By David Dayen, author of Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud.
You could spread around a lot of blame for the current state of our two-tiered system of justice and lack of accountability, particularly as it relates to the financial sector. But if you wanted to find the most pathetic figure involved in that whole rigamarole, all roads lead to Iowa Attorney General Tom Miller.
As a refresher for non-obsessives, Miller was the somewhat highly regarded law enforcer put in charge of the 50-state Attorney General investigation after revelations around the end of 2010 that mortgage servicing companies, mortgage-backed trustees and their law firms were issuing false documents in foreclosure cases on a mass scale to cover up busted chains of title on securitized loans. (I, er, wrote a book on this.) Within days of being announced as the lead investigator, we learned that Miller received $261,000 from banking interests for his re-election campaign – 88 times more than he ever took in the previous decade – and that he personally asked bank lawyers for contributions. Miller then famously told community groups in Iowa that “we will put people in jail” for foreclosure fraud, only days later his office backtracked and said they weren’t referring to foreclosure fraud but some separate mortgage fraud investigation in Iowa (which he didn’t put people in jail for either), and then days after that he called the case “inherently civil,” and days after that he appeared at the Senate Banking Committee and admitted he had two settlement negotiations with Bank of America within the first month of the vaunted investigation. I could go on, but why bother? Whatever his outlook going into the investigation, Miller folded within first contact with the system, and became Washington’s lackey for a settlement that didn’t even rise to the level of a slap on the wrist.
So it was no surprise to dig up a public comment he made a couple weeks ago to the Department of Education, praising civil settlements for corporate crimes rather than holding individuals and corporations accountable for their wrongdoing. This paean to settlements couldn’t come from a better source.
Just as Miller quickly settled out foreclosure abuses, he opted for a national settlement with for-profit college chain Education Management Corporation (EDMC) after they misled prospective students with bogus job placement statistics. No executive saw handcuffs or restrictions on their bonuses from that either. But after a series of these incidents, and outcry from student groups who were forced to pay back their loans to colleges that defrauded them, the Education Department was belatedly pressured into issuing a rule providing a streamlined debt forgiveness process.
The Education Department rule would allow defrauded students to more easily assert a “defense to repayment” on their student debt, as stipulated in their loan contract. The rules restrict the use of mandatory arbitration to settle disputes with wronged students, require schools to post warnings if they have financial problems or poor student loan repayment outcomes, and force colleges to secure a letter of credit if they engage in misconduct, so they would be responsible for paying back students, not taxpayers.
That last one is what Miller objects to. One of the triggering events for the letter of credit acquisition is any state or federal settlement in excess of $750,000. Since the letter of credit would make colleges far more liable to repay borrowers they harmed, and would be costly to obtain, this could make them less likely to agree to settlements. And Tom Miller just cannot have that. So he wrote a comment letter on the proposed rule.
“I am concerned that this component of the proposed rule will negatively impact the states’ efforts to protect consumers from the predatory practices of certain educational institutions by deterring them from settling with state attorneys general,” Miller writes. “In many scenarios, settling is more appropriate than bringing a lawsuit, and settlements are often the best vehicle for providing refunds or loan forgiveness to consumers.”
I mean, we already knew that Tom Miller had an ongoing love affair with settlements, but writing a mash note to them borders on ridiculous. The Education Department rule would make colleges who dupe their students specifically liable to deliver relief to them. It would actually empower students to enforce their own contracts. And it would be so devastating that the institutions would steer clear of engaging in any misconduct to begin with. Miller’s “settle now and settle later” strategy provides no deterrent, dooming students to abuse in perpetuity.
Miller’s rationale is that settling is faster, a claim he made during the foreclosure settlement too, sacrificing adequacy for speed. By the way, the one settlement Miller mentioned, with EDMC, granted 80,000 students $102.8 million in relief, an average of just $1,285 per student (and these for-profit colleges are far more expensive than their non-profit counterparts). And Miller actually bragged about the EDMC case in this letter!
“Reaching a settlement means companies do not have to spend significant amounts of money on litigation, leaving more money available for refunding consumers,” Miller added, as if there wasn’t a year-plus of lawyer-led wrangling on the mortgage settlement, like every other one. He also said that settlements allow him to spend more time pursuing other bad actors, essentially arguing that he should be able to settle so he can make more settlements. And he beamed with pride about the requirements attached to settlements, which invariably amount to little more than Miller’s office telling some miscreant “Don’t do it again.”
Never mind that Miller’s job is not “Settlement Officer” but “Attorney General,” charged with leading an office of prosecutors, not negotiators. It’s one thing to make a cost-benefit analysis on cases after obtaining all the evidence and gaming out the prospects of a legal case. But Miller is actually making a defined rule that settlements are preferable to “a lengthy lawsuit with an uncertain outcome.” Any law enforcement official elected to protect the public interest should be ashamed of such an outlook. Miller has made a virtue of settlements, and a standard of fearing the courtroom.
Even when Miller acknowledges that “bringing suit can be an important tool,” he means that it can be an important tool in bringing a settlement! The example Miller gives is a consumer fraud case against La’ James International College, which never went to trial and settled for $2.6 million. He’s not really saying that settlements are a good option for offices like his, he’s saying they’re the only option.
If Miller had any self-awareness, he wouldn’t write something that so debases the mission of his office. This is the real problem with the Eric Holder, Lanny Breuer-driven culture of settlement that has neutered our justice system. It expresses a new goal for law enforcement: to stand in front of a podium proudly parroting some headline number rather than actually doing the job of preventing lawbreaking and making sure those who do it pay a price.
Filed under: foreclosure