International Journal on Criminology Volume 2, Number 1, Spring 2014 | Page 10

International Journal on Criminology
“The Subprime Tsunami” 4
As highlighted by the expert, Noël
Pons 5 , the mechanics of the crisis
that broke out in 2009 were almost
identical to that of the 1980s. Only the parties
involved were different. In this new format,
the banks were fed with applications
for loans by mortgage brokers who made
lavish promises. A number of applications
were discreetly categorized as "non-documented".
They were in fact faked, involving
acts of fraud, scamming, abuse of trust,
and forgery. Operating with the backing of
mortgage lenders, the brokers dispensed
questionable loans, using predatory lending
techniques, consisting of lending to people
from vulnerable demographic groups (poor
people, ethnic minorities, etc.). Credit frequently
exceeded 125% of the value of the
home purchased with the loan. Home values
were also significantly inflated. Loans
were frequently made to borrowers unable
to meet capital repayments on an interest
only basis, a system thriving only in conditions
of speculation. The illusion persists as
long as the market is still rising. The entire
economy, steeped in debt, became a "pyramid
economy", a gigantic Ponzi scheme.
In an attempt to conceal what was
really happening, the banks tried amalgamating
loans into common pools by "securitizing"
them and then, in the second stage,
mixing the "junk" securities with others in
global structures, themselves overvalued,
to produce a cocktail of fund derivatives
based on nothing, but still highly speculative.
Naturally, accounts were also falsified
or externalized. In the third stage, the "globalized"
structures were insured and then
reinsured and finally sold to "investors",
many of whom were domiciled in tax havens.
These on-sold "receivables" were then
used as leverage to raise loans from the
major commercial banks that placed these
"virtual securities" with other, notably foreign,
banks, local authorities, associations,
etc. From the bottom of the ladder upwards,
these dealings may not always have been
blatantly fraudulent but were at least often
very shady.
A few months before the outbreak
of the subprime crisis, although nothing
could be done to prevent it, Michael Mukasey,
Attorney General in the George W.
Bush administration, curiously denounced
the criminalization of the economic and financial
markets on April 23, 2008, at a conference
on organized crime at the Center for
Strategic and International Studies (CSIS).
More recently in Europe, there was
the case of the carbon VAT scam which involved
buying rights to pollute, exclusive of
VAT, in one European country through a
dummy or shell company, with almost immediate
resale on the French, English, or Italian
markets, inclusive of VAT. The fraudsters
pocket the VAT rate differential and disperse
it between offshore accounts.
These transactions involve the
fraudsters themselves, their protectors, and
financiers, especially the "launderers" of the
monies earned from trafficking, including
in narcotics. A judge was reported in
the newspaper "Le Parisian" as saying that
"there is a veritable Mafia behind the carbon
emissions tax and a Mafia does not hesitate
to kill."
In January 2009, Serge Lepage, son
of a well-known underground figure, was
shot down in front of his home. It was suspected
that he had been called upon as a
provider of funding for carbon emission tax
fraudsters.
Amar Azzoug was executed on April
30, 2010, in a brasserie in Saint-Mandé. A
known former bank robber, this 35-yearold
man had been implicated in carbon
tax fraud and its embezzled millions. He
had known that he was a marked man and
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