Brian Erbis Consulting Blog

The Financial Crisis of 2008: An Analysis Based Upon Evidence Obtained From All The Devils Are Here — The Hidden History of the Financial Crisis By Bethany McLean and Joe Nocera — From a Bureaupathology Perspective

Brian Erbis

Section A – Introduction and General Description:

            “Greed is Good”—until it goes bad. The mortgage crisis of 2007 involved several organizations, from mortgage brokers who provided the means of homeownership by making loans to homebuyers to the investment banks that constantly provided sources of funding using the force of Wall Street. Other companies that played key roles to enable mortgage lending were quasi-public/private organizations, such as the Federal National Mortgage Association, colloquially known as “Fannie Mae,” and the Federal Home Loan Mortgage Corporation, known as “Freddie Mac.”  These companies were government-sponsored enterprises (“GSEs”) intended to federally guarantee mortgages to minimize risk.  This minimized risk instilled confidence in the market. There were credit rating agencies that graded investments, such as Moody’s and Standards and Poor’s, who later compromised their integrity by selling ratings to mortgage-backed securities for profit.  In addition, government oversight bodies such as the Office of Thrift Supervision and the Office of the Comptroller of the Currency oversaw banks depending on their classification, the Securities and Exchange Commission (“SEC”) regulated the investment banks and of course, the politicians working on Capitol Hill, who were supposed to keep the industry honest, allowed politics to dictate their actions. Additionally, large insurance firms such as American International Group (“AIG”) played an integral part in the process by insuring securities while at the same time sacrificing their neutrality by trading in those securities. Moreover, Alan Greenspan, the chairman of the Federal Reserve, who ignored all signs pointing to the looming burst of the housing bubble.  Each entity played a crucial role, creating a toxic primordial soup consisting of avarice, envy, favoritism, politics, institutionalization, structural and oversight failure that culminated in the meltdown of the mortgage market and a major worldwide financial and home foreclosure crisis.

            This crisis, however, actually began with a benevolent goal.  By increasing sources of mortgage funding, the American dream of homeownership was broadened, especially for minority customers in poor communities. Prior to the 1980s, mortgages originated mostly through banks, particularly “Savings and Loan” banks (“S&Ls”), which used capital from bank account deposits to provide home loans. As such, mortgage funding was constrained by onerous restrictions as banks needed to keep large amounts of capital on hand, making less money available for lending. Successful lobbying led to political changes favorable to homeownership which resulted in the rise of lending companies. Investment banks on Wall Street increased the complexity of “securitization” in mortgage funding at the behest of big investment bank firms such as Goldman Sachs, Bear Stearns, and Lehman Brothers by creating investment products—both tangible and intangible—that were originally intended to sell the mortgage to investors by freeing up more money to fund future mortgages. The process, however, became perverse as cash flow realization led to corrupt practices and continual quantification of risk, leading to the creation of synthetic investments which were not available to the public nor traded on an open market and with no true way of valuation. Ultimately, all players involved were blinded by greed—both personal and corporate—in a seemingly never-ending battle of market share, arrogance, and narcissism. These players were motivated by market share, realizing organizational profits generated through investments, and the ability to charge exorbitant fees to mortgagees who were classified as “subprime” (those who had bad credit). Lenders knowingly underwrote, sometimes fraudulently, and funded mortgages they knew would default, often driven by the motivation of profiting handsomely by charging exorbitant fees on borrowers. Large investment banks who marginalized resident experts skeptical of these strategies often favored the young and aggressive. The older, institutionalized senior executives turned a blind eye or remained aloof and out of touch with the inner workings of the organization. Moreover, bad practices were enabled by the lack of government oversight from Congress to the President, which trickled down to regulatory agencies. All of the above entities and circumstances set the crisis in motion—a crisis that would affect the markets for years to come and led to landmark legislation aimed at reforming the financial industry in a manner not seen since The Great Depression.

Section B – The Failure:

            At the epicenter of the mortgage crisis was unmitigated envy, hubris, and avarice. Multiple parties competed for money and “market share,” fueled by a lack of foresight, internal and external oversight, and numerous other failures spanning several organizations.  The prospect of incurring huge financial gains for all parties was so great that people and organizations became nearsighted as they made a staggering profit. Everyone wanted more, whether it was commissions, fees, or market domination. They were willing to do whatever it took without concern for the consequences. Whether it was the mortgage makers (originators) or “Wall Street” (financial firms), there were great incentives to lend money to borrowers who were unqualified for conventional mortgages backed by the GSEs, usually due to a poor credit score. These mortgages were considered “subprime.” Both the lender and the borrower were aware of the lender’s standing, but a mortgage could be underwritten for the right price, usually resulting in exorbitant fees paid by the borrower. One of the several methods employed by subprime mortgage makers in “making a mortgage” to subprime borrowers was a “no documentation” loan facilitated by fraudulent paperwork, such as forged W-2s, false employment verification documents, or misleading applications with forged signatures. These loans, often referred to as “liar loans,” were made possible by submitting incomplete paperwork and providing the borrower with the option of a low or no down payment (McLean & Nocera, 2010, pg. 211). Underwriting standards had eroded to the point of non-existence (pg. 130). Borrowers were set up to fail with such home loan products such as “adjustable-rate mortgages” or “2/28 loans” which made up for almost 69 percent of subprime loans in 2006 (McLean & Nocera, 2010, pg. 211). Borrowers of these products would often be lured by loan officers under the guise that these loans would be interest-free for the first two years, only for the interest rate to become practically usurious in year three (McLean & Nocera, 2010). The borrower was under intense pressure to re-finance by year three because payments were applied to interest instead of principal, increasing the amount owed, and borrowers unable to refinance as planned would be stuck in the terms of the underlying loan (McLean & Nocera, 2010). Subprime mortgages, however, consisted of mostly refinanced mortgages, usually “second lien” mortgages, in which the homeowner borrowed money against the equity of their homes.  This was possible because home values were on the rise, but that value was quite often not accurate due to inflated appraisals (McLean & Nocera, 2010). Funds obtained from refinancing referred to a “cash-out refinancing” where homeowners refinanced their homes and liquidated cash value based upon the equity of the home, often using the funds for spending (McLean & Nocera, 2010). Another huge subprime lender by the name of New Century specialized in refinancing to the point where two-thirds of their loans were refinancings by February of 2004 (McLean & Nocera, 2010). Ameriquest, a key subprime lender, and other mortgage originators, often hired young, inexperienced, and ambitious people to sell mortgages, luring them into the work with a flashy lifestyle including high-end luxury cars, lavish parties, and most of all, making a great deal of money. Of those recruited, some had the requisite personalities, “the gift of gab,” and were kids just out of high school or college (McLean & Nocera, 2010). “These young people became loan officers, some of them earning a paycheck of $30,000 or $40,000 per month” (McLean & Nocera, 2010, pg.125). Some were plied with illicit drugs to increase productivity and, therefore, positive incoming cash flow (McLean & Nocera, 2010).

            In the early 1980s, a series of state laws throughout the country were passed that “abolished state usury caps, which had long limited how many financial firms could charge on first-lien mortgages” (McLean & Nocera, 2010, pg. 29). It also separated the definition of loans made to buy a house and loans secured by a house such as home equity loans (McLean & Nocera, 2010, pg. 29). In the two years that followed, a law was passed to allow lenders to be more creative in the home loan products that were offered, such as adjustable-rate mortgages and those with balloon payments, as an alternative to conventional thirty-year fixed rate instruments (McLean & Nocera, 2010). These laws allowed the mortgage market to be funded permitting alternatives to bank-funded mortgages, giving rise to the subprime market as new lending companies began lending to lenders who were previously unqualified for a mortgage (McLean & Nocera, 2010).

            Investment banks and organizations eventually found a way to fund mortgages through securitization. It involved a process of freeing up capital by lenders selling mortgages to Wall Street, who would make instruments that were bought by institutional or personal investors. These securities, known as “mortgage-backed securities” could take many forms, from tangible to intangible. Some securities used in this crisis were known as credit default swaps or collateralized debt obligations (“CDOs”). These securities, known as derivatives, were derived from another security and were a different approach to funding mortgages (McLean & Nocera, 2010). The original securitization of mortgages meant “investors in mortgage-backed securities owned pieces of actual mortgages” (McLean & Nocera, 2010, pg. 78). Before securitization, mortgage funding was usually “the province of the banks and S&Ls, which relied on savings and checking accounts to fund the loans” (McLean & Nocera, 2010, pg. 20). Eventually, a different approach to obtaining mortgage funding found itself by harnessing the power of Wall Street where investment firms were able to bundle mortgages and sell them to investors as securities. These securities were initially extremely attractive to lenders and financial firms due to spreading risk out to other concerned parties (McLean & Nocera, 2010). Securitization took the loan off the books of the originator, and lenders would no longer take the hit in the case of default (McLean & Nocera, 2010). The approach to securitization started to evolve into increasingly complex investment products, starting with “credit default swaps” that enabled speculators to bet on or against default and merely referenced a tangible item such as an MBS.  Eventually intangible items such as “CDO Squared” were used to bet against CDOs. (McLean & Nocera, 2010, pg. 123). This initially assisted banks and investment firms to assess and mitigate risk. As such, investors did not own corporate loans, but rather, they owned the associated risk. Hence, with a synthetic investment there was always a winner and loser that would allow firms to assess their risk by measuring who was betting on what (McLean & Nocera, 2010). As there was a success in this methodology, “Wall Street” began to create other similar but increasingly complex synthetic investment products that firms would trade amongst each other, often mixing derivatives or MBSs of higher quality with those of lower quality. Of the top five investment firms, Goldman Sachs, which had no other no customers outside of other institutions and sophisticated investors, wallowed more in hubris because of their reputation. The firm would eventually become their own best customer upon going public in 1999. The CEO at the time, Hank Paulson, began putting the firm’s own best interests in mind ahead of clients by actively trading their portfolios and, at times, treating their clients as adversaries or “counterparties”. He felt that the concept of investment banking, the raising of capital for other companies, would no longer be the mainstay of the company (McLean & Nocera, 2010). The investment bank went on to acquire a huge portfolio of synthetic securities and trade derivatives. When the securities started to plummet in price, the firm attempted to sell the investments off to their unsuspecting customers by creating other products bearing their brand (McLean & Nocera, 2010). Immediately prior to the burst in the housing bubble, as synthetic investments and indexes were plummeting, Goldman would seemingly harangue AIG over CDOs they both played a part in launching, with collateral calls in the billions of claims often based upon contested interpretation of market conditions (McLean & Nocera, 2010). This ultimately caused AIG to initially lose approximately $5.5 billion and to need a bailout by the federal government.

