Meet
the woman JPMorgan Chase paid one of the largest fines in American history to
keep from talking
Matt Taibbi
She tried to stay quiet, she
really did. But after eight years of keeping a heavy secret, the day came when
Alayne Fleischmann couldn't take it anymore.
"It was like watching an old lady get
mugged on the street," she says. "I thought, 'I can't sit by any
longer.'"
Fleischmann is a tall, thin, quick-witted
securities lawyer in her late thirties, with long blond hair, pale-blue eyes
and an infectious sense of humor that has survived some very tough times. She's
had to struggle to find work despite some striking skills and qualifications, a
common symptom of a not-so-common condition called being a whistle-blower.
Fleischmann is the central witness in one of
the biggest cases of white-collar crime in American history, possessing secrets
that JPMorgan Chase CEO Jamie Dimon late last year paid $9 billion (not $13
billion as regularly reported – more on that later) to keep the public from
hearing.
Back in 2006, as a deal manager at the
gigantic bank, Fleischmann first witnessed, then tried to stop, what she
describes as "massive criminal securities fraud" in the bank's
mortgage operations.
Thanks to a confidentiality agreement, she's
kept her mouth shut since then. "My closest family and friends don't know
what I've been living with," she says. "Even my brother will only
find out for the first time when he sees this interview."
Six years after the crisis that cratered the
global economy, it's not exactly news that the country's biggest banks stole on
a grand scale. That's why the more important part of Fleischmann's story is in
the pains Chase and the Justice Department took to silence her.
She was blocked at every turn: by
asleep-on-the-job regulators like the Securities and Exchange Commission, by a
court system that allowed Chase to use its billions to bury her evidence, and,
finally, by officials like outgoing Attorney General Eric Holder, the chief
architect of the crazily elaborate government policy of surrender, secrecy and
cover-up. "Every time I had a chance to talk, something always got in the
way," Fleischmann says.
This past year she watched as Holder's
Justice Department struck a series of historic settlement deals with Chase,
Citigroup and Bank of America. The root bargain in these deals was cash for
secrecy. The banks paid big fines, without trials or even judges – only secret
negotiations that typically ended with the public shown nothing but vague,
quasi-official papers called "statements of facts," which were
conveniently devoid of anything like actual facts.
And now, with Holder about to leave office
and his Justice Department reportedly wrapping up its final settlements, the
state is effectively putting the finishing touches on what will amount to a
sweeping, industrywide effort to bury the facts of a whole generation of Wall
Street corruption. "I could be sued into bankruptcy," she says.
"I could lose my license to practice law. I could lose everything. But if
we don't start speaking up, then this really is all we're going to get: the
biggest financial cover-up in history."
Alayne Fleischmann grew up in
Terrace, British Columbia, a snowbound valley town just a brisk 18-hour drive
north of Vancouver. She excelled at school from a young age, making her way to
Cornell Law School and then to Wall Street. Her decision to go into finance
surprised those closest to her, as she had always had more idealistic
ambitions. "I helped lead a group that wrote briefs to the Human Rights
Chamber for those affected by ethnic cleansing in Bosnia-Herzegovina," she
says. "My whole life prior to moving into securities law was human rights
work."
But she had student loans to pay off, and so
when Wall Street came knocking, that was that. But it wasn't like she was
dragged into high finance kicking and screaming. She found she had a genuine
passion for securities law and felt strongly she was doing a good thing.
"There was nothing shady about the field back then," she says.
"It was very respectable."
In 2006, after a few years at a white-shoe
law firm, Fleischmann ended up at Chase. The mortgage market was white-hot.
Banks like Chase, Bank of America and Citigroup were furiously buying up huge
pools of home loans and repackaging them as mortgage securities. Like soybeans
in processed food, these synthesized financial products wound up in everything,
whether you knew it or not: your state's pension fund, another state's workers'
compensation fund, maybe even the portfolio of the insurance company you were
counting on to support your family if you got hit by a bus.
As a transaction manager, Fleischmann
functioned as a kind of quality-control officer. Her main job was to help make
sure the bank didn't buy spoiled merchandise before it got tossed into the meat
grinder and sold out the other end.
