WASHINGTON – Despite its public commitment to mortgage fraud enforcement, the Justice Department did not ensure that the problem was a high-priority law-enforcement matter, an internal inquiry concluded last week.
Justice Department Inspector General Michael Horowitz said that within the FBI’s Criminal Investigative Division, mortgage fraud was the “lowest-ranked criminal threat” in the unit’s “lowest-crime category” from fiscal 2009 to 2011. And in some of the bureau’s most prominent field offices, including Los Angeles, Miami and New York, mortgage fraud ranked low or was not listed as a priority at all during the review period.
The inspector general also reviewed a highly publicized October 2012 incident in which the department and Attorney General Eric Holder vastly overstated the success of an enforcement effort involving total losses first estimated at $1 billion. The actual loss involved in the fraud scheme was about $95 million, and the number of criminal defendants charged as part of the initiative was 107, not 530 as originally reported by Justice officials.
Although Justice officials publicly acknowledged the errors in August 2013, the inspector general said the government waited months to do it even after officials acknowledged to investigators in November 2012 that they were “concerned with the accuracy of the statistics.”
“Despite being aware of the serious flaws in these statistics since at least November 2012, we found that the department continued to cite them in mortgage fraud press releases that it issued in the ensuing 10 months,” the inspector general said.
In the department’s response, Deputy Attorney General James Cole agreed with the inspector general’s recommendations, which included a request for a better case management process. But Cole defended the department’s enforcement effort, saying that the number of mortgage fraud convictions increased from 555 in fiscal 2009 to 1,118 in 2011.
Addressing the department’s handling of the inaccurate October 2012 announcement, Cole said officials moved to “determine the source of the error” when questions were raised.
“While it took some time to fully verify the set of data,’’ Cole said, “we issued corrections approximately six months ago and took steps to modify press releases and other public statements to reflect the correct statistics.”
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