The Financial Rape of America The Realty of It



9:56 AM (3 minutes ago)
to LindsayEsq.KimgeorgiaTravisbillieGerry

So Lets See   FinCen,

These  BANKSTER BASTARDS have rigged a  MONEY LAUNDERING  SYSTEM.    Maybe  THE Mother  F@$#!%s     Rigged The US  Mortgage Markets to  LAUNDER Their  Filthy  SHIT MONEY.    Maybe  The LAUNDERING of 100s of Billions and Trillions is all about   OFF SHORING  PROFITS  and Using the  US and World  Real Eastate Markets to   CLEAN UP Their  BLOOD MONEY.

FinCen  has absolutely NO Moral or Legal Right to  SECRET The  records associated with the  MULTI TRILLION  RESERVE NOTE BAIL OUT of the  Biggest  Whores and Pimps in World History.

THE US Congress and Senate   NOR any member of US or  State Government  have any right to  HIDE FROM  AMERICA the  Filthy BASTARDS  Methods of Operation.

Produce  ALL of  FinCen’s  Records, Files, Videos, Reports and Information on HOW The US real Estate SUBPRIME PREDATORY MORTGAGE  Industry  The   MORTGAGE  MAFIAS …..  Their Ways of  SHAFTING  American Consumers is  OVER ……  GAME  OVER

Produce Your Records.   Produce ALL Files and Records that reveal how  Deutsche Bank, JP Morgan Chase,  Select Portfolio Servicing and the  CUGNO MORTGAGE BROKERING MAFIA  Swindled, Baited and Shafted America’s  VICTIMS of the  Predatory Subprime  Laundering  LIARS LOANS.


Judson Witham

Legacy Trust Media


On Fri, Mar 22, 2019 at 1:11 PM SwampFox <> wrote:

The  BANKSTERS  OPERATE IN SECRET WITH THEIR POLITICAL  PROTECTION.    The  SECRET  BANKING ACTIVITIES in the  So Called United States is  a  VAST  ABUSE  Against the People of the So Called United States.    SECRET BANKING ….  COVER UP  …..  WHITE WASH  and   SWEEP UNDER THE RUG …..    YES  ABSOLUTELY     COURT IS THE NEXT STOP.     Trillions in Bail Outs and   PEANUTS in FINES for ll the  WELL CONNECTED  and  Those That BUY   INFLUENCE.    What a  COMPLETE  RACKET.


Son of the Swamp Fox

Judson Witham

On Fri, Mar 22, 2019 at 9:36 AM Orlin, Lindsay <> wrote:

Mr. Witham: attached is a signed copy by the Deputy Director on the FOIA Appeal under goFOIA 2019-02-146



Thank you

Lindsay Orlin

Legal Program Specialist

Office of Chief Counsel

LONG BEFORE MERS , Taylor Bean & Whitacker, Select Portfolio Services, WAMU, Countrywide and Bank Of America etc etc ….. Land Fraud | Cochise County

Land Fraud. Land Fraud. Every … Every Arizona county and hundreds of thousands of trusting land … Florida was not far behind and many states had similar swindles …

Every Arizona county and hundreds of thousands of trusting land purchasers were victimized by the rampant land scams of the 1960’s. Artist renditions showed trees and lakes with boating and all the modern facilities: streets, street lights, golf courses, a real piece of the American dream. The true…

feel the Bern

Feds looking into Bernie Sanders’ wife over real estate deal

MONTPELIER, Vt. (AP) — A spokesman for the wife of U.S. Sen. Bernie Sanders says she has hired a lawyer as federal investigators examine a real estate deal involving…


Looting and Laundering Millions of  Titles and Trillions of  RESERVE NOTES

The Largest Most Expensive Crime Spree in Human History

Lets go back a little in time to the days of the  RANCHERO RACKETEERS and figures like The King of Arizona,   Charles  Keating,  Paul Friggins, Don Bolles and those  Warm and Fuzzy  Clowns from the  Valley of the Lakes and PNC  Bank,  Oh and lets NOT forget the  DRAMA of  the   FIRREA,  Couch Mortgage,  The Colonial House Scam and Looting of  HUD and the  GAY OLD TIMES of  the  Great Florida Land Swindles and Busts.   FOLKS  YOU CAN NOT MAKE THIS STUFF UP.

