Victimization on main street: occupy Wall Street and the mortgage fraud crisis.

• Author: Jordan, Sandra D.

Introduction I. Historical Perspective of Corporate and White Collar Crime II. Economic Disparities are Reflected in Criminal Justice Policies III. Language Does Matter IV. Mortgage Fraud V. Comparison to the Savings and Loan Crisis VI. Victimization, Mortgage Fraud, and Drug Offenses Conclusion INTRODUCTION

"We are the 99%! We are the 99%!" This quote has become the rallying cry of the Occupy Wall Street movement, which has spread across the globe. (1) The Occupy Wall Street movement has highlighted the wealth discrepancy in the United States and the factors that led to the Great Recession. (2) Simultaneously, the subject of white collar and corporate crime has escalated in recent years. Criminal justice policy and focus has turned the public's attention toward this field of law, raising numerous concerns about fairness within the criminal justice system. The way white collar offenders are investigated, charged, prosecuted, and sentenced demonstrates a dual system of justice that many view as unfair. As the rich get richer, the poor do indeed get prison. (3) The discrepancies in the treatment of various types of crimes raise fundamental concerns about our definitions of crimes and our reasons for punishment.

In Part I, I explain the historical underpinnings of white collar and corporate crimes and why this category of criminal activity was viewed and treated differently within our criminal justice system. Part II examines the economic disparities within the criminal justice system that flow from our perceptions of who the offenders are and what type of criminal activity is being committed. (4) Not only are the "Occupiers" on Wall Street angry at economic inequity, but many of them believe the government should be more aggressive in prosecuting the crimes perpetrated by the Wall Street elite. Part III demonstrates why language matters in our discourse on crimes. The way we define criminal conduct affects the public perception which, in turn, can affect the way that legislators enact statutes, the way that prosecutors exercise discretion, and the way judges sentence criminals.

Part IV looks at mortgage fraud and how this type of fraud is at the heart of the economic meltdown and current fiscal crisis. Part V compares the Savings and Loan crisis of the 1980s and points out that the government response was much more aggressive than what we are witnessing today with the financial meltdown. Part VI points out that the victims of mortgage fraud suffer many of the same harms as do victims of drug distribution networks. Instead of funneling resources into a War on Drugs, perhaps we should focus on a War on Greed. Finally, I propose that we should discard the language of white collar and corporate crime if it means that we will treat mortgage fraud more seriously. I posit that the mortgage fraud crisis should be viewed under the lens of the criminal law standards rather than civil remedies. By shifting our language, we can place mortgage fraud in the context of "real" crimes and deal with these widespread offenses in the serious manner that they deserve. This change can result in a shift in government resources, much as we did to fight the War on Drugs in the 1980s. (5)

1. HISTORICAL PERSPECTIVE OF CORPORATE AND WHITE COLLAR CRIME

   The treatment of criminal activity where the offender has no mind to think (no mens rea) and no body to act or imprison (no actus reus) in the corporate arena explains some of the historical roots of our approach to addressing crimes in the white collar field. Since the corporation does not "fit" into the common law definition of a criminal, courts and the legislature initially excluded corporations from the scope of criminal actors or activity. This view began to change in the early part of the last century, but we maintain these vestiges of disparate treatment today. By common definition, the field of white collar crime encompasses both corporate crimes and individual crimes perpetuated within and outside of corporate structures. (6)

   In the 1909 case of New York Central & Hudson River Rail Road Company v. United States (N. Y. Central, (7) the Supreme Court first tackled with the concept of holding a corporation criminally liable for the harm it caused. In N.Y. Central, a railroad company and its employees were convicted of violating the Elkins Act after regulating the rates common carriers could charge. In extending the tort doctrine of respondeat superior to a criminal case, the Supreme Court rejected two arguments advanced by the railroad company: that the conviction would harm or punish innocent shareholders and that the conviction was improper because there was no evidence that the board of directors authorized the actions. (8)