            Even AIG, as a top insurance company, would become heavily involved in dealing with synthetic securities by acquiring a portfolio in these securities, spinning off a subdivision to be able to trade financial products. This subdivision, known as AIG-FP (Financial Products Division), circumvented legal constraints prohibiting insurance companies from trading securities and having certain capital requirements, enabling the company to acquire market share and enormous profits. During the formative events of this crisis and up until a few years before the meltdown, AIG was run by a CEO who was antiquated in his approach to running the company for a variety of reasons, including his concerns about secrecy and profitability. The CEO at the time, Hank Greenberg, refused to pay for anything that did not turn a profit (McLean & Nocera, 2010). He also created a siloed corporate structure by walling off parts of the company in a manner where crucial communication only came to him. At one point, Greenberg had thirty employees reporting directly to him (McLean & Nocera, 2010). Under Greenberg’s tenure, there was always pressure to take risk because they were a large company with a Triple-A rating from the credit rating agencies (McLean & Nocera, 2010). There was even more pressure to consistently show a 15% profit each year.  After the company faced scrutiny the following year, several intentional and faulty accounting practices would come to light (McLean & Nocera, 2010). Furthermore, their ongoing fiduciary relationship with Goldman Sachs enabled AIG to increase their market share by being able to guarantee subprime loans.  AIG-FP was able to “lend” securities to other entities to facilitate the short sale of stock and even had a mortgage originator making subprime loans (McLean & Nocera, 2010, pg. 193). As such, the company heavily invested in the subprime market and when the market started to deteriorate due to default, so did AIG. Eventually what brought down Hank Greenberg was his arrogance towards regulators, such as the SEC and the New York Attorney General.  He stonewalled requests for documents and remained cavalier instead of acknowledging wrongdoing despite evidence to the contrary, which incurred the ire of his board of directors as well (McLean & Nocera, 2010). His arrogance towards both regulators and his board led to the uncovering of accounting irregularities by AIG’s accounting firm after they audited the books of AIG and several of its subsidiaries (McLean & Nocera, 2010). 

            As time went on, companies who rated securities, such as Moody’s, Standard’s & Poor’s, and Fitch, compromised their rating systems’ integrity by selling their illustrious top “AAA” ratings to subscribers (investment firms) instead of analyzing the security, thereby enabling the financial firms involved to claim that their issued security was rated AAA (McLean & Nocera, 2010). By selling their AAA ratings, which only a few companies legitimately enjoyed, it opened up the market to certain institutions who were, by law, only allowed to buy these AAA rated securities (McLean & Nocera, 2010). Individual and institutional investors depended on the credit rating agencies’ opinions in choosing what investments to make. As synthetic investments became increasingly complex, they were bundled with securities based on the subprime market. In time, subprime mortgages would default as borrowers were unable to meet their obligations. Ultimately the securities became worthless, leading to losses in the billions to firms and other invested parties such as pension funds and municipalities.

            All the while, investment firms such as Merrill Lynch, marginalized the concept of risk management.  The experienced traders who were well versed in risk management, for instance, John Breit, a tenured risk manager and former physicist, was considered to be overly conservative for the firm’s appetite, were marginalized in favor of the young and aggressive who were extremely motivated to realize an ever-increasing profit. After sidelining risk management across the top five investment firms and as various synthetic securities would eventually crumble, some senior executives, such as Stan O’Neal, CEO of Merrill Lynch, remained aloof or lacked a crucial understanding or micro-managed creating silos.  These CEOs were either in denial or panicking trying to keep their companies viable.

            The federal government not only turned a blind eye but curtailed investigations and laws enacted on a state level to curb predatory lending. Although states filed various lawsuits against certain subprime lenders, including Ameriquest who paid $325 million to settle charges of predatory lending brought by the various state Attorney Generals, it failed to spur any federal action (McLean & Nocera, 2010). The companies were charged with misleading and deceptive lending practices, acting in concert with appraisers who would artificially inflate the value of the collateral house, charging upfront fees “points” with the false promise of lower interest rates, and misrepresenting the existence of other fees such as the existence of prepayment penalties (State of CT, 2006).

            Then there was Alan Greenspan, who, at the time, was Chairman of the Federal Reserve. Mr. Greenspan was a believer in market discipline and “an outlier in his libertarian opposition to most regulation” (pg. 85). Under the tutelage of Ayn Rand and, at the time, a conservative economist, he evolved to become even more of a true believer in the free market (pg. 85).  As such, his view was that the market would correct itself in the normal course of business.  There were several mechanisms in place to curb predatory lending at the disposal of the Fed – including a law called the “Home Ownership and Equity Protection Act (“HOEPA”) which gave the Federal Reserve to power to flatly prohibit mortgage lending practices that it concluded were unfair or deceptive – or designed to evade HOEPA” (McLean & Nocera, 2010, pg. 86). 

            GSEs’ secondary mortgage markets were intended to buy mortgages from mortgage makers (“originators”) and give their stamp of approval to free up money for lenders to make more loans (McLean & Nocera, 2010).  By doing so, the GSEs gave their stamp of approval to the mortgage being purchased which was considered just as good as a AAA rating given by the credit agencies and carried with it the full faith and credit of the United States Government (pg. 47). The GSEs wielded a lot of political power through friends on Capitol Hill (McLean & Nocera, 2010). Their downfall was that they developed an insatiable appetite for market share regarding mortgage-backed securities and derivatives (McLean & Nocera, 2010). This would later result in huge losses necessitating a government bailout and takeover to preserve what was left of the mortgage market (McLean & Nocera, 2010). Eventually, the GSEs were also consumed by not only a lust for power but also an unquenchable thirst for profit, and as such, lost sight of their underlying mission. “Fannie and Freddie raced to get into subprime mortgages because they feared being left behind by their non-government competitors” (McLean & Nocera, 2010, pg. 363). 

            In the end, as “subprime” borrowers started to default on their payments, housing prices fell, and the value of the derivatives, which were not traded on open markets, started to plummet. Investment firms sustained heavy losses and became indebted to other interested parties to the tune of billions of dollars. This resulted in not only the end of some financial firms, but also congressional hearings.  Moreover, there were economic ripple effects spanning from widespread foreclosures to plummeting of various investment products, including retirement and pension funds.   

Section C- Symptomatic Analysis:

            An in-depth examination of the various organizations, specifically the mortgage originators and the financial firms that directly caused the financial crisis of 2008, reveal several symptoms. The first and most prominent was a self-serving corporate culture fueled by greed and hubris. For example, at AIG, Greenberg refused to keep up with the technology necessary for a modern financial firm trading in an electronically based market and used an outdated method to data-mine their earnings. “Hank ran the company unlike any other twentieth-century company” (McLean & Nocera, 2010, p. 192). “Even though it had gotten huge, there was no company infrastructure. The systems were completely antiquated. It still gathered its earning data every quarter by hand. And all decisions were made by him to a remarkable degree” (McLean & Nocera, 2010, p.192). Greenberg is a perfect example of a damaging performance by a chief executive of the corporation. As discussed, Greenberg “didn’t like to pay for anything that didn’t generate revenue” and, as such, “scrimped on computers and software that other companies bought as a matter of course, and refused to pay the salaries necessary to hire a first-rate operations staff” (McLean & Nocera, 2010, p.192). This explained how his internal controls were later found to be subpar, not only by Goldman Sachs investment bankers working on a joint venture with AIG but also by AIG’s accountants, PriceWaterhouseCoopers, and regulatory agencies such as the SEC and the New York State Attorney General’s Office (McLean & Nocera, 2010). This would eventually lead to various civil regulatory actions against Greenberg. Furthermore, lateral communication was also non-existent as other departments and subsidiaries were walled off and, as a result, had thirty executives reporting to him directly when most CEOs of similar companies only had six (McLean & Nocera, 2010). Greenberg only wanted either himself or his second in charge to have a “complete grasp of AIG’s convoluted business” (McLean & Nocera, 2010, p.192). Additionally, there was a constant push by Greenberg for 15% profit margins and increasing the amount of risk taken even though the company had a seemingly large and profitable cash flow. When faced with inevitable external scrutiny, Greenberg was often resistant, arrogant, and uncooperative despite a mountain of evidence of corporate improprieties.  He incurred the wrath of not only the oversight bodies but his own board of directors which resulted in additional harsh punitive measures. In the end, since AIG had numerous international clients and several business deals, the U.S. government initially bailed out AIG for approximately $85 billion to contain the meltdown (McLean & Nocera, 2010).

