ELIZABETH WARREN UNITED STATES SENATE WASHINGTON DC 20510-2105 MASSACHUSETTS ,.. 202 224-4!.43 COP,tMlnEES BANKING, HOUSING, AND URBAN AFFAIRS HEAL TH , EDUCATION, LABOR, AND PENSION S nnitcd ~rotes ~mate ARMED SERVICES 2400 JFK FEDERAL BUILDING 15 NEW SUDBURY STREET BOSTON. MA 02203 P617 666 3170 1550 MAIN STREET SUITE 400 SPRINGFIELD, MA 01103 p -113 788 7690 SPECIAL COMMITIEE ON AGING www wanen.Mtnate gov August 19, 201 9 William Barr Attorney General U.S. Department of Justice 950 Pennsylvania Avenue, NW Washi ngton, D.C. 20530-0001 Dear Atromey General Barr: J write to request info1mation regarding recent repo11s that " well-connected lawyers" representing two major banks implicated in the 2008 fin ancial crisis used their "access to the top echelons of the Trump DOJ'' to reduce the fines imposed on these banks for their roles in the cns1s. ProPublica reported earlier this month that senior Department of Justice (DOJ or Main Justice) officials appointed by President Trump forced staff prosecutors in the U. S. Attorneys' Office for Massachusetts and the Eastern District of New York to reduce the amount Barclays Capital Inc. (Barclays) and Royal Bank of Scotland (RBS) would have to pay to settle lawsuits stemming from their role in the 2008 housing crisis. 1 As a result, the final settlements were reported to have left "billions of dollars in potential recoveries on the table'· and dismissed civil charges against two former Barclays executives who did not have to "admi t wrongdoing" and "might not have to pay a d ime out of their own pockets." 2 T hese weak settlements send a clear message to financial institutions and white-collar crim inals that they can evade accountabi lity as long as they are wealthy and well connected. RBS and Barclays employed some of the most deceptive practices that contributed to the 2008 financia l crisis. In the three years prior to the crisis, RBS underwrote and issued faulty residential mortgage-backed securities (RMBS), while fa lsifying records to mislead rating agencies, and foisted the risk and "billions of dollars in subsequent losses, o nto unsuspecting 1 ProPubl ica, ''How Trum p's Pol itical Appointees Overruled Tougher Settlements With Big Banks," Jesse Eisinger and Kevin Wack, August 2, 20 19, https://www. propubl ica.org/article/trump-pol iticalappointees-overruled-settlements-with-barclays-royal-bank-of-scotland. 2 ProPublica, ·' How Trump's Political Appointees Oven-uled Tougher Settlements With Big Banks," Jesse Eisinger and Kevin Wack, August 2, 2019, https://www.propublica.org/a1t icle/trump-politicalfilillQ.Lnlees-overruled-setllcments-with-barclays-royal-bank-of-scotland. investors across t]1e globe."3 Similarly, Barclays "repeatedly deceived investors" and "engaged Jn a fraudule11t scheme to sell tens of billions of dollars" ofRMBS. 4 Mortgages securitized by these banks lost o\·er $70 billion. Despite the fact that t11is activity i11tlicted sucl1 tremendous harm on the U.S. and global econo1ny, the Barclays a11d RBS settle1nents require that they only pay a small fraction of these damages: $2 billio11 and $4.9 billion in civil penalties, respectively. 5 Tl1e 2008 financial crisis cost tl1e American econo1ny over $22 trillion, robbing i11illions offa1nilies of their hon1es and savi_ngs in t11e process. 6 A decade later, not a single big bank CEO has gone to jail, \Vl1ite-collar enforcement actions have hit a 20-year low, and fonncr governn1ent officials running through the revolving door to cash in arc still hel1Jing the bank:s respo11sible for the crash avoid the consequcnces. 7 Between llBS a11d Barclays, tl1e banks' representatives included a former assistant to tl1e Solicitor General, a former criminal division cl1ief-in a U.S. Attorney's Office, and two forn1er Deputy Atto111eys General- 011e of whom "coditled the conditions prosecutors had to assess in bringing cases against corporations."8 When proseculors in the U.S. Attorney's Office (USAO) in Massacl111setts i11itially decided to bring criminal charges agai11st l{BS in 2016, analysts estimated that DOJ "cottld i1npose a tine of up to $12 billion" on the bank for fraudulent practices it employed leadi11g up to the financial crisis. 