Loretta Lynch questioned over secret deal depriving fraud victims of $40M

Loretta Lynch questioned over secret deal depriving fraud victims of $40M

Probe of Obama attorney general nominee sought over secret deals for cooperators

Loretta Lynch
Loretta Lynch more >
00:00 / 01:25
– The Washington Times – Sunday, January 4, 2015

More than a year before President Obama nominated federal prosecutor Loretta Lynch to be attorney general, a former federal judge quietly called on Congress to investigate her U.S. attorney’s office for trampling on victims’ rights.

Paul Cassell, a law professor at the University of Utah, said Ms. Lynch’s office, the U.S. Attorney for the Eastern District of New York, never told victims in a major stock fraud case that a culprit had been sentenced — denying them a chance to seek restitution of some $40 million in losses.

Mr. Cassell, in written remarks to a House Judiciary Committee panel in 2013, said if prosecutors were using secretive sentencing procedures to reward criminals for cooperating with them, it could violate the Crime Victims Restitution Act.


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“Every day that the office withholds notice from the victims in this case about the continuing proceedings that are occurring in this case is a day in which the office is violating the CVRA,” he wrote, urging the subcommittee to conduct its own inquiry into Ms. Lynch’s office.

The Judiciary Committee acknowledged in an email to The Washington Times that it never followed up to contact Ms. Lynch’s office, but added the panel “has not ruled out sending an inquiry to the U.S. attorney’s office regarding its handling of victims’ rights.”

Ms. Lynch’s nomination to be attorney general will soon come before the Senate Judiciary Committee, now controlled by Republicans, and the case could surface as a topic of inquiry.


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“I do think it’s something that the Senate should be investigating as part of the confirmation process,” Mr. Cassell said in an interview.

Meanwhile, a lawyer has filed a Supreme Court petition to force more records in the criminal case to be unsealed, charging that Ms. Lynch’s office has failed to explain secret deals it gives cooperators.

“These deals, indisputably in defiance of mandatory federal forfeiture and restitution laws, allow cooperators to keep the proceeds of their crimes in exchange for their cooperation and keep their reputation intact, hidden behind secret dockets,” said attorney Frederick Oberlander, who has sued the businessman on behalf of fraud victims.

Brian Fallon, a Justice Department spokesman, said in a statement that the Supreme Court petition “raises no claims of any merit.”

“Many of these claims have already been litigated on no fewer than three prior occasions, and each time the courts have rejected them,” he said. “One court went so far as to warn the petitioner against any future frivolous findings or else potentially face court-imposed sanctions.”

The petition isn’t the first time that Mr. Oberlander and his attorney, Richard Lerner, have sought to pry loose sealed records in the long and complicated case of Felix Sater, the businessman at the center of the stock fraud.

Pump and Dump

Sater pleaded guilty in 1998 in a racketeering stock “pump and dump” fraud scheme, but his case remained on a secret docket in federal court in Brooklyn, New York, as he cooperated with the government in other investigations, court records show.

The secrecy surrounding the 1998 criminal case allowed Sater to resume “his old tricks” and defraud new victims of hundreds of millions of dollars, Mr. Oberlander charged in a civil racketeering lawsuit he filed against Sater in recent years. An attorney for Sater disputes that account, saying his client has been a “model citizen.”

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