Justice Department officials used misleading data to argue that their efforts to fight mortgage fraud were more effective than they actually were, a new internal report has concluded, faulting officials for using the incorrect data for ten months after it was learned the information was inaccurate.
According to the department’s inspector general, the trouble started at an October 9, 2012 news conference where agency officials announced the early fruits of their “Distressed Homeowner Initiative” that year targeting those taking advantage of families in dire financial straights. At the news conference, Attorney General Eric Holder announced that 530 people were charged with crimes that affected 73,000 homeowners and losses totaling more than $1 billion.
Eventually, it was disclosed that the actual number of people charged with crimes was 107, and the actual amount of money involved was $95 million — roughly 420 people and $900 million less than originally reported.
The inspector general requested facts backing up the claim, but said they were told by Justice Department personnel that “shortly after the news conference concluded they became concerned with the accuracy of the statistics.”
The inspector general’s report concluded that “the department should have been more forthright at a much earlier date about this flawed information,” and that it “should not have continued to issue press releases with these statistics once it became aware of the serious flaws” in the data.
The transcript of the news conference and the attorney general’s remarks available on the Justice Department’s website were given a notification that the information presented as slightly off.
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Yet despite the findings that “numerous significant errors and inaccuracies existed with the information,” Justice Department officials continued to use the numbers in mortgage fraud press releases for the next 10 months, investigators said.
Officials said they worked to correct the data as soon as they discovered the problems, but that it took time to get the correct numbers.
“While it took some time to fully verify the set of data, we issued corrections approximately six months ago and took steps to modify press releases and other public statements to reflect the correct statistics,” Justice Department officials said in their response to the inspector general’s findings.
The incorrect data should not detract from what law enforcement personnel were able to accomplish, the department argued.
“The department has brought significant criminal and civil enforcement actions against company officials for conducting mortgage fraud resulting in significant losses,” the department officials said.
The inspector general said that many of the convictions the Justice Department counted weren’t actually related to homeowner mortgage fraud, or were prosecutions that had occurred prior to the program’s implementation.
Also, when submitting data to the FBI for compilation, various agencies and offices were supposed to list who exactly the executive was who signed off on the information, such as a director or president. Instead, the inspector general found 98 times where the executive was identified only as “other,” “unknown,” or “n” — which investigators said seemed to stand for “no.”
The inspector general chided the FBI for not having “a rigorous methodology for independently verifying the criminal mortgage-fraud statistics provided by law enforcement agencies nationwide.”
Combating mortgage fraud and other financial crimes has received increased attention since the financial collapse of 2008, brought on in large part by the collapse of the housing market bubble.
In 2012, the inspector general listed mortgage-related fraud as one of the top management challenges facing the agency, and noted that “rarely in the department’s history has this role received as much attention — or as many resources — as in the past few years.”
But in the most recent report released last week, investigators expressed concern that the FBI and other Justice Department offices weren’t paying enough attention to the subject.
“Despite receiving significant additional funding from Congress to pursue mortgage fraud cases, the FBI in adding new staff did not always use these new positions to exclusively investigate mortgage fraud,” investigators said.
• Phillip Swarts can be reached at pswarts@washingtontimes.com.
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