The Justice Department, empowered by an executive order by President Trump, is creating a new task force on Market Integrity and Consumer Fraud. The plan was detailed, on Wednesday, in public remarks by Deputy Attorney General Rod Rosenstein.
“The Task Force will focus on combating fraud against consumers—particularly the elderly, service members, and veterans—and corporate fraud that victimizes the general public and the government,” Rosenstein said. He was joined by Acting Director Mick Mulvaney of the Consumer Financial Protection Bureau, Chairman Jay Clayton of the Securities and Exchange Commission, and Chairman Joe Simons of the Federal Trade Commission.
Recently, the Attorney General and the Secretary of Health and Human Services announced the prosecution of 601 defendants in what was the nation’s largest coordinated health care fraud enforcement action, Rosenstein said. The fraud schemes allegedly involved more than $2 billion in false billings; 162 of the defendants, including 76 doctors, were charged for illegally distributing opioids and other dangerous narcotics.
In another example, from last month, the Justice Department announced Operation Wire Wire, a coordinated effort that also included the Department of Homeland Security, the Department of the Treasury, and the Postal Inspection Service. It resulted in 74 arrests in the United States and overseas. The operation, Rosenstein explained, targeted cyber-enabled financial fraud that caused companies, real estate purchasers, the elderly, and others to transmit money and sensitive personal information on the basis of fraudulent representations by the perpetrators.
The Department also uses affirmative civil enforcement authority to recover fraud proceeds and impose penalties, he added. Last year, it obtained more than $3.7 billion in settlements and judgments from civil cases involving fraud against the government. Total recoveries since 1986 amount to more than $56 billion.
The Justice Department has also paid nearly $6.6 billion to whistleblowers.
“The new Task Force on Market Integrity and Consumer Fraud will allow us to do even more,” Rosenstein said.
President Trump’s executive order directs the new Task Force to encourage multi-agency partnerships.
“By working together, we can achieve more effective and efficient outcomes,” Rosenstein said. “Drawing on our pooled resources, including subject-matter expertise, data repositories, and analysts and investigators, we can identify and stop fraud on a wider scale than any one agency acting alone.”
In May, the Department of Justice announced a new policy to encourage cooperation internally and with other enforcement agencies when imposing multiple penalties for the same corporate misconduct. The goal is to discourage “piling on,” and instead coordinate with local, state, federal, and foreign authorities to achieve a joint result that imposes appropriate punishment without prolonging investigations and unnecessarily spending investigative resources. “For responsible companies that choose to cooperate in our investigations, voluntarily report misconduct, and remediate the harm, we will work together with other agencies to ensure an appropriate and just result,” Rosenstein said.
As for the new task force, he expects a focus on cases involving fraud against the government, the financial markets, and consumers; procurement and grant fraud; securities and commodities fraud; digital currency fraud; money laundering; health care fraud; tax fraud; and other financial crimes.
Clayton praised the initiative. “Serving and protecting Main Street investors is my main priority at the SEC,” he said. “We recognize that close partnerships with our fellow regulators and law enforcement agencies are vital to helping us detect and respond to fraud.”
Clayton highlighted efforts by the Commission to combat retail securities fraud and stressed the importance of inter-agency cooperation.
Last year, the SEC’s Division of Enforcement formed an internal Retail Strategy Task Force to develop strategies and techniques for addressing the types of misconduct that most affect retail investors. These include microcap “pump and dump” frauds, Ponzi schemes, and the sales of unsuitable complex products, which frequently target the most vulnerable members of the investing public.
In one example, he said, the Enforcement Division charged 13 individuals with running a boiler-room scam targeting elderly investors, alleging that the individuals defrauded investors of $10 million through the use of high-pressure sales tactics and lies about penny stocks.
“In this action, we worked with federal criminal authorities, FINRA, and state and foreign securities regulators to bring an end to the alleged fraud,” he said.
Clayton stressed that “cyber-threats present some of the greatest risks confronting today’s financial markets.”
“We have not acted alone in this area. The Commission has filed multiple actions this year concerning allegedly fraudulent Initial Coin Offerings, and has frozen tens of millions of dollars of assets raised in allegedly unregistered Initial Coin Offerings, while working in parallel with federal criminal authorities,” he said. “In addition, we have worked closely with other regulators to provide clarity on the application of our laws and regulations to new and emerging products. I know cyber-enabled crime is an area of focus that the SEC shares with many others on this Task Force.”