Feds to Target Lawyers in Fraud Cases

ABA Journal piece by Martha Neil

Lawyers and other "gatekeepers," such as mortgage and real estate brokers, should be prime targets in upcoming criminal prosecutions of widespread fraud underlying the current economic crisis, officials said at a Senate Judiciary Committee hearing today.

“They have the most to lose, they’re the most likely to flip, and they make the best examples,” testified Neil Barofsky. He is special inspector general for the Troubled Assets Relief Program, reports a Blog of Legal Times post on the hearing.

However, prosecutorial resources are stretched thin after an exponential increase in mortgage fraud, and the hearing was primarily focused on how these resources can be enhanced, Bloomberg reports.

The FBI now has more than 1,800 open mortgage fraud investigations, double the number in the 2006 fiscal year, the news agency writes.

The proposed Fraud Enforcement and Recovery Act would both expand the potential scope of federal criminal law and provide another $500 million to boost prosecutions, reports Pro Publica.

The bill would broaden the 1863 False Claims Act to permit prosecution of any fraudulent claim for government money or property, even if no government official or employee is directly implicated, and regardless of the defendant's intent to defraud the government, Government Executive reports. It is co-sponsored by Sen. Patrick Leahy (D-Vt.) who chairs the committee, and Sen. Charles Grassley (R-Iowa).

This proposal is one of a series of aggressive steps by federal prosecutors to hold lawyers more accountable for the conduct of their clients, and my fear is just when and where they will draw the line. Local prosecutions of prominent counsel here in Broward and Dade tip the scales on this one. The feds may have gone to far already, though they would suggest otherwise. Now they are looking for legislation to sustain and buttress their position.