            Merrill Lynch became increasingly symptomatic under the tenure of Stan O’Neal, who was envious of Goldman Sachs and became increasingly obsessive in his crusade to not only compete with Goldman Sachs but to eventually surpass them, striving to dominate the investment end of the mortgage market. The primary symptom of dysfunctional organization exhibited by Merrill Lynch was the damaging behavior exhibited by the CEO, such as communication blocks, obstinacy, aloofness.  All of this damaging behavior resulted in conflict within the executive ranks. Additionally, the company exhibited an inward-looking, self-serving, organizational culture. Furthermore, O’Neal also fostered a closed and siloed corporate environment where he “insisted that the company executives speak only to him about their business and not discuss the business with one another” (McLean & Nocera, 2010, p.162). O’Neal was elevated to CEO in 2002 and wanted to immediately change the culture of the company affectionately known as “Mother Merrill”, an idea of what the company was founded upon, because he saw it as meek and too risk-averse (McLean & Nocera, 2010). Much like Greenberg at AIG, O’Neal also took many risks, constantly pushing his executives and trading desks to take more risk.  He was also in favor of hiring the young and aggressive while firing those who did not have the risk appetite he preferred (McLean & Nocera, 2010). Part of the increased risk-taking strongly favored by O’Neal was the ever-increasing underwriting of collateralized debt obligations (“CDOs”) that was partly derived from subprime mortgages (McLean & Nocera, 2010).  The risk became intense as levelheaded and experienced key risk managers and traders were marginalized in favor of the young and aggressive traders.  Some of the young traders were charismatic, had the ear of credit rating agencies, and had the ability to have securities he peddled rated as AAA (McLean & Nocera, 2010). Risk managers were often left scratching their heads, concerned with trader ethics and whether the investment being sold was suitable for the client (McLean & Nocera, 2010).  At times, reason would prevail with some senior traders making sure that Merrill Lynch did not keep too many synthetic securities in inventory.  Rather, these synthetic securities were “warehoused” and as such, were reflected on the firm’s balance sheet (McLean & Nocera, 2010). That approach was not risky or aggressive enough for Merrill Lynch. One senior executive, Dow Kim, would assure traders “that the firm would do whatever it takes to stay number one” (McLean & Nocera, 2010, p.166). Even competent and experienced risk managers such as John Breit, who felt that “Wall Street was quantitatively illiterate,”  wasn’t opposed to derivatives but felt that they needed to be reined in and expertly managed (McLean & Nocera, 2010, p. 236). Merrill Lynch would become yet more aggressive, firing more experienced yet cautious traders in favor of more intensive managers who would drive trading deeper into the subprime market. One specific manager, Osman Semerci, had a reputation of being exceptionally driven, extremely aggressive and dangerously reckless. Semerci was not afraid of taking big risks for a big profit—exactly what O’Neal wanted on the trading desks (McLean & Nocera, 2010). Semerci also purged crucial risk management staff. As the end of the world as the firm knew it neared, Semerci had his exit strategy planned with $10,000 taped to the bottom of his desk and a Turkish passport that was not registered with the firm as required. (McLean & Nocera, 2010). In its ongoing quest for dominating Wall Street in subprime mortgages, Merrill Lynch acquired a subprime mortgage originator, much to O’Neal’s behest and delight. The firm intended to “securitize to its heart’s content” as a result (McLean & Nocera, 2010, p. 238).  In the end, O’Neal, often remained detached, as “the intricacies of the firm’s trading positions held no interest for him, except to the extent they had shown profits or losses” (McLean & Nocera, 2010, p.235). It would be the beginning of the end for his tenure when he finally listened to John Breit, who informed him in September of 2007 that the firm was going to lose at least $6 billion (McLean & Nocera, 2010). Merrill Lynch would report an approximate loss of $10 billion in October of 2007.  Merrill Lynch was subsequently sold to Bank of America at a substantial discount from the first offer.  Amazingly, O’Neal walked away with $161 million in retirement benefits (McLean & Nocera, 2010). It was then he fully realized the error of his ways, trusting in the wrong people (McLean & Nocera, 2010). In a bit of poetic justice, the cautious and competent trader fired by Osman Semerci, Jeff Kronthal, was rehired by O’Neal’s successor to thunderous applause from the trading staff (McLean & Nocera, 2010).

            The mortgage originators, specifically Countrywide Financial, employed management policies that certainly encouraged damaging employee behaviors. The CEO, Angelo Mozilo, founded the company in 1969 with noble intentions. He was a self-made business from humble beginnings who believed that every American should be able to own a home. “Mozilo, Bronx born and Fordham educated spent his life wanting to beat the establishment and harboring a burning resentment towards it” (McLean & Nocera, 2010, p.23). Mozilo started working for a mortgage company in a menial capacity at a young age, worked his way up there while in high school, and met his future business partner who, with Mozilo, started Countrywide Financial in 1969 (McLean & Nocera, 2010). After some initial struggles through the years, from obtaining mortgage funding through a bank, investors, or an investment bank, options were limited to loans that could be insured by the Federal Housing Administration or Veterans Affairs. Countrywide was able to start experiencing growth after the Savings and Loan crisis fueled lending by non-bank mortgage companies (McLean & Nocera, 2010, pg. 23). Fannie Mae was known to buy up mortgages shortly after they were made, freeing up more capital for mortgages (McLean & Nocera, 2010). As mortgage originators such as Countrywide became wildly popular in the home lending business, Mozilo would have a metamorphosis.  He changed from a well-intentioned entrepreneur to a greedy CEO who became lost in his thirst for market share. (McLean & Nocera, 2010). As Countrywide was prospering, he became increasingly intense, driving his employees incredibly hard, consistently wanting more (McLean & Nocera, 2010). “For a long time he had a classic case of entrepreneurial paranoia – that gnawing fear that, someday, everything he had built would suddenly vanish” (McLean & Nocera, 2010, p. 25). A proud man who had to know absolutely everything about his business, he created a very competitive and fiercely loyal workplace culture where employees toiled and considered the company a difficult place to work (McLean & Nocera, 2010).   These traits would eventually lead Countrywide over the brink. Initially, Mozilo was fundamentally opposed to subprime mortgages that he saw as predatory. Mozilo, however, would come to put his business over his ideals (McLean & Nocera, 2010). Once lending volume on loans aimed at lending conventional mortgages dropped at Countrywide, with borrowers going to subprime lenders, it got the attention of inquiring stock analysts (McLean & Nocera, 2010). “He got in because he felt he had no choice. If he stayed out of subprime, Countrywide would never be number one – and that was unacceptable” (McLean & Nocera, 2010, p.37). Mozilo would look at competitors, such as Ameriquest, with disdain, and “he did not want Countrywide viewed in the same light (McLean & Nocera, 2010, p.138). Market share remained his obsession (McLean & Nocera, 2010). Eventually, Mozilo and his Chief Operating Officer, Stan Kurland, would take Countrywide down a path similar to Merrill Lynch, with the acquisition of a bank in 2000. Before that, they formed a Real Estate Investment Trust (“REIT”) which did business as Countrywide Mortgage Investments.  The REIT’s purpose was to “aggregate loans from other lenders and turn them into mortgage-backed securities” which also began originating its subprime mortgages (McLean & Nocera, 2010, p.192). Eventually, some at Countrywide would be taken aback about how money was starting to matter too much to Mozilo. For instance, “in 2000, he owned 2.8 million shares of Countrywide stock, including options, and would take home $6.6 million in compensation – a number that would rise to $10.1 million by 2001 and $23.6 million by 2003” (McLean & Nocera, 2010, p. 141). Also mirroring the modus operandi at Merrill Lynch, Countrywide had a taste for the aggressive at the expense of the cautious and experienced. Similar to Osman Semerci at Merrill Lynch, there was a salesman at Countrywide by the name of Dave Sambol “who cared about risk but wanted to win” and “only cared about building his kingdom” (McLean & Nocera, 2010, p.142). Eventually, as was the situation at Merrill Lynch, the cautious and experienced workers were marginalized in favor of the risk-takers. At one point, Countrywide, at Mozilo’s behest, delved even further into the subprime market by offering 180 different subprime mortgage products (McLean & Nocera, 2010). Among those were a “subprime loan known as 80/20 – the customer took out two loans to borrow 100 percent of the money needed to purchase a home” where the sales force was told by Mozilo to listen to Sambol and not Kurland (McLean & Nocera, 2010, p.144). As predatory lending would begin to surface in the national spotlight, Countrywide and Mozilo remained politically savvy and “spent $8.7 million between 2002 and 2006 on political donations, campaign contributions, and lobbying to defeat anti-predatory lending legislation” (McLean & Nocera, 2010, p.149). Mozilo, however, remained arrogant and was quoted as stating “no regulator is going to tell me what kind of products I can offer” (McLean & Nocera, 2010, p.149). Even as the market was well on its way to disaster in the summer of 2007, Countrywide was still obsessed with market share. “Countrywide ramped up its business of buying loans” (McLean & Nocera, 2010, p.300). They were no longer selling other loans on its books, thus bearing a tremendous amount of risk (McLean & Nocera, 2010). Eventually, securitization of mortgages stopped, home prices dropped, and mortgages, including prime mortgages, increasingly defaulted (McLean & Nocera, 2010). Eventually, Bank of America would invest $2 billion in Countrywide to keep market confidence. With the staggering amount of debt, Countrywide was about to realize, however, the crash wiped out Countrywide’s 2005 and 2006 reported earnings. Bank of America acquired them in January of 2008 for $4 billion, and that was the end of Countrywide.

