Sixty Minutes had a segment on this featuring two whistleblowers, who reported that the way mortgages were being doctored, and reported were of dubious quality and a high percentage of their loans fell into this category, if I remember correctly this was somewhere above 50%. The problem was systemic and across the company's. The Sarbanes–Oxley Act of 2002
was supposed to address this.
In a nutshell, the CEO/CFO's of major financial institutions with over 500 million in assets were to sign a document at physcal year end that said all financial statements under their scrutiny were valid and accurate. If fraud could be proven, and they were tried and convicted they could be subject to:
You have to watch the Sixty Minutes program to get the full picture, but to date the Securities and Exchange Commission (SEC) the oversight branch and the US Justice Department, the judicial branch have not prosecuted or convicted any of the major banks involved in the Securities debacle, with exception of two people, one of which, Richard Scrushy is described below.
The laws are in place, and there appears to be substantial evidence to investigate, but as you can see from the fines and the periods for confinement have not been dealt to anyone accused and convicted of cooking the books at the expense of the shareholders. The financial penalty and incarceration time in proportion to the the amount of harm done to our economy and million's of people's lives seems out of whack to me.
One of the guy's who was prosecuted and convicted under Sarbanes–Oxley, Richard Marin Scrushy
recieved this penalty for his crimes. His criminal trial was in Montgomery, Alabama.
His civil trial was in Birmingham, Alabama.
After review of what Scrushy was ordered to serve and pay for his crimes (plea bargained down substantially from the maximum penalty) it hardly seems fair does it ? Do you think his punishments will deter others from continuing the practice of misreporting financial statements as a CFO ? Personally, I doubt it, the reward is too high and the risk and punishment too low. I might add as a final tribute the the Sixty Minute Investigators, they report that the Justice Department has for unknown reasons been unwilling to aggressively pursue other CEO's and CFO's of major US financial institutions.