bank
prosecutions, including our LIBOR investigation involving UBS,
RBS, and Barclays, more than $2.5 billion has been the monetary
assessment. In our prosecution of BP, it was a $4 billion--
Mr. Sherman. And yet, there could be a small community bank
where $100,000 would be just as big.
Chairman McHenry. The gentleman's time has expired. I have
been very generous with allowing Members to get full answers.
We will end with that. Mr. Green has 5 more minutes and I have
5 minutes. And so, I will recognize myself for 5 minutes, and
then give the ranking member the opportunity to close.
You have referenced that you have certain ongoing matters
that prevent you from testifying about the Department of
Justice going after financial firms and those people in it who
were breaking the law. When those matters close, would you be
willing to come back before this committee to give us the
rundown, and share?
Ms. Raman. Absolutely. Within the parameters of what I will
be able, by court rules and other ethical obligations, to share
with you we--
Chairman McHenry. On a closed case.
Ms. Raman. We will be ready to share with you whatever we
can.
Chairman McHenry. There is a deferred prosecution that has
been before a judge for a number of months, and we wanted to
ask some questions about that, and I understand your
unwillingness to talk about that. I did want to talk about,
though, this economic analysis. You went through the nine
rules--and again, we are getting close to the end here--the
nine sets of weighing through these things.
So you have U.S. Attorneys who look at this, and you weigh
those things out. And they are not all equally weighted, are
they?
Ms. Raman. Depending on the facts of the cases, each can
have different--
Chairman McHenry. Okay.
Ms. Raman. --proportionate weights, yes.
Chairman McHenry. Okay, okay. But you talk about the impact
on the economy. Senator Merkley sent a letter to the Attorney
General in December of 2012, and he said that the Dodd-Frank
Act, ``explicitly created new authority to permit a failed
institution to be wound down safely without impacting financial
stability.'' Do you agree with that analysis?
Ms. Raman. I am not an expert on Dodd-Frank. I will have to
defer to--
Chairman McHenry. Okay. So when the Justice Department
estimates economic costs of prosecuting a firm, we are not
talking about a specific example, we are talking about your
policy, your procedure. That is why we have you here. But when
you are estimating the economic cost of prosecuting a large
financial institution, that analysis takes into account the
cost associated to the economy, right?
Ms. Raman. Again, only when it is raised and only in a very
small sliver of cases in which that argument may be raised by a
bank or a subject entity.
Chairman McHenry. So yes, it is, on occasion, raised.
Ms. Raman. Banks have raised, and I expect will continue to
raise these sorts of arguments.
Chairman McHenry. Okay. So internally, within your
Department, when you are estimating the costs associated with
perhaps a failure of a large financial firm, do you take into
account the Dodd-Frank process of the Orderly Liquidation
Authority?
Ms. Raman. As prosecutors, we do not take into account
Dodd-Frank, per se. As prosecutors, we want--
Chairman McHenry. But you are taking the fact that a firm
could fail as a result of your prosecution.
Ms. Raman. Yes, because of the potential collateral
consequences to--
Chairman McHenry. Yes. So now we have a procedure that is
within the government to wind down an institution, and it is
called the Orderly Liquidation Authority. Senator Merkley, some
of my colleagues contend that it ended--it actually ends too-
big-to-fail, right? Going back to the Attorney General's quote
that I referenced at the beginning of this hearing--where he
says that some of these firms are too large, too complex--that
goes counter to the arguments that proponents of the Orderly
Liquidation Authority make, that this authority means that
firms that are too big actually can fail, and there is a
process for that. What I am asking is, that is very important
when you are talking about a firm failing if you have a
government procedure that some contend means that the firm is
wound down. So you don't take that into account whatsoever?
Ms. Raman. We take into account whether or not a particular
type of law enforcement action will trigger disproportionate
collateral consequences on the public or innocent third
parties. And so in whatever form or format that might present
itself in any particular case, we have to, and do, consider
those. And so, the Orderly Liquidation Authority issue--
Chairman McHenry. But how can you not take in the Dodd-
Frank Orderly Liquidation Authority when you are going through
what you just said?
Ms. Raman. Our concern is to ensure that when we bring a
charge, when we don't bring a charge, when we resolve a case
that we have a full understanding that it is an--
Chairman McHenry. But if you have a full understanding, you
would know that Orderly Liquidation Authority exists in that
procedure.
Ms. Raman. And I understand that the purpose of Dodd-Frank
legislation is to ensure such orderly liquidation.
Chairman McHenry. It has been on the books for 3 years.
Ms. Raman. We consider collateral consequences of all
types, and they don't always--
Chairman McHenry. But do you consider that consequence of
the Orderly Liquidation Authority?
Ms. Raman. We consider all of the--and I am trying to
answer the question, but I want to answer it--
Chairman McHenry. But you are not. Do you consider the
Dodd-Frank Orderly Liquidation Authority, yes or no?
Ms. Raman. The bottom line is that the liquidation of a
company or not is only one factor that is of relevance when we
are talking about collateral consequences.
Chairman McHenry. I understand you don't want to answer the
question. It is kind of clear because I am trying to restate it
in a way that you could answer it. And I am not trying to
badger you about this, but it is important to note. It is
either yes, you take it into account, or no, you do not. And it
is an existing law that deals with a whole class of companies
that have been designated as systemically important or
systemically significant.
