I just ran Eric "InAction Jackson" Holder's announcement relating to "Operation Broken Trust" through a word cloud generator to demonstrate a simple point.
According to the feared one, this is what the combined resources of the United States Government enforcement apparatus (Obama's "Financial Fraud Enforcement Task Force") has been busy doing during the past three months, chasing Ponzi clowns to see if there is another Bernie Madoff hidden in the financial cracks and bringing down pump and dump schemes.
What is it these vermin financial predators are pumping and dumping is what I want to know.
Fraud, investment, financial, schemes...those are the big words you see.
Here are some of the big words you don't see: the name of a major Wall Street institution or any Wall Street firm for that matter, the word bank, the word mortgage, the words origination fraud, the words title and foreclosure fraud, the word housing, the word securitization, the word RICO, the word subprime and finally, the word C-O-M-P-E-T-E-N-T.
ATTENTION ALL BANKSTAS, you have nothing to fear, InAction Jackson and the Federal posse are busy chasing the financial Boogeymen so the rest of you can sleep tight tonight.
TEXT OF BUFFOON:
Attorney General Eric Holder Speaks at the Operation Broken Trust Announcement
Washington, D.C.
Monday, December 6, 2010
Good morning, and thank you all for being here.
I’m pleased to be joined today by several key leaders in our collective effort to combat financial fraud – FBI Executive Assistant Director Shawn Henry and SEC Director of Enforcement Robert Khuzami, as well as the U.S. Postal Inspection Service’s Chief Postal Inspector, Guy Cottrell; IRS Criminal Investigation Deputy Chief Rick Raven; and Commodity Futures Trading Commission Acting Director of Enforcement Vincent McGonagle.
We are here to announce the results of Operation Broken Trust, a three-and-a-half-month targeting of investment fraud schemes throughout the country – and a critical step forward in law enforcement’s work to protect American investors, to ensure the strength of our markets, and to prevent financial fraud schemes.
While there is nothing new about conducting nationwide operations and sweeps – this one is different in that it brought together a broad array of criminal and civil enforcement tools, at both the federal and state level, to attack investment fraud schemes collectively. Operation Broken Trust is the first national operation in history to target the many different types of investment fraud schemes that prey directly on the investing public.
This historic effort has been coordinated, executed, and led by members of the Financial Fraud Enforcement Task Force that President Obama created in November 2009. This task force is the broadest coalition of law enforcement, investigatory and regulatory agencies ever established to combat fraud. Multiple federal agencies, as well as partners at the state level, are working together to ensure that no stone is left unturned when it comes to protecting consumers and investors.
Our mission is simple – to bring financial fraud schemes to light and those who operate them to justice.And our aggressive, coordinated approach is working.
Since Operation Broken Trust was launched on August 16th, all across the country investment fraud cases have been prioritized. To date, the operation has involved enforcement actions against 343 criminal defendants and 189 civil defendants, whose conduct harmed more than 120,000 victims. Several individuals have been charged with defrauding men and women across the country out of thousands – and sometimes millions – of dollars. The cases in this operation involve a variety of different investment fraud schemes that have led to more than $8.3 billion in losses in just the criminal cases alone. Staggering numbers. These losses represent hard-earned money and even life savings. They represent needs that may not be met and dreams that may not be fulfilled.
All of these victims can tell a tragic and cautionary story of being misled and exploited – often by someone they trusted. In fact, many of the scam artists we’ve identified were preying on their own neighbors – and on the most vulnerable members of their communities. Several of those prosecuted during this operation solicited victim investors from their own churches. One man in Texas allegedly targeted his fellow parishioners, asking them to invest with him and claiming that his success in foreign exchange trading was “a blessing from God.”
In Florida, one defendant was convicted recently for his role in an investment scam that specifically targeted the local Haitian community. In Ohio, a former police officer operating a Ponzi scheme solicited investments from active and retired police officers and firefighters. And in Chicago, another Ponzi scheme resulted in more than $30 million in losses to hundreds of victims – many of them elderly, Italian immigrants. As a result of our prosecution, the man who operated this scheme has been sentenced to more than 20 years in prison.
