Attorney General Nominee Loretta Lynch is Soft on Political Corruption

Loretta Lynch and Barack ObamaLoretta Lynch, President Obama’s choice to replace Eric Holder as Attorney General, has an especially weak record of investigating and prosecuting political corruption. Moreover, her longstanding ties to the New York political machine have limited her independence as a prosecutor.

Lynch, who currently serves as U.S. Attorney for the Eastern District of New York, has watched as Preet Bharara, the U.S. Attorney for the neighboring Southern District of New York, has prosecuted case after case. And Bharara would not have acted except for a slew of newspaper headlines about political corruption generated by the National Legal and Policy Center.

We conducted these investigations from afar, based primarily by an examination of public documents, without the benefit of tools available to prosecutors. Loretta Lynch had nothing to do with exposing all this corruption that was taking place right under her nose.

To his credit, Bharara is also investigating New York Governor Andrew Cuomo in the wake of Cuomo disbanding the so-called Moreland Commission. A New York state law from 1907 named for its sponsor, Sherman Moreland, allows the governor to appoint investigators with subpoena power to seek out corruption in state government. Cuomo established the Commission last year in response to the wave of corruption, but closed it down after it started to look at his friends.

Beginning in 2010, we reviewed public documents connected to U.S. Rep. Gregory Meeks (D-NY) and his political network. Meeks was involved with a nonprofit called New Direction Local Development Corporation. Among other irregularities, the group raised money for Hurricane Katrina victims who never received the money. Newspaper headlines about New Direction, starting with a New York Post exposé on January 31, 2010, apparently prompted a series of often overlapping investigations. Here is a summary:

  • New York State Senator John Sampson is facing trial in January 2015. A former Senate Majority Leader, he is charged with embezzlement, obstruction of justice and making false statements to the FBI. He allegedly embezzled $440,000 from escrow accounts on foreclosed properties. Sampson is reportedly also under investigation for his role in the Aqueduct bid-rigging scheme, described below. The investigations of Meeks reportedly led to Sampson.
  • New York State Senator Malcolm Smith is facing trial in February 2015, along with several Republican Party officials. The arrests resulted from a scheme to bribe Republican officials to allow Smith to run for New York City mayor as a Republican. The Smith investigation was reportedly prompted by media coverage of New Direction, in which Smith was also involved.
  • On September 10, 2014, Melvin E. Lowe, a New York political consultant, was found guilty of conspiring with State Senator John Sampson of Brooklyn to defraud the New York Senate Democratic Campaign Committee out of $100,000. The Sampson investigation apparently led to Lowe.
  • On August 11, 2014, Albert Baldeo, a Meeks associate and Democratic Party leader in New York City, was convicted of obstructing justice. He reported phantom donors to his unsuccessful 2010 City Council campaign in order to qualify for taxpayer matching funds. The scheme was described in a New York Post story of October 2011, based on information provided by NLPC.
  • New York City Councilman Ruben Wills was arrested on May 7, 2014. He is accused of looting a nonprofit group he controlled that was the recipient of taxpayer funds. At the time, Mills was Chief of Staff to former State Senator Shirley Huntley (D-Queens) who was convicted and imprisoned for a similar scheme that was exposed by NLPC.
  • On December 5, 2013, Dr. Dorothy Ogundu was arrested on the basis of information provided to the New York Post by NLPC. A Nigerian-born physician, Ogundu ran a fake health clinic in Queens, New York. She was accused of stealing $370,000 from twelve separate government grants. She is a donor to Meeks, who secured $380,500 in earmarked funds for the fake clinic.
  • In January 2013, Huntley was convicted of fraud. In March 2011, a New York Post article, based on info provided by NLPC, exposed a sham charity she founded called The Parents Workshop, to which she steered taxpayer money. An aide and her niece helped her siphon off $87,000. Huntley was arrested in August 2012 and spent a year in prison.
  • On July 28, 2012, the New York Times published a front-page story based on information provided by NLPC. The article spotlighted a “mysterious donor” named Bob Williams who made $900,000 in political contributions despite having no visible means of support. To date, Williams has not been prosecuted.
  • The media coverage of New Direction resulted in scrutiny of a successful bid by Aqueduct Entertainment Group (AEG) for a lucrative gaming franchise at Aqueduct Raceway. Some of the same individuals involved in New Direction also were involved with AEG. The franchise was revoked and an investigation is reportedly underway into a bid-rigging scheme. According to media reports, the Aqueduct controversy was a major reason Governor David Paterson did not seek re-election.

The most prominent case here prosecuted by Lynch is Sampson. Although Sampson is facing serious charges, we have always feared that Sampson was about to get off easy, perhaps with a plea deal that would result in a minimal sentence.

Sampson had a mole in Lynch’s office named Sam Noel, a paralegal who worked there for 22 years. Sampson asked “Noel the Mole” for names of potential witnesses in a related case so he could “take them out.” Noel was caught but the unanswered questions are how long he had been doing favors for politicians and how he got away with it for so long.

Sampson allegedly embezzled $440,000 while serving as a court-appointed referee for the sale of foreclosed properties. There is no way Sampson could not have pulled off his scheme without the knowledge and contrivance of others in the court system. Corrupt judges and other court officials are important actors in New York machine politics. They provide the grease that keeps the wheels of graft running smoothly. Lynch has talked tough about Sampson, but she has indicted no other officials. There is no evidence of a broader investigation.

The connection between real estate fraud and political corruption was richly illustrated in the Edul Ahmad case. A Guyanese-American businessman. Ahmad pleaded guilty in 2012 in a multimillion dollar mortgage fraud scheme. Sampson served as Ahmad’s lawyer in real estate transactions and received an unsecured personal loan from Ahmad of $188,500 that Sampson used to try to cover his embezzlement.

