Nice Try, President Obama. Breuer and Khuzami Have to Go. And Indictments Have to Be Immediate.

President Obama,

you’re right, critics of yours from the left–people like me–love the idea of NY Attorney General Eric Schneiderman chairing a “special unit to investigate misconduct and illegalities that contributed to both the financial collapse and the mortgage crisis” that would be “part of a new Unit on Mortgage Origination and Securitization Abuses.” But that’s not what you’re announcing, at least as described by Sam Stein for the HuffPo.

Schneiderman isn’t chairing anything. He’s Co-Chairing. That’s a huge difference. If he’s Chair he’s in charge. If he’s Co-Chair he needs consensus. And who is he Co-Chairing with? Four people, starting with Lanny Breuer. That’s unacceptable.

The reason we want Schneiderman in charge of prosecuting is because Breuer, who heads the Justice Department’s Criminal Division, hasn’t done his job. If he had pursued these prosecutions we’d have a lot more justice in this country right now than we do. Why has Breuer failed to go after the people who committed “misconduct and illegalities that contributed to both the financial collapse and the mortgage crisis”? Is it because he’s an ex- (and likely future) Covington & Burling partner? Doesn’t matter. His track record speaks for itself. There is only one reason to have him co-chair with Schneiderman, and that’s to rein Schneiderman in.

Schneiderman’s also got to contend with Robert Khuzami, the SEC’s top law enforcer. Khuzami’s SEC can be called aggressive only when measured against Breuer’s Criminal Division. Having Khuzami on the committee gives the weak-enforcement lawyers two people to Schneiderman’s one. And Khuzami is deeply conflicted because he was Deutsche Bank’s CDO lawyer in 2006 and 2007, peak shadiness times.

Both have to go.

The U.S. Attorney from for Colorado, John Walsh, is another co-chair. I don’t know him well enough to judge. He certainly has the prosecutorial chops to help Schneiderman. But since 1996 he’s worked the defense side. Granted, his firm is different than a Covington & Burling. Justice’s Assistant Attorney General Tony West is the final co-chair. West has a background in prosecution that’s strong but off-topic; he successfully took on child pornographers. And after that, he became a litigation partner at Morrison & Foerster, which is more like Covington & Burling. I don’t know what West’s practice was there, but here’s how the firm markets itself on the webpage you see when you click on “practices“:

“We believe that the kind of intelligence that clients look for when they seek us out for intellectual property advice, or for a bet-the-company case, is actually quite similar to that exhibited by our lawyers who come up with novel financial products for our financial services clients.” (bold mine.)

So at best, your committee seems stacked 3-2 against Schneiderman.

UPDATE: Tony West is CA AG Kamala Harris’s brother in law. West is on this committee in part/mostly/wholly to pressure her to take the foreclosure fraud deal. That’s a bad sign. I say in part/mostly/wholly because it’s hard to know what else he really brings to the table besides that relationship. But since I wasn’t privy to the meetings setting this up, I’ll admit maybe he adds value to the team beyond adding value to Team Obama’s political calculus. Turns out West is also a co-chair of the Mortgage Fraud Working Group of the Financial Enforcement Task Force, which means he’s culpable, like Breuer and Khuzami, for the task force’s focus on convicting little crooks and letting the big ones go free. So he’s got to go too.

But getting rid of Breuer and Khuzami, and West is not enough. There are some indictments that could be filed immediately, like against JPMorgan people for violations of the Servicemembers’ Civil Relief Act. That law says:

XI. Invalidation of Sale, Foreclosure, or Seizure of Servicemember’s Property:

Any sale, foreclosure, or seizure of property for breach of a mortgage, trust deed, or similar security will be invalid, if made during the period of military service or up to 90 days thereafter.

• Exception is where it is done by court order;

• Exception is where servicemember has signed a written waiver of this SCRA provision.

A violation of this SCRA provision may be a criminal misdemeanor offense which is punishable by a sentence of up to one year imprisonment.

• it will also subject the violator to damages for wrongful conversion of property;

JPMorgan has admitted to foreclosing illegally on servicemembers 18 times. So that’s 18 counts known now.

President Obama, if you want to do good policy, you have to kick off Breuer, Khuzami and West. They must be recused; fully walled off. Schneiderman must run the show, not Co-Chair it. Unless his Co-Chairs are SIGTARP Neil Barofsky and US Attorney Patrick Fitzgerald. Whether on his own or backed by true law enforcement allies, Schneiderman must have full subpoena power backed up by the resources to fully investigate and prosecute. And indictments must be immediate.

Note: I’ve edited this slightly for style since I published it and updated it with information about West, Barofsky and Fitzgerald.

Want to help set Schneiderman free? Sign this petition, The White House petition website has been a nightmare for people to use. So I’ve started another petition at an easy to use site. Please, sign and share THIS PETITION.

and get your friends to too. For further reading, check out David Dayen here and Yves Smith here, and earlier posts on their blogs and mine..

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