Archive for November 15th, 2012

We’re stunned. This settlement is pathetic. The $4 billion penalty is equivalent to just a fifth of the company’s 2011 profits."Tyson Slocum" "Public Citizen"

The point of the criminal justice system is twofold: to punish and to deter. This does neither. It is a weak-tea punishment that provides zero deterrence to BP or other companies. Consider that after the 2005 Texas refinery explosion that killed 15 people, BP pleaded guilty to a criminal charge and paid a fine. Now, after a 2010 event that killed 11 people, BP is again pleading guilty and paying a fine. Zero deterrence.

Although the government is right to pursue manslaughter charges against two individuals BP employees, the settlement is inadequate to address BP’s repeated criminal conduct.

The government must impose more meaningful sanctions. Nothing in this settlement stops BP from continuing to get federal contracts and leases. BP will earn more in annual federal contracts than it will pay in penalties as a result of this. That’s appalling.

Below is earlier statement made just prior to announcement:

The Department of Justice (DOJ) reportedly has reached a multibillion-dollar settlement with BP in which the company will plead guilty only to obstruction of justice for lying to Congress in the disaster’s aftermath. The reports suggest that DOJ will not pursue criminal charges against BP for the events that led to the April 20, 2010, disaster. While civil violations of the Clean Water Act are still pending against the company after this settlement, the lack of criminal sanctions for conduct up to April 20 would be a defeat for the communities and families harmed by the disaster. The single criminal charge is inadequate; remember that two BP subsidiaries were under criminal indictment at the time of the Deepwater Horizon tragedy. Claims arising from the Gulf disaster, which killed 11 workers and did untold damage, puts the company’s liability at a minimum of $51.5 billion.

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"Bart Naylor" "Financial policy reform"Let’s say you run JPMorgan Chase & Co.’s mortgage department, and you’ve just settled a massive lawsuit that claims you forged documents in foreclosure proceedings. You’ve agreed to identify victims and pay them up to $125,000 each. Now, who could you hire to play a role in that process that might call into question the legitimacy of your commitment to finding all the victims and shelling out all those $125,000 checks? Someone who formerly played a leading role at Countrywide Financial Services, the company whose name has become virtually synonymous with abusive lending practices, no doubt. How about Rebecca Mairone?

Mairone works with JPMorgan’s program to identify and compensate victims of foreclosure abuse. But on Oct. 24, the Department of Justice identified her in a complaint filed in a federal district court alleging a massive fraud at Countrywide,  where she worked before JPMorgan. Mairone was chief operating officer at Countrywide and was involved in overseeing employees who underwrote mortgage loans and sold them to the government-sponsored enterprises Fannie Mae and Freddie Mac. The Justice Department alleges that a “streamlined” loan-program initiated by Countrywide in 2007 eliminated quality controls and led to the origination and sale to Fannie and Freddie of defective loans that had obvious problems. Mairone, according to the allegations, failed to heed repeated warnings and internal reviews indicating that Countrywide was foisting bad mortgages on Fannie and Freddie.  Internally, the streamlined loan program was called “the Hustle,” referring to the speed with which Countrywide originated and sold bad loans. By knowingly selling defective loans to Fannie and Freddie and eliminating its quality controls even while telling Fannie and Freddie that it was tightening its standards, Countrywide defrauded Fannie and Freddie — and ultimately U.S. taxpayers — of over a billion dollars, according to the Justice Department lawsuit.

If the government’s allegations are true, JPMorgan appears to have hired a manager who turned a blind eye to, and perhaps affirmatively enabled, fraudulent practices at Countrywide.

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