AG Holder: “Thank you, Richard Bowen”

By William K. Black

Those should have been the first four words of Attorney General Eric Holder at the press conference announcing the settlement with Citicorp.

This article is the first in a series of pieces discussing the critical omissions in Holder’s statement at that press conference.  These omissions explain why elite banksters now routinely control our largest banks and use their power to become wealthy through leading fraud epidemics, with impunity from the law, that cause the our financial crises.

Richard M. Bowen, III

Richard M. Bowen, III was Citi’s top underwriter for purchased mortgage product.  Tellingly, Citi did not use its own experts to underwrite loans prior to purchasing the loans.  Bowen’s staff was only allowed to underwrite a sample of the loans after they were purchased.  He found that Citi was purchasing loans – for the purpose of selling them overwhelmingly to Fannie and Freddie – that were poor credit quality and lacked essential documentation.  He also discovered that Citi was making false “reps and warranties” about these vital loan characteristics in order to deceive Fannie and Freddie.

I explain these deficiencies and their implications in a future installment.  For present purposes it is sufficient to know only a few key things.  Here is what Bowen found and what he did in response:

  • Most of the mortgages Citi was purchasing to sell to Fannie and Freddie were poor quality or missing documentation essential to determining its quality – which made Citi’s “reps and warranties” to Fannie and Freddie fraudulent
  • He alerted everyone in the Citi leadership to the problems he found
  • After he made these warnings the percentage of  deficient loans and false reps and warranties rose from 60 to 80 percent
  • Instead of promoting and praising Bowen for  his prescient warnings Citi retaliated against Bowen by demoted him and removing his staff (which had been 220 strong)

DOJ Based its Case Against Citi on Bowen’s Findings and Actions and Citi’s Response

Here is what DOJ released as the introductory summary of its “Statement of Facts” at the Citi press conference.  (The document is a disgrace crafted to minimize the ability of the public to understand the massive frauds at Citi frauds and the culpability of its senior leaders for those frauds.)


“In 2006 and 2007, Citigroup Inc., through certain of its affiliates (“Citigroup”), securitized thousands of residential mortgage loans and sold the resulting residential mortgage backed securities (“RMBS”) for tens of billions of dollars to investors, including federally insured financial institutions. Prior to securitization, Citigroup conducted due diligence on loans (including credit, compliance, and valuation due diligence). In securitizing and issuing the RMBS, Citigroup provided representations in offering documents about the characteristics of the underlying loans. As described below, in the due diligence process, Citigroup received information indicating that, for certain loan pools, significant percentages of the loans reviewed did not conform to the representations provided to investors about the pools of loans to be securitized.”

As the reader can see, DOJ’s case tracked exactly Bowen’s disclosures.   Bowen handed DOJ its case against Citi’s senior officers on a platinum platter in his April 7, 2010 testimony before the Financial Crisis Inquiry Commission (FCIC).

DOJ waited over four years, confirmed that Bowen was correct and emphasized the “strength” of the evidence of culpability, and failed to prosecute anyone (even the bank) for these “egregious” frauds that Holder says contributed “mightily” to the crisis.

Bowen demonstrated competence, integrity, loyalty to the protecting the shareholders, and courage.  He put all the key Citi officials on notice – often in writing – of the massive crimes being committed by Citi’s officers.  The fact that they were put on notice by Bowen, the fact that the response to the warnings was to substantially increase the frequency of those crimes, and the fact that Citi’s senior leaders retaliated against Bowen rather than praising him constitute the ideal fact pattern for a criminal case against Citi’s leadership.   Citi was allowed to present five witnesses to FCIC that could have attempted to counter Bowen’s testimony, his findings, his warnings, and Citi’s response to those warnings.  None of them even attempted to rebut Bowen.

What Would a Real Attorney General Have Said about Bowen at the Press Conference?

The press conference about the Citi settlement would have been a priceless opportunity for a real head of a real “Justice” Department.  Given the destruction of the criminal referral process at the federal banking regulatory agencies the only means DOJ has of making criminal cases against banks and their officers is whistleblowers like Bowen.  Any competent AG interested in prosecuting the senior officers that led the three fraud epidemics that drove the financial crisis and the Great Recession would have taken the opportunity of the press conference to praise Bowen, thank him for service to the Nation, emphasize the outrageous retaliation by Citi against him, and call on others to come forward with information about crimes committed by other senior bank officers.

Of course, any real AG would have arranged such a press conference in February 2009, accompanied by the head of every federal banking regulatory agency, and President Obama.  (In fairness to Obama, it was the Bush administration that should have taken these actions no later than 2006.)  The press conference would have announced four things.

  • The immediate reestablishment of the criminal referral coordinators at the federal banking regulatory agencies and making such referrals and aiding the investigation and prosecution of the elite bankers that led the fraud epidemics a top agency priority
  • The creation of a task force of the financial regulators, State AGs, and FBI and DOJ to prosecute financial frauds – not simply mortgage backed securities (MBS) frauds  (which is what Holder finally did as an emergency political move just before the elections)  and the direction of the President and the AG to make the prosecution of the elite banksters a top national priority
  • The creation of a national center to encourage whistleblowers and to get their  information routed promptly to the appropriate regulatory and law enforcement agencies
  • A personal plea by President Obama for whistleblowers to come forward to the Center with information on the banksters’ crimes

Of course, six years later, none of these things have happened.  Economists believe in “revealed preferences” (their version of “actions speak louder than words.”  Inaction speaks even louder.  No AG or President who intends to enforce the rule of law is so incompetent that they would fail

DOJ Implied it Did it all on its Own

Holder’s press release contains this misleading quotation attributed to U.S. Attorney of the Eastern District of New York Loretta Lynch that purports to explain how DOJ made it case against Citi.

“After nearly 50 subpoenas to Citigroup, Trustees, Servicers, Due Diligence providers and their employees, and after collecting nearly 25 million documents relating to every residential mortgage backed security issued or underwritten by Citigroup in 2006 and 2007, our teams found that the misconduct in Citigroup’s deals devastated the nation and the world’s economies, touching everyone….”

The press release does not mention Bowen, which is sadly ironic since it charges Citi with “misleading” the public.


DOJ treated the many Clayton (the largest external underwriter) whistleblowers that helped make possible its civil case against Citi and the Bank of America whistleblower that made possible DOJ’s only successful contested civil case against a senior bank officer in the same disgraceful manner as it treated Bowen.  I ask our readers to join me in thanking Bowen and other whistleblowers for their service to the Nation.

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