Look  at all  the  NON  Border  Colonias on the  NEWER  MAPS   LOL

The Cleaner

Dedicated to the  Lying  Cheating Abusive  Plantation  Masters of Montgomery County  Texas …. There are so many  LIARS and CROOKS that I can name that are Montgomery County Officials it would take up half this site.   The  County  Commissioners  Court has been a  RICO  Scam  for  DECADES.

Texas is CHOCK FULL OF THESE SCAMS and has been for many DECADES ……
SEE Problems in Montgomery County neighborhoods in the 1980s
Houston Chronicle …..Gordon, Cathy “POTHOLES & PROMISES/Montgomery County’s crumbling subdivisions/ Homeowners handle property woes.” Houston Chronicle. Sunday June 21, 1987. Section 1, Page 1.


from  18  Years  Ago



HUD’s incomplete ILLEGAL Developments Maps

Hocus Pocus

From Boston to Philly, Miami to Vegas, Salt Lake to Alaska and Hawaii, California, Texas and ARIZONA …… and on and on and on …… Now Governor Greg Abbot and John Cornyn, Joe Barton and Kevin Brady, CRAIG DOYAL and BARB and NELDA and the Whole Harris / Montgomery County Gang …… SHERIFF HENDERSON and DA LIGON will understand …… Dr. Ben Carson ABSOLUTELY gets it ….. Dirt Dealin is SERIOUS BUSINESS …….


And just a few short years later  America was  GANG RAPED for  TRILLIONS

BOOKS & BUSINESS; Organized Looting

THE GREATEST-EVER BANK ROBBERY The Collapse of the Savings and Loan Industry. By Martin Mayer. 354 pp. New York: Charles Scribner’s Sons. $22.50.

FOR the past several weeks, Representative Bill Schuette, the Republican Senate candidate in Michigan, has been accusing Democratic Senator Carl Levin of accepting campaign contributions from a law firm that worked for Charles H. Keating Jr., the former savings and loan executive who has become a symbol of the nation’s worst financial scandal. When the two candidates debated in early September, Senator Levin fired back, saying that Mr. Schuette had accepted funds from a major accounting firm that had been implicated in another savings and loan failure. The next day Mr. Schuette escalated again, accusing Senator Levin of accepting funds from six accounting firms that are “being sued by the Federal Government in connection with the S.& L. scandal.”

Such is the extent to which the bottomless savings and loan disaster has diminished the reputations of many of our leading professions. To the veteran financial journalist Martin Mayer, that story, the failure of accountants, lawyers, Wall Street brokers, politicians and most regulators to rein in fast-dealing S.& L. executives, is the real scandal in the industry’s spectacular collapse. “What makes the S& L outrage so important a piece of American history is not the hundreds of billions of dollars [ lost ] but the demonstration of how low our standards for professional performance have fallen in law, accounting, appraising, banking, and politics — all of them,” he writes in his awkwardly titled book, “The Greatest-Ever Bank Robbery.”

That tone of sustained moral outrage at the professions that acquiesced in, and often encouraged, the looting is Mr. Mayer’s real contribution to the swelling shelf of books on the savings and loan disaster. Over all, this is only a workmanlike effort that adds little to the existing literature. He revisits the familiar story of the savings and loans’ descent into financial hell. Squeezed by inflation in the late 1970’s, the industry — which had traditionally anchored itself in the unglamorous business of accepting savings from small depositors and writing home mortgages — won from Congress and the Reagan Administration the authority to bid aggressively for larger deposits and to invest the money in speculative ventures. With that new freedom, an astounding variety of schemers and dreamers pilfered, lost and gambled away immense sums, leaving the Federal Government with a tab that may exceed $500 billion by the year 2020.

