U.S. JUSTEICE DEPARTMENT GENERATED ALMOST $2 BILLION FROM CONSUMER FRAUD CASES

FROM: U.S. DEPARTMENT OF JUSTICE
Friday, March 8, 2013
Justice Department Secures Nearly $2 Billion in Consumer Protection Cases in 2012
Through Consumer Protection Branch, Civil Division Successfully Combatted Consumer Fraud Schemes
The Justice Department’s Consumer Protection Branch secured nearly $2 billion in criminal fines, forfeiture, restitution, and civil disgorgement in 2012, Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division, announced today at the Consumer Protection Working Group’s Second Annual Consumer Protection Summit. Since 2009, the consumer protection efforts of the Civil Division, working with U.S. Attorneys’ Offices around the country, have led to recoveries of more than $5.89 billion, over 140 criminal convictions, and total prison sentences exceeding 327 years.

"This summit and our other outreach efforts are essential to the fight against consumer fraud. But our real strength lies in the cases brought by the attorneys in the Consumer Protection Branch every day. The results the branch achieved in 2012 are outstanding, and reflect the determination of this Department of Justice to combatting consumer fraud," said Principal Deputy Assistant Attorney General Delery, who serves as a co-chair of the Consumer Protection Working Group of the President’s Financial Fraud Enforcement Task Force. "The Consumer Protection Branch’s extraordinary work enforcing federal consumer protection laws has reached new levels, and is evidence that the department has made protecting consumers a top priority."

The summit brings together over two dozen state and federal agencies to highlight some of the most significant issues facing consumers today: consumer debt, nutritional supplements, money and imposter scams and tax-related fraud. The summit exposes some of the most egregious fraud schemes, provides information on how consumers can protect themselves, and shares what the Consumer Protection Working Group is doing to combat fraud in these areas.

Recently reorganized, the Consumer Protection Branch deploys powerful enforcement tools in creative ways to protect the most vulnerable consumers from myriad forms of fraud and abuse, including financial fraud, new forms of telemarketing fraud, and immigration services fraud.

In 2012, for example, the branch prosecuted three Missouri individuals for their roles in a scheme to defraud consumers seeking immigration-related services. These individuals worked for a company that defrauded legal immigrants who were trying to abide by the rules. The firm falsely told consumers that it employed paralegals who would help customers correctly fill out immigration forms, that it handled excess call volume for U.S. Citizenship and Immigration Services (USCIS), and that fees paid to the firm included government processing fees. All three defendants in the case pled guilty to conspiring to defraud consumers.

Collaborating closely with state Attorneys General and other federal agencies, t he Consumer Protection Branch has been instrumental in the department’s effort to hold accountable those who, in violating the law, contributed toward the 2008 financial crisis. Earlier this year, the department filed a civil lawsuit against the credit rating agency Standard & Poor’s alleging that S&P engaged in a scheme to defraud investors in structured financial products known as Residential Mortgage-Backed Securities (RMBS) and Collateralized Debt Obligations (CDOs). The lawsuit, brought under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), alleges that investors, many of them federally insured financial institutions, lost billions of dollars on CDOs for which S&P issued inflated ratings that misrepresented the securities’ true credit risks. The complaint also alleges that S&P falsely represented that its ratings were objective, independent, and uninfluenced by S&P’s relationships with investment banks when, in reality, S&P’s desire for increased revenue and market share led it to favor the interests of these banks over investors. The Consumer Protection Branch played a key role in investigating and bringing the case, along with the Federal Programs Branch of the Civil Division and the U.S. Attorney’s Office for the Central District of California.

The Consumer Protection Branch has also responded to the financial crisis by aggressively pursuing various forms of financial fraud, including foreclosure rescue schemes targeting distressed homeowners. For instance, in 2012, the branch successfully prosecuted four individuals in connection with a firm that claimed to assist homeowners at risk of foreclosure. The defendants represented that homeowners’ properties would be sold to investors, but that the present homeowners could stay in their homes. The defendants designed sham sales to straw purchasers, created false loan applications and documents, pocketed the equity drawn out of the sham sales, and then allowed the loans to go into foreclosure. Victims lost their equity, and most were forced to move out of their homes. The defendants were sentenced to prison for terms of up to five and a half years.

In addition to playing a prominent role in the Consumer Protection Working Group, and organizing the annual Consumer Protection Summit the Consumer Protection Branch has employed new techniques to enhance its outreach and prevention efforts. For instance, the Branch has conducted webinars to educate financial institutions on the dangers of working with payment processors who may facilitate fraudulent schemes. It has also engaged consumer advocacy groups in new ways, and sought to create new partnerships with state attorneys general and military legal assistance providers.

While continuing to innovate, the branch has also sharpened its focus in traditional areas of enforcement, such as ensuring the safety of pharmaceutical products, medical devices, food, and dietary supplements. Health care fraud cases were the sources of the Consumer Protection Branch’s largest recoveries in 2012. The branch brought enforcement actions and criminal prosecutions in response to a number of violations, including the misbranding of pharmaceuticals, deficient manufacturing processes, the sale of adulterated and unsafe products, and the resale of prescription drugs that had been diverted from lawful channels of distribution. The branch recovered more than $1.9 billion in criminal fines and forfeiture and secured 16 criminal convictions in connection with these cases.

"Whether consumers are targeted by scammers looking to cheat them or manufacturers of food or pharmaceuticals that put profit ahead of consumer safety, the department will bring to bear its expertise and all available tools to root out conduct that harms consumers," said Principal Deputy Assistant Attorney General Delery. "The success of the Consumer Protection Branch demonstrates our unwavering commitment to the protecting the health and safety of Americans."

Another key component of the Consumer Protection Branch’s work is defense of the decisions of government agencies charged with protecting consumers. In 2012, the branch successfully defended cases involving, for example, the Food and Drug Administration’s (FDA) approval of various generic drugs to increase consumers’ market choices and the Federal Trade Commission’s (FTC) interpretation of a provision of the Fair Credit Reporting Act (FCRA) that requires lenders to disclose certain information to consumers. The branch was also instrumental in securing court orders requiring major tobacco companies to place statements on their websites, on cigarette packages, and at retail stores correcting past false statements that they had been making about the safety of their products.

Principal Deputy Assistant Attorney General Delery expressed his gratitude and appreciation for the dedicated public servants who work tirelessly to protect consumers. These individuals include attorneys, investigators, paralegals and other personnel throughout the Civil Division, the U.S. Attorneys’ Offices, the Department of Health and Human Services, the FDA, the FTC, the Consumer Product Safety Commission, the Postal Inspection Service and other federal and state agencies.