A few months into her tenure, Fleischmann
would later testify in a DOJ deposition, the bank hired a new manager for
diligence, the group in charge of reviewing and clearing loans. Fleischmann
quickly ran into a problem with this manager, technically one of her superiors.
She says he told her and other employees to stop sending him e-mails. The
department, it seemed, was wary of putting anything in writing when it came to
its mortgage deals.
"If you sent him an e-mail, he would
actually come out and yell at you," she recalls. "The whole point of
having a compliance and diligence group is to have policies that are set out
clearly in writing. So to have exactly the opposite of that – that was very
worrisome." One former high-ranking federal prosecutor said that if he
were taking a criminal case to trial, the information about this e-mail policy
would be crucial. "I would begin and end my opening statement with
that," he says. "It shows these people knew what they were doing and
were trying not to get caught."
In late 2006, not long after the "no
e-mail" policy was implemented, Fleischmann and her group were asked to
evaluate a packet of home loans from a mortgage originator called GreenPoint
that was collectively worth about $900 million. Almost immediately, Fleischmann
and some of the diligence managers who worked alongside her began to notice
serious problems with this particular package of loans.
For one thing, the dates on many of them were
suspiciously old. Normally, banks tried to turn loans into securities at warp
speed. The idea was to go from a homeowner signing on the dotted line to an
investor buying that loan in a pool of securities within two to three months.
Thus it was a huge red flag to see Chase buying loans that were already seven
or eight months old.
What this meant was that many of the loans in
the GreenPoint deal had either been previously rejected by Chase or another
bank, or were what are known as "early payment defaults." EPDs are
loans that have already been sold to another bank and have been returned after
the borrowers missed multiple payments. That's why the dates on them were so
old.
In other words, this was the very bottom of
the mortgage barrel. They were like used cars that had been towed back to the
lot after throwing a rod. The industry had its own term for this sort of loan
product: scratch and dent. As Chase later admitted, it not only ended up
reselling hundreds of millions of dollars worth of those crappy loans to
investors, it also sold them in a mortgage pool marketed as being above
subprime, a type of loan called "Alt-A." Putting scratch-and-dent
loans in an Alt-A security is a little like putting a fresh coat of paint on a
bunch of junkyard wrecks and selling them as new cars. "Everything that I
thought was bad at the time," Fleischmann says, "turned out to be a
million times worse." (Chase declined to comment for this article.)
When Fleischmann and her team reviewed random
samples of the loans, they found that around 40 percent of them were based on
overstated incomes – an astronomically high defect rate for any pool of
mortgages; Chase's normal tolerance for error was five percent. One mortgage in
particular that sticks out in Fleischmann's mind involved a manicurist who
claimed to have an annual income of $117,000. Fleischmann figured that even
working seven days a week, this woman would have needed to work 488 days a year
to make that much. "And that's with no overhead," Fleischmann says.
"It wasn't possible."
But when she and others raised objections to
the toxic loans, something odd started happening. The number-crunchers who had
been complaining about the loans suddenly began changing their reports. The process
she describes is strikingly similar to the way police obtain false confessions:
The interrogator verbally abuses the target until he starts producing the
desired answers. "What happened," Fleischmann says, "is the head
diligence manager started yelling at his team, berating them, making them do
reports over and over, keeping them late at night." Then the loans started
clearing.
As late as December 11th, 2006, diligence
managers had marked a full 33 percent of one loan sample as "stated income
unreasonable for profession," meaning that it was nearly inevitable that
there would be a high number of defaults. Several high-ranking executives were
copied on this report.
Then, on December 15th, a Chase sales
executive held a lengthy meeting with reps from GreenPoint and the diligence
team to examine the remaining loans in the pool. When they got to the
manicurist, Fleischmann remembers, one of the diligence guys finally caved
under the pressure from the sales executive. "He had his hands up and just
said, 'OK,' and he cleared it," says Fleischmann, adding that he was
shaking his head "no" even as he was saying yes. Soon afterward, the
error rate in the pool had magically dropped below 10 percent – a threshold
that itself had just been doubled to clear the way for this deal.
After that meeting, Fleischmann testified,
she approached a managing director named Greg Boester and pleaded with him to
reconsider. She says she told Boester that the bank could not sell the
high-risk loans as low-risk securities without committing fraud. "You
can't securitize these loans without special disclosure about what's wrong with
them," Fleischmann told him, "and if you make that disclosure, no one
will buy them."