Other books — including “The Big Fix” by James Ring Adams and the best-selling “Inside Job” by three financial journalists — Stephen Pizzo, Mary Fricker and Paul Muolo — have already recounted the sheer picaresque lunacy of this conflagration with far more enthusiasm than Mr. Mayer. Mr. Mayer does his usual thorough reporting job, but he has little flair for storytelling or characters; his politicians are all cardboard figures, his regulators and industry executives distant and vague.

His preferred milieu is the intricacies of Federal law and banking regulation. Mr. Mayer knows his way around this arcane territory, but his focus on it leaves the book with the dry feel of a legal brief — and a somewhat disorganized one at that. The book has an unfortunate tendency to begin stories and then drift away to other subjects. If there is an organizational scheme here, it is as complicated as any of the bizarre loan arrangements savings and loan executives used to evade their regulators.

For all its defects, the book has important virtues. Mr. Mayer’s asides are often eye-opening: he chides newspapers for unquestioningly running advertisements soliciting deposits for S.& L.’s that were clearly on the verge of collapse. And Mr. Mayer performs a service by shining the spotlight of outrage not only on the crass and colorful hucksters who crashed previously sleepy thrifts, but the pin-striped pillars of prominent law offices and accounting firms who profitably cloaked the hucksters’ schemes in respectability.

What Mr. Mayer illustrates is complete institutional myopia on all sides, the dispiriting inability of almost anyone who interacted with the thrift industry — even those in public service — to think for a moment about the implications of their actions for the public interest. The exceptions — a few courageous savings and loan regulators in Texas, California and Washington who tried to slow down the rush to disaster — found themselves harassed by some of the most powerful members of Congress, from Senator Alan Cranston, the majority whip, to former Speaker of the House Jim Wright, who relied on the industry for substantial campaign contributions.

Mr. Mayer has waded through this financial swamp searching for the correct moral. “We are farther along than anyone thought on our road to a Hobbesian society: These days you can’t trust anybody,” he writes. “Americans really don’t want to live this way. But they have forgotten that there are other ways.” That is a sobering lesson from a dizzying calamity.

The Looting of America’s Coffers – The New York Times

Mar 10, 2009 – Looterssavings and loans and Texas developers in the 1980s; the American … that “the self-interest” of Wall Street bankers hadn’t prevented this mess. … other banks, you name it — were repaid with government bailouts.
Apr 14, 2011 – Mr. Cuomo, as a Wall Street enforcer, had been questioning banks ….. against Enron executives and those who looted savings and loans in the …

Hundreds of Wall Street Execs Went to Prison During the Last Fraud ……/hundreds-of-wall-street-execs-went-to-prison-during-the-last-fraud…

Looting the Pension Funds: How Wall Street Robs Public Workers …

Sep 26, 2013 – All across America, Wall Street is grabbing money meant for public workers. … upon whom Wall Street dumped its fraud-riddled mortgage-backed securities in … artists like Bain Capital are put in charge of their retirement savings. ….. Looting Main Street: How the Nation’s Biggest Banks Are Ripping Us Off.

Apr 14, 2016 – Expose’ on Massive Bank, S&L, Mortgage and Wall Street Crimes. ….. Inside job : the looting of America’s savings and loans / Stephen Pizzo, …

You’ve visited this page 3 times. Last visit: 6/12/17
Jan 22, 2013 – Not one Wall Street executive has been prosecuted for fraud related to the subprime crisis. … Beginning in 1932, the Senate Committee on Banking and Currency … A more aggressive response followed the savings and loan crisis of the ’80s … Quoting from the 1993 research paper, Looting: The Economic …

Theft of a Nation: Wall Street Looting and Federal Regulatory … › Social Science › Criminology

The book also assesses Wall Street Financial Reform and the Consumer Protection Act of 2010, … From the Savings and Loan Bailouts to Too Big to Fail. 39.