Ahmad also “loaned” money to Meeks. After the FBI started to scrutinize Meeks finances in 2010 after the New Direction stories, Meeks amended his Financial Disclosure Reports to show a $40,000 payment from Ahmad in 2007. Meeks claimed it was a loan, but there were no notes or payments until several years after the payment was made.

Ahmad was prosecuted by Lynch’s office, but Meeks has not been indicted. One would think that Ahmad, facing years in prison, would have to provide information about his dealings with New York politicians as part of any plea deal. For instance, he could confirm that the payment to Meeks was what it looked like – an illegal gratuity. 

The prosecution of a sitting member of Congress requires the approval of the Attorney General. It appears that Meeks has enjoyed the protection of Eric Holder, with whom he shares personal and political ties. (Rep. Michael Grimm, a Republican who represents Staten Island, apparently enjoys no such protection. He’s been indicted by Lynch.)

Meeks office put out a statement calling Lynch’s nomination “welcome news.” It certainly is for Meeks. It will preclude his arrest if Lynch is confirmed. Lynch was groomed by Holder to take his place, a plan that apparently was in the works for several years.

In 2012, Lynch announced a $1.9 billion settlement with the bank HSBC. The event is significant for two reasons. First, Lynch’s office had little to do with the investigation or the eventual settlement. Instead, the investigation was conducted by the office of William J. Ihlenfeld, II, the U.S. Attorney for Northern West Virginia. Holder, however, arranged for Lynch to make the announcement in New York. The press conference was a bit of an embarrassment for Lynch. After her remarks, no reporter had a question for her.

Ihlenfeld’s office was about as diplomatic as it could be, putting out a press release that began, “One of the largest settlements of a criminal case in the history of the American justice system was reached in large part because of the efforts of federal prosecutors and agents from Northern West Virginia.”

Second, while Holder may have wanted to showcase Lynch, the settlement was really nothing for any prosecutor to be proud of. Here’s how it was described by Juan Gonzalez of the radio program Democracy Now during an interveiw of investigative journalist Matt Taibbi :

The banking giant has escaped indictment for laundering billions of dollars for Mexican drug cartels and groups linked to al-Qaeda. The bank reportedly supplied a billion dollars to a firm whose founder had ties to al-Qaeda and shipped billions in cash from Mexico to the United States despite warnings the money was coming from drug cartels. Earlier this year, a Senate investigation concluded that HSBC provided a, “gateway for terrorists to gain access to U.S. dollars and the U.S. financial system.”

Despite evidence of wrongdoing, the Justice Department has allowed the bank to avoid prosecution and pay a $1.9 billion fine. No top HSBC officials will face charges. While it’s reportedly the largest penalty ever paid by a bank, the deal has come under wide criticism. Officials reportedly agreed to seek the fine over concerns that criminal charges would have hurt the global financial system.

The HSBC episode raises another question. Why would Lynch have to barnacle on to a case pursued by a West Virginia U.S. Attorney when she was sitting there in New York, the financial capital of the world? Lynch assumed office in 2010 in the wake of the financial meltdown. It would seem like an opportune time to go after the perpetrators of crisis, which was based on fraud on top of fraud. Not one executive of a major banking center firm, however, has been prosecuted for their roles in the near-collapse of our financial system.

Contrary to the rhetoric of Obama and Holder, no administration in history has been better for Wall Street and the big banks. Dodd-Frank institutionalized the “too big to fail” doctrine and insulates money center banks from competition. A policy of easy money guarantees profitability and has artificially buoyed the stock market. The unwritten deal is that the financial services industry will get risk-free profits in return for absorbing administration shots. It looks like Loretta Lynch would fit right in, and that’s the problem.


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Meeks Crony Baldeo Convicted of Obstruction of Justice

Meeks Pushed for Iran Sanction Exemption After Azerbaijan Junket

Azerbaijan Trip by House Members Broke Rules

NY Times: Cuomo ‘Hobbled’ Anti-Corruption Moreland Commission

NYC Councilman Ruben Wills Busted

John Sampson Busted; He Also Got Loan From Fraudster Ed Ahmad

Queens Politics Paralyzed Amid Reports Ex-Sen. Shirley Huntley Wore FBI Wire

State Senator Malcolm Smith Busted in Scheme to Rig New York City Mayoral Race

Meeks Cronies Probed in Aqueduct Bid Rigging Scheme

NY State Sen. Shirley Huntley Says She Will Be Arrested; NLPC Exposed Her Sham Charity

Rep. Meeks Blames NLPC for Ethics Woes

Rep. Meeks Threatens to ‘Go After’ NLPC

Another Meeks Crony, Albert Baldeo, is Arrested

NLPC Asks Feds to Investigate Meeks’ House Sale

Meeks’ Crony Ahmad Busted by FBI

House Ethics Committee Investigating Rep. Gregory Meeks

Meeks Defends Secret Loans, Blames NLPC for Controversy

Testy Meeks Disclosed Loan Only After FBI Inquiry

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Ex-Rep. Floyd Flake, Cronies Get More Media Scrutiny

Rep. Gregory Meeks Attacks the Wrong Peter Flaherty

NLPC Complaint Alleges Rep. Gregory Meeks Got Sweetheart Deal on Home

High-Living Congressman Meeks Blames NLPC for Scrutiny

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Rep. Meeks Can’t Account for Hurricane Katrina Money; Puts Spotlight on Paterson/Flake Aqueduct Gambling Deal

Are Corrupt NY Politicians Cashing in on Aqueduct Gambling?

Rep. Gregory Meeks’ Charity Looks More Like Slush Fund