A former Olympic ski jumper, Boester was such
an important executive at Chase that when he later defected to the
Chicago-based hedge fund Citadel, Dimon cut off trading with Citadel in
retaliation. Boester eventually returned to Chase and is still there today
despite his role in this affair.
This moment illustrates the most basic
element of the case against Chase: The bank knowingly peddled products stuffed
with scratch-and-dent loans to investors without disclosing the obvious defects
with the underlying loans.
Years later, in its settlement with the
Justice Department, Chase would admit that this conversation between
Fleischmann and Boester took place (though neither was named; it was simply
described as "an employee . . . told . . . a managing director")
and that her warning was ignored when the bank sold those loans off to
investors.
A few weeks later, in early 2007, she sent a
long letter to another managing director, William Buell. In the letter, she
warned Buell of the consequences of reselling these bad loans as securities and
gave detailed descriptions of breakdowns in Chase's diligence process.
Fleischmann assumed this letter, which Chase
lawyers would later jokingly nickname "The Howler" after the
screaming missive from the Harry Potter books, would be enough to force the bank
to stop selling the bad loans. "It used to be if you wrote a memo, they
had to stop, because now there's proof that they knew what they were
doing," she says. "But when the Justice Department doesn't do
anything, that stops being a deterrent. I just didn't know that at the time."
In February 2008, less than two years after
joining the bank, Fleischmann was quietly dismissed in a round of layoffs. A
few months later, proof would appear that her bosses knew all along that the
boom-era mortgage market was rotten. That September, as the market was
crashing, Dimon boasted in a ball-washing Fortune article titled "Jamie Dimon's SWAT
Team" that he knew well before the meltdown that the subprime market was
toast. "We concluded that underwriting standards were deteriorating across
the industry." The story tells of Dimon ordering Boester's boss, William
King, to dump the bank's subprime holdings in October 2006. "Billy,"
Dimon says, "we need to sell a lot of our positions. . . . This stuff could go up in
smoke!"
In other words, two full months before the
bank rammed through the dirty GreenPoint deal over Fleischmann's objections,
Chase's CEO was aware that loans like this were too dangerous for Chase itself
to own. (Though Dimon was talking about subprime loans and GreenPoint was technically
an Alt-A pool, the Fortune
story shows that upper management had serious concerns about industry-wide
underwriting problems.)
In January 2010, when Dimon testified before
the Financial Crisis Inquiry Commission, he told investigators the exact opposite
story, portraying the poor Chase leadership as having been duped, just like the
rest of us. "In mortgage underwriting," he said, "somehow we
just missed, you know, that home prices don't go up forever."
When Fleischmann found out about all of this years
later, she was shocked. Her confidentiality agreement at Chase didn't bar her
from reporting a crime, but the problem was that she couldn't prove that Chase
had committed a crime without knowing whether those bad loans had been sold.
As it turned out, of course, Chase was
selling those rotten dog-meat loans all over the place. How bad were they? A
single lawsuit by a single angry litigant gives some insight. In 2011, Chase
was sued over massive losses suffered by a group of credit unions. One of them
had invested $135 million in one of the bank's mortgage--backed securities.
About 40 percent of the loans in that deal came from the GreenPoint pool.
The lawsuit alleged that in just the first
year, the security suffered $51 million in losses, nearly 50 times what had
been projected. It's hard to say how much of that was due to the GreenPoint
loans. But this was just one security, one year, and the losses were in the
tens of millions. And Chase did deal after deal with the same methodology. So
did most of the other banks. It's theft on a scale that blows the mind.
In the spring of 2012,
Fleischmann, who'd moved back to Canada after leaving Chase, was working at a
law firm in Calgary when the phone rang. It was an investigator from the
States. "Hi, I'm from the SEC," he said. "You weren't expecting
to hear from me, were you?"
A few months earlier, President Obama, giving
in to pressure from the Occupy movement and other reformers, had formed the
Residential Mortgage-Backed Securities Working Group. At least superficially,
this was a serious show of force against banks like Chase. The group would
operate like a kind of regulatory Justice League, combining the superpowers of
investigators from the SEC, the FBI, the IRS, HUD and a host of other federal agencies.