Ms. Raman. We take into consideration every single
regulatory action and option available that may be triggered by
a criminal conviction. Sometimes--
Chairman McHenry. So on this matter of the Orderly
Liquidation Authority, has your Department had conversations
with the FDIC, which is charged with that procedure? Not about
an individual case, about that procedure?
Ms. Raman. We have had many conversations with regulators
across-the-board about--
Chairman McHenry. I understand. You have said that
repeatedly. I am talking about the Orderly Liquidation
Authority.
Ms. Raman. I have not had that conversation, but I know
that we--
Chairman McHenry. But you are in charge of the division.
Ms. Raman. --have had conversations with regulators about
all of the regulatory actions that can be triggered by a
criminal conviction, including the FDIC's authority to revoke a
bank's deposit insurance if a charter is revoked, for example.
And so we have had robust, and will continue to have robust,
conversations with these types of regulators. And--but we--
Chairman McHenry. It sounds like you have not yet had those
robust conversations on a law that has existed for 3 years.
The ranking member has been very generous, and I would now
recognize the ranking member for 5 minutes.
Mr. Green. Thank you, Mr. Chairman. If you need more time,
I will gladly yield some of my time to you.
I want to ask a couple of questions about persons who have
asked you to submit additional evidence for the record. You
have had more than one request today. I assume that you will
comply and you will submit the additional evidence for the
record?
Ms. Raman. We will.
Mr. Green. I asked you for evidence, and you complied and
you provided this evidence to me. Was my request any different
than any of the other requests that you have had today for
evidence to go into the record?
Ms. Raman. No. I haven't kept track of every single
request, although I am certain some behind me have.
Mr. Green. No, I am talking about--
Ms. Raman. But we are happy to be as helpful as we possibly
can.
Mr. Green. Yes. I am talking about, now, more specifically
in terms of my having just made a request to you to give me
something to go into the record. Was that request made any
differently? Other than it was made before we got here today
because I wanted to make sure I had something that I could look
at and peruse beforehand.
Ms. Raman. That is right.
Mr. Green. Let's go on to something else now. The Code of
Judicial Conduct, the canons of ethics, all of these codes that
deal with professional responsibility, most of them focus on
protecting not the Justice Department itself, but they have to
do with rights of individuals who may be prosecuted, rights of
entities that may be prosecuted. But you don't promulgate some
of these codes. I know the canons of ethics don't allow lawyers
to do certain things and the Code of Judicial Conduct will
prohibit a judge from discussing a case pending before the
court.
These are not professional codes of responsibility that you
are trying to hide behind. But you do have to adhere to them.
Is that a fair statement?
Ms. Raman. I do.
Mr. Green. And in so doing, it is not to preclude our
knowing about evidence. It is just that if you do this and you
violate one of the codes, then there may be consequences for
you if you should do this. Is that a fair statement?
Ms. Raman. Yes. And there are obviously good reasons why
those ethics rules and local rules in courts exist. It is to
avoid interfering with ongoing matters.
Mr. Green. Yes. I know that, as a judge, if the judge
happens to make a comment about a pending matter, it could
prejudice the case one way or the other, depending on how the
comment is made. And I just wanted to get that in the record
because it is important for people to know that you don't
produce the codes but you do have to adhere to them.
Now, let's talk for just a moment about FSOC and the
Orderly Liquidation Authority. You personally have not had any
conversations with persons concerning cases that are associated
with the Orderly Liquidation Authority. Is this correct?
Ms. Raman. Setting aside ongoing matters.
Mr. Green. Yes.
Ms. Raman. The Department of Justice is constantly engaged,
as a general matter, with our regulatory partners and with
experts within the government about these sorts of matters to
ensure that we are best educated. And, in fact, we have
redoubled efforts to do so just to ensure that we are doing
everything we possibly can. I have not personally had a
discussion with FSOC.
Mr. Green. And I will close with this. Do you believe Mr.
Holder when he says there is no institution, there is no
individual that cannot be prosecuted by the U.S. Justice
Department? Do you believe that?
Ms. Raman. I believe him, and I believe that the career
prosecutors in the Department understand that principle.
Mr. Green. Thank you.
I yield back the balance of my time, Mr. Chairman.
Chairman McHenry. I thank the ranking member. And again,
the hearing title today is, ``Who is Too Big to Fail: Are Large
Financial Institutions Immune from Federal Prosecution?'' And
the questions we raised today were about whether or not Dodd-
Frank did, in fact, end too-big-to-fail, the Justice
Department's refusal to prosecute some large firms with
contradicting statements from the Attorney General, and whether
or not too-big-to-fail, in fact, results in ``too-big-to-
jail.''
And then finally, in deciding not to prosecute large
financial institutions, the Justice Department either did not
consider the Dodd-Frank's Orderly Liquidation Authority, or
found that the Orderly Liquidation Authority did not solve the
problems of too-big-to-fail. Those are among the questions.
I thank the ranking member for his indulgence in this long
hearing. Ms. Raman, thank you so much for being here today and
making it through what was a large and long hearing.
The Chair notes that some Members may have additional
questions for this witness, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to this witness and to place her responses in the record. Also,
without objection, Members will have 5 legislative days to
submit extraneous materials to the Chair for inclusion in the
record.
And with that, this hearing is now adjourned.
[Whereupon, at 4:42 p.m., the hearing was adjourned.]
A P P E N D I X
May 22, 2013
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