U.S. Justice: Small Fish Fry; Big Ones Get Away

Posted on Monday, 4th April 2011 @ 12:05 AM by Text Size A | A | A

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Bob Bauman (March 30, 2011)

A few weeks ago, when the U.S. Justice Department decided not to prosecute Angelo Mozilo, the former chief executive of Countrywide mortgage company, New York Times columnist Joe Nocera wrote a column very properly lamenting the fact that none of the big fish were likely to go to prison for their roles in the financial and home mortgage crisis.

Mozilo and Countrywide made billions in profit, some of it on “liar loans “that he acknowledged were likely fraudulent, action that did major damage to the national economy. He personally was paid hundreds of millions of dollars.  Though he agreed last year to a $67.5 million fine to settle fraud charges brought by the SEC, it was a small fraction of what he earned.  Otherwise, he walked.

Your Government at Work

With that background it was even more painful to read Nocera’s Sunday (March 27) column about one Charlie Engle, 48, (left) who was recently convicted, sentenced, and incarcerated in a federal prison for committing mortgage fraud– as a borrower!

I invite you to read that column if you want to rekindle your justified antipathy towards government in general and the IRS in particular. (You might also want to write to Mr. Engle and let him know that many Americans are with him in his time of persecution).

Unlike Angelo Mozilo, who made millions for himself participating in billions of mortgage frauds, Charlie Engle wasn’t a seller of bad mortgages. He was a borrower. And the “mortgage fraud” for which he was prosecuted was something that millions of Americans did during the subprime bubble. Supposedly, he lied on two “liar loans,” exaggerating his net worth and assets in order to qualify.

The IRS went all out find something, anything, on Charlie. The government’s star witness, a shady mortgage broker who himself had been convicted of fraud, claimed Engle provided false information and overstated his income on a “stated income” liar loan application.

The jury acquitted Engle on the charge of providing false information. But they somehow managed to find him guilty for mortgage fraud!

Dumpsters and Ferraris

Mr. Engle was the subject of a 2008 documentary film, “Running the Sahara.” Robert W. Nordlander, a special IRS agent, saw the film and wondered: “How does a guy train for this because most people have to work from nine to five and it’s very difficult to train for this part-time.” Agent Nordlinger also said that sometimes, when he sees somebody driving a Ferrari, he’ll check license plates to see if they make enough money to afford it.

Engle’s tax records showed that while his actual income was substantial, his taxable income was quite small, in part because he had a large tax-loss carry forward, due to a past business deal. Still convinced that Engle must be hiding income, Nordlander did undercover surveillance and took “Dumpster dives” into Mr. Engle’s garbage.

Here’s Looking at You Babe

In March 2009, still unsatisfied, Nordlander persuaded his IRS superiors to send an attractive female undercover agent, Ellen Burrows, to meet Mr. Engle and see if she could get him to say something incriminating. In the course of several flirtatious encounters, she asked him about his investments.

After acknowledging that he had been speculating in real estate during the bubble to help support his running, he said, according to Mr. Nordlander’s grand jury testimony, “I had a couple of good liar loans out there, you know, which my mortgage broker didn’t mind writing down, you know, that I was making four hundred thousand grand a year when he knew I wasn’t.”

Mr. Engle added, “Everybody was doing it because it was simply the way it was done. That doesn’t make me proud of the fact that I am at least a small part of the problem.”

Unbeknownst to Mr. Engle, Ms. Burrows was wearing a wire.

I invite you to read Joe Nocera’s full column to review all the facts that in totality raise the question whether any crime was ever committed by Engle.

Final Irony

Even when he emerges from prison, though, his ordeal will not be over. As part of his sentence,  Engle was ordered to pay $262,500 in restitution to the owner of his mortgages. And what institution might that be? You guessed it: Countrywide, now owned by Bank of America.

Nocera says: “Angelo Mozilo ought to get a good chuckle out of that one.”

And we all should learn something about the tactics of the IRS, an agency that habitually presumes Americans guilty instead of innocent — as the Constitution requires – and as this sad case shows, they’ll do almost anything to manufacture that guilt.

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