The Men That Crashed The World





WASHINGTON: White-collar crimes, not poor economic conditions or deregulation are the root cause of the savings and loan crisis

Printer-friendly versionPrinter-friendly versionSend to friendSend to friendPaper: HOUSTON CHRONICLE
Date: THU 03/23/1989
Section: Business
Page: 4
Edition: 2 STAR
Crime blamed for thrift crisis/Fraud, insider abuse the main culprits, GAO study findsAssociated Press
WASHINGTON – White-collar crimes, not poor economic conditions or deregulation, are the root cause of the savings and loan crisis, congressional auditors said Wednesday.The General Accounting Office told the House Judiciary Committee’s criminal justice subcommittee that it had examined 26 insolvent thrift institutions in eight states and found evidence of fraud or abusive insider dealing in each.While the survey was skewed to S&Ls with the worst problems – the 26 thrifts represented 60 percent of losses sustained by the government’s insurance fund from 1985 through 1987 – the pattern of fraud and abuse among all failed thrifts “clearly is pervasive,” GAO officials said.The huge losses, estimated at $100 billion to $150 billion, will ultimately be passed to the nation’s taxpayers and “did not come about primarily because of economic conditions or deregulation,” Assistant GAO Comptroller General Frederick Wolf told the subcommittee.”The bulk of the losses are directly attributable to the failure by management of a minority of the industry to follow basic, prudent business practices, including the establishment of effective systems of internal control,” Wolf said.Asked if that is a crime, Wolf said violation of fiduciary responsibilities to operate in a sound manner is clearly a criminal issue.The GAO said it found inadequate records and controls at all 26 of the failed thrifts it examined in detail, excessive loans to one borrower at 23 of them, conflicts of interest among officers or directors at 20 and excessive salaries and benefits at 17.
Bill Clinton Gives Lecture At Georgetown University
The subcommittee’s chairman, Rep. Charles E. Schumer, D-N.Y., complained that of the 11,000 S&L cases the Federal Home Loan Bank Board has referred to the Justice Department in the last two years for criminal prosecution, fewer than 200 have resulted in convictions.”Ten billion dollars would go a long way to housing the homeless, feeding the poor, educating the public, caring for the sick,” Schumer said. “Instead it has been wasted on lavish parties, jets, real estate, travel and meals at the expense of taxpayers.” ( Yeah like 550 Billion would do what 1,00s of times MORE – Judson Witham )Attorney General Dick Thornburgh last month blamed fraud and insider abuses for 25 percent to 30 percent of the S&L failures. Industry regulators said they have found the crimes a “factor” in at least 70 percent of insolvent institutions.Of the 26 failed thrifts examined by the GAO, the Bank Board had referred 19 of them and allegations against 182 people to the Justice Department for suspected violations of criminal conspiracy, theft, fraud and embezzlement statutes.As of this month, Wolf said, 23 of those people had been convicted – at least 11 after pleading guilty – and 19 more were under indictment. Two people were acquitted in trials.
Of those convicted, 15 were sentenced to prison, but the sentences “generally were suspended with probation,” Wolfe said.The GAO did not name the 26 S&Ls it examined, saying some of them are still open, or the individuals who had been referred to the Justice Department for investigation.”We are prohibited by law from disclosing the names of open banks we review and, as a matter of long-standing policy, we treat thrifts in the same manner,” Wolf said.He said the GAO also is “sensitive to the effect such disclosures could have on the government’s effort to seek recoveries in civil suits or to prosecute alleged criminal acts.”Message Those Funny Little DIRT ROAD CONS well Montgomery County Texas may want to explain a little more –
Judson Withamjudson witham wrote:The Continuing SAGA of MUD & MONEY – the Land Cons and Bank–S&L Lootings

You Know Funny Thing Is CONROE , Houston and Dallas TEXAS resembles EXACTLY what went down in FLIPPIN Arkansas



In case anyone actually cares, I IN FACT litigated these matters in US Court in Houston and UNDER FEDERAL COURT ORDERS I obtained IN FACT exposed the Land Cons reported in the Houston Post and the Houston Chronicle and ABC, NBC, CBS, FOX and a host of other Radio Stations, TV Stations and many, many LOCAL NEWSPAPERS – Judson Witham (Crazy Like The FOX)

UPDATES: Realty Times — :
How much real estate industry crime is costing consumers is not clear, but those costs are increasing rapidly as a fast growing number of industry outlaws seek to cash in on the quick run up in property values and prices.…

Jud Witham wrote:

That Little “DIRT ROAD” Land Con thing where these ASSHOLES Looted the S&Ls & BANKS is pretty interesting to !!!

