Eric Frazier

Wall St. fraud vs. Main St. fraud

Richard Fuld, then CEO of Lehman Brothers, gets heckled by protesters in Washington, D.C., in 2008.
Richard Fuld, then CEO of Lehman Brothers, gets heckled by protesters in Washington, D.C., in 2008. AP

A justice system pop quiz:

Defendant A – A young con artist who cooks up a luxury home-buying scheme that helps him steal more than $75 million from investors and banks over seven years. It prompts one of the largest mortgage fraud investigations in U.S. history.

Defendant B – The CEO of what was once the nation’s fourth-largest bank. His aggressive pursuit of subprime mortgage assets helps precipitate the 2008 banking meltdown and the Great Recession. During the crisis, he conveys ownership of a $13.75 million Florida mansion to his wife and the firm manipulates its balance sheet to hide $50 billion worth of risky assets.

Which one is headed to federal prison?

If you guessed the CEO, you must have been asleep the past seven years. You’d have an easier time finding an Obama voter at a Tea Party rally than a banking crisis CEO in prison.

No such fate has befallen Defendant B, better known as Richard Fuld, the former Lehman Brothers chief and a poster boy for Wall Street arrogance.

During the crisis, he was hauled before Congress and compared to a looter for pocketing close to $500 million as his company hurtled toward the biggest bankruptcy in U.S. history.

He resurfaced last week, speaking at a financial conference in New York. The man nicknamed “the gorilla” still didn’t get it.

He blamed Lehman’s demise on the federal government’s push to increase home ownership. He said Lehman could have survived, but was railroaded into bankruptcy by the feds.

Heaven help us – he sounded like a man hoping to make a comeback.

“What did Rocky say?” he asked. “‘It’s not how hard you hit but whether you get up after you’ve been knocked down.’ I love Rocky.”

Which brings us to Defendant A, James Tyson Jr. He’s been knocked down, too. But his comeback must wait for about 30 years. That’s the sentence a federal judge in Charlotte handed him last week in the “Operation Wax House” investigation.

The sprawling eight-year probe into real estate fraud in Charlotte and Waxhaw produced charges against 91 people, including attorneys, mortgage brokers, bank insiders and builders. Tyson was the scheme’s “leader of leaders,” prosecutors said.

Of course, Tyson and Fuld don’t make for an apples-to-apples comparison. Tyson conned individual investors and tricked banks into underwriting fraudulent mortgages. Angry shareholders say Fuld’s firm sold them junk investments. But that’s the market, right? Win some, lose some.

Then again, five days before Lehman filed for bankruptcy, its chief financial officer told shareholders it had $42 billion in available cash. Was that an honest mistake? Or deliberate deception?

Federal prosecutors haven’t answered that question, at least not in court. They never mounted a serious effort at a criminal prosecution of Lehman, a report by the New York Times and the investigative website ProPublica suggests.

The sight of Tyson heading off to prison makes you question yet again if there’s one set of rules for little fish and another for big ones.

It brings to mind Bryan Stevenson, the noted civil rights attorney who recently spoke in Charlotte. Too often, “wealth, not culpability, shapes outcomes” in our criminal justice system, he contends.

Tyson deserves to go to prison. But surely folks like Fuld deserve a lot more than dented reputations. With some in Congress pushing to roll back parts of the Dodd-Frank banking safeguards, that lack of proper consequences should concern us all.

During his talk last week, Fuld was asked why he didn’t just ride into the sunset and remain low-profile.

“Why don’t you bite me?” he jokingly replied.

Might as well be talking to the entire country.

Eric: or @Ericfraz on Twitter.