Financial fraudsters beware! The Head of Enforcement at the Commodities Futures Trading Commission’s (CFTC) has prosecuted mobsters, clerked at the US Supreme Court, and put away the most powerful politician in New York.
In a wide-ranging interview, the CFTC’s head of market intelligence, Andrew Busch, discusses the career of James McDonald, the CFTC’s head of enforcement, and the man in charge of investigating derivative fraud.
The impressive career includes prosecuting members of the Genovese crime family when serving as a prosecutor for the US Attorney’s Office, clerking for US Supreme Court Chief Judge John Roberts, and leading the prosecution of Sheldon Silver, the disgraced former speaker of the New York House of Representatives .
McDonald noted that his introduction to financial crime was trial by fire, working in the justice department in 2008, shortly after the financial crisis.
“I was in a position called deputy associate counsel where I worked on a range of things from congressional investigations, foreign relations law, and financial-related matters. It was during the financial crisis of 2008, and that’s really where I got my start in the world of the intersection between law and finance,” McDonald told Busch.
McDonald also mentioned his time as clerk for Justice Roberts when he worked on the appeal of Jeff Skilling, the disgraced former Chief Executive Officer of Enron.
“There was an important white collar crime case, United States v. Jeffrey Skilling,” McDonald said, “So that maybe was my second – the second interaction I had with the intersection of law and finance, and here, specifically, white collar crime.”
In that case, the US Supreme Court examined the term “honest services fraud”, a term meaning a “scheme or artifice to defraud includes a scheme or artifice to deprive another of the intangible right of honest services.”
The US Supreme Court took a narrow view of that term, defining it only as a bribe or kickback scheme and reduced Skilling’s jail term significantly.
McDonald’s next post was that of prosecutor in the US Attorney’s Office for the Southern District of New York, the region which includes Wall Street.
Here, he prosecuted members of the Genovese crime family, one of the five Mafia families which operates in New York City.
“They [the investigators] were able to determine from listening to the calls that there was a murder-for-hire plot, who the target of the murder for hire was, where it was going to happen, and they actually stopped the car on the way. So they stopped the car, and they searched the car, and we – the agents who were there – found a gun loaded with hollow point rounds,” McDonald said of the movie like investigation. “They found a bag of socks, which we later learned was going to be used to clean up the scene, and a spray bottle full of bleach.”
McDonald also led the prosecution of Sheldon Silver, the long-time Speaker of the New York House of Representatives who was convicted of numerous bribery charges.
McDonald is currently head of enforcement at the CFTC.
“I lead a team of about 180 people. That includes lawyers, paralegals, investigators, economists, and a surveillance staff. The biggest part of what we do is we investigate violations of our relevant laws and regulations, and we bring enforcement actions, and we file the enforcement actions. Where the Commission determines that a violation is significant enough to warrant an enforcement action, we file those in federal court, and we litigate them there,” McDonald said.
McDonald continued: “We want to insure that we are – we want to insure that the market knows, that everybody knows that we’re on duty. We’re on watch to make sure that if there’s market harm, if there’s harm to market integrity, or if there’s harm to customers, misappropriation of their funds, fraudulent solicitation, things like that, the Enforcement Division is there to make sure that the people who have committed the violations are accountable, and to provide the right incentives to make sure that, going forward, folks are complying with the law and really trying to minimize the market harm and customer harm going forward.”
McDonald has been busy busting up commodity pool frauds, off-exchange binary options, and most recently a multi-state Ponzi scheme.
McDonald was a guest on a new podcast that Busch is hosting for the CFTC.