Biden Judicial Pick Ignored 'Serious Criminal Allegations' Relating to Largest Ponzi Scheme in New Hampshire History

Biden circuit court nominee Michael Delaney / Senate Judiciary Committee
May 10, 2023

President Joe Biden's nominee to the First Circuit Court of Appeals, Michael Delaney, says on his Senate disclosure that, as attorney general of New Hampshire, he fought in 2012 to secure a $25 billion settlement for victims of "mortgage loan servicing and foreclosure abuses."

But he makes no mention of his decision three years earlier not to prosecute the perpetrators of the largest Ponzi scheme in New Hampshire's history, in which hundreds of New Hampshire citizens lost their life savings.

Reading Delaney’s disclosures to the committee, one would have no idea that his office sat on their hands as the company once known as Financial Resources Mortgage swindled as much as $80 million and left unsuspecting investors broke. Critics charge that Delaney’s office failed to heed warnings, something he himself conceded in a 2010 report that describes his office’s "failure to detect and protect against the fraud inflicted on its citizens."

It’s unclear whether Delaney’s failure to disclose his role violates federal law, which requires judicial nominees to disclose their "significant legal activities," even those that did not go to trial, and bars them from intentionally omitting or misrepresenting information on their Senate questionnaires.

But accusations of prosecutorial negligence could add another roadblock to his already-bumpy confirmation journey. Senate Democrats have already raised concerns about Delaney’s handling of a high-profile sexual assault case, in which he publicly identified an underage victim. And earlier this month, left-wing activists groups attacked Delaney for serving on the board of a Boston-based free-market advocacy group.

A vote on Delaney’s nomination is scheduled for Thursday, and Sen. Dianne Feinstein (D., Calif.), who returned to Washington, D.C., on Tuesday evening after a months-long leave of absence due to shingles, could give Delaney the vote he needs to clear the Judiciary Committee and make it to a full Senate vote. Feinstein’s office did not respond to a request for comment.

Financial Resources Mortgage was ostensibly a mortgage broker that matched borrowers with poor credit to private lenders. In reality, the firm was shuffling money between its clients. At the time of its collapse, it had $670,000 in checks prepared to go out but "zero in the bank account," according to the federal bankruptcy trustee appointed to dig through the firm’s wreckage.

The firm was helmed by Scott Farah, who was ultimately prosecuted by the Justice Department and pled guilty in 2010 to federal fraud charges. He was sentenced to 15 years in prison.

A book by former New Hampshire state securities regulator Mark Connolly, Cover Up, catalogs Delaney’s negligence and that of other senior state officials. The book received wide acclaim at the time of its publication in 2011, including from Harry Markopolos, one of the whistleblowers who helped land notorious fraudster Bernie Madoff in prison, who said Connolly "stood up for victims while others didn’t."

Connolly, who died in 2019, alleges that Delaney ignored warning signs about Financial Resources Mortgage's illegal practices and declined to prosecute the firm in order to spare state Democrats further embarrassment.

Delaney’s office received several complaints about Financial Resources Mortgage’s practice. "This all begs the question," Connolly writes, "Why would the highest prosecutorial body in the state of New Hampshire ignore serious criminal allegations made by several residents and other criminal complaints involving FRM and Farah?"

Even after the company collapsed, Delaney stood by. His motivations for this decision are unclear, but Connolly posits that "he sought to provide cover" to prominent state Democrats, including then-governor John Lynch. A prosecution would have laid bare the office’s mistakes, including Delaney’s, and reflected poorly on the governor, so, Connolly argues, Delaney insisted that the case was outside his jurisdiction, and had been even when the attorney general’s office received complaints against Financial Resources Mortgage.

"The attorney general … [was] attempting to spread blame so as to minimize the damage to their respective [agency] and state government," Connolly wrote. It was the Department of Justice that ultimately stepped in to prosecute the crooks.

A $10 million state-run Financial Resource Mortgage victims' fund paid out money as recently as January. Among those who