The ROSE LIEFIRM and those PESKY Land Title Questions, Plat Dedications anyone ?

Another problem was that the thrift was in violation of the Interstate Land Sales Act, which required that the development be registered before any sales occurred.
Sworn Testimony Of Jim Clarke
” National Bank Examiner”



Land owned by the Whitewater Development Corp. in Flippin, Ark.

There are THOUSANDS of these DIRT ROAD CONS all over TEXAS and many other States.

Judson Witham
The Great Texas Bank Job
have you seen that $ 550 Billion Lately ???

There is NO Coincidence Here Folks THE VANISHING TRILLIONS has alaways been an INSIDE JOB


First a little background on ” DIRT ROAD LAND CONS”…

Where Can I get a SUB PRIME LOAN
to retire in the Caribean On ???


The MUD and MONEY of Land Cons 101 :……

S&L’s: Repeating the Past :;_ylu=X3oDMTE5c2VtcnNu…

For example, more than 1,000 S&L insiders were convicted of felonies, and the … fraud as the bubble expanded; these we could call “opportunistic control frauds. … ethicalperspectives/fraud.html – 19k – Cached :…

In the EARLY 1980s myself and a very close friend were taken to RECORDING BOOTHS at the 515 Rusk offices of the FBI and we revealed how DIRT ROAD LAND DEVELOPMENTS “hundreds of them” all around CONROE, just minutes North of Houston were being used to LAUNDER MONEY from LAND FLIPS into POLITICAL CASH and SLUSH funds for POLITICAL CRONIES of many Publican and DEMONRAT politicos. see
Resource Center || Search the IRE Publications Journal Database … :;_ylu=X3oDMTE5N29vcWI4…

Daisy Chain” about the savings-and-loans debacle, as well as the “land flips” and “daisy chains” that occurred along with the crisis. … journal.php?action=search&…&method=unique – 18k – Cached :…

Once Upon a Time in Arkansas :;_ylu=X3oDMTE5c2VtcnNu…

– Frontline Takes a look at the deals and relationships at the heart of the scandal. – 10k – Cached :…

The Castle Grande deal, like other transactions at the S&L, was essentially a sham deal — a “pyramid scheme” intended to enrich institution insiders and bolster the institution’s stated net worth. According to Clark… Madison was one of the three worst cases of insider dealing that heíd seen in his 20 years as an examiner.

Clark also uncovered some additional transactions between Ward and McDougal, including an option agreement, suggesting that Ward would receive payments for his role in the Castle Grande deal. At the time, Clark was told by Madison officials that these transactions were not related to Castle Grande. But later, investigators with the Inspector General of the Federal Deposit Insurance Corporation, determined that the option agreement was indeed part of a concerted effort to further conceal Ward’s role as a “straw man” in the sham Castle Grande deal.

Road woes continue/Neighborhood battles county over upkeep :…

PAUL McKAY : Staff The problem goes a lot further than just this single subdivision.” Pioneer Trails is probably one of the worst examples of an unrecorded subdivision,” Winberry says. 09/24/1989

POTHOLES & PROMISES/Montgomery County’s crumbling subdivisions/ Developers facing county crackdown :…

CATHY GORDON : Staff Montgomery County, in its crackdown on developers of unrecorded subdivisions, wants the mess cleaned up. In other words, I `poor-boyed’ this subdivision.

