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.