Operation Broken Trust
Encyclopedia
Operation Broken Trust, the largest investment fraud sweep by the Federal government of the United States
, was conducted between August 16 and December 1, 2010. The stated purpose of the operation was to "root out and expose" investment scams within the U.S. and to educate the public. It was announced that the operation involved 343 criminal cases with damages of $8.3 billion and 189 civil cases with damages of $2.1 billion; more than 120,000 victims were affected.
in November 2009 and involved several government agencies. At the December 6, 2010, press conference, participating agencies were represented by Attorney General Eric Holder
for the United States Department of Justice
, Federal Bureau of Investigation
(FBI) Executive Assistant Director Shawn Henry, U.S. Securities and Exchange Commission (SEC) Director of Enforcement Robert Khuzami
, U.S. Postal Inspection Service (USPIS) Chief Postal Inspector Guy Cottrell, Deputy Chief Rick Raven of the Internal Revenue Service
Criminal Investigation (IRS-CI), and Acting Director of Enforcement Vince McGonagle of the U.S. Commodity Futures Trading Commission
(CFTC). Other participating agencies included the U.S. Secret Service and the National Association of Attorneys General
.
s. Affinity fraud
was directed at the savings of trusting but often uninformed people. Scams included fraud in commodities, real estate, foreign exchanges, business opportunities, and market manipulation (such as pump and dump
). Khuzami explained that "fraud by well-known companies or high-profile executives gets the biggest headlines, but other scams are equally devastating to hard working families and retirees", and stressed that law enforcement will "pursue fraud in whatever form."
As of December 6, eighty-seven defendants had received prison sentences that in some cases exceeded 20 years.
According to The New York Times
, Operation Broken Trust included cases that were investigated already during the Bush administration or before the formation of the task force, and many were well on the way to completion before the sweep began. Also, the mixing of criminal cases and civil cases may have led to overlap and double counting in the number of defendants, victims, and losses.
, Merrill Lynch
, Citigroup
, and Goldman Sachs
(other than Fabrice Tourre) has been charged criminally. Thus it was criticized as allocating resources to the wrong arena, described as a "sideshow
", and going for the "little fish". It was opined that rather than focusing on small-time operators, the government should prosecute individuals for their role in the 2008 financial crisis even if guilty verdicts were not assured; court proceedings would allow for transparency, serve as a deterrent, and provide lessons on how to prevent future grand scale fraud.
Federal government of the United States
The federal government of the United States is the national government of the constitutional republic of fifty states that is the United States of America. The federal government comprises three distinct branches of government: a legislative, an executive and a judiciary. These branches and...
, was conducted between August 16 and December 1, 2010. The stated purpose of the operation was to "root out and expose" investment scams within the U.S. and to educate the public. It was announced that the operation involved 343 criminal cases with damages of $8.3 billion and 189 civil cases with damages of $2.1 billion; more than 120,000 victims were affected.
Financial Fraud Enforcement Task Force
The interagency task force was set up by President Barack ObamaBarack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
in November 2009 and involved several government agencies. At the December 6, 2010, press conference, participating agencies were represented by Attorney General Eric Holder
Eric Holder
Eric Himpton Holder, Jr. is the 82nd and current Attorney General of the United States and the first African American to hold the position, serving under President Barack Obama....
for the United States Department of Justice
United States Department of Justice
The United States Department of Justice , is the United States federal executive department responsible for the enforcement of the law and administration of justice, equivalent to the justice or interior ministries of other countries.The Department is led by the Attorney General, who is nominated...
, Federal Bureau of Investigation
Federal Bureau of Investigation
The Federal Bureau of Investigation is an agency of the United States Department of Justice that serves as both a federal criminal investigative body and an internal intelligence agency . The FBI has investigative jurisdiction over violations of more than 200 categories of federal crime...
(FBI) Executive Assistant Director Shawn Henry, U.S. Securities and Exchange Commission (SEC) Director of Enforcement Robert Khuzami
Robert Khuzami
Robert S. Khuzami is currently the director of the Division of Enforcement of the U.S. Securities and Exchange Commission. He is a former United States federal prosecutor and general counsel of Deutsche Bank AG....
, U.S. Postal Inspection Service (USPIS) Chief Postal Inspector Guy Cottrell, Deputy Chief Rick Raven of the Internal Revenue Service
Internal Revenue Service
The Internal Revenue Service is the revenue service of the United States federal government. The agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue...
Criminal Investigation (IRS-CI), and Acting Director of Enforcement Vince McGonagle of the U.S. Commodity Futures Trading Commission
Commodity Futures Trading Commission
The U.S. Commodity Futures Trading Commission is an independent agency of the United States government that regulates futures and option markets....
(CFTC). Other participating agencies included the U.S. Secret Service and the National Association of Attorneys General
National Association of Attorneys General
The National Association of Attorneys General is an organization of 56 state and territorial attorneys general in the United States...
.
Scope of the investigation
On December 6, 2010, the Task Force went public announcing that it had examined scams targeting individual investors, not complex corporate fraud issues. In each case individual investors entrusted their money to individuals who presented "investment opportunities" promising superior returns. These investments were either fictitious or different than claimed, and often involved Ponzi schemePonzi scheme
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation...
s. Affinity fraud
Affinity fraud
Affinity fraud includes investment frauds that prey upon members of identifiable groups, such as religious or ethnic communities, language minorities, the elderly, or professional groups. The fraudsters who promote affinity scams frequently are – or pretend to be – members of the group...
was directed at the savings of trusting but often uninformed people. Scams included fraud in commodities, real estate, foreign exchanges, business opportunities, and market manipulation (such as pump and dump
Pump and dump
"Pump and dump" is a form of microcap stock fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price....
). Khuzami explained that "fraud by well-known companies or high-profile executives gets the biggest headlines, but other scams are equally devastating to hard working families and retirees", and stressed that law enforcement will "pursue fraud in whatever form."
As of December 6, eighty-seven defendants had received prison sentences that in some cases exceeded 20 years.
According to The New York Times
The New York Times
The New York Times is an American daily newspaper founded and continuously published in New York City since 1851. The New York Times has won 106 Pulitzer Prizes, the most of any news organization...
, Operation Broken Trust included cases that were investigated already during the Bush administration or before the formation of the task force, and many were well on the way to completion before the sweep began. Also, the mixing of criminal cases and civil cases may have led to overlap and double counting in the number of defendants, victims, and losses.
Reaction
Reactions to Holder's announcement about Operation Broken Trust were framed by the apparent lack of governmental efforts of prosecuting individuals who may bear responsibility for the 2008 financial crisis, specifically since nobody at LehmanLehman
- People :*Albert Lehman, American Olympic medalist lacrosse player* Bruce Lehman , American patent lawyer* David Lehman , American poetry editor* Edward E...
, Merrill Lynch
Merrill Lynch
Merrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
, Citigroup
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...
, and Goldman Sachs
Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...
(other than Fabrice Tourre) has been charged criminally. Thus it was criticized as allocating resources to the wrong arena, described as a "sideshow
Sideshow
In America, a sideshow is an extra, secondary production associated with a circus, carnival, fair or other such attraction.- Types of attractions :There are four main types of classic sideshow attractions:...
", and going for the "little fish". It was opined that rather than focusing on small-time operators, the government should prosecute individuals for their role in the 2008 financial crisis even if guilty verdicts were not assured; court proceedings would allow for transparency, serve as a deterrent, and provide lessons on how to prevent future grand scale fraud.