In December, when Iowa Attorney General Tom Miller said unequivocally to a group of foreclosure activists, “We will put people in jail,” the working assumption was that he was referring to the 50 state AG investigation of foreclosure fraud in the mortgage servicing industry. However, as it turned out, he walked that back almost immediately. The 50 state investigation, his office claimed, was inherently civil in nature. The statement about putting people in jail referred to a separate state-level investigation in conjunction with a US Attorney in Iowa.
But there may be a good reason for that. Geoff Greenwood, a spokesman for Miller, told The Lookout that when the AG spoke of putting people in jail, he wasn’t referring to the 50-state probe, which is a civil investigation targeting major lenders like Bank of America, Wells Fargo, and JP Morgan Chase, as well as the law firms they hired to help speed the foreclosure process. Rather, he was talking about pursuing local criminal cases as part of an upcoming partnership with the US Attorney’s Office for the Southern District of Iowa.
That partnership was eventually announced. But pay attention to how it refers to “mortgage fraud,” and with a very vague set of targets.
United States Attorney Nick Klinefeldt and Iowa Attorney General Tom Miller announced today the creation of the Iowa Mortgage Fraud Working Group.
The working group will identify and investigate targets for criminal prosecution in the Southern District of Iowa and perform other important functions in the fight against mortgage fraud. Klinefeldt and Miller said they expect the working group to effectively and efficiently protect the public from mortgage fraud and ensure that wrongdoers are brought to justice. The working group combines the civil expertise of the Attorney General in the mortgage industry with the criminal expertise of the United States Attorney [...]
“This new partnership between my office and the United States Attorney’s office will help us take some of the most egregious mortgage fraud cases to the next level,” said Miller. “There are some situations where civil enforcement efforts simply are not enough to punish the wrongdoers. We look forward to working with the United States Attorney to ensure that criminal enforcement tools are also available.”
I’ve talked to enough people throughout this process to know that “mortgage fraud” means something entirely different from foreclosure fraud, and Miller is profiting from this shift in language. Usually, mortgage fraud refers to stopping scam artists who try to help borrowers with loan modifications, or other penny-ante scams. There’s nothing in that announcement that specifically refers to prosecuting the type of foreclosure practices we’ve seen, only an oblique reference to Miller’s other foreclosure investigation. If you think about it, a local investigation into ripoffs of Iowans almost by definition cannot generate criminal prosecutions for national bank executives.
So Miller was from day one, playing games with language. And when he described the 50 state AG investigation as “inherently civil,” many people jumped on him, figuring that this was a total betrayal. I joined that chorus. But it turns out he was gently fibbing almost from the moment he made that statement.
Since the release of the “inherently civil” comment, foreclosure activists have inundated Miller’s office with queries. They’ve stopped trying to shift the “put people in jail” comment to this unrelated local investigation. Instead, they are claiming that the state AG investigation can only enforce civil consumer fraud law, and that any criminal conduct they find in the course of the investigation will be forwarded along to the proper authorities. Additionally, they say that conduct that constitutes a crime under state law can be addressed by local authorities.
But this conflicts with an interview Miller gave to the Washington Post in late December:
Miller did not rule out the possibility that the large-scale issues with foreclosure filings – which prompted lenders such as Bank of America, GMAC and Ally Financial to halt foreclosures temporarily – could lead to criminal charges. But that’s not his current aim, he said. Some criminal matters probably would rest with federal officials.
“Our focus is on the civil side now,” he said. “We hope to clear up the problems. We hope to have redress for any homeowners that have been harmed, and we hope to try and leave the situation better than when we came in. We think this has been, in varying degrees, a mess for a long time.”
Clearly Miller is focused on the civil penalties. But he “did not rule out” criminal charges at that time. Essentially, within the course of a week or two, he’s saying that criminal charges could never be addressed by the 50-state investigation.
Getting the truth here is pretty slippery. But it’s clear that people seeking civil penalties for foreclosure fraud could be satisfied by his investigation, but people seeking actual enforcement, the invocation of the rule of law, criminal charges, will not. And the claim that state AGs cannot prosecute criminal fraud in the foreclosure industry in a joint investigation seems to me to be a pretty weak claim.
UPDATE: PICO, a faith-based community group who has been working on foreclosure fraud, and whose members were in the room when Miller made the “We will put people in jail” statement, released this comment:
Homeowners urge Attorneys General to stand strong against mortgage fraud
Homeowners expect Iowa Attorney General Tom Miller and the other Attorneys General who are investigating mortgage fraud to conduct a thorough investigation, punish banks that broke the law, and impose remedies that stop the flood of foreclosures destroying lives and communities.
As the top law enforcement officers in the states, the Attorneys Generals must exert bold action against the nation’s biggest banks that engaged in pervasive fraud against the American people.
Over the coming weeks, homeowners from PICO, National People’s Action, Alliance for a Just Society, Alliance of Californians for Community Empowerment, IAF Southeast, SEIU and other organizations representing homeowners will be meeting with Attorneys Generals across the country — including a meeting this Thursday with Mass. Attorney General Martha Coakley — to press for a strong settlement that makes principal reduction the primary strategy for addressing the harm done by mortgage fraud.
I don’t think their concept of “mortgage fraud” and Miller’s are the same.