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Prosecutor Declares New Front in War on Wall Street Fraud

A top federal prosecutor in New York will?on Thursday declare another front in the war on Wall Street fraud, focusing new resources on civil litigation to complement existing criminal actions.

Wall Street sign
Paul Giamou | Aurora | Getty Images
Wall Street sign

The move by Preet Bharara, US attorney for the southern district of New York, comes amid criticism of the relatively small number of criminal prosecutions brought after the financial crisis. The district has mounted high-profile prosecutions after previous crises.

“Not every case is a criminal case,” Mr. Bharara told the Financial Times. “It’s important for us that we deploy all the tools we have, even in cases where a criminal prosecution is not appropriate.”

Mr. Bharara will announce the appointment of Heidi Wendel, a former New York state deputy attorney-general, to head a six-strong unit focused on taking civil enforcement action against fraud. Her remit covers “every single type of fraud”, including complex financial misconduct, mortgage deals, abuse of the government’s troubled asset relief programme and healthcare scams, Mr. Bharara said.

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Civil actions, which require a lower burden of proof than criminal charges, can be used to levy substantial fines and penalties from companies. Mr. Bharara said civil actions could have a significant “deterrent effect on other people, as well as bringing back money for investors and into the public purse.”

He added: “The goal [of the civil frauds unit] over time is not just to do a case here or there but to find areas where there’s an industry-wide abuse or bad practice and use our resources to try to remedy something on a broad scale.”

Laura Flippin, a former US deputy assistant attorney-general, said civil action could allow prosecutors to “avoid some of the difficulties they’ve encountered following the financial crisis in making criminal charges stick.”

Mr. Bharara declined to comment on “whether or why there are criminal cases responding to the financial crisis.”

Mr Bharara’s move follows the passage of legislation last year giving US attorneys enhanced power in civil cases to demand that executives attend interviews or disclose confidential internal documents. Previously, federal prosecutors needed the approval of the US attorney-general to make such “civil investigative demands.”

He added that Ms. Wendel, an experienced prosecutor, would take an “aggressive and thorough” approach.