9 However, after the repo1ted interve11tion of a cadre of DOJ officials U.S. Depa111nen1 of Justice, "Royal Bank of Scotland Agrees to Pay $4.9 Billion for Financial Crisis-Era Misconduct," press release, August 14, 2018, https://\VW\v.juslicc.gov/opa/pr/royal-bank-scotlandagrees-pay-49-b i lIi on-fina nc ia I-eris is-era- in iscon du ct. ~ lJ.S, Departn1ent of Justice. "Barclays Agrees to Pay $2 l~illion in C-ivil Penalties to Resolve Clai1ns for Fraud in the Sale of Residential Mortgage-Backed Securities." press release, March 29, 2018, htt ps ://W\V\V. j us ti ce.gQ.yI opal pr/bare la vs-agrees-pay-2-bil Iion-c ivi 1-pcna lties-reso lvc-c !ain1s-fra udsa le-resid entia !-111 ortgage. 5 U.S. Depart1nent of Justice. "'Barclays Agrees to Pay $2 Billion in Civil Penalties to Resolve Claims for Fraud in the Sale of Residential Mo11gage-Backed Securities," press release, March 29, 2018, h!ms://"'"'\V\V. justice. govI opa/Qr/barcl ays·agrecs-pay-2-b ill i qn-~lvi 1-pena !ti es-re solve-c1ai ins-fraudsale-rcsidenti al-mottgagc; U.S. J)epa111nent of Justice, "Royal Bank of Scotland Agrees to Pay $4.9 Billion for Financial Crisis-Era Misconduct," press release, August 14, 2018, hllRs:/;,V\V\\'. j usticc. gov Iopa/pr/royal-bank-scot land-arrrees- p~4 9-b il J ion-financ i al-crl sis-erain i scond uct 6 Cioven1111cnt Accountability Office, "Financial Crisis I~osses and Potential (n1pacts of the Dodd-Frank Act.'' Jan. 16, 2013, https://\VW\V,gao.gov/products/GA0-13-180; Federal Reserve Bank of San Francisco, "l'he Financial Crisis at 10: Will We Ever Recover?," Regis Barnichon, Christian Matthes, and Alexander Ziegenbein, August 13, 2018, https://wwv·i,frbsf.org/econo1nicresearc h/ RQ b Ji cations/econom ic_-1 etter/20 18/august/financial-eris is-at -1 0-years-\v i II-we-ever-recover/. 1 Office of Senntor Elizabeth Warren, ''Rigged Justice 2.0: Govemn1cnt of the Billionaires, by the Billionaires, and for the Billionaires," https://w\vw.warren.senate.gov/download/riggcd-justice-20gove111111ent-of-the-billignaires-by-thebillionaires-and-for-the-billionaires. 8 ProPub\ica, "Ho\-V Tru1np's Political Appointees Overruled Tougher Settletnents With Big Banks," Jesse Eisinger and Kevin Wack, August 2, 2019, https://www.propublica.org/article/tru1np-political9:PPOintees-overruled-sett!cn1cnts-\vith-barclays-rova!-bank-of-scotland, 9 H.euters, ·'RBS reaches $4,9 billion deal to settle U.S. 1nortgage bond investigation," Nate Rayn1ond, f'.'.ric- Walsh, and Sinead Cruise, May 9, 2018, https://\V\\c\v,reuters.co1n/article/us-royal-bank-seot,settle1nent/rbs-reaches-4-9-b i 11 ion-deal-to-se.ttle-u-s-n1 ortgage-bond-probe-i dU S KBN l IA3 l~O. :i 2 appointed by President Trump -10nner Deputy Attorney General l{od Rosenstein, Deputy Associate Attor11ey General -stepl1e11 Cox, and former Principal Deputy Associate Atto1ney General Jesse Panuccio -- tl1e prosecutors \Vere reporteclly instructed to forego criminal charges, and to settle for only $4.9 billion, because as 011c appointee put it, '"RBS vvon't go that high." 10 Si1nilarl)', when prosecutors in the EDNY initia!ly filed a lawsuit against Barclays iI1 2016, they "wanted a fine of about $5 billio11." 11 l-Iovvever, according to t11e ProPublica report, the san1e 'frun1p DOJ appointees - fol1ov,1i11g direct discussions with Barclays - instructed them to "settle tl1e case within a narrO\\' range around $2 billion," and to drop civil charges against two former Barclays cn1ployees, allowing the bank to potentially cover the. $2 million fine against then1. 12 It is unconscionable that t11e Adn1inistration is ref11sing to hold corporate criininals fully accottntable for tl1eir role in the fi11ancial crisis. Earlier this year, f released a report, Rigged Justice 2.0: Govern1nent o.f.the Billionaires, by Billionaires c1ndfor Billionaires, which found tl1at "our justice system's soft touch \Vith 11uge corporations and billionaires is not a new phcno1neno11. But under President Trump, it is far worse than it l1as ever been. " 13 I have introduced Jegislatio11 to end this coddling of corporate wrongdoers. 