Janette Parker and her lawyer are not the only people who question how Beazer Homes was prosecuted.
The governments top housing investigator in 2010 accused federal prosecutors in Charlotte of hindering his investigation and going too easy on Beazer Homes.
First of all, he pointed out, the government allowed the homebuilder to hire an Atlanta-based law firm, Alston & Bird, to conduct an internal review of Beazer and report back to federal investigators about whether illegal activities occurred. Outsourcing investigations has become routine in corporate fraud cases, blamed on limited government resources.
But Kenneth Donohue, then-inspector general of the Department of Housing and Urban Development, said prosecutors prohibited agents with the Office of Inspector General from conducting interviews while Alston & Bird did its review.
As a law enforcement official for over 40 years ... , Donahue wrote, I have never witnessed a like action.
He complained that Beazer paid Alston & Bird $35 million to $50 million for the internal review, thus reducing the amount of money the homebuilder could pay federal agencies and taxpayers for the fraud committed against them. A deferred prosecution agreement with Beazer, Donahue said, provided too little restitution to HUD compared to the losses it sustained.
Sen. Charles Grassley, R-Iowa, demanded answers from Attorney General Eric Holder.
Someone needs to be watching out for the taxpayers and ensuring that those who committed the very types of fraud that led to the financial crisis are held personally responsible, Grassley wrote in a letter to Holder, also in 2010. The Justice Department owes Americans a detailed explanation.
In his reply, assistant Attorney General Ronald Welch defended the investigation, saying it provided millions of dollars both in restitution to private victim home buyers and in recovery to the Federal Housing Administration (FHA) Insurance Fund.
If the government had demanded more money, prosecutors said, Beazer might have gone bankrupt and 15,000 employees and contractors would have lost their jobs.
Scapegoat versus CEO?
Russell Mokhiber, editor of the Corporate Crime Reporter, said the Beazer case fits an absolute slam-dunk pattern of a two-tier system of justice.
Companies cooperate with federal authorities to get special deals and, to get them, they have to throw them a few executives, Mokhiber said. Those are the scapegoats.
But UNC Chapel Hill law professor Richard Myers, who prosecuted white collar crimes as an assistant U.S. attorney, said prosecutors are limited by the legal standard of reasonable doubt.
Sometimes the person whos easy to prove is not the person high up in the corporation, he said. If youre the CEO you might be three steps removed from what happened.
Often, he said, the best the government can do is get corporations to pay back money.
Asked whether prosecutors felt that all responsible people were held accountable in the Beazer case, a spokesperson for the U.S. Attorneys office in Charlotte said she could not comment on decision-making in individual cases, but said: Ms. Parker was prosecuted for loans that she handled personally, pled guilty, and told the court under oath that she acted knowingly and was responsible for her own criminal actions.
A very tepid effort
Attorney Chris Swecker, who once headed the FBI in North Carolina and later oversaw the agencys worldwide criminal investigations, said he could understand Janette Parkers consternation.
If you looked at the S&L crisis, 1,200 executives went off to jail. If you look at the Enron series of fraud cases, again it was a full-court, all-out effort. In both cases, agents with certified expertise were transferred to the trouble spots. Prosecutors were moved.
Not so with the recent crisis.
You saw a very tepid effort, Swecker said. Even though we were screaming it from the rooftops about mortgage fraud there wasnt any resource enhancement.
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