David Dayen: Tom Miller Pens Love Letter to Settlements with Financial Fraudsters

Tom Miller Pens Love Letter to Settlements with Financial Fraudsters

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.

http://www.nakedcapitalism.com/2016/08/tom-miller-pens-love-letter-to-settlements-with-financial-fraudsters.html

4 Responses

  1. Here’s the options… Allow the banks to continue to securitize student loans (debt), but remove the parent co-sign requirment and the federal guarantees.

    This will lower the cost of college tuition overnight. Banks will refuse to loan borrowers tuition costs that exceed their ability to repay. Institutions that provide higher education (perceived anyway) will lower the costs to fill the seats…. Supply and demand

    Or we require that our children are better educated in 1-12, and for those that do not want to go into a trade or other line of work, we provide 13 and 14th grade at no cost. If the student is not passing the new 13 and 14th grade (lol), they are removed from the program.

  2. Reblogged this on Deadly Clear and commented:
    When will they ever learn?

  3. This is a great piece with one glaring omission.

    You don’t call the scam by its name……………The GSE Business Model.

    People have to understand exactly what the crux of the problem is. The “financial fraudsters” are selling a Model that does not work for the purpose intended (remember Madoff).

    Whether it be in the mortgage industry or education the culprit is the same—-The GSE Business Model.

  4. Who is policing the police?

    GRAFT– see US Code – Chapter 11: BRIBERY, GRAFT, AND CONFLICTS OF INTEREST

    From the free dictionary:
    Graft:

    A colloquial term referring to the unlawful acquisition of public money through questionable and improper transactions with public officials.

    Graft is the personal gain or advantage earned by an individual at the expense of others as a result of the exploitation of the singular status of, or an influential relationship with, another who has a position of public trust or confidence. The advantage or gain is accrued without any exchange of legitimate compensatory services.

    Behavior that leads to graft includes Bribery and dishonest dealings in the performance of public or official acts. Graft usually implies the existence of theft, corruption, Fraud, and the lack of integrity that is expected in any transaction involving a public official.
    ___

    Okay, so we know graft is illegal, and the folks involved lack integrity, so who do you go to when the law enforcement officials you are supposed to go to are protecting the criminals?

    Did any homeowners agree to settlements or did they trust someone “who has a position of public trust or confidence” to do what the AG job requires him to do and we trust him to do? What secret threats or promises happen between the banks and our officials? These are crimes that tear apart millions of families and drive people into homelessness, bankruptcy, depression and even death.

    The people we trusted also created the bailout. The bailout alone was enough to pay off every single debt in our country (every mortgage, student loan, credit card or car, etc.) The BANKS needed a bailout by the tax payers?? Whose bailing us out? Oh yeah, it’s okay for us to fail because we are too small to matter, yet somehow big enough to pay the bailout tab.