It included noted anti-corruption- investigator and New York Attorney General
Eric Schneiderman, which gave many observers reason to hope that finally
something would be done about the crimes that led to the crash. That makes the
fact that the bank would skate with negligible cash fines an even more
extra-ordinary accomplishment.
By the time the working group was set up,
most of the applicable statutes of limitations had either expired or were about
to expire. "A conspiratorial way of looking at it would be to say the
state waited far too long to look at these cases and is now taking its sweet
time investigating, while the last statutes of limitations run out," says
famed prosecutor and former New York Attorney General Eliot Spitzer.
It soon became clear that the SEC wasn't so
much investigating Chase's behavior as just checking boxes. Fleischmann
received no follow-up phone calls, even though she told the investigator that
she was willing to tell the SEC everything she knew about the systemic fraud at
Chase. Instead, the SEC focused on a single transaction involving a mortgage
company called WMC. "I kept trying to talk to them about GreenPoint,"
Fleischmann says, "but they just wanted to talk about that other
deal."
The following year, the SEC would fine Chase
$297 million for misrepresentations in the WMC deal. On the surface, it looked
like a hefty punishment. In reality, it was a classic example of the piecemeal,
cherry-picking style of justice that characterized the post-crisis era. "The
kid-gloves approach that the DOJ and the SEC take with Wall Street is as
inexplicable as it is indefensible," says Dennis Kelleher of the financial
reform group Better Markets, which would later file suit challenging the Chase
settlement. "They typically charge only one offense when there are dozens.
It would be like charging a serial murderer with a single assault and giving
them probation."
Soon Fleischmann's hopes were
raised again. In late 2012 and early 2013, she had a pair of interviews with
civil litigators from the U.S. attorney's office in the Eastern District of
California, based in Sacramento.
One of the ongoing myths about the financial
crisis is that the government is outmatched by the legal talent representing
the banks. But Fleischmann was impressed by the lead attorney in her case, a
litigator named Richard Elias. "He sounded like he had been a securities
lawyer for 10 years," she says. "This actually looked like his idea
of fun – like he couldn't wait to run with this case."
She gave Elias and his team detailed
information about everything she'd seen: the edict against e-mails, the
sabotaging of the diligence process, the bullying, the written warnings that
were ignored, all of it. She assumed that it wouldn't be long before the bank
was hauled into court.
Instead, the government decided to help Chase
bury the evidence. It began when Holder's office scheduled a press conference
for the morning of September 24th, 2013, to announce sweeping civil-fraud
charges against the bank, all laid out in a detailed complaint drafted by the
U.S. attorney's Sacramento office. But that morning the presser was suddenly
canceled, and no complaint was filed. According to later news reports, Dimon
had personally called Associate Attorney General Tony West, the third-ranking
official in the Justice Department, and asked to reopen negotiations to settle
the case out of court.
It goes without saying that the ordinary
citizen who is the target of a government investigation cannot simply pick up
the phone, call up the prosecutor in charge of his case and have a legal
proceeding canceled. But Dimon did just that. "And he didn't just call the
prosecutor, he called the prosecutor's boss," Fleischmann says. According
to The New York Times,
after Dimon had already offered $3 billion to settle the case and was turned
down, he went to Holder's office and upped the offer, but apparently not by
enough.
A few days later, Fleischmann, who had by
then moved back to Vancouver and was looking for work, was at a mall when she
saw a Wall Street
Journal headline on her iPhone: JPMorgan Insider Helps U.S. in
Probe. The story said that the government had a key witness, a female employee
willing to provide damaging testimony about Chase's mortgage operations.
Fleischmann was stunned. Until that moment, she had no idea that she was a
major part of the government's case against Chase. And worse, nobody had
bothered to warn her that she was about to be effectively outed in the
newspapers. "The stress started to build after I saw that news," she
says. "Especially as I waited to see if my name would come out and I
watched my job possibilities evaporate."
Fleischmann later realized that the
government wasn't interested in having her testify against Chase in court or
any other public forum. Instead, the Justice Department's political wing, led
by Holder, appeared to be using her, and her evidence, as a bargaining chip to
extract more hush money from Dimon. It worked. Within weeks, Dimon had upped
his offer to roughly $9 billion.