Section D – Diagnosis:

            Upon review of various organizations who played a part in the financial crisis of 2008, a crisis fueled by the mortgage market, three diagnostic categories apply – Institutionalization, Oversight Failure, and Structural Failure.

            AIG’s failure to keep up with evolving modern technology led by an antiquated and self-serving management was consistent with structural failure. Although the company had become a behemoth of a corporation with several subsidiaries, the company’s information technology was woefully inadequate for a modern-day business. Employees railed against the infrastructure, especially when data mining to gather earnings information was conducted in a laborious and archaic manner. This resulted in extremely subpar internal controls, which came to the attention of other business partners and regulators. The company did not want to pay for anything that did not turn a profit.  Hence, they did not invest in the requisite hardware and software necessary to function in the modern era, nor did they hire staff that would capably operate and such equipment in the form of an IT department. 

AIG also suffered from institutionalization as its structural failure was self-serving the company.  AIG was structured in an extremely convoluted manner with internal communication silos. The top executives, most of which ran the numerous AIG subsidiaries, were isolated and obstructed from communicating with counterparts. These executives were to report only to the CEO, Greenberg, who kept proprietary details to himself. Keeping the company as arcane as possible also impeded regulators.  Additionally, Greenberg took an arrogant approach to external oversight, to the company’s disadvantage.  As additional fines were levied on the company by regulators, the board of directors became exasperated.   Furthermore, in Greenberg’s crusade to turn a 15% profit each year, he was obsessed with ever-increasing risk taking despite the profitability and wealth of the business. His antiquated and opaque manner of running a business would serve to keep employees sequestered and facilitate the corporate crusade for unreal profit margin expectation. This, in turn, would place AIG as a major contributor to the financial crisis resulting in losses to the company for billions of dollars—losses which were subsequently burdened by the U.S. taxpayer.

            Merrill Lynch suffered from structural failure, institutionalization and internal oversight failure. Like AIG, the structure of the firm was constructed in a manner where internal executive communication was siloed to the detriment of the company. An intense competitive corporate vision and a desire to dominate the mortgage securities market changed the ethos of the corporation from making investments available to average investors to securitizing and trading for the firm’s portfolio. As such, the firm acquired a voracious appetite for what would become an overwhelming amount of risk, fostering “the young and the reckless” in both trading and management positions. Internal oversight, specifically the Risk Management Department, quickly became marginalized—segregated and moved from a front-office to back-office operation. Even in risk management’s minimal role, they recognized improprieties regarding trades and the methods employed by aggressive traders. With minimal resources and power, they were often left just to ponder due diligence. As oversight mechanisms were given a backseat to maximize profit, the firm’s overexposure to securities underwritten by the firm ultimately caused failure, resulting in the subsequent discounted and distressed sale to Bank of America. Furthermore, the firm failed to recognize that one of its favored aggressive managers, Osman Semerci, a foreign national, had an escape plan.  Semerci had a UK passport which was registered with compliance, but he also possessed a Turkish passport, unbeknownst to the firm, which he had taped under his desk along with $10,000 dollars. On the day he was fired, as he was being escorted from the corporate headquarters, he asked his secretary to retrieve both. Further contributing to internal oversight failure was the aloof manner in which the CEO ran the investment bank in addition to his isolated and close-minded approach to leadership. This led to company short-sightedness.  The company failed to realize the dire straits of the company’s position and put full faith in Machiavellian executives whose priority was for the organization to stay number one at all costs. This corporate culture fostered institutionalization as the company became consumed and blinded by its obsession with profits and cornering the market. At the end, the CEO, O’Neal, would lament that he placed his trust in the wrong people as he retired with a bruised ego but an exorbitant severance package.

            As for Countrywide Financial, their quest for dominance in the mortgage lending market led to organizational institutionalization. Facilitated by an arduous work culture set fostered by management which stressed fidelity, the company evolved from a company with an ethical philosophy of making suitable loans to becoming a predatory lender. Propelled by the unquenchable thirst for market domination and faced with the prospect of risk by potential downgrading of the company’s common stock due to competition, the company looked inward and opted for self-preservation instead of ethics. As such, Countrywide fully immersed itself into the subprime market and away from the sacred principles that it was founded upon, becoming antithetical to its former self.  The company eventually made completely unsuitable loans fully cognizant of the strong likelihood of default, passing the debt instrument onto investors. As with Merrill Lynch, Countrywide also sidelined risk management—the aggressive were put on a pedestal while the more conservative and cautious were rendered insignificant. The cavalier culture of the company rallied around a doing whatever it takes slogan.  This approach to its interpretation of both regulation and risk led to its “doubling down” of predatory lending practices, all under the arrogant assumption that protection could be bought through political contributions.  

Section E – Summary and Current State of Affairs:

            Upon examination of the several organizations that converged to create the financial crisis of 2008, the most prevalent underlying catalyst was greed—both personal and corporate. Whether it was the mortgage originators, the investment banks, the insurance companies, or rating agencies, materialism played a crucial role—both in a quest for profit and market share. This led to an institutional mindset, formulated and cultivated by a culture that was fostered by leaders. Political greed and agendas also had a role in the crisis advanced by political campaign contributions and pandering under the guise of setting unrealistic goals of fulfilling the American Dream. At times, this culminated in subsequent federal curtailment of state lawsuits alleging predatory lending.

            Twelve years later, the companies involved look quite different or received substantial government bailouts.  Countrywide Financial was sold to Bank of America. Ameriquest was absorbed by Citigroup who took over what was left of its portfolio of mortgages, valued at $45 billion (McLean & Nocera, 2010, pg. 208). AIG was ultimately bailed out by the federal government for a total of $182 billion to prevent exacerbating the meltdown due to AIG’s international deals (McLean & Nocera, 2010, pg. 358). Goldman Sachs was made whole by the Federal Reserve regarding their dealings with AIG which later led to some allegations that Goldman Sachs was favored and received more than lost (McLean & Nocera, 2010). Further, it was alleged that some of the bailout money went to pay bonuses, drawing the ire of many (McLean & Nocera, 2010). The firm was eventually called in front of the Senate to answer for its arrogance and was publicly lambasted for duping clients and thus exacerbating the crisis. (McLean & Nocera, 2010, pg. 361). Merrill Lynch now operates under the name of Merrill and continues as an investment firm as a subsidiary of Bank of America. Additionally, the federal government bought what was left of securitized subprime mortgages in an effort to get banks back up and running (McLean & Nocera, 2010, pg. 358).

            Several reforms were enacted under the Wall Street Reform and Protection Act, signed into law in July 2010. Among some of the changes were broadening powers of the Federal Reserve in examining the financial system, the creation of a new consumer protection agency to prevent predatory lending, and most derivatives are now traded on an exchange, enabling transparency (McLean & Nocera, 2010, pg. 358). Some other reforms prohibited proprietary trading at financial institutions which accept deposits and allowed liquidation of failing companies as an alternative to bailouts (McLean & Nocera, 2010, pg. 358).

            Regarding mortgage lending practices, Fannie Mae and Freddie Mac remain wards of the government, GSEs that still have the mandate to guarantee mortgages (McLean & Nocera, 2010).  Mortgage lenders have tighter standards— such as continuing education and certification—and consumers must meet set standards such as credit scores, debt to income ratio, employment verification, and loan counseling, among other things, are required for borrowers.


McLean, B. & Nocera, J. (2010). All The Devils Are Here: The Hidden History of the Financial        Crisis. New York: Portfolio/Penguin

State of Connecticut, Department of Banking (2006, January 23). Ameriquest to Pay $325    Million for Predatory Lending Practices that Bilked Consumers. Retrieved on 10/28/20     from$325-Million-in-        Nationwide-Settlement

WRITTEN BY Brian Erbis

Brian Erbis is a retiring NYPD detective based in New York City. Financial crimes consultant and owner of Brian Erbis Consulting LLC. Freelance blogger.

Identity Theft/Financial Fraud and The Need for an Office of a Special Prosecutor

  • Published on March 2, 2020

Brian Erbis

Police Detective at New York City Police Department

Every state needs a special prosecutor’s office dedicated to the investigation and prosecution of identity theft/financial fraud, which is often a multi-jurisdictional crime. This would facilitate a robust investigation and prosecution of such crime. There are numerous problems that arise with localized prosecution in the investigation and prosecution of financial crimes and identity theft. It is a pervasive crime and the number of victims, limited government resources, overworked or inexperienced prosecutors, lack of knowledge or understanding of the elements of the crime, and application of the traditional approach to jurisdiction used in physical crimes further compound the problem. 

On September 19, 1972, New York State Governor Nelson D. Rockefeller signed a series of executive orders, one of which led to appointing special prosecutors and created state prosecutor’s office to prosecute, known as Office of the Special Narcotics Prosecutor, to address what was the proliferation of sale and use of illegal drugs (Najdari, 1974).  

In 1972, the Office of the Special Narcotics Prosecutor for New York City (OSNP) was established to combine into a singular office the manpower, equipment, and resources of each of the five district attorney’s offices that serve the New York metropolitan area. The OSNP has citywide jurisdiction over drug-related offenses. The other five district attorneys work closely with the OSNP by assigning attorneys to its staff and developing similar policies regarding prosecution of drug offenders. Sterling Johnson, as the first Special Narcotics Prosecutor, is the official spokesman for the other district attorneys with respect to narcotics matters (H.Rep. No. SCNAC-96-2-15, 1980).

Identity-based crimes are one of the most significant and growing problems of the last 20 years and inflict significant economic harm to victims. The increased use and availability of personal information through on-line outlets has significantly increased the risk of identity-based fraud, although few have considered the factors that affect the likelihood of this type of victimization. (Holt &Turner, 2012, pg. 308).

