In
remarks before the New York City Bar Association, federal district judge (SDNY)
Jed Rakoff noted that, in striking contrast with past prosecutions engendered
by past financial crises, not a single high level executive has been
successfully prosecuted in connection with the recent financial crisis, and
given the fact that most of the relevant criminal provisions are governed by a
five-year statute of limitations, it appears very likely that none will be. One
possibility, already mentioned, is that no fraud was committed, a possibility
that should not be discounted.
While he
has no opinion as to whether criminal fraud was committed in any given
instance, Judge Rakoff remarked that the Financial Crisis Inquiry Commission, in its final report, uses
variants of the word fraud no fewer than 157 times in describing what led to
the crisis, concluding that there was a systemic breakdown, not just in
accountability, but also in ethical behavior. The Commission found that the
signs of fraud were everywhere to be seen. Without multiplying examples, the
point is that, in the aftermath of the financial crisis, the prevailing view of
many government officials was that the crisis was in material respects the
product of intentional fraud.
Examining
the issue of the difficulty of proving intent, Judge Rakoff noted that willful
blindness or conscious disregard are a well-established basis on which federal
prosecutors have asked juries to infer intent, in cases involving complexities,
such as accounting treatments, at least as esoteric as those involved in the
events leading up to the financial crisis. And while some federal courts have
occasionally expressed qualifications about the use of the willful blindness
approach to prove intent, the Supreme Court has consistently approved it.