In late November, the two sides agreed on a
settlement deal that covered a variety of misbehaviors, including the fraud
that Fleischmann witnessed as well as similar episodes at Washington Mutual and
Bear Stearns, two companies that Chase had acquired during the crisis (with
federal bailout aid). The newspapers and the Justice Department described the
deal as a "$13 billion settlement," hailing it as the biggest
white-collar regulatory settlement in American history. The deal released Chase
from civil liability. And, in what was described by The New York Times as a "major
victory for the government," it left open the possibility that the Justice
Department could pursue a further criminal investigation against the bank.
But the idea that Holder had cracked down on
Chase was a carefully contrived fiction, one that has survived to this day. For
starters, $4 billion of the settlement was largely an accounting falsehood, a
chunk of bogus "consumer relief" added to make the payoff look
bigger. What the public never grasped about these consumer--relief deals is
that the "relief" is often not paid by the bank, which mostly just
services the loans, but by the bank's other victims, i.e., the investors in
their bad mortgage securities.
Moreover, in this case, a fine-print addendum
indicated that this consumer relief would be allowed only if said investors
agreed to it – or if it would have been granted anyway under existing
arrangements. This often comes down to either forgiving a small portion of a
loan or giving homeowners a little extra time to pay up in full. "It's not
real," says Fleischmann. "They structured it so that the homeowners
only get relief if they would have gotten it anyway." She pauses. "If
a loan shark gives you a few extra weeks to pay up, is that 'consumer relief'?"
The average person had no way of knowing what
a terrible deal the Chase settlement was for the country. The terms were even
lighter than the slap-on-the-wrist formula that allowed Wall Street banks to
"neither admit nor deny" wrongdoing – the deals that had helped spark
the Occupy protests. Yet those notorious deals were like the Nuremberg hangings
compared to the regulatory innovation that Holder's Justice Department cooked
up for Dimon and Co.
Instead of a detailed complaint naming names,
Chase was allowed to sign a flimsy, 10-and-a-half-page "statement of
facts" that was: (a) so short, a first-year law student could read it in
the time it takes to eat a tuna sandwich, and (b) so vague, a halfway
intelligent person could read it and not know anyone had done anything wrong.
The ink was barely dry on the deal before
Chase would have the balls to insinuate its innocence. "The firm has not
admitted to violations of the law," said CFO Marianne Lake. But the deal's
most brazen innovation was the way it bypassed the judicial branch. Previously,
federal regulators had had bad luck with judges when trying to dole out
slap-on-the-wrist settlements to banks. In a pair of celebrated cases, an
unpleasantly honest federal judge named Jed Rakoff had rejected sweetheart
deals worked out between banks and slavish regulators and had commanded the
state to go back to the drawing board and come up with real punishments.
Seemingly not wanting to deal with even the
possibility of such a thing happening, Holder blew off the idea of showing the
settlement to a judge. The settlement, says Kelleher, "was unprecedented
in many ways, including being very carefully crafted to bypass the court
system. . . . There can be little doubt
that the DOJ and JP-Morgan were trying to avoid disclosure of their dirty deeds
and prevent public scrutiny of their sweetheart deal." Kelleher asks a
rhetorical question: "Can you imagine the outcry if [Bush-era Attorney
General] Alberto Gonzales had gone into the backroom and given Halliburton
immunity in exchange for a billion dollars?"
The deal was widely considered a good one for
both sides, but Chase emerged with barely a scratch. First, the ludicrously
nonspecific language surrounding the settlement put you, me and every other
American taxpayer on the hook for roughly a quarter of Chase's check. Because
most of the settlement monies were specifically not called fines or penalties,
Chase was allowed to treat some $7 billion of the settlement as a tax
write-off.
Couple this with the fact that the bank's
share price soared six percent on news of the settlement, adding more than $12
billion in value to shareholders, and one could argue Chase actually made money
from the deal. What's more, to defray the cost of this and other fines, Chase last
year laid off 7,500 lower-level employees. Meanwhile, per-employee compensation
for everyone else rose four percent, to $122,653. But no one made out better
than Dimon. The board awarded a 74 percent raise to the man who oversaw the
biggest regulatory penalty ever, upping his compensation package to about $20
million.