Identity theft is not a new crime. Long before the internet, thieves used low-tech methods to obtain and misuse people’s credit and identification documents. Identity theft techniques include simple pickpocketing, “dumpster diving” for discarded financial records and credit card statements, stealing pre-approved credit card applications from mailboxes, completing “change of address” forms through the Post Office to divert a victim’s mail, and securing low-level employment with an organization to gain access to and steal consumers’ social security numbers, credit reports, and financial records. These techniques still account for most identity theft cases, but the Internet and the increased use of databases for storing consumer information has allowed high tech thieves easier access to greater quantities of individual information at one time. In the same amount of time it would take for a thief to monitor a physical mailbox and steal one individual’s new credit card, the thief can now set up a phishing scam and potentially steal hundreds or thousands of individuals’ personal identifying information (Lynch, 2005).

In the last twenty years, the internet has been increasingly used to commit identity theft. For example, “phishing” is a scheme involving “sending out fraudulent emails and viruses to attract unsuspecting customers to fake bank websites, requesting a person to enter bank account numbers and password” (Tcherni, Davies, Lopes & A. Lizotte, 2015). By obtaining personal identifying information (PII), a person can steal an identity for the purpose of committing various financial crimes. Identity theft and other financial frauds now have a cybercrime element. Identity theft is increasingly committed over the internet in “cyberspace.” Cyberspace is defined as “the environment within which communications and other online activities through Internet-enabled digital devices take place. This space has transformed the way in which individuals communicate, disclose, exchange, and retrieve information, develop and maintain relationships, and move money.” (Maras, 2017, pg.4).

When a person uses the Internet, computers and related technology in the commission of a crime, he or she is considered as a cybercriminal. Cybercrime can fall under the following six proposed typologies: cybertrespass and cybervandalism; cybertheft; interpersonal cybercrime; cyberdeviance and public order cybercrime; organized cybercrime; and political cybercrime” (Maras, 2017, pg. 4).

“Cybercriminals also engage in illicit acts that target websites, computers, and other digital devices.” (Maras, 2017, pg. 4).

Cybercriminals can attack, offend, threaten, humiliate, harass, steal from, and otherwise harm victims and exploit and damage computers and other technological devices. The crimes perpetrated by these actors are referred to as cybercrimes. This type of crime occurs on a far greater scale than traditional crime because of its ability to reach and affect individuals around the globe. Furthermore, cybercrime is not restricted by physical, geographical borders; instead, it transcends them (Maras, 2017, pg.4).

The advancement of computer technology and the development of the Internet have provided identity thieves with more options to obtain the necessary information to carry out their crime. Identity thieves may be able to obtain a victim’s personal information by hacking into a database, personal computer, or a company’s computer system. The Internet, therefore, allows a potential identity thief to obtain a victim’s personal information from her home, office, public library, hotel room, or any other location with Internet accessibility. Such easy access obviates the need for an identity thief to rummage through a victim’s garbage or mail, follow a victim to a supermarket, or any other conventional method of obtaining a victim’s personal information. Moreover, the Internet allows identity thieves to seek out victims from virtually anywhere in the world. Finally, the identity thief may carry out her crime via the Internet, regardless of how the victim’s personal information is obtained (Perl, 2003).

Lacking physical borders, the investigation and possible prosecution of identity theft in cyberspace can be troublesome for a variety of reasons.

When asked what legal and prosecution issues have been encountered, 67% cited the cross jurisdictional nature of digital crime. No agency reported a local prosecutor that would consider a crime that crosses international borders. Crimes of this type may need to be referred to the U.S. Attorney’s Office for consideration if it were a federal infraction. It was also found that 54% felt prosecutors did not understand technology, 49% felt judges did not understand technology, and 44% had difficulty enforcing out-of-state subpoenas. A further 41% indicated they encountered inconsistencies in interpretation of laws, such as a felony in one district may be a misdemeanor in another. Other findings were that 33% felt that laws were not keeping pace with technology, 28% face international threads, 18% encountered inadequate laws, and 15% encountered ethical breaches. Often it comes down to what can be prosecuted most effectively given the time, budget, and nature of the crime (Gogolin & Jones, 2010, pg. 138).

One problem that prosecutors often face when prosecuting identity theft is finding the appropriate venue in which to prosecute. For example, an identity thief living in state A may obtain the personal information of a victim domiciled in state B, and use that information to carry out her crime in state C or D. Moreover, an identity thief who carries out her crime, even in part, over the Internet can further complicate the venue determination. Recognizing this potential dilemma, some states allow prosecution to take place “in any locality where the person whose identifying information was appropriated resides, or in which any part of the offense took place, regardless of whether the defendant was ever actually in such locality” (Perl, 2003).

Considering the problems in investigating and prosecuting identity theft/financial frauds which can cross both international borders and state lines, some cases could result in federal prosecution (aggravated identity theft and associated wire fraud charges). Some U.S. Attorney’s Office have established guidelines with respect to what identity theft/financial frauds cases they will prosecute, usually set to a high dollar amount or cases involving numerous victims. According to Section 9-27.200 of The United States Department of Justice Principles of Federal Prosecution:

if the attorney for the government concludes that there is probable cause to believe that a person has committed a federal offense within his/her jurisdiction, he/she should consider whether to:

  1. Request or conduct further investigation;
  2. Commence or recommend prosecution;
  3. Decline prosecution and refer the matter for prosecutorial consideration in another jurisdiction;
  4. Decline prosecution and commence or recommend pretrial diversion or other non-criminal disposition; or
  5. Decline prosecution without taking other action. (USDOJ, 9-27.200)

In deciding to accept a case, there should be a “substantial federal interest” which is defined in Section 9-27.230 of The United States Department of Justice Principles of Federal Prosecution as:

in determining whether a prosecution would serve a substantial federal interest, the attorney for the government should weigh all relevant considerations, including:

  1. Federal law enforcement priorities, including any federal law enforcement initiatives or operations aimed at accomplishing those priorities;
  2. The nature and seriousness of the offense;
  3. The deterrent effect of prosecution;
  4. The person’s culpability in connection with the offense;
  5. The person’s history with respect to criminal activity;
  6. The person’s willingness to cooperate in the investigation or prosecution of others;
  7. The person’s personal circumstances;
  8. The interests of any victims; and
  9. The probable sentence or other consequences if the person is convicted. (USDOJ, 9-27.230)

In U.S. Attorneys’ Offices, which are assigned to investigate crimes in district where located, the number of assistant United States attorneys (AUSAs) in a district depends on the population. The offices can also consider federal priorities/resources when deciding to take a case. In a heavily populated area, there are generally more local district attorney’s offices separated by counties. Both offices, however, are limited in several ways. Some factors that may limit an effective investigation and prosecution of identity theft/cyber identity theft by a federal or local district attorney’s office are office policy, the manpower and resources of the specific office, misinterpretation or obsolete knowledge of the current law, and the assigned prosecutor’s caseload.

Section 9-27.230 addresses “federal law enforcement priorities” (USDOJ, 2019):

Federal law enforcement resources are not sufficient to permit prosecution of every alleged offense over which federal jurisdiction exists. Accordingly, in the interest of allocating its limited resources so as to achieve an effective nationwide law enforcement program, from time to time the Attorney General may establish national investigative and prosecutorial priorities. These priorities are designed to focus federal law enforcement efforts on those matters within the federal jurisdiction that are most deserving of federal attention and are most likely to be handled effectively at the federal level, rather than state or local level. (USDOJ, 2019)

Depending on the administration, the priorities of prosecution could fall to other declared priorities such as, the opioid crisis or immigration, with less emphasis on financial crimes.

In 2011, the New York State Criminal Procedure Law (“CPL”), was amended to expand underlying factors in which identity theft offenses can be prosecuted in New York State. This was promulgated on June 24, 2011 giving New York expanded geographical jurisdiction for identity theft crimes and all crimes which are part of the same criminal transaction, such as larceny. This allowed for the prosecution of all related crimes in a single venue, which in theory would economize resources for the parties and the court (NYC Bar, 2011).

NYS CPL Section 20.40:

(l) An offense of identity theft or unlawful possession of personal identifying information and all criminal acts committed as part of the same criminal transaction as defined in subdivision two of section 40.10 of this chapter may be prosecuted (i) in any county in which part of the offense took place regardless of whether the defendant was actually present in such county, or (ii) in the county in which the person who suffers financial loss resided at the time of the commission of the offense, or (iii) in the county where the person whose personal identifying information was used in the commission of the offense resided at the time of the commission of the offense.

It had been my experience as a detective assigned to an NYPD precinct detective squad for seven years and later the NYPD Financial Crimes Task Force, Special Frauds Squad for four years, that although law was changed in 2011 expanding the jurisdiction for identity theft prosecutions, the law did not completely solve the jurisdictional problems. For example, where jurisdictional boundaries spanned two or more counties within The City of New York, conflicts would arise as to which district attorney’s office would prosecute. Although probable cause existed, the jurisdiction with better standing sometimes would decline to prosecute directing that the case be brought to the other that had jurisdiction. Sometimes, the case was dismissed by one jurisdiction months into prosecution. These decisions were often made by prosecutors who did not know what the law provided nor did they know the elements of the criminal case and how to effectively apply the law.

Creating a special prosecutor’s office and modeling it after the Office of the Special Narcotics Prosecutor for New York City (OSNP) would provide for focused investigation and prosecution of identity theft, physical or cyber, and associated financial crimes. The OSNP was created in response to the rising drug epidemic.

