No CEOs Charged For Financial Fraud Causing The Crisis? Khuzami Begs to Differ

Robert Khuzami, the Director of the SEC’s Division of Enforcement, seems to be pretty defensive about claims that the federal government has not prosecuted CEOs and other executives for financial fraud in cases that led to the Financial Crisis. In fact, at remarks announcing the Financial Fraud Enforcement Task Force’s new Mortgage-Backed Securities Working Group, he declared that the SEC has been “incredibly busy in the pursuit of financial crisis cases.” 

Moreover, Khuzami said, the SEC has “focused on misconduct by those at the highest corporate levels and by institutions with the greatest involvement in the products, transactions and practices that gave rise to the financial crisis.”
 
Khuzami stated that, to date, the SEC has “filed actions against nearly 90 such individuals and entities involving public companies that failed to disclose the increasing risks in their mortgage businesses such as Countrywide, New Century, and IndyMac; against funds and investment advisers that made misleading disclosures when offering funds holding mortgage and other financial products such as Morgan Keegan, State Street Bank and Trust, Charles Schwab and Reserve Fund; against top executives at Fannie Mae and Freddie Mac for failing to accurately disclose subprime exposure; and against banks making misleading disclosures about subprime exposure and the structure of even more complex mortgage products called CDOs such as Goldman Sachs, JPMorganChase and Wachovia.”
 
In these actions, the SEC has named “approximately 45 CEOs, CFOs and other senior corporate officers.”
 
It may be that the disagreement so far is one of perception. In any event, it seems clear to us here at the Financial Fraud Law blog that we will be seeing more individuals named in both civil and criminal suits in connection with mortgage-backed securities in the future – and probably in the very near future.