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The $9 Billion Witness: Meet JPMorgan Pursue s Worst Nightmare – Rolling Stone

The $9 Billion Witness: Meet JPMorgan Pursue’s Worst Nightmare

Meet the woman JPMorgan Pursue paid one of the largest fines in American history to keep from talking

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S he attempted to stay quiet, she indeed did. But after eight years of keeping a strenuous 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, lean, quick-witted securities lawyer in her late thirties, with long blondie hair, pale-blue eyes and an infectious sense of humor that has survived some very harsh times. She's had to fight to find work despite some striking abilities and qualifications, a common symptom of a not-so-common condition called being a whistle-blower.

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Fleischmann is the central witness in one of the largest cases of white-collar crime in American history, possessing secrets that JPMorgan Pursue 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 very first witnessed, then attempted 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 very 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 thickest banks stole on a grand scale. That's why the more significant part of Fleischmann's story is in the aches Pursue and the Justice Department took to muffle her.

She was blocked at every turn: by asleep-on-the-job regulators like the Securities and Exchange Commission, by a court system that permitted Pursue to use its billions to bury her evidence, and, ultimately, by officials like outgoing Attorney General Eric Holder, the chief architect of the crazily elaborate government policy of give up, secrecy and cover-up. ”Every time I had a chance to talk, something always got in the way,” Fleischmann says.

This past year she observed as Holder's Justice Department struck a series of historic settlement deals with Pursue, 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. 

Jamie Dimon Bloomberg/Getty

And now, with Holder about to leave office and his Justice Department reportedly wrapping up its final settlements, the state is effectively putting the completing touches on what will amount to a sweeping, industrywide effort to bury the facts of a entire 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 commence speaking up, then this truly is all we're going to get: the thickest financial cover-up in history.” 

A layne 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 youthful age, making her way to Cornell Law School and then to Wall Street. Her decision to go into finance astonished 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 entire 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 rock-hard, Fleischmann ended up at Pursue. The mortgage market was white-hot. Banks like Pursue, Bank of America and Citigroup were furiously buying up fat 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 threw 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 fresh 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.

“I could lose everything. But if we don't begin speaking up, we're going to get the largest financial cover-up in history.” 

“If you sent him an e-mail, he would actually come out and yell at you,” she recalls. ”The entire 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 attempting 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 instantaneously, 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 attempted 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 gigantic crimson flag to see Pursue 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 Pursue 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 numerous 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: scrape and dent. As Pursue 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 cover of paint on a bunch of junkyard wrecks and selling them as fresh cars. ”Everything that I thought was bad at the time,” Fleischmann says, ”turned out to be a million times worse.” (Pursue declined to comment for this article.)

When Fleischmann and her team reviewed random samples of the loans, they found that around forty percent of them were based on overstated incomes – an astronomically high defect rate for any pool of mortgages; Pursue's normal tolerance for error was five percent. One mortgage in particular that plunges 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 four hundred eighty eight 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 protestations to the toxic loans, something odd embarked happening. The number-crunchers who had been complaining about the loans abruptly began switching their reports. The process she describes is strikingly similar to the way police obtain false confessions: The interrogator vocally manhandles the target until he starts producing the desired answers. ”What happened,” Fleischmann says, ”is the head diligence manager commenced yelling at his team, berating them, making them do reports over and over, keeping them late at night.” Then the loans embarked clearing.

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As late as December 11th, 2006, diligence managers had marked a total thirty three percent of one loan sample as ”stated income unreasonable for profession,” meaning that it was almost unavoidable that there would be a high number of defaults. Several high-ranking executives were copied on this report.

Then, on December 15th, a Pursue 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 ultimately caved under the pressure from the sales executive. ”He had his arms up and just said, 'OK,' and he cleared it,” says Fleischmann, adding that he was wiggling his head ”no” even as he was telling yes. Soon afterward, the error rate in the pool had magically dropped below ten 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 significant executive at Pursue that when he later defected to the Chicago-based hedge fund Citadel, Dimon cut off trading with Citadel in retaliation. Boester eventually returned to Pursue and is still there today despite his role in this affair.

This moment illustrates the most basic element of the case against Pursue: The bank knowingly peddled products wedged with scratch-and-dent loans to investors without disclosing the demonstrable defects with the underlying loans.

Years later, in its settlement with the Justice Department, Pursue would admit that this conversation inbetween Fleischmann and Boester took place (tho’ neither was named; it was simply described as ”an employee . . . told . . . a managing director”) and that her warning was overlooked when the bank sold those loans off to investors. 

Illustration by Victor Juhasz

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 Pursue's diligence process.

