Fraud Probers, Defenders in Demand

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While major law firms are awash in layoffs, lawyers who either probe and prosecute or defend against financial fraud charges are gearing up for a boom.

Home loan scams have already spurred dozens of indictments all over the U.S. Now, some public officials apparently hope to raise the ante by pursuing the bogeymen du jour: "executives" and "Wall Street."

Most targets thus far have been loan processors, mortgage brokers and bank officers indicated by numerous state authorities. The Brooklyn, N.Y. district attorney last week launched a 12-member real estate fraud unit. Maryland assembled an inter-agency mortgage fraud task force last month.

'Open Season' on Bank Executives?

As the New York Times notes, the Obama administration requested a 13 percent budget raise for the SEC and money to hire more FBI agents to investigate mortgage fraud and white-collar crime. Former Justice Department lawyers indicate that federal subpoenas could proliferate after the department fills some important staff vacancies, and/or after markets become less chaotic.

The Times says little about who in the industry's mid- to upper ranks might be targeted - or more important, why. A close reading suggests future moves to prosecute bank executives, traders or fund managers will rely on the quasi-legal "theory," popular among middle-school dropouts and people who comment online beneath Wall Street Journal articles, that whenever money is "lost," it must have "gone somewhere" - most likely into some boss' pocket.

To be sure, the government would face an uphill battle proving that the financial sector's collapsed investments and bombed-out balance sheets stemmed from malfeasance rather than miscalculation. "We punish people for intentional misconduct, we don't punish them for stupidity or innocent mistakes," reminds former federal prosecutor Michael F. Buchanan, now a partner at Jenner & Block. "If you're a prosecutor, you want evidence that shows real dishonesty."