Many of the criminals we’ve identified used investor funds to support lavish lifestyles. One man operating an $880 million Ponzi scheme in Florida duped investors from across the country – and used the money to buy floor seats at professional basketball games and to make payments on his personal yacht, his beach house, and his Mercedes. A New Jersey man charged with operating an investment scam allegedly used investor funds to make payments on three different luxury cars and to pay fees at two country clubs.
With this operation, the task force is sending two messages. A message to the public: be alert for these frauds, take appropriate measures to protect yourself, and report such schemes to proper authorities when they occur. And a second message to anyone operating or attempting to operate an investment scam: we will use every tool at our disposal to find you, to stop you, and to bring you to justice. Cheating investors out of their earnings and savings is no longer a safe business plan.
Along with the agencies represented here on stage, I also want to thank the Federal Trade Commission, the U.S. Secret Service, and the National Association of Attorneys General. Because of their work, and the contributions of everyone involved in Operation Broken Trust, dozens of criminals who hatched fraud schemes now face significant time behind bars – including one sentence of 85 years.
Although this operation marks an important step forward, our fight to combat financial fraud goes on.
The task force will continue working with consumer groups to increase financial literacy and raise awareness about the warning signs of financial scams. And we encourage investors to share tips and concerns with us by visiting stopfraud.gov. With the commitment of so many partners and with the help of an informed public, I am confident that we can take our fight against financial fraud to a new level.
And now I’d like to turn things over to FBI Executive Assistant Director, Shawn Henry.
WB7: No need to edit the speech because it is funny enough as is. Here is my closing question: What precisely is it that they were doing prior to the last three months?
This evil financial genius was foiled from bringing down the financial system.
MEANWHILE: This is for those of you losing faith in Federal law enforcement:
"A German man apparently smuggled hundreds of tarantulas and various other arachnids into the US, authorities said on Friday, according to AFP.
Authorities set up a sting to catch 37-year-old Sven Koppler in a sting called “Operation Spiderman,” the news agency reported. He was arrested on Thursday after flying into Los Angeles.
"He is one of the largest importers of illegal tarantulas into United States.
He has been doing it for several years," Assistant US Attorney Mark Williams told the Los Angeles Times.
Williams said that Koppler made around $300,000 for selling off the spiders in various countries including the US. The Times reported that he could get a maximum prison sentence of 20 years and fine of $250,000."
The Wall Street Journal real estate blog reports that Federal banking regulators will conduct an examination of MERS, the electronic mortgage and servicing rights data service (hat tip ForeclosureHamlet). As much as scrutiny of MERS is very much in order, it remains an open question as to whether this effort is serious.
One impetus for this review is an article by Chris Peterson, which was very critical of MERS’ inconsistent roles. For instance, the manner in which MERS registers mortgages in local courthouses is problematic:
MERS’s rights vis-à-vis mortgages registered on the MERSCORP database have created a conundrum for courts, borrowers, and foreclosure attorneys. In boilerplate security agreements included in mortgages and deeds of trust around the country, lenders include this clause:
“MERS” is Mortgage Electronic Registration Systems, Inc. MERS is a separate corporation that is acting solely as nominee for Lender and Lender’s successors and assigns. MERS is the mortgagee under this Security Instrument….
On the one hand, MERS purports to be acting as a nominee—a form of an agent. On the other hand, it also is claiming to be an actual mortgagee, which is to say an owner of the real property right to foreclose upon the security interest. It is axiomatic that a company cannot be both an agent and a principal with respect to the same right.19 In litigation all across the country, attorneys representing MERS frequently take inconsistent positions on the legal status of the company, depending on the legal issue at hand.
Both the MERS-as-an-agent and the MERS-as-an-actual mortgagee theories have significant legal problems. If MERS is merely an agent of the actual lender, it is extremely unclear that it has the authority to list itself as a mortgagee or deed of trust beneficiary under state land title recording acts. These statutes do not have provisions authorizing financial institutions to use the name of a shell company, nominee, or some other form of an agent instead of the actual owner of the interest in the land. After all the point of these statutes is to provide a transparent, reliable, record of actual—as opposed to nominal—land ownership.