    FYI:
    ___
    CHAPTER 11, SECTION 201:
    (a) For the purpose of this section –
    (1) the term “public official” means Member of Congress, Delegate, or Resident Commissioner, either before or after such official has qualified, or an officer or employee or person acting for or on behalf of the United States, or any department, agency or branch of Government thereof, including the District of Columbia, in any official function, under or by authority of any such department, agency, or branch of Government, or a juror;
    (2) the term “person who has been selected to be a public official” means any person who has been nominated or appointed to be a public official, or has been officially informed that such person will be so nominated or appointed; and
    (3) the term “official act” means any decision or action on any question, matter, cause, suit, proceeding or controversy, which may at any time be pending, or which may by law be brought before any public official, in such official’s official capacity, or in such official’s place of trust or profit.
    (b) Whoever –
    (1) directly or indirectly, corruptly gives, offers or promises anything of value to any public official or person who has been selected to be a public official, or offers or promises any public official or any person who has been selected to be a public official to give anything of value to any other person or entity, with intent –
    (A) to influence any official act; or
    (B) to influence such public official or person who has been selected to be a public official to commit or aid in committing, or collude in, or allow, any fraud, or make opportunity for the commission of any fraud, on the United States; or
    (C) to induce such public official or such person who has been selected to be a public official to do or omit to do any act in violation of the lawful duty of such official or person;
    (2) being a public official or person selected to be a public official, directly or indirectly, corruptly demands, seeks, receives, accepts, or agrees to receive or accept anything of value personally or for any other person or entity, in return for:
    (A) being influenced in the performance of any official act;
    (B) being influenced to commit or aid in committing, or to collude in, or allow, any fraud, or make opportunity for the commission of any fraud, on the United States; or
    (C) being induced to do or omit to do any act in violation of the official duty of such official or person;
    (3) directly or indirectly, corruptly gives, offers, or promises anything of value to any person, or offers or promises such person to give anything of value to any other person or entity, with intent to influence the testimony under oath or affirmation of such first-mentioned person as a witness upon a trial, hearing, or other proceeding, before any court, any committee of either House or both Houses of Congress, or any agency, commission, or officer authorized by the laws of the United States to hear evidence or take testimony, or with intent to influence such person to absent himself therefrom;
    (4) directly or indirectly, corruptly demands, seeks, receives, accepts, or agrees to receive or accept anything of value personally or for any other person or entity in return for being influenced in testimony under oath or affirmation as a witness upon any such trial, hearing, or other proceeding, or in return for absenting himself therefrom;
    shall be fined under this title or not more than three times the monetary equivalent of the thing of value, whichever is greater, or imprisoned for not more than fifteen years, or both, and may be disqualified from holding any office of honor, trust, or profit under the United States.
    (c) Whoever –
    (1) otherwise than as provided by law for the proper discharge of official duty –
    (A) directly or indirectly gives, offers, or promises anything of value to any public official, former public official, or person selected to be a public official, for or because of any official act performed or to be performed by such public official, former public official, or person selected to be a public official; or
    (B) being a public official, former public official, or person selected to be a public official, otherwise than as provided by law for the proper discharge of official duty, directly or indirectly demands, seeks, receives, accepts, or agrees to receive or accept anything of value personally for or because of any official act performed or to be performed by such official or person;
    (2) directly or indirectly, gives, offers, or promises anything of value to any person, for or because of the testimony under oath or affirmation given or to be given by such person as a witness upon a trial, hearing, or other proceeding, before any court, any committee of either House or both Houses of Congress, or any agency, commission, or officer authorized by the laws of the United States to hear evidence or take testimony, or for or because of such person’s absence therefrom;
    (3) directly or indirectly, demands, seeks, receives, accepts, or agrees to receive or accept anything of value personally for or because of the testimony under oath or affirmation given or to be given by such person as a witness upon any such trial, hearing, or other proceeding, or for or because of such person’s absence therefrom; shall be fined under this title or imprisoned for not more than two years, or both.
    (d) Paragraphs (3) and (4) of subsection (b) and paragraphs (2) and (3) of subsection (c) shall not be construed to prohibit the payment or receipt of witness fees provided by law, or the payment, by the party upon whose behalf a witness is called and receipt by a witness, of the reasonable cost of travel and subsistence incurred and the reasonable value of time lost in attendance at any such trial, hearing, or proceeding, or in the case of expert witnesses, a reasonable fee for time spent in the preparation of such opinion, and in appearing and testifying. (e) The offenses and penalties prescribed in this section are separate from and in addition to those prescribed in sections 1503, 1504, and 1505 of this title.

    The rest of the Section names:
    Section 202 Definitions
    Section 203 Compensation to Members of Congress, officers, and others in matters affecting the Government
    Section 204 Practice in United States Court of Federal Claims or the United States Court of Appeals for the Federal Circuit by Members of Congress
    Section 205 Activities of officers and employees in claims against and other matters affecting the Government
    Section 206 Exemption of retired officers of the uniformed services
    Section 207 Restrictions on former officers, employees, and elected officials of the executive and legislative branches
    Section 208 Acts affecting a personal financial interest
    Section 209 Salary of Government officials and employees payable only by United States
    Section 210 Offer to procure appointive public office
    Section 211 Acceptance or solicitation to obtain appointive public office
    Section 212 Offer of loan or gratuity to financial institution examiner
    Section 213 Acceptance of loan or gratuity by financial institution examiner
    Section 214 Offer for procurement of Federal Reserve bank loan and discount of commercial paper
    Section 215 Receipt of commissions or gifts for procuring loans
    Section 216 Penalties and injunctions
    Section 217 Acceptance of consideration for adjustment of farm indebtedness
    Section 218 Voiding transactions in violation of chapter; recovery by the United States
    Section 219 Officers and employees acting as agents of foreign principals
    Section 223 Repealed.
    Section 224 Bribery in sporting contests
    Section 225 Continuing financial crimes enterprise
    Section 226 Bribery affecting port security
    Section 227 Wrongfully influencing a private entity’s employment decisions by a Member of Congress
    – See more at: http://codes.lp.findlaw.com/uscode/18/I/11#sthash.PGoMns4u.dpuf

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