Advice for potential property buyers: Ask questions :…

If the subdivision next door is having a problem, that’s a good indication your subdivision will too. This sometimes is a signal the subdivision is unrecorded and not up to county standards. 06/23/1987

Resident’s crusading `fans fire’/Subdivision’s critic outlines difficulties :…

CATHY GORDON : Staff It started six years ago with his myriad of complaints to developers and county officials about the unrecorded east county subdivision’s drainage and roads. 06/22/1987

POTHOLES & PROMISES/Montgomery County’s crumbling subdivisions/ Homeowners handle property woes :…

It has to be on which subdivisions are the worst. His property in the unrecorded Shepard’s Landing subdivision off FM 2854 is not only in the flood plain, it’s in the river bed. 06/21/1987

FBI Houston, was at that time OCCUPIED by pieces of RUBBISH like FORMER FBI TRASH John Connolly of the Boston, Bulger MAFIA. The DALLAS Postal Inspection Service did though BUST IT HARD !!!
SEC Bank Fraud Wall Street Scandal Money Laundering FBI Texas Land … :;_ylu=X3oDMTE5ODAwdDlu…

The Great Texas Bank Job was , Is and Always Will be a … gone, along with the jobs of virtually all the bank’s officers and managers and … Parliament/5349 – 557k – Cached :…

John Connolly (FBI) :;_ylu=X3oDMTE5aW10M2swBHNlYwNzcgRwb3MDNARjb2xvA3NrMQR2dGlkA0RGRDVfMTIyBGwDV1Mx/SIG=124ko1o3d/EXP=1196269891/**http%3a//

– Wikipedia, the free encyclopediaJohn “Zip” Connolly is a former FBI agent, currently in federal prison for … Living people | FBI agents | Corrupt FBI agents | United States crime …Quick Links: External links :… (FBI) – 16k – Cached :…

In any event, the CLINTONIAN LAND CON the DIRT ROAD Whitewater and Castle Grande CONS there in Arkansas may be more recognizable  to lay persons. Suffice it to say DAIZY CHAINS of close CRONIES would simply FLIP these Illegal Subdivision Lots amongst themselves, EACH TIME FALSELY INFLATING the price and wha lah – INSTANT MILLIONS for what Campaigns, Yachts, Woman and WEAPONS. You may look into Ollie North’s IRAN CONTRA mess a little closer and oh yeah JACK ABRAMOFF and that Arkansas Governor’s Mansion – You Know PIMP GATE there in Little Rock !!


U.S. must pay $101.7 million to men framed by FBI –… :;_ylu=X3oDMTFhMDNvYWp2…

murder they didn’t commit after the FBI withheld evidence of their innocence. … They argued that Boston FBI agents knew mob hitman Joseph “the Animal” Barboza … wrongful.convictions.ap/index.html – 66k – Cached :…

FDIC: Criminal Activity Bibliography :;_ylu=X3oDMTE5N29vcWI4…

Gup, Benton, Bank Fraud: Exposing the Hidden Threat to Financial Institutions, … Paul Muolo, Inside Job: The Looting of America’s Savings and Loans, New … slbib7.html – 14k – Cached :…

Crime blamed for thrift crisis/Fraud, insider abuse the main culprits, GAO study finds :…

Associated Press
Attorney General Dick Thornburgh last month blamed fraud and insider abuses for 25 percent to 30 percent of the S&L failures.

Attention turns to shaky banks :…

JAMES FLANIGAN : Los Angeles Times Syndicate
But failing to restrain the flow, in the S&L debacle, has proven to be political and economic poison.

Failed S&Ls’ losses staying lost in Texas/Federal recovery efforts fall far short :…

RICHARD KEIL : Associated Press
Not a single RTC case against Texas S&L operators ever reached a jury. Questions remain about why so few S&L officials in Texas have been subpoenaed or found liable for thrift losses.

Key figure in S&L case speaks out/McDougal asserts Clintons innocent :…

Associated Press
McDougal owned Madison S&L and ran its real estate subsidiary, Madison Financial Corp.

Villains, victims abound in S&L, bank crises :…

BCCI worked its way into the U.S. government in much the same way that the S&L industry did.

No letup in S&L prosecutions/After a decade, Houston defendants getting day in court :…

The FBI declined to say how many agents are investigating S&L and bank fraud.
Repeating The Past
By William K. Black :
Forgetting the mistakes of the past is bad, but we’ve done something far worse. This newest wave of corporate fraud occurred because we learned exactly the wrong lessons from our last wave, the savings & loan debacle. As Mark Twain warned, “It ain’t what people don’t know that hurts them, it’s what they do know that ain’t so.”