1'he E11ding Too Big to ,Jail .Act would create a pennanent i11vestigativc unit for financial crimes; the L'orporate ]!,);_ecutii-'e Accountability .Act would mal(e it easier to send executiv'es to jaii for serio11s cri1nes by expa11ding crin1i11al liability to negligent executives of big corporations: and the Ant;-(_:arrUJJfion and Public lntegrit}' /let would close and lock the revolving door betwee11 industry and government. 14 l will contin1Le \Vorkil1g to pass these bills. Jn the meantin1e, tl1c American public 11as a right to know ho\\' and \\.'h)' J:>rosecutors who worked to l1old bm1ks responsible for the financial crisis \Vere forced to agree to meager settlements t11at amount to pocket change for the banks. In order to get a better l1ndcrstandi11g of the circumstances surrounding the finalization of these settle1nent to 11 12 ProPublica, "I1ow 'frurnp's Political Appointees Overruled Tougher Settlements With Big Banks," Jesse Eisinger and Kevin Wack, August 2, 2019, https://\'.'W\v.propublica.org/article/tru1np-politicalappointecs-overruled-settlements-\vith-barclavs-roval-bank-of-scotland. Bloo1nberg, "Barclays \Yins Its DOJ Gan1ble With $2 Billion Mortgage Scttlen1ent," Stephen Morris and Gavin Finch, March 28, 20 18, https://W\Vw.bloo1nberg,co1p/news/artictes/20 I 8-03-29/barclaysagrecs-to-pay-2-bi I!ion -lo-sett] e-u-s-r1n bs-su it ProPublica, "I-low Trump's Political Appointees Overruled Tougher Settlen1ents With Big Banks,'' Jesse Eisinger and Kevin Wack, August 2, 2019, https://wV·.'\V.propublica.org/artic!e/tru1np-politicalappointees-overruled~settlements-\vith-barclays-royal-bank-of-scotland. 1 Office of Senator Elizabeth Vl'arren, "lligged Justice 2.0: Govern1nent of the Billionaires, by the Billionaires, and for the Billionaires," https://\\'W\V.\Varren.scnate.gov/i1no/n1edia/doc/Iliggedo/020Justice%20Repo1t.pdf. 14 Ending 'foo Big to Jail Act, S. l 005, https://w\.V\\'.congress.gov/bill/116th-congress/senateQill/l 005?q=% 7Bo/y.22search%22o/o3 A%22ending+too+big+to+jail+acto/o22%70; Corporate Executive Accountability Act, S. l 010, hltps://\VW\V .conere~§.,ggv/bill/ l l 6th-congress/senate: bill/\ OI O?q=o/o 7B%22searcho/o22°/o3 A%5 I3%2?Corporate+Executive+ Accountability+ Act 0/o22%5Do/o 7I)&s=2&r=l; Anti-Corruption and Public Integrity Act, h1tps ://W\V'iY._, \Varren .senate. gov Id O\Vll !oad/111 aster-su1n1narv-o f-a11ti-corrupti on-act -final. L 3 agreements, I ask that you provide answers to the following questions no later than September 2, 2019. 1. How did DOJ and the other settling parties arrive at the $2 billion and $4.9 billion payment amount for Barclays and RBS, respectively? a. Are each of these settlements consistent with initial goals established by prosecutors? If not, why not? 2. Please provide any internal review or analysis DOJ (or any other agency) conducted to quantify the financial cost to the government and taxpayers related to the banks' fraudulent conduct. a. Did Main Justice perform a separate analysis from the USAOs related to the RBS and Barclays settlements? If so, please provide copies of this analysis. b. Did officials from Main Justice provide suggestions, recommendations or orders regarding these settlements? If so, who provided them, and what was the nature of these suggestions, recommendations or orders? 3. Please provide copies of all email or other communications between Deputy Associate Attorney General Stephen Cox and representatives for Barclays and RBS related to their settlement discussions. 4. Please provide copies of all email or other communications between former Associate Attorney General Jesse Panuccio and representatives for Barclays and RBS related to their settlement discussions. 5. Please provide copies of all email or other communications between Main Justice and the U.S. Attorneys' Office for Massachusetts and the EDNY related to the settlement agreements for Barclays and RBS. This should include the "spreadsheet[s] that listed the dollar range" 15 of the settlements that Main Justice provided to the USAOs. Thank you for your attention to this matter. Sincerely, United tates Senator 1s Id. 4