Fleischmann assumed this letter, which Pursue 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 calmly dismissed in a round of layoffs. A few months later, proof would show up 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 utter months before the bank rammed through the dirty GreenPoint deal over Fleischmann's protestations, Pursue's CEO was aware that loans like this were too dangerous for Pursue itself to own. (However 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.)

The ordinary citizen who is the target of a government investigation cannot pick up the phone, call the prosecutor and have his case dropped. But Dimon did just that.

In January 2010, when Dimon testified before the Financial Crisis Inquiry Commission, he told investigators the exact opposite story, portraying the poor Pursue 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 Pursue didn't bar her from reporting a crime, but the problem was that she couldn't prove that Pursue had committed a crime without knowing whether those bad loans had been sold.

As it turned out, of course, Pursue 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, Pursue 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 forty percent of the loans in that deal came from the GreenPoint pool.

The lawsuit alleged that in just the very first year, the security suffered $51 million in losses, almost fifty 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 ems of millions. And Pursue 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.

I n the spring of 2012, Fleischmann, who'd moved back to Canada after leaving Pursue, was working at a law rigid 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, providing 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 demonstrate of force against banks like Pursue. 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 Fresh York Attorney General Eric Schneiderman, which gave many observers reason to hope that ultimately 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. 

Fresh York Attorney General Eric Schneiderman (L) speaks whille Attorney General Eric Holder listens during a news conference at the Justice Department on January 27th, 2012. Mark Wilson/Getty

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 Fresh York Attorney General Eliot Spitzer.

It soon became clear that the SEC wasn't so much investigating Pursue's behavior as just checking boxes. Fleischmann received no follow-up phone calls, even however she told the investigator that she was willing to tell the SEC everything she knew about the systemic fraud at Pursue. Instead, the SEC focused on a single transaction involving a mortgage company called WMC. ”I kept attempting to talk to them about GreenPoint,” Fleischmann says, ”but they just wished to talk about that other deal.”

The following year, the SEC would fine Pursue $297 million for misrepresentations in the WMC deal. On the surface, it looked like a hefty penalty. In reality, it was a classic example of the piecemeal, cherry-picking style of justice that characterized the post-crisis era. ”The kid-gloves treatment 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 Pursue settlement. ”They typically charge only one offense when there are dozens. It would be like charging a serial murderer with a single brunt and providing them probation.”

S oon Fleischmann's hopes were raised again. In late two thousand twelve 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 signifying the banks. But Fleischmann was amazed by the lead attorney in her case, a litigator named Richard Elias. ”He sounded like he had been a securities lawyer for ten years,” she says. ”This actually looked like his idea of joy – like he couldn't wait to run with this case.”

She gave Elias and his team detailed information about everything she'd seen: the decree against e-mails, the sabotaging of the diligence process, the bullying, the written warnings that were overlooked, all of it. She assumed that it wouldn't be long before the bank was hauled into court.

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Instead, the government determined to help Pursue 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 abruptly 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 lodge the case out of court.

It goes without telling 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 Fresh York Times, after Dimon had already suggested $Trio billion to lodge the case and was turned down, he went to Holder's office and upped the suggest, but evidently 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 eyed 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 hurting testimony about Pursue'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 Pursue. And worse, nobody had bothered to warn her that she was about to be effectively outed in the newspapers. ”The stress commenced to build after I witnessed that news,” she says. ”Especially as I waited to see if my name would come out and I observed my job possibilities evaporate.”

Fleischmann later realized that the government wasn't interested in having her testify against Pursue 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 suggest to toughly $9 billion.

In late November, the two sides agreed on a settlement deal that covered a multitude of misbehaviors, including the fraud that Fleischmann witnessed as well as similar scenes at Washington Mutual and Bear Stearns, two companies that Pursue 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 thickest white-collar regulatory settlement in American history. The deal released Pursue from civil liability. And, in what was described by The Fresh 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 Pursue was a cautiously contrived fiction, one that has survived to this day. For starters, $Four billion of the settlement was largely an accounting falsehood, a chunk of bogus ”consumer ease” added to make the payoff look fatter. What the public never gripped about these consumer–relief deals is that the ”ease” 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 ease would be permitted 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 puny portion of a loan or providing homeowners a little extra time to pay up in utter. ”It's not real,” says Fleischmann. ”They structured it so that the homeowners only get ease 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 ease'?”

The average person had no way of knowing what a terrible deal the Pursue settlement was for the country. The terms were even lighter than the slap-on-the-wrist formula that permitted Wall Street banks to ”neither admit nor deny” wrongdoing – the deals that had helped spark the Occupy protests. Yet those famous 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, Pursue was permitted to sign a flimsy, 10-and-a-half-page ”statement of facts” that was: (a) so brief, 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.