The S&L collapse was the largest financial scandal in U.S. history and cost taxpayers $150 billion, but the conventional economic wisdom about it is, even with the benefit of hindsight, 20:200. The best way to see this is to read a classic textbook, “The Economic Structure of Corporate Law,” authored by Frank H. Easterbrook and Daniel R. Fischel. Here students are taught five myths about fraud:

Fraud is not a problem because the markets easily spot it. “A rule against fraud is not . . . an important ingredient of securities markets.”
Only honest firms can get a clean opinion from a top auditor. “The accountant who certifies the books of many firms has a reputational interest . . . much greater than the gains to be made from slipshod or false certification of a particular firm.”
CEOs who own stock in the firm will not defraud it. “If the firm does poorly, the managers lose with the other investors.”
Highly leveraged firms are unlikely to be fraudulent. “Debt . . . forces the managers to pay out the profits, and if there are no profits, forces the firm into bankruptcy.”
Regulation not only can’t reduce fraud, it encourages fraud.

The reality?

Massive frauds repeatedly fool the markets.
Every fraudulent S&L got a clean opinion from a top firm.
The worst S&L frauds were committed by owner/CEOs (these are known as “control frauds”). CEOs can loot millions while the firm fails, increasing their income and prestige. Insiders sell their shares before values collapse.
Debt creates pressures that induce fraud, and fraud staves off bankruptcy.
Fraud grows where rules and regulators are weak. For example, more than 1,000 S&L insiders were convicted of felonies, and the catastrophic failures were all control frauds.

What do today’s cases share with the S&L control frauds? They seem to understand that the way to loot a firm is with bad accounting, not by embezzling. You shop for an auditor who will bless your bad accounting. This perverts what is supposed to be an external control into your greatest ally. Fraud creates fictional income, which allows you to use normal corporate mechanisms such as bonuses and stock options, which you exercise and sell before the crash. Embezzlers are easy to convict, but it is very difficult to convict someone for receiving a bonus.

Another understanding that the new and old frauds share is that a few politicians in the pocket can speed deregulation, which almost invariably makes accounting fraud easier and fends off the regulators. And all the CEOs involved share a similar personality: They are not brilliant but audacious.

Enron set up scam partnerships that used “hedge accounting”—a notorious area of abuse—to create more than $1 billion of phony income while hiding the real losses. WorldCom’s form of accounting fraud was pure audacity; no remotely competent auditor could have missed labeling $4 billion in expenses as “investments.” Global Crossing swapped identical bandwidths with rival companies and both booked a gain. Imagine going to a department store and exchanging a medium shirt for a large at the same price. Now imagine that both you and the store claimed that this exchange created profit. That’s what Global Crossing did.

If it’s any consolation, the S&Ls did something far worse. It was called “I’ll trade you my dead horse for your dead cow.” Both of our S&Ls paid $40 million to buy office buildings that were worth only $12 million. The regulators were demanding we each recognize a $28-million loss. We would buy each other’s building for $50 million. Our real losses were instantly transmuted into fictional $10-million gains.

Arthur Andersen played a prominent role in both scandals. At Enron, Andersen destroyed documents to cover up its culpability. But that was after Enron’s collapse was public and it didn’t hurt investors. At Lincoln Savings, Andersen created documents to make it look as if the S&L was following the law, giving cover to CEO Charles Keating to loot the company in what became the largest financial failure in U.S. history. Unfortunately, Andersen was not prosecuted though it paid scores of millions of dollars in damages.

Enron bought national and state politicians wholesale and used its political leverage to bring about deregulation and force the chairman of the Federal Energy Regulatory Commission, Curtis Hebert, out of office when he wouldn’t do Enron’s bidding—Hebert has said this himself—and convince President George W. Bush to appoint Enron’s choice as his replacement. Consider how large the list of prominent politicians is right now that is scrambling to return WorldCom’s contributions.