Conversely, if MERS is actually a mortgagee, then while it may have authority to record mortgages in its own name, both MERS and financial institutions investing in MERS-recorded mortgages run afoul of longstanding precedent on the inseparability of promissory notes and mortgages. Since the 19th century a long and still vital line of cases has held that mortgages and deeds of trust may not be separated from the promissory notes that create the underlying obligation triggering foreclosure rights.2
As troubling is MERS’ lax corporate governance. The parent, MERSCORP, has under 50 employees; the subsidiary MERS, which is the database, has no employees. It instead relies on the peculiar procedure of having employees of MERS members (typically, bank servicing units and foreclosure mills) temporarily become MERS officers for the sole purpose of taking action in MERS’ name:
As a practical matter, the incoherence of MERS’ legal position is exacerbated by a corporate structure that is so unorthodox as to arguably be considered fraudulent. Because MERSCORP is a company of relatively modest size, it does not have the personnel to deal with legal problems created by its purported ownership of millions of home mortgages. To accommodate the massive amount of paperwork and litigation involved with its business model, MERSCORP simply farms out the MERS, Inc. identity to employees of mortgage servicers, originators, debt collectors, and foreclosure law firms.22 Instead, MERS invites financial companies to enter names of their own employees into a MERS webpage which then automatically regurgitates boilerplate “corporate resolutions” that purport to name the employees of other companies as “certifying officers” of MERS.23 These certifying officers also take job titles from MERS stylizing themselves as either assistant secretaries or vice presidents of the MERS, rather than the company that actually employs them. These employees of the servicers, debt collectors, and law firms sign documents pretending to be vice presidents or assistant secretaries of MERS, Inc. even though neither MERSCORP, Inc. nor MERS, Inc. pays any compensation or provides benefits to them. Astonishingly, MERS “vice presidents” are simply paralegals, customer service representatives, and foreclosure attorneys employed by other companies. MERS even sells its corporate seal to non-employees on its internet web page for $25.00 each.24 Ironically, MERS, Inc.—a company that pretends to own 60% of the nation’s residential mortgages—does not have any of its own employees but still purports to have “thousands” of assistant secretaries and vice presidents.
To be more precise, in Senate testimony earlier this week, MERS president R.K. Arnold said MERS has over 20,000 certifying officers.
To give you an idea of how little control MERS has over the activities of its supposed officers, consider this discussion from a November 11, 2009 deposition of MERSCORP’s William Hultman by Nick Wooten (see page 148):
Q. Is there anyone at MERS who verifies that the acts being undertaken in the name of MERS by its certifying officers are acts which are authorized by this corporate resolution?
A. There’s no one at MERS other than the officers who generally oversee the activities of the certifying officers. However, there are employees of the parent corporation MERSCORP that regularly audit the activities of our members to ensure that they are complying with our rules and procedures in our agreement with them.
Q. Who are those employees?
A. They are the people who work in the law department and the people who work in the products performance division — department.
Q. How many of those people are they?
A. I think there is, there are seven in the law department, and product performance department’s probably, and that — I don’t know off the top of my head because I haven’t looked at the org chart lately, but there’s probably seven or eight or nine people there.
Q. Well, let’s just go with the highest number. Seven in law and nine in product performance. So 16 people out of 47?
A. Give or take, yeah.
Q. And you say those 16 people are involved in auditing the thousands of transactions executed daily by the thousands of certifying officers of MERS?
A. I didn’t say that….
Q. Okay. How much time in a typical day do those 16 people spend auditing the activities of certifying officers?
A. I have no idea.
Q. You are in charge of the law department, aren’t you?
A. No.
Q. You are in charge of what department?
A. I’m in charge of the corporate group or the corporate division.
Q. Does that include the law department?
A. It does.
Q. Who’s in charge of the law department?
A. Sharon Horstkamp.
Q. Does Sharon Horstkamp report to you?
A. She does.
Q. Okay. Do you receive reports on the frequency of audits undertaken by her department?
A. I do not….
Q. Right. And so again my question is there are 16 people designated to look at that issue, and you have thousands of certifying officers; correct?
A. Are you asking me if I have thousands of certifying officers?
Q. Yes.
A. Yes.
Q. You have 16 people who look at their compliance with this resolution?
A. Generally, yes.
Q. And do you have any idea daily how many transactions are taken in the name of MERS by these thousands of corporate certifying officers?