While Holder was being lavishly praised for
releasing Chase only from civil liability, Fleischmann knew something the rest
of the world did not: The criminal investigation was going nowhere.
In the days leading up to Holder's November
19th announcement of the settlement, the Justice Department had asked
Fleischmann to meet with criminal investigators. They would interview her very
soon, they said, between December 15th and Christmas.
But December came and went with no follow-up
from the DOJ. She began to wonder: If she was the government's key witness, how
was it possible that they were still pursuing a criminal case without talking
to her? "My concern," she says, "was that they were not
investigating."
The government's failure to speak to
Fleischmann lends credence to a theory about the Holder-Dimon settlement: It
included a tacit agreement from the DOJ not to pursue criminal charges in
earnest. It sounds outrageous, but it wouldn't be the first time that the
government used a wink and a nod to dispose a bank of major liability without
saying so publicly. Back in 2010, American Lawyer revealed Goldman Sachs wanted a full
release from liability in a dozen crooked mortgage deals, while the SEC didn't
want to give the bank such a big public victory. So the two sides quietly
agreed to a grimy compromise: Goldman agreed to pay $550 million to settle a
single case, and the SEC privately assured the bank that it wouldn't recommend
charges in any of the other deals.
As Fleischmann was waiting for the Justice
Department to call, Chase and its lawyers had been going to tremendous lengths
to keep her muzzled. A number of major institutional investors had sued the
bank in an effort to recover money lost in investing in Chase's fraud-ridden
home loans. In October 2013, one of those investors – the Fort Worth Employees'
Retirement Fund – asked a federal judge to force Chase to grant access to a
series of current and former employees, including Fleischmann, whose status as
a key cooperator in the federal investigation had made headlines in The Wall Street Journal
and other major media outlets.
In response, Dorothy Spenner, an attorney
representing Chase, told the court that Fleischmann was not a "relevant
custodian." In other words, she couldn't testify to anything of
importance. Federal Magistrate Judge James C. Francis IV took Chase's lawyers
at their word and rejected the Fort Worth retirees' request for access to
Fleischmann and her evidence.
Other investors bilked by Chase also tried to
speak to Fleischmann. The Federal Home Loan Bank of Pittsburgh, which had sued
Chase, asked the court to force Chase to turn over a copy of the draft civil
complaint that was withheld after Holder's scuttled press conference. The
Pittsburgh litigants also specified that they wanted access to the name of the
state's cooperating witness: namely, Fleischmann.
In that case, the judge actually ordered
Chase to turn over both the complaint and Fleischmann's name. Chase stalled.
Later in the fall, the judge ordered the bank to produce the information again;
it stalled some more.
Then, in January 2014, Chase suddenly settled
with the Pittsburgh bank out of court for an undisclosed amount. Months after
being ordered to allow Fleischmann to talk, they once again paid a stiff price
to keep her testimony out of the public eye.
Chase's determination to hide its own dirt
while forcing Fleischmann to keep her secret was becoming more and more absurd.
"It was a hard time to look for work," she says. All that prospective
employers knew was that she had worked in a department that had just been
dinged with what was then the biggest regulatory fine in the history of
capitalism. According to the terms of her confidentiality agreement, she
couldn't even tell them that she'd tried to keep the bank from committing
fraud.
Despite it all, Fleischmann still had faith
that the Justice Department or some other federal agency would make things
right. "I guess I was just a trusting person," she says. "I
wasn't cynical. I kept hoping."
One day last spring,
Fleischmann happened across a video of Holder giving a speech titled "No
Company Is Too Big to Jail." It was classic Holder: full of weird
prevarication, distracting eye twitches and other facial contortions. It began
with the bold rejection of the idea that overly large financial institutions
would receive preferential treatment from his Justice Department.
Then, within a few sentences, he seemed to
contradict himself, arguing that one must apply a special sort of care when
investigating supersize banks, tweaking the rules so as not to upset the world
economy. "Federal prosecutors conducting these investigations,"
Holder said, "must go the extra mile to coordinate closely with the
regulators who oversee these institutions' day-to-day operations." That
is, he was saying, regulators have to agree not to allow automatic penalties to
kick in, so that bad banks can stay in business.