The newest control frauds were made possible by the greatest bull market in history during the second half of the 1990s, in which firms with no track record, no product and absurd valuations could raise funds in the equity markets and borrow from banks. This is the worst thing a bubble economy does: Investments are no longer made on the basis of fundamentals. Some CEOs were attracted by the chance to commit fraud as the bubble expanded; these we could call “opportunistic control frauds.” More CEOs embraced fraud as a way to cover up their firm’s failure when the bubble burst—”reactive control fraud.” There are now dozens of investigations trying to sort out who did what to whom when.

A new mentality took hold during the bubble. Cheating became rampant in the mid 1990s, and because it was the norm it was no longer seen as wrong. Indeed, it became seen by competing CEOs as clever. Many firms used this scam: Sell the product just before the end of the quarter and get the product back a week later as a return. This created phony profits for scores of Silicon Valley firms.

The S&L scandal occurred during a time when real estate values in Texas were skyrocketing, even as vacancy rates were rising. This was a bubble: As real estate values shot up, the S&Ls created fictional income so they could pour even more real estate into a market that was already glutted; fundamentals had stopped driving investment decisions.
Deregulation was a principal cause of the S&L debacle by making it easy to commit massive accounting fraud and grow rapidly. Deregulation of energy and telecommunications permitted the sales of energy and bandwidths that powered the Enron, WorldCom and Global Crossing frauds.

Deregulation is made worse by “desupervision.” If you don’t vigorously enforce the rules, you create a fraud-friendly environment. The SEC does not have one-tenth the staff it needs to do its job, but its lack of leadership and will is even more disabling.

There are two victims of fraud—the public and honest firms. Strong accounting regulation helps honest firms and makes markets more efficient. We need a new SEC chair committed to enforcement. President George W. Bush should stop opposing real accounting reform, remove the complacent regulators he put in place who have failed to protect the public, and prosecute the frauds. The rogue Democrats who blocked accounting reform under Clinton should not be re-elected.

With both parties in thrall to the big auditors, it’s hard to imagine real reform occurring. But this time, unlike in the S&L debacle, the crisis so severe that it is hammering the stock markets, causing the dollar to fall and threatening the entire economic recovery. The politicians can either back real reform or risk their re-election.

William K. Black is an assistant professor at the LBJ School of Public Affairs, University of Texas at Austin. He was director of litigation for the Federal Home Loan Bank Board. He is also the visiting scholar at the Markkula Center for Applied Ethics 2002-03.
This article originally appeared in Newsday on July 7, 2002.


Criminal Activity Associated with S&L Failures

Black, William, The Incidence and Cost of Fraud and Insider Abuse, Washington, DC: National Commission on Financial Institution Reform, Recovery and Enforcement, Staff Report No. 13, 1993.

Calavita, Kitty, Pontell, Henry N., and Tillman, Robert H. Big Money Game: Fraud and Politics in the Savings and Loan Crisis, Berkeley, Calif.: University of California Press, 1997.

Ettleson, Sherry and Thomas Hilliard, Crime and Punishment in the S&L Industry: The Bush Administration’s Anemic War on S&L Fraud, Washington, DC: Public Citizen’s Congress Watch, 1990.

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O’Shea, James, The Daisy Chain: How Borrowed Billions Sank a Texas S&L, New York: Pocket Books, 1991.

Pilzer, Paul Z. and Robert Deitz, Other People’s Money: The Inside Story of the S&L Mess, New York: Simon and Schuster, 1989.

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The U.S Government’s War Against Fraud, Abuse, and Misconduct in Financial Institutions: Winning Some Battles but Losing the War: Twenty-Ninth Report, Washington, DC: U.S. House of Representatives. Committee on Government Operations, Committee Report 101-982, 1990.

Whiteford, Taylor & Preston, Issues Regarding the Role of Fraud and Other Criminal Misconduct in Causing Failures in the Thrift Industry, Washington, DC: National Commission on Financial Institution Reform, Recovery and Enforcement, Staff Report No. 14, 1993.

Why S&L Crooks Have Failed to Pay Millions of Dollars in Court-Ordered Restitution: Nineteen Case Studies, Washington, DC: U.S. House of Representatives. Committee on Banking, Finance and Urban Affairs, Committee Print 102-11, 1992.

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