   At the time of the decision, corporations were commonly viewed as incapable of committing crimes and were subjected to only civil fines for violations. (9) These violations were used to hold corporations accountable for harm caused by their actions and omissions or on the basis of strict liability. For the first time, the Supreme Court held that an agent of a corporation could be held criminally liable under the respondeat superior theory of liability for performing acts within the scope of employment. (10) As the Supreme Court stated, "many offenses might go unpunished and acts [can] be committed in violation of the law" without the respondeat superior theory of liability. (11) The N.Y. Central decision is seen as the seminal statement allowing for direct criminal sanctions for corporate wrongdoing. The case resulted in a changed focus among prosecutors who began to look to corporate wrongdoing with new eyes. (12) In the years since the N. Y. Central case, the courts have extended corporate criminal liability to include the Model Penal Code's "high managerial agent," (13) a more restrictive view of corporate criminal liability. Under this view of criminal liability, the prosecution must identify at least one person within the corporation with some level of managerial responsibility who condoned or participated in the criminal activity. (14)

   A much broader theory of criminal liability for corporations emerged in the mid-1980s known as the "collective knowledge" doctrine. (15) This version of criminal liability holds that the corporation can be held accountable based on the collective knowledge of the sum of its individual corporate agents. This theory is the broadest version of corporate liability because it does not require high level employees to sanction the wrongdoing. (16) It emerged in 1987 in United States v. Bank of New England, (17) after the Bank of New England (Bank) failed to file the Currency Transaction Reports (CTRs) triggered by thirty-one separate cash withdrawals made by a customer over the course of a year's time. (18) Bank of New England increased the exposure of financial institutions to include criminal actions for failure to file the required CTRs. In adopting the collective knowledge theory of mens rea, the court acknowledged that no specific individual within the Bank knowingly violated the law. (19) The court found that the collective knowledge of all of the employees was sufficient to hold the Bank accountable for the failure to file the reports. (20)

   Most courts have rejected this theory of criminal liability, finding it overly broad and inconsistent with principles of criminal accountability. (21) Collective knowledge, however, is quite similar to the concept of "willful blindness," which is used with regularity in drug prosecutions. (22) When an actor is willfully blind about a fact, and refuses to gain the requisite knowledge, the law will treat this as actual knowledge. (23) Where a drug courier accepts a package under suspicious circumstances, such as huge payment, directive not to open, or direction to deliver to only certain individuals at a particular time, this would raise suspicions in a reasonable person that criminal activity is afoot. Willful blindness is also used in cases involving receipt and sale of stolen property--if it sounds too good to be true, and costs a fraction of the retail value, it is in all likelihood stolen property. (24) There is little reason not to utilize this theory of investigation and prosecution for mortgage and related frauds committed within and on behalf of financial institutions. If a banker or executive can direct employees and agents to act in suspicious ways, tells them to just "do it" and not ask questions, or instructs them to destroy documents, then the supervisor is causing them to act in a willfully blind manner which is conduct suggestive of criminal knowledge. Imputing the knowledge as collective knowledge, just as is done in the drug cases, is a viable theory of prosecution. In fact, this is precisely how the court convicted Bank of New England--the sum of all of the employees was imputed to the Bank. (25) A comparable approach would assist in closing the schism between the two worlds of crime--street crime and white collar crime.

2. ECONOMIC DISPARITIES ARE REFLECTED IN CRIMINAL JUSTICE POLICIES

   Economic disparity in the United States has a direct impact on the nature of crime and the identity of individuals who are prosecuted and convicted for criminal conduct. One author described the situation succinctly in a comprehensive book titled, "The Rich Get Richer and the Poor Get Prison." (26) As I write this Article, we are witnessing the growth of Occupy Wall Street, a grassroots movement that started on Wall Street and spread across the globe. The Occupiers consist of masses of individuals who are expressing their anger and frustration with the policies of the fiscally elite, the richest 1% of the population. (27) The movement began on September 17, 2011, and partially reflects a criticism of the Wall Street banking bailout that contributed to the collapsing economy and the current Great Recession. (28) The Occupiers describe the movement as a "leaderless resistance...