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The Law Enforcement Response to the Financial Crisis

By Mark K. Schonfeld
March 30, 2009

Last month, the Senate Judiciary Committee held a hearing entitled “The Need for Increased Fraud Enforcement in the Wake of the Economic Downturn.” During the hearing, Sen. Patrick J. Leahy (D-VT) said, “I want to see people prosecuted ' . Frankly, I want to see them go to jail.”

As the financial crisis has deepened, the pressure for prosecutions from politicians, the media and the public has grown. In turn, federal and state law enforcement and regulatory agencies have devoted vast resources to investigating the crisis. Thus far, the number of resulting cases has been limited. A question remains whether law enforcement will ultimately seek to hold individuals or entities legally accountable for such a widespread crisis. In the meantime, in this environment of heightened law enforcement scrutiny and financial volatility, executives at financial firms face particular risks when communicating with investors and making judgments about financial disclosures.

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