The Justice Department made a long-overdue disclosure late Friday: Last year when U.S. Attorney General Eric Holder boasted about the successes that a high-profile task force racked up pursuing mortgage fraud, the numbers he trumpeted were grossly overstated.
We're not talking small differences here. Originally the Justice Department said 530 people were charged criminally as part of a year-long initiative by the multi-agency Mortgage Fraud Working Group. It now says the actual figure was 107 -- or 80 percent less. Holder originally said the defendants had victimized more than 73,000 American homeowners. That number was revised to 17,185, while estimates of homeowner losses associated with the frauds dropped to $95 million from $1 billion.
The government restated the statistics because it got caught red-handed by a couple of nosy reporters. Last October, two days after Holder first publicized the numbers, Phil Mattingly and Tom Schoenberg of Bloomberg News broke the story that some of the cases included in the Justice Department's tally occurred before the initiative began in October 2011. At least one was filed more than two years before President Barack Obama took office.
After their initial story, I asked a Justice Department spokeswoman, Adora Andy, several times over the course of a month for a list of the people charged and their case details so I could look them up myself. She promised repeatedly to provide one, until she finally stopped responding to my requests.
Her e-mails to me were priceless. On Oct. 19, Andy said: “We’ll have a list to you -- it will take some time to pull it together.” On Oct. 26, she said: “You will get a list,” explaining that “this is a labor-intensive process.” On Nov. 5, she said: “It looks like we should have the list to you by the end of the week if not sooner.” On Nov. 13: “Hold tight. Finalizing things on this end. Should have something to you tonight.” Again, no list. “I assure you I’m working as hard as I can to get this to you along with the lead agency on this matter, FBI,” she said later that same day. “It’s just very laborious with so much going on and so little staff.”
My column about the Justice Department's refusal to come clean ran a few days later last fall. And it seems obvious now why I wasn't given the list. The government would have been handing me the proof that the numbers it was touting were wrong.
In an updated press release Friday, which corrected its initial release of last October, the Justice Department said a review of the cases found that the inflated figures included defendants who had been sentenced or convicted in fiscal year 2012 -- not just people who had been criminally charged, as originally reported. Its original, lofty tally also included cases in which the victims weren't distressed homeowners.
"As a result, the announcement overstated the number of defendants that should have been included as part of the Distressed Homeowner Initiative, as well as the corresponding estimated loss amount and number of victims," the Justice Department said.
When Holder first trotted out these figures last October, he bragged during a press conference about the results of the government's "Distressed Homeowner Initiative," which he called “a groundbreaking, yearlong mortgage-fraud enforcement effort” and “the first ever to focus exclusively on crimes targeting homeowners.” Secretary of Housing and Urban Development Shaun Donovan joined him at the press conference.
What a charade. No wonder the government found it so difficult to bring a meaningful number of accounting-fraud cases against bank executives after the financial crisis. Its own books were cooked.
This was the second time, mind you, that Holder's Justice Department had pulled a stunt like this. In December 2010, Holder held a press conference to tout a supposed sweep by the president’s Financial Fraud Enforcement Task Force called "Operation Broken Trust." (The mortgage-fraud program was part of the same task force.) As with the mortgage-fraud initiative, Broken Trust wasn’t actually a sweep. All the Justice Department did was lump together a bunch of small-fry, penny-ante fraud cases that had nothing to do with one another. Then it held a press gathering.
At least on that occasion, the Justice Department promptly provided me with a list of the defendants’ names and case details when I asked for them. That is how I was able to determine for a December 2010 column that the government’s Broken Trust numbers were inflated. Among the handful of cases on the list that I spot-checked, one defendant was sentenced to probation before the operation’s supposed start date. Another person on the list had no record of criminal charges. Other cases had nothing to do with any actions by the task force. The Justice Department still hasn't restated the Broken Trust numbers -- even though those statistics clearly were in error, too.
The Obama administration has been on the defensive for years over its lack of decisive, high-profile prosecutions related to the financial crisis. So it leads one to believe that might help explain why the feds have occasionally inflated their fraud statistics: to persuade the public that they were being tough on financial crimes.
Holder needs to come forward and explain exactly how this happened and why. He used a press conference with the cameras rolling to give out numbers that proved to be false -- and they appear to have been willfully false. He should be just as eager to hold another press conference to set the record straight, answer any questions about his apparent sleight of hand when it comes to financial-fraud metrics and apologize to the American people.
(Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter.)