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The ink was slightly dry on the deal before Pursue would have the testicles to insinuate its innocence. ”The stiff 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 attempting to dole out slap-on-the-wrist settlements to banks. In a pair of celebrated cases, an unpleasantly fair federal judge named Jed Rakoff had rejected sweetheart deals worked out inbetween banks and slavish regulators and had commanded the state to go back to the drawing board and come up with real penalties.

Seemingly not wanting to deal with even the possibility of such a thing happening, Holder blew off the idea of showcasing the settlement to a judge. The settlement, says Kelleher, ”was unprecedented in many ways, including being very cautiously crafted to bypass the court system. . . . There can be little doubt that the DOJ and JP-Morgan were attempting 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 Pursue emerged with slightly a scrape. Very first, the ludicrously nonspecific language surrounding the settlement put you, me and every other American taxpayer on the hook for harshly a quarter of Pursue's check. Because most of the settlement monies were specifically not called fines or penalties, Pursue was permitted to treat some $7 billion of the settlement as a tax write-off.

Duo 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 Pursue actually made money from the deal. What's more, to defray the cost of this and other fines, Pursue last year laid off 7,500 lower-level employees. Meantime, per-employee compensation for everyone else rose four percent, to $122,653. But no one made out better than Dimon. The board awarded a seventy four percent raise to the man who oversaw the fattest regulatory penalty ever, upping his compensation package to about $20 million.

“The assumption they make is that I won't suck up my life to do it. But they're wrong about that.”

While Holder was being lavishly praised for releasing Pursue 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, inbetween 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 shocking, but it wouldn't be the very first time that the government used a wink and a nod to dispose a bank of major liability without telling so publicly. Back in 2010, American Lawyer exposed Goldman Sachs dreamed a total 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 calmly agreed to a grimy compromise: Goldman agreed to pay $550 million to lodge 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, Pursue 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 Pursue's fraud-ridden home loans. In October 2013, one of those investors – the Fort Worth Employees' Retirement Fund – asked a federal judge to force Pursue 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 signifying Pursue, 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 Pursue's lawyers at their word and rejected the Fort Worth retirees' request for access to Fleischmann and her evidence. 

Other investors bilked by Pursue also attempted to speak to Fleischmann. The Federal Home Loan Bank of Pittsburgh, which had sued Pursue, asked the court to force Pursue 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 dreamed access to the name of the state's cooperating witness: namely, Fleischmann.

In that case, the judge actually ordered Pursue to turn over both the complaint and Fleischmann's name. Pursue stalled. Later in the fall, the judge ordered the bank to produce the information again; it stalled some more.

Then, in January 2014, Pursue all of a sudden lodged with the Pittsburgh bank out of court for an undisclosed amount. Months after being ordered to permit Fleischmann to talk, they once again paid a stiff price to keep her testimony out of the public eye.

Pursue's determination to hide its own mud 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 thickest regulatory fine in the history of capitalism. According to the terms of her confidentiality agreement, she couldn't even tell them that she'd attempted 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.”

O ne day last spring, Fleischmann happened across a movie of Holder providing a speech titled ”No Company Is Too Big to Jail.” It was classic Holder: utter of weird prevarication, distracting eye grimaces 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 telling, regulators have to agree not to permit automatic penalties to kick in, so that bad banks can stay in business.

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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 sustain crimes that otherwise might have triggered crippling regulatory penalties. As she observed in mounting outrage, Holder packaged up his address with a less-than-reassuring pronouncement: ”I am resolved to eyeing [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 determined to break her muffle. ”I attempted 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 attempting to keep this secret and my bod was literally rejecting it.”

Ironically, over the summer, the government contacted her again. A fresh 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 Pursue's fraud, Holder or whoever succeeds him can still make the entire thing vanish by negotiating a soft landing for the company. ”That's the thing I'm worried about,” she says. ”That they make the entire thing vanish. 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 willfull deeds of any single individual.”

In other words, people don't commit crimes, corporate culture commits crimes! It's most likely 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 entire situation almost funny.

Ask her where the crime was, and Fleischmann will point out exactly how her bosses at JPMorgan Pursue committed criminal fraud: It's right there in the documents; just palm 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 lightly 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 disregarding warnings from inwards the rigid 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 example, 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 fair 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 eventually gets there, she still has to risk everything to take that last step. ”The assumption they make is that I won't deep-throat up my life to do it,” Fleischmann says. ”But they're wrong about that.”

Good for her, and fine for her that it's ultimately 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 deeds, 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 Pursue 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.

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