Fleischmann winced. Fully fluent in Holder's
three-faced rhetoric after years of waiting for him to act, she felt that he
was patting himself on the back for having helped companies survive crimes that
otherwise might have triggered crippling regulatory penalties. As she watched
in mounting outrage, Holder wrapped up his address with a less-than-reassuring
pronouncement: "I am resolved to seeing [the investigations] through."
Doing so, he added, would "reaffirm" his principles.
Or, as Fleischmann translates it: "I
will personally stay on to make sure that no one can undo the cover-up that
I've accomplished."
That's when she decided to break her silence.
"I tried to go on with the things I was doing, but I just stopped sleeping
and couldn't eat," she says. "It felt like I was trying to keep this
secret and my body was literally rejecting it."
Ironically, over the summer, the government
contacted her again. A new set of investigators interviewed her, appearing to
have restarted the criminal case. Fleischmann won't comment on that
investigation. Frustrated as she has been by the decisions of the higher-ups in
Holder's Justice Department, she doesn't want to do anything to get in the way
of investigators who might be working the case. But she emphasizes she still
has reason to be deeply worried that nothing will be done. Even if the
investigators build strong cases against executives who oversaw Chase's fraud,
Holder or whoever succeeds him can still make the whole thing disappear by
negotiating a soft landing for the company. "That's the thing I'm worried
about," she says. "That they make the whole thing disappear. If they
do that, the truth will never come out."
In September, at a speech at NYU, Holder
defended the lack of prosecutions of top executives on the grounds that, in the
corporate context, sometimes bad things just happen without actual people being
responsible. "Responsibility remains so diffuse, and top executives so
insulated," Holder said, "that any misconduct could again be
considered more a symptom of the institution's culture than a result of the
willful actions of any single individual."
In other words, people don't commit crimes,
corporate culture commits crimes! It's probably fortunate that Holder is
quitting before he has time to apply the same logic to Mafia or terrorism
cases.
Fleischmann, for her part, had begun to find
the whole situation almost funny.
"I thought, 'I swear, Eric Holder is
gas-lighting me,' " she says.
Ask her where the crime was, and Fleischmann
will point out exactly how her bosses at JPMorgan Chase committed criminal
fraud: It's right there in the documents; just hand her a highlighter and some
Post-it notes – "We lawyers love flags" – and you will not find a
more enthusiastic tour guide through a gazillion-page prospectus than Alayne
Fleischmann.
She believes the proof is easily there for
all the elements of the crime as defined by federal law – the bank made
material misrepresentations, it made material omissions, and it did so
willfully and with specific intent, consciously ignoring warnings from inside
the firm and out.
She'd like to see something done about it,
emphasizing that there still is time. The statute of limitations for wire
fraud, for instance, has not run out, and she strongly believes there's a case
there, against the bank's executives. She has no financial interest in any of
this, no motive other than wanting the truth out. But more than anything, she
wants it to be over.
In today's America, someone like Fleischmann
– an honest person caught for a little while in the wrong place at the wrong
time – has to be willing to live through an epic ordeal just to get to the
point of being able to open her mouth and tell a truth or two. And when she
finally gets there, she still has to risk everything to take that last step.
"The assumption they make is that I won't blow up my life to do it,"
Fleischmann says. "But they're wrong about that."
Good for her, and great for her that it's
finally out. But the big-picture ending still stings. She hopes otherwise, but
the likely final verdict is a Pyrrhic victory.
Because after all this activity, all these
court actions, all these penalties (both real and abortive), even after a fair
amount of noise in the press, the target companies remain more ascendant than
ever. The people who stole all those billions are still in place. And the bank
is more untouchable than ever – former Debevoise & Plimpton hotshots Mary
Jo White and Andrew Ceresny, who represented Chase for some of this case, have
since been named to the two top jobs at the SEC. As for the bank itself, its
stock price has gone up since the settlement and flirts weekly with five-year
highs. They may lose the odd battle, but the markets clearly believe the banks
won the war. Truth is one thing, and if the right people fight hard enough, you
might get to hear it from time to time. But justice is different, and still far
enough away.