A. Generally, no.
Q. Okay. Is there any way that MERS is able to track every transaction conducted in the name of MERS by a certifying officer?
A. Only to the extent that it’s reported to us either systematically or it’s reported to a certifying officer within the organi- — the servicing organization.
Q. So I mean I guess again my point is there are thousands of transactions on a daily basis that MERS has no record of; right?
A. I don’t know that there are thousands of transactions being taken daily by the certifying officers.
Q. Well, let’s just talk about this affidavit we were discussing with respect to the Harmon Law Offices. Do you have any records in MERS system of the number of affidavits of nonmilitary status executed on a daily basis?
A. In which systems are we speaking?
Q. In MERS system.
A. In the MERS, the computer automated systems?
Q. In any method of storage, retrieval, archiving that is available to you and that you use, do you have any record of the number of affidavits of nonmilitary status executed by a certifying officer on a daily basis in this country?
A. Only to the extent that that information has been reported to another certifying officer of the servicer.
Q. Okay. And how would you obtain that information?
A. I would call the servicer up.
Q. Okay. So that is not a MERS record?
A. Well, to the extent that it’s in the custody of the MERS certifying officer we would consider that a MERS record.
Q. Outside of the servicer’s own system — well, first of all, let me ask it this way. Is the servicer required to report these activities to you on a daily, weekly, monthly basis?
A. Which services?
Q. Affidavits of nonmilitary status.
A. They are not required to report that to us.
Q. Do they report that to you?
A. They do not.
Q. Okay. And on your own systems do you have any records of the number of affidavits of nonmilitary status that are executed on a daily basis?
A. If you’re talking about the MERS system, no.
Q. Okay. What about any other system owned or operated by MERS?
A. Generally, no.
Q. Okay. What about assignments of mortgage or deeds
of trust?
A. What about them?
Q. Do you have any idea how many of those are done on a daily basis by MERS certifying officers?
A. I do not.
Q. Do you have access to that through the MERS system or any other system maintained, owned, controlled and operated by MERS?
A. Only to the extent that we ask the servicer they provide that information to us.
Q. So they do not put that information on the MERS system as a matter of course?
A. Put what stuff on?
Q. I’m sorry. Let me try to ask a better question. Assignments of a mortgage or a deed of trust are not generally reported to MERS on a daily basis, are they?
A. Correct.
Q. And MERS has no records of its own about how many mortgage assignments or assignments of deeds of trust are undertaken in its name on a daily basis, does it?
A. Only to the extent that that information is not in the hands of the MERS certifying officer for a particular servicer.
Q. If you wanted to stop this deposition and go call someone at MERS and say how many assignments have been done in our name today of a mortgage or deed of trust, you could not get that information that simply, could you?
A. I could get the information, but it might take some time.
Q. So there’s nothing in your system that catalogs how frequently that occurs?
A. There’s nothing in the MERS system or the automated systems that we operate for our members that has that information readily available.
Q. And you rely on the servicers to keep any records of that if any records are kept?
A. Yes.
Q. How about foreclosure deeds? Do you have any record of how many foreclosure deeds are executed in the name of MERS on a daily basis in this country by certifying officers?
A. No….
Q. — I mean do you have any idea how many endorsements are done in the name of MERS?
A. No, I do not.
Q. Do you have any idea how many proofs of claim are filed in the name of MERS on a daily basis?
A. I do not.
It gets even better. Between this deposition, and an earlier one of MERSCORP president R.K. Arnold by Nick Wooten, one get a more complete picture of how lax MERS’ operational controls are. MERS does keep a record of who its certifying officers are, but it has not record of what actions any particular certifying officer has taken. This would seem to be a fatal shortcoming in conducting any kind of audit. Arnold maintained that MERSCORP did various quality reviews, but was unable to say what they consisted of or even who on his team was responsible for them.
Both depositions make clear that the integrity system rest entirely on timely and accurate entries by MERS members. Since MERSCORP lacks access to any of the underlying records, it is impossible for it to vet accuracy even if it wanted to absent extensive cooperation with the servicer and document custodian.
For those of you who have the patience, below are the depositions.
September 25. 2009 Deposition of R.K. Arnold, MERSCORP
November 11. 2009 Deposition of William Hultman, MERSCORP
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