By Rick Claypool
Phew! Finally we can all sleep soundly knowing that Trump is taking consumer protection seriously.
President Trump has signed an executive order creating a “Task Force on Market Integrity and Consumer Fraud.” That the name of Trump’s task force puts the “market” before consumers and lacks the word “enforcement” does not seem incidental — especially coming from a man who paid $25 million to settle fraud cases stemming from his failed real estate seminar program.
At a press conference announcing the task force’s formation, Assistant Attorney General Rod Rosenstein used this opportunity to talk about how Trump’s Department of Justice is getting tough on corporations that rip off consumers and scam the government by highlighting his signature policy of lowering corporate penalties. The Trump executive order replaces a financial fraud task force created by President Obama.
How does one get tough on corporations by lowering corporate penalties? Unclear! But that doesn’t stop Rosenstein, who doesn’t think it’s fair when a corporate violation that spans multiple jurisdictions triggers multiple penalties for the company. Rosenstein characterizes these instances as “piling on,” and has used his authority to limit how much a single corporate violation can trigger penalties from multiple enforcement agencies.
Rosenstein, apparently proud of DOJ’s enforcement work, shared some impressive numbers:
The Department also uses affirmative civil enforcement authority to recover fraud proceeds and impose penalties. Last year, we 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. We have paid almost $6.6 billion to whistleblowers who came forward to report fraud and assist our investigations.
The $3.7 billion from civil cases involving fraud against the government refers to False Claims Act cases, which often involve whistleblowers exposing fraudulent or abusive contracting practices. That number is expected to be much smaller in the future, after former Associate Attorney General Rachel Brand instructed DOJ lawyers to stop citing noncompliance with “guidance documents” as evidence of a violation.
Analysis of Violation Tracker data shows that between Obama’s last year and Trump’s first year, False Claims Act penalties against corporations dropped 43 percent, from $4.5 billion to $2.5 billion.
The announcement of a purported fraud-prevention effort puts Trump officials in an awkward spot of issuing half-hearted endorsements of governmental activities they typically oppose.
Mick Mulvaney, director of Trump’s Office of Management and Budget and acting head of the Consumer Financial Protection Bureau, said at the event, according to the Wall Street Journal’s Yuka Hayashi, “We absolutely intend to continue to protect consumers … It will give us a chance to prove that a lot of what you might have heard about us since I took over management of the bureau is not accurate.”
Under Mulvaney’s predecessor at the CFPB, Richard Cordray, the agency issued an average of two penalties per month. During Mulvaney’s entire eight-month tenture, the agency has issued only three penalties.
As a member of Congress, Mulvaney strongly opposed Operation Choke Point, an anti-fraud initiative of the Obama administration’s Justice Department. Mulvaney inaccurately described the operation as “an effort by the DOJ and the FDIC to put legal businesses out of business.” Trump’s DOJ ended the initiative after years of criticism from prominent conservatives including Newt Gingrich.
Other Trump-appointed leaders of agencies that are supposed to protect consumers were also present:
- Chairman Jay Clayton of the Securities and Exchange Commission, who is seeking to reduce the awards his agency offers whistleblowers who expose fraud.
- Chairman Joe Simons of the Federal Trade Commission, whose agency’s head of consumer protection is Andrew Smith, who “may be single most conflicted member of [Trump’s] administration,” according to the Los Angeles Times’ David Lazarus. Smith’s past work on behalf of more than 50 corporate clients includes AMG Capital Management, the predatory lender controlled by Scott Tucker, who was sentenced earlier this year to more than 16 years in prison. AMG was slapped with a $1.3 billion penalty from the FTC, which accused the firm of engaging in an illegal predatory lending scheme. (Financial disclosure forms obtained by Public Citizen through a public records request show Smith’s past clients also included a private equity company that invested in a “lead generation” outfit which paid $2.1 million to settle charges that it broke New York’s usury law in hawking high-rate online loans with ads featuring television host Montel Williams.)
In other words, it’s exactly the kind of corporate group one would expect Trump to put in charge of fighting consumer fraud.