An independent prosecutors’ office with citywide jurisdiction, the Office of the Special Narcotics Prosecutor (SNP) is responsible for felony narcotics investigations and prosecutions in the five boroughs of New York City. Founded in 1971, it is the only agency of its kind in the United States.

Created in response to a burgeoning heroin epidemic and a related spike in violent crime, SNP was granted broad authority under New York State Judiciary Laws to root out sophisticated narcotics trafficking organizations and track offenders across traditional jurisdictional boundaries.

The office’s far-reaching cases target major trafficking networks that distribute narcotics in the city, across the United States and around the world. Renowned for its expertise in wiretap investigations, SNP uses cutting-edge electronic technology to identify and pursue members of criminal enterprises from street-level dealers to top suppliers. Recognizing the link between drugs and violence, the office also investigates gang-related activity.

The office is committed to reducing demand for narcotics by raising public awareness and facilitating treatment for addicted offenders. Since assuming leadership of the office, Ms. Brennan established the Heroin Trafficking Interdiction Unit, the Prescription Drug Investigation Unit, the Digital Forensic Unit, the Narcotics Gang Unit and the Money Laundering and Financial Investigation Unit (Office of the Special Narcotics Prosecutor, 2016).

As stated, the office was “created in response to a burgeoning heroin epidemic and a related spike in violent crime” (Office of the Special Narcotics Prosecutor, 2016). The office, however, has a reform and rehabilitation component as noted “committed to reducing demand for narcotics by raising public awareness and facilitating treatment for addicted offenders” (Office of the Special Narcotics Prosecutor, 2016). It should also be noted that the office has evolved since inception to keep up to date with the latest technology and approach to combating narcotics trafficking such as creating a “Digital Forensics Unit” and is already abreast with the financial crimes aspect as referenced by the office’s “Money Laundering and Financial Investigation Unit.”

As with the creation of the OSNP, a creation or metamorphosis of the OSNP or otherwise incorporation of such to create identity theft/financial fraud special prosecutor’s office requires either executive action from the governor or legislative action from the New York State Legislature. Attempts have been made to lobby Albany but the proposed idea did not gain enough support.

Based upon my examination of past research, current sources, and my own professional experience, I have found that identity theft/financial fraud in various forms, whether committed in cyberspace or in the physical realm, necessitates not only specialized investigation but special prosecution due to the complexity that this particular crime presents. Therefore, an office of a special prosecutor, with prosecutors who specialize in these types of cases, should be created in every state to combat it. 


Gogolin, G. & Jones, J. (2010) Law Enforcement’s Ability to Deal with Digital Crime and the Implications for Business. Journal of Digital Forensic Practice, 3, 131-139

Holt, T. & Turner, M. (2012) Examining Risks and Protective Factors of On-Line Identity Theft, Deviant Behavior 33, 308-323.

H. Rep. No. SCNAC-96-2-15, at 9 (1980) Retrieved on August 7, 2019 from

Lynch, J. (2005) Identity Theft in Cyberspace: Crime Control Methods and Their Effectiveness in Combating Phishing Attacks, Berkeley Tech L.J., 20 (1), 28, 259-300.

Maras, M. (2017). Cybercriminology. New York, NY: Oxford University Press. Retrieved from!/4/4@0.00:0.912

Nadjari, M, H. (1974). New York State’s Office of the Special Prosecutor: A Creation Born of Necessity. Hofstra Law Review 2, 1, 97-128

New York City Bar. (2011). New York Expands the Geographical Jurisdiction for Offenses of Identity Theft. Retrieved on August 8, 2019 from

New York State Criminal Procedure Law, Section 20.40 (l) (2011)

Office of the Special Narcotics Prosecutor for the City of New York (2016). About Us. Retrieved on August 8, 2019 from

Perl, M, W. (2003) It’s Not Always about the Money: Why the State Identity Theft Laws Fail to Adequately Address Criminal Record Identity Theft, J. Crim. L. & Criminology, 94, 1, 5 169-208. Retrieved on August 7, 2019 from

The United States Dept. of Justice, Principles of Federal Prosecution 9-27.000 (2018),

The United States Dept. of Justice, Principles of Federal Prosecution 9-27.200,

Initiating and Declining Prosecution-Probable Cause Requirement (2018),

The United States Dept. of Justice, Principles of Federal Prosecution 9-27.230,

Initiating and Declining Prosecution-Substantial Federal Interest (2019), this

Published by

Brian Erbis

Police Detective at New York City Police Department


The complexities in prosecution identity theft and financial crimes. hashtag#prosecutionhashtag#financialcrimeshashtag#identitytheft

Leader Member Exchange Theory

Brian ErbisMar 30·5 min read

Leader behaviors associated with in-group, out-group and middle-group members can vary widely in both public and private organizations. The group dynamic is more common in police organizations due to the high stakes of police work, resulting in intense emotions (Haberfeld, 2013a, pg. 37). This paper will examine the different behaviors associated with a leader in their interaction with those specific groups, identify and discuss six indicators of the “in-group,” and discuss the application of Leader-Member Exchange Theory (LMX) in the further development of said team.

Leader behaviors with the in-group in LMX are “two-way communication, trust, leeway and consideration” in a “leadership” capacity (Fraher, 2020). Leader behaviors associated with the middle-group are “partial two-way communication” that is “task oriented” and of an “aloof” and “evaluative nature” in a “stewardship” setting (Fraher, 2020). Lastly, leader behaviors correlated with the out-group are tantamount to “supervision” which is “authoritarian” and “punitive” in nature, comprised of a “structured task environment” with “one-way communication” where a “formal relationship” exists (Fraher, 2020).

The six indicators of an in-group relationship are a “high degree of communication of information,” “influence in decisions” — consultation, joint or delegation aspects of participative leadership (Haberfeld, 2013a, pg. 67), — “priority of task assignment”, “job latitude”, “support” and “attention”. (Fraher, 2020). “High degree of communication” means that the in-group members are privy to enhanced communication which facilitates accomplishment of an assigned task (enhanced intelligence) instilling feelings of trust amongst the team members (Fraher, 2020). The in-group enjoys the benefits of participative leadership as the group is often solicited for input in the decision-making process as “the supervisor instills a sense of responsibility as to the organizational goals and does not micromanage each small specific task” (Haberfeld, 2013a, pg. 67). This is then ratified as a decision made collectively for the group. The in-group also enjoys being assigned priority tasks that have a high likelihood of enriching their career (Fraher, 2020) and are given leeway to accomplish the task (Fraher, 2020). In practical terms, this is often based on not only the affinity between leader and subordinates due to the dyadic nature of exchange but augmented by a high level of confidence. This exhibits that the subordinates are not only responsible but highly competent in basic skills by continued demonstration of their expertise (Fraher, 2020). Furthermore, the in-group benefits from a high level of support from their leader as shown by the degree that the leader is willing to stand by their subordinates (Fraher, 2020). As such, the team members are willing to take on increased risk during a mission or task knowing that their leader will support them if they fail (Fraher, 2020). Moreover, the in-group receives directed attention in a “mentor-protégé” fashion (Fraher, 2020) which further expands the professional development of not only the team but the leader themselves. This leads to greater status for subordinates as they become “trusted assistants” (Fraher, 2020). The ultimate goal for a leader is to shrink the out group by inflating the in-group, optimizing the leader’s performance (Fraher, 2020).

In developing an effective team using LMX theory in policing, it would be important to minimize the out group by maximizing membership of the in group modeled after the “span of control” concept which recommends a limit of how many subordinates a supervisor/manager can effectively manage. This, of course, would depend on a selection process as, according to Dr. Haberfeld, “it is impossible to make everybody a part of one huge in-group” (2013a, pg.37). There are also personality conflicts between leaders and subordinates. As Dr. Haberfeld points out, “[W]e have our favorite people, those to whom we are indifferent, and those whom we dislike” (2013a, pg.37). Dr. Haberfeld makes the important point that “it is also possible to interact, trust, and support people equally in a work environment” (Haberfeld, 2013a, pg.37). Rising above personal feelings and misconceptions, objectivity would be used to set the criteria for admission to the in-group. An important part of the criteria for selection should be assessing the education level and competence of subordinate staff. A second, but equally important part of the criteria, would be work ethic. Assessing the work ethic of a middle-group and/or an out-group member should be viewed from an objective standpoint to eliminate nepotism. For a nominal employee, a determinant factor in work ethic should be whether potential exists. Also, the work environment the employee works in should be analyzed. “When the dyadic relationship or the perceived level of organization support is weak, only personal benefits will motivate subordinates, limiting their career development and work activities” (Maurer, as cited in, Haberfeld, 2013a, pg. 35).

Upon completion of the selection process, a leader can then build on the dyad by forging high quality relationships with members of the in-group which would then begin the desired transition from a group to a team. “Supervisors need to foster relationships with employees but they also need to surround themselves with high quality employees” (Haberfeld, 2013a, pg. 36). Incorporating the stewardship model into the in-group dyad can facilitate this transition as “leaders are charged with nurturing subordinates, helping them to develop their intellect, independence and personal leadership abilities” (Haberfeld, 2013a, pg. 15). This could foster a harmonious and productive work environment where cohesion and synergy may ultimately develop by drawing out loyalty and enthusiasm of subordinates by managers tapping into each employee’s individual talents and work styles (Maurer, in Haberfeld, 2013a, pg. 35).

Throughout my career with the New York City Police Department (“NYPD”), I found that good leaders were rare. Quite often, the good leaders would not survive in their positions because of the leadership styles of middle management or command level executives. Looking back, the application of LMX would have been productive in its true form. It would not be practical, however, due to a transactional leadership-based hierarchy which practices a silo style of management which isn’t compatible with the unity of command concept. Due to the personnel structure of the NYPD, political demands, and conflicting needs and competition, police officers assigned to patrol often find themselves answering to several masters despite having a squad supervisor. It is nearly impossible to answer solely to a direct supervisor. Personality conflicts, whether personal or work related, further complicate the issue. The fact that nepotism and personality conflicts are pervasive throughout various ranks in the NYPD, narrowing the out-group would not work. Based upon my observation of the command operation in the 10th Precinct where I served for sixteen years, the out-group members often served in a patrol capacity. The in-group served in special operations assignments such as plainclothes assignments, in administrative capacities such as community affairs, or in crime analysis. The in-group would often have first choice at prime overtime details with the flexibility to change their shifts to accommodate the overtime assignments. The in-group would usually have an informal relationship with their immediate supervisors. By contrast, the out-group would have a formal relationship with their immediate boss.


Fraher, W. G. (2020). Leader Member Exchange Theory [PowerPoint Slides]. Retrieved on March 21, 2020 from

Haberfeld, M.R. (2013a). Police Leadership: Organizational and Managerial Decision-Making Process (2nd edition). Upper Saddle River, NJ: Prentice Hall


Brian Erbis is a retiring NYPD detective based in New York City. Financial crimes consultant and owner of Brian Erbis Consulting LLC. Freelance blogger.

Transformational Leadership and the NYPD Re-Engineering of 2014

Brian ErbisMay 22·9 min read

The theory of Transformational Leadership is crucial to raising morale in a failing or stagnating organization, whether public or private, by instilling hope in employees. When applied properly and by a leader with altruistic intent, Transformational Leadership can heighten productivity and even save an organization. This paper will examine the strengths and weaknesses of Transformational Leadership as a concept and the potential for a transformational leader with malicious intent to exploit followers to benefit himself. In this paper, I will also discuss an example of Transformational Leadership, Bill Bratton’s New York City Police Department (“NYPD”) Re-Engineering of 2014, and how it was ultimately a failure since the program was rushed and not followed through to completion.

In the spring of 2014, I was offered and accepted the opportunity to serve as part of Bratton’s NYPD Re-Engineering 2014. I was assigned to the Forms, Reports and Logs module. Our purpose was to analyze the voluminous and often duplicative amount of forms and book bound logs which were used in the NYPD. This module was ultimately overseen by a deputy chief who explained Commissioner Bratton’s desire to eliminate the “siloed” style of information exchange in the NYPD, which had been part of its business model since its inception. Over the course of the re-engineering, several ideas were submitted by our panel, but only a few were accepted. Most of the obstacles we faced were resistance from civilian unions and other uniformed members of the service in a position of power who were resistant to change based upon a “business as usual” philosophy of the NYPD.

At the time when Re-Engineering 2014 was presented to the organization and implemented, morale was at an all-time low. As an organization, we were transitioning from Commissioner Ray Kelly’s 13-year regime which was very nepotistic, transactional and non-innovational. The NYPD had practically no presence on social media and was not receptive to new ideas outside of the executive levels. Every personnel decision was centralized and funneled to Commissioner Kelly for approval and signature, which often took several months. When Bratton was re-appointed NYPD Commissioner, he had a vision for staff that was largely reminiscent of his first term as police commissioner in 1994 and his term as Chief of the New York City Transit Police in 1990. When Bratton took the helm at the NYC Transit Police, morale was non-existent. The NYC Transit Police were beleaguered for a variety of reasons — out of touch supervision/management, dilapidated police facilities, and subpar or obsolete equipment including cars, radios, body armor, and firearms (City Journal: Victory in the Subways, 1992). Not only did Bratton procure new equipment for his subordinates, he also visited them in the field on several occasions making himself more visible and accessible. This gave patrol officers a voice about the department and their working conditions. Bratton demonstrated the behaviors associated with transformational leadership such as idealized influence, individualized consideration, intellectual stimulation, and inspirational leadership by his ability to “define goals, to state how they could be accomplished, to set standards and to exhibit confidence and determination” (Haberfeld, 2013a, pg. 51). Officers out in the field felt that Bratton was not only a chief but a leader because he visited officers out in the field, demonstrated concern for them, led by example, and used his power to institute changes. Bratton further inspired the Transit Police force by cutting back on mundane and mindless tasks routinely assigned to patrol officers and instead allowed his officers to conduct specialized enforcement activity by means not previously used in the department. Such innovation allowed them to feel as if they were fighting crime with better equipment and as a result, a sense of pride developed amongst officers (City Journal: Victory in the Subways, 1992). He also compelled his managerial staff to leave the comfort of their offices and ride the subway to witness what a transit patrol officer was experiencing on a daily basis (City Journal: Victory in the Subways, 1992).

Having charisma is a prerequisite for a Transformational Leader. To be an effective transformational leader, one must have a following. In order to attract followers, the leader must be able to inspire others. According to Max Weber (1947) “charisma is based on the follower’s belief that their leader possesses extraordinary qualities” (Weber, in Haberfeld, 2013, pg. 51). As a result, a charismatic leader can “manage their image, articulate visions, communicate high expectations and instill confidence in followers” (De Vries, et al., in Haberfeld, 2013, pg. 51). Problems can arise, however, when following a charismatic leader who relies solely on their personality. Devotion to a leader who garners power through fraudulent or purely self-serving means ultimately causes harm to the follower and the organization. A transformational leader such as this would not be able to practically accomplish what they claim to be able to do, whether from a known lack of power, lack of resources, or other deception. One example of this type of leader is the televangelist or religiously based motivational speakers. The televangelist’s followers are often manipulated based on the charisma of the leader and a faith-based worldview. Many televangelists tell their followers God associates blessings with money and “earthly possessions” and also extols his followers to send money to ensure the future success of the speaker and continuation of God’s work. The leader is enriched to the disadvantage of the follower. Problems also arise when the charismatic leader perhaps suffers from mental illness or is a predator. Sometimes these leaders manipulate followers whom themselves may suffer from mental illness or who were being previously victimized and, as a result, are looking for other outlets, disenchanted with their previous lives. One example of this type of leader is David Koresh who led the Branch Davidian sect in Waco, Texas.

A genuine transformational leader can create a vision for followers by unveiling a plan for the organization that projects his values and beliefs of what is right through frequent articulation of these ideas to followers (Haberfeld, 2013, pg.55). The basis for these ideas can often be derived through “intellectual stimulation.” This can be accomplished by use of the ideas to form an “intuitive and appealing picture of what the organization in the future” (Fraher, 2020). Leaders will often get ideas by surveying followers or by other methods which allow followers to anonymously or openly submit ideas. During the NYPD Re-Engineering of 2014, members of the NYPD received emails with links to surveys and were encouraged to submit ideas. Often the chairpersons from a specific focus group would make follow up phone calls to obtain further input, discuss whether the idea was feasible, or whether the idea would be submitted to the Police Commissioner. The NYPD also disseminated videos throughout the department via the NYPD intranet. Commissioner Bratton would often formally address the rank and file at official Re-Engineering auditorium meetings where he would apprise the membership of his vision and the progress being made. Besides speeches, a leader’s vision can be also be conveyed through behaviors, symbols and policies (Fraher, 2020). Seeing changes in policies is the most crucial way to convey a leader’s vision because followers in an organization that is suffering from malaise, especially when a challenge to the old order and a break with continuity is warranted, are the most optimistic when they see procedural change (Fraher, 2020). Bratton also effectively used symbols during the Re-Engineering process. Workgroup members received a specialized challenge coin reflective of the efforts made in the group.

The use of Transformational Leadership is most appropriate when an organization is going through a period of crisis, change, instability, or when followers are justifiably disillusioned with policies or a general disenchantment with current conditions exist (Fraher, 2020). Essentially, the theory is best used to reinvigorate a stagnant or failing organization or when executive level management is completely detached from followers, and the disparity is evident. An example of this is when the ritualistic way of doing business is no longer feasible and has festered to the point of becoming malignant, thereby greatly impacting morale and productivity. For example, in a nepotistic organization, a large talent pool could go unnoticed because they are part of the “outgroup.” Therefore, diverse wisdom is not harnessed and ultimately detrimental to the organization.

Appropriate leader behaviors when utilizing Transformational Leadership theory are often founded on moral altruism. According to Kanungo (2001), “transformational leaders possess an organic worldview characteristic of a deontological perspective” which “asserts that a leader’s actions have a morally intrinsic value” (Kanungo, in Haberfeld, 2013, pg. 55). Specifically, the appropriate behaviors are to “develop and communicate a vision,” “use of unconventional strategies to achieve performance,” “communicate high expectations and confidence (integrity, ethics and performance),” “show concern for followers,” and “demonstrate self-sacrifice” (Fraher, 2020). A leader’s development and communication of a vision “serves as a source of self-esteem and common purpose for every member of the organization” (Fraher, 2020). This culminates in identifying, clarifying, and ultimately achieving key changes or reaffirming, re-energizing, or refocusing existing workgroups or organizational direction (Fraher, 2020). This was particularly prominent during the NYPD Re-Engineering of 2014 when, at its inception, Commissioner Bratton encouraged every member, in his communicated vision, to be a part of the input process. The “use of unconventional strategies to achieve performance” can inspire followers through innovation by instilling the “belief that the leader, the organization and the vision are extraordinary and unique” (Fraher, 2020). Furthermore, conveying a vision is insufficient without the communication of high expectations and confidence. “A leader’s policies and behaviors must reflect a trust and faith in the competence of their followers” (Fraher, 2020). When it is apparent to followers that their leader has confidence in both them and their abilities, the vision of a transformational leader is enhanced through the leader’s display of unwavering devotion (Fraher, 2020). This would have a dual effect on followers as it would also show a genuine concern in fulfillment of the third component of transformational leadership, intellectual stimulation, through leader valuation of subordinate ideas. Additionally, a transformational leader shows concern for his followers which can “take the form of effective delegation, mentoring, counseling and “management by walking around” (Fraher, 2020). By taking time to put a name to a face, a leader can add the second ingredient of transformational leadership, “individualized consideration,” by showing a follower their value by treating them as an esteemed follower rather than a number. In essence, getting to know your employees’ strengths and weaknesses, along with their personal needs, shows the followers that a leader’s sole concern is not for the organization but also has vested interest in the development of the follower. “Leaders evaluate the talents and needs of subordinates and then expose the weaknesses of the status quo within the organization, followed by the formulation of new goals” (Haberfeld, 2013, pg. 52). Lastly, a leader who demonstrates self-sacrifice during the transformation of an organization would likely be effective. For instance, a leader who is asking their followers to do more with less in troubling times but, in turn, is asking for more than they are willing to give would be viewed as a hypocrite and have a negative effect on morale (Fraher, 2020). “A leader’s self-sacrifice may take many forms, including personal risk taking and personal effort to attain the vision they espouse” (Fraher, 2020).

Throughout my career with the NYPD, leaders who led by example commanded respect and were the most effective with the rank and file officers. While I was on patrol and an investigator in the NYPD, I found that the knowledgeable and selfless leader who did not demand followers perform unreasonable and potentially unethical tasks were the most effective. As a workgroup member and as a follower in the re-engineering of the NYPD, I found it to be an overall failed initiative due to the early and possibly planned departure of Commissioner Bratton and the implementation of fostered ideas in a hastened manner with the inability to study the long term effects of the promulgated changes. Most importantly, the self-serving culture of the NYPD remains largely intact which was why a re-engineering was necessary in the first place. The NYC Transit Police was a much smaller agency with less internal bureaucracy and labor union issues which made it conducive for a transformational leader to implement drastically needed changes, especially on a short-term basis.


City Journal. (1992). City Journal Interview: Victory In The Subways. 1–16. Retrieved on April 15, 2020 from

Fraher, W. G. (2020). Transformational Leadership [Document]. Retrieved on May 5, 2020 from

Haberfeld, M.R. (2013a). Police Leadership: Organizational and Managerial Decision-Making Process (2nd edition). Upper Saddle River, NJ: Prentice Hall


Brian Erbis is a retiring NYPD detective based in New York City. Financial crimes consultant and owner of Brian Erbis Consulting LLC. Freelance blogger.

The Progressive Tale of Two Cities and the FOIL Stonewall

Brian ErbisAug 27·1 min read

A recent project that I’ve self-initiated, as part of my blog, is exposing the hypocrisy concerning governmental transparency and the demagogues who enjoy the same “privilege” that they tout as race-based and limited to white people. These progressive politicians, self-proclaimed champions of the underserved and the underprivileged meanwhile live protected and privileged lifestyles themselves. For instance, the quite outspoken Jumaane D. Williams, NYC Public Advocate, and a “man of the people” who is no friend of law enforcement and advocates for defunding the police yet lives in not only a gated community but a section of Fort Hamilton, Brooklyn. An active-duty U.S. Army base with a section that has been re-developed for “members-only” housing with not only security but a military police presence. All the while being protected and chauffeured by his NYPD security detail.

A little food for thought in exposing politicians with an obvious agenda and analyzing what their angle is… Ask yourself this. Is it purely their duty or is there something in it for them? 221 Washington Road Apt. H Brooklyn, NY 11209, a residence he shares with his fiancee, India L. Sneed, an associate attorney at Greenberg Traurig, a law firm with offices internationally. Stay tuned. The story outlined in today’s online edition of the NY Post.


Brian Erbis is a retiring NYPD detective based in New York City. Financial crimes consultant and owner of Brian Erbis Consulting LLC. Freelance blogger. 

The Stonewall of Silence

Brian ErbisOct 5·1 min read

The tip of the iceberg inside the “Stonewall of Silence”

The NYC City Council decided to preemptively remove a fellow councilmember over a slew of ethics charges…

Who responded with a rambling speech with accusations, of course, with the playing of the race card despite the fact that fellow councilmembers who voted for his removal included black and latino lawmakers…I

t is times such as these that constituents and other citizens should examine who they vote for and subsequently elect…from the fraudsters to the unethical but most of all woefully unqualified.

I leave you with this question — who’s watching the lawmakers besides fellow lawmakers and the voter?

It’s time for an Inspector General for all legislative bodies in New York State.

The saga continues…

Stay tuned.


Brian Erbis is a retiring NYPD detective based in New York City. Financial crimes consultant and owner of Brian Erbis Consulting LLC. Freelance blogger.

Hypocrisy in the NYPD Detective Bureau

Brian ErbisOct 13·4 min read

NYPD Lt. John Dandola of the NYPD Chief of Detectives Investigation Unit, who has been in his position since retired Chief of Detectives Robert Boyce was at the helm of the bureau, purportedly has an ax to grind with some in an adversarial capacity. Go figure.

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Lt. John Dandola — credit: New York Daily News

In recent years, Dandola, pursued cases with religious zeal — as some familiar with his methods would say his approach is tantamount to “investigative bias.”

Dandola was recently overheard stating during the course of an investigation “His father’s next, f–king union” and a sergeant replied, “we’re going to crush him like a fucking cockroach.” Out of two sergeants present for the investigation, who could that possibly be? To add a touch of swagger and sarcasm, John Dandola stated to the subject, “Tell your dad I said “Hi.”

It was later alleged that Dandola used unethical and possibly coercive tactics in the investigation.

Dandola allegedly turned off the tape recorder during some official interviews against NYPD guidelines and possibly made false statements in his reports. I’m curious how local district attorneys haven’t taken in interest in this since it has been adopted an operating philosophy over recent years to broadly interpret what constitutes an “instrument.” Other police officers have been charged with “Offering a False Instrument For Filing” under New York State Penal Law 175.35, an E felony.

Dandola has baggage of his own. Shocking. He was apparently accused in 2016 of manipulating internal tests.

Deputy Commissioner Joseph “Sloppy Joe” Reznick of NYPD Internal Affairs didn’t discipline Dandola over the incident according to a source.

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Deputy Commissioner Joseph Reznick — credit: New York Daily News

In lieu of internal charges, Reznick transferred Dandola to a Queens precinct, people familiar with the move said. Which seems to be amongst many double standards Reznick applies in a despotic manner. Those who worked on the “dark side” could attest that there is no rhyme or reason in the actions that Reznick undertakes or orders. No change in duty status, no “highway therapy” — and somewhere along the line Dandola was allowed to work in an investigative capacity once again.

Dandola has prospered throughout. His salary in 2019 was $202,038 — up 68% from the $120,031 he earned in 2014. Top pay for a Lieutenant in the NYPD is $125,531. Does Lieutenant Dandola rate $76,507 in overtime? According to SeeThroughNY, his employment has been increasingly lucrative throughout recent years.

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It is also further alleged that Dandola choked a fellow officer who accepted a subpoena on his behalf regarding a recent lawsuit. Credible allegations of workplace violence. Perhaps inner anger fuels his vitriol? According to the Civilian Complaint Review Board, Dandola was the subject of two civilian complaints, one of which for force. Both seemed to arise from the same incident.

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And again no change in duty status by Reznick, who likes to still refer to himself as “Chief Reznick” despite being retired at the mandatory age of 63, accepting a deputy commissioner title instead of enjoying his pension and retirement. Hey Joe, there’s life after the job. Ah, institutionalization…

And yet, no action was taken by Police Commissioner Dermot Shea or NYPD Internal Affairs regarding the alleged misconduct Dandola committed in his investigation. Where is the Civilian Complaint Review Board on this regarding “abuse of authority?” Or the NYC Department of Investigation NYPD Inspector General?

Yet, Reznick routinely demotes any ranks not covered by “white shirt immunity.”

Speaking of conflicts of interest, a recent complaint against Dandola is being overseen by Inspector Edward Armstrong, Dandola’s commanding officer.

I’m not shocked, all the signs of stonewalling.

Retire, John. Judging by a common-sense approach to interpreting that picture, you’re a fan of the drink. Your words — “it will behoove you.”


Brian Erbis is a retiring NYPD detective based in New York City. Financial crimes consultant and owner of Brian Erbis Consulting LLC. Freelance blogger.

Proselytizing and Hypocrisy in The Party of Tolerance

Brian Erbis·Oct 23

So back to New York State Senator Brad Hoylman, who represents Hell’s Kitchen in Manhattan. An often proselytizing supporter of the underdog and tolerance has increasingly resorted to some questionable posts on social media — some drawing both unbridled support and criticism from his like-minded constituents and supporters.

Mr. Hoylman is a Harvard-educated lawyer and a man of privilege, who resides in a tony apartment building on 5th Avenue in Greenwich Village, within a stone’s throw of Washington Square Park and the protectorate of New York University.

Despite this, the tone and contents of his official posts on social media display little tolerance and neophytic behavior — which is not becoming of a person who holds office in a proclaimed tolerant state. Further exacerbating this is someone who portrays himself as a family man as evidenced by parading his two young daughters on display on social media for all to see. All under the guise that he is setting the right example and touting the photos and beliefs of Ruth Bader Ginsburg.

Yet, he found it perfectly appropriate to tweet this last night…

I’m disappointed in you, Brad for a variety of reasons — for gay man and a demagogue to advocate hatred, shame on you.

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Credit: Twitter

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