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White-Collar Crime | MONDAY, SEPTEMBER 28, 2015 | S9

Why did prosecutors pursue criminal charg- counsel signals culpability. The Abacus case

es in a case where the bank cooperated, and should serve as a cautionary tale to those
there was no clear victim?19 Thomas Sung, the considering wading into discussions with
founder of Abacus, and Vera Sung’s father, saw regulators and the government on their own.
prejudice against the Chinese American com-
munity. “Why should this small minority bank Although Abacus survived the indictment and
be singled out for prosecution relating to the ensuing trial, Thomas Sung has stated that the
inancial crisis of 2008,” he asked after the ver- bank ultimately spent $10 million to defend
dict.20 Matt Taibbi, who wrote about the early itself.24 As a businessman and banker, chances
stages of the prosecution in his 2014 book The
are that he wishes he had invested more up
Divide, posited that in contrast to the global front, to ensure that the bank’s cooperation
banks considered too-big-to-fail, Abacus was was not perceived as “too little, too late.”
“oficially deemed small enough to destroy.”21
A comment by Vera Sung after the verdict •••
suggests another possibility. Speaking about ••••••••••••••••••••••••••
the bank’s irst interactions with prosecutors, 1. G. Morgenson, “A Tiny Bank’s Surreal Trip Through
she said: “We thought they were going to help a Fraud Prosecution,” New York Times, July 17, 2015.
us resolve a crime against the bank. We did 2. D. Bennett, “Mortgage Fraud Prosecutors Pounce
on a Small Bank,” Bloomberg Business, Jan. 13, 2013; M.
not have an attorney early on. We cooperated Taibbi, The Divide: American Injustice in the Age of the
with them, not realizing we were the target.”22 Wealth Gap (2014), at 46.
The bank did not hire counsel for a year.23
3. D.E. Rosen, “A Morning at Cy Vance’s Ofice: Mort-
gage Fraud and Etan Patz,” Commercial Observer, May 31,
2012 (quoting statement of Abacus Federal Savings Bank).
4. D. Bennett, supra note 2; R. Beuttner, “Abacus Bank
It could not have helped that Charged With Mortgage Fraud,” New York Times, May
31, 2012 (quoting Vance’s remarks at press conference
the bank initially interacted announcing indictment).
with prosecutors without the 5. The Ofice of Thrift Supervision became part of the
Ofice of the Comptroller of the Currency on July 21, 2011.
assistance of counsel.
6. In re Abacus Federal Savings Bank, OTS Docket No.
08059, Order No.: NE-11-08.
7. Id.; M. Taibbi, supra note 2, at 47.
While it is impossible to know all of the 8. G. Morgenson, supra note 1.
factors considered in determining to proceed 9. People v. Abacus Federal Savings Bank, et al., In-
with the prosecution, it could not have helped dictment No. 2480/2012, at 2, 4.
that the bank initially interacted with prosecu- 10. Press release, DA Vance: Abacus Bank and 19 In-
tors without the assistance of counsel. Coun- dividuals Charged in Large-Scale Mortgage Fraud Con-
spiracy, May 31, 2012 (on ile with author).
sel may have been able to obtain assurances 11. See, e.g., M. Taibbi, supra note 2, at 8 (reporting that
in return for cooperation, may have been able Abacus had a 0.5 percent default rate, roughly ten times
to make an attorney proffer and avoid admis- better than the national average); G. Morgenson, supra
sions, and may have been able to steer the note 1 (reporting igures at trial that in 2009, only one-
matter to a civil resolution as opposed to third of 1 percent of Abacus mortgages was seriously de-
indictment. Counsel also likely would have linquent, compared to a national average of 6.26 percent).
reminded the bank that regulators’ and pros- 12. Id.
ecutors’ emphasis on the beneits of coop- 13. K. Freifeld, “Abacus Federal Savings Bank indicted for
Mortgage Fraud,” Reuters, May 31, 2012 (quoting Vance).
eration notwithstanding, self-reporting and 14. M. Taibbi, supra, at 48.
15. http://manhattanda.org/press-release/district-
cooperation do not inoculate cooperators attorney-vance-announces-375-million-settlement-hsbc-
from potential liability. That is particularly bank (Dec. 11, 2012).
so in the case of entities and senior manage- 16. http://www.justice.gov/opa/pr/justice-depart-
ment who have a responsibility to supervise ment-federal-and-state-partners-secure-record-13-bil-
lower level employees. How one cooperates lion-global-settlement (Nov. 13, 2013); http://www.
in these situations is just as important as the justice.gov/opa/pr/justice-department-federal-and-state-
mere fact of cooperation. The tone and tenor partners-secure-record-7-billion-global-settlement (July
of communications may inluence investiga- 14, 2014); http://www.justice.gov/opa/pr/bank-america-
pay-1665-billion-historic-justice-department-settlement-
tors’ perceptions of the cooperator. It is also inancial-fraud-leading (Aug. 21, 2014).
Network with Develop new business Get to know General Access vital business
important to balance fulsome and forthright 17. G. Morgenson, supra note 1.
inluencers eficiently, using active records of Counsel before you development
cooperation against avoiding unnecessary 18. J. McKinley, “Abacus Bank Found Not Guilty of utilizing contact each corporation’s top- even meet them
information from a
admissions or statements that could be mis- Mortgage Fraud and Other Charges,” New York Times, information for choice, go-to law irms with biographical single, searchable,
construed should the case proceed.
June 4, 2015. Ten of the lower level employees have plead- General Counsel, as for outside counsel
information such as easy-to-use tool
It is notable that even in the early stages ed guilty (eight of them before the indictment was handed well as department- industry expertise,
Abacus was not without legal expertise. Vera, down), while cases remain pending against the other sev- head contacts
education, law irm
her father Thomas, and her sister Jill, who is en. The Sungs and other executive team members were experience and more
also an executive at the bank, all trained as not charged. The remaining individuals have their next
court dates in September, while the individuals who pled
attorneys. Vera Sung was once a prosecutor guilty are scheduled to appear again in October.
in the Brooklyn DA’s ofice. Yet familiarity with 19. The DA’s ofice, of course, would not agree with this characterization. As the lead prosecutor argued in
the legal system and guidance by in-house summation, Fannie Mae was a victim “because it was a Start Connecting
counsel are often not suficient under these crime to misrepresent material facts to Fannie Mae and
circumstances. Outside counsel can make rep- thereby induce Fannie Mae to give the bank their mon- Attend a demo or learn more at
resentations—and push back against prosecu- ey.” J. McKinley, supra note 18.
almlegalintel.com/ALI/InHouseDirectory
tors’ demands when necessary—as persons 20. K. Freifeld, “Abacus bank acquitted of all charges
external to the organization. Unlike in-house in N.Y. mortgage fraud trial,” Reuters, June 4, 2015 (quot-
ing Thomas Sung).
counsel, outside counsel are not potentially 21. M. Taibbi, supra note 2, at 49 (describing how FDIC
implicated in the conduct under investigation.
and OCC oficials were on site the day of the indictment
Entities and individuals often express in the event of a run on the bank).
reluctance to hire counsel at the outset of 22. G. Morgenson, supra note 1.
their dealings with the government, because 23. Id.
of the expense and out of a concern that hiring
24. Id.