In Person: Prosecutor heads campaign to punish Wall Street
Leon Weidman, an unassuming 69-year-old career prosecutor, is the architect of the government’s strategy to punish financial institutions for the financial crisis.
The New York Times
The architect of a recent legal crackdown on Wall Street’s dubious mortgage practices was not the attorney general, a U.S. attorney or a rising star in the Justice Department.
Instead, it was Leon Weidman, an unassuming 69-year-old career prosecutor.
For much of his 43 years as a government lawyer, Weidman led a small group of federal prosecutors in Los Angeles.
In the 1990s and 2000s, he and his team brought nearly 200 civil-fraud lawsuits against two-bit mortgage crooks and small-business cheats, using an obscure federal law created in the aftermath of the savings-and-loan crisis a quarter-century ago.
Now the work of Weidman has leapt to a bigger stage: the government’s campaign to punish Wall Street for the financial crisis.
His pioneering use of the law — the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, or FIRREA — underpinned the Justice Department’s tentative $13 billion settlement with JPMorgan Chase.
The U.S. attorney in Manhattan, Preet Bharara, has deployed the statute most often, filing a barrage of civil-fraud actions against Wells Fargo, BNY Mellon and Bank of America, among others.
The wave of cases has ignited a legal controversy, raising the question of whether federal prosecutors, in dusting off an old statute, are misapplying the law. So far, judges have blessed the government’s tactics.
“It’s been an extremely effective tool,” Weidman said.
His work came into focus in 2009 with the economy reeling and the Obama administration under fire for not holding Wall Street banks accountable.
As the Justice Department searched for new prosecutorial methods, Weidman became an overnight sensation within the agency.
Federal prosecutors flew out to California to pick his brain. He held training sessions across the country.
The Justice Department assigned him to one of its most promising investigations, a civil action against the credit-rating agency Standard & Poor’s.
That case hinged on FIRREA. Enacted in the late 1980s after risky lending practices imperiled the savings-and-loan industry, the law created a powerful tool to punish fraud committed by bank executives and their employers.
FIRREA is unusually crafted, as it requires a criminal violation like wire fraud or mail fraud to trigger the law’s penalties.
But because it is a civil statute, it requires a lower burden of proof than criminal charges — finding guilt by a preponderance of the evidence versus beyond a reasonable doubt.
Defense lawyers say that FIRREA gives the government a game-changing weapon in pursuing civil cases against banks.
“In retrospect, it’s surprising that prosecutors have waited so long to happen upon such a powerful statute,” said Susan Brune, a former federal prosecutor and now a partner at Brune & Richard.
Weidman discovered FIRREA in the early 1990s while thumbing through materials in his office’s law library.
He briefly formed a “FIRREA unit” but disbanded it when the caseload sunk.
The financial crisis reignited interest in the law.
With criminal investigations of banks facing an uncertain future, U.S. Attorney General Eric Holder instructed Tony West, who at the time ran the Justice Department’s civil division in Washington, D.C., to pursue his own cases.
At a legal conference in South Carolina, West and Weidman met to discuss FIRREA.
Months later, one official said, West circulated a three-page memo to every U.S. attorney in the country, urging broader use of FIRREA.
Citing the “potential deterrent effect,” West outlined the Justice Department’s “guidelines for approval” of cases under FIRREA.
Federal prosecutors in Manhattan were the first to seize on Weidman’s work.
In 2009, Bharara, the U.S. attorney in Manhattan, made it a priority to beef up his office’s civil division. “No one had ever brought cases like this before, but no one had ever seen conduct like this before,” Bharara said.
Banks have challenged the government’s cases, but at least four federal judges have denied the banks’ motions to dismiss these cases, lending credibility to Weidman’s strategy.
Weidman joined the Justice Department straight out of law school and moved to Los Angeles a few years later, being named head of the office’s civil division in 1990.
In an era when lawyers routinely shuttle back and forth between the Justice Department and lucrative law-firm partnerships, Weidman is something of a relic.
Earning a government salary of $155,000 a year, he says he has no plans to spin his recent success into a seven-figure salary.
“I’m not going anywhere,” he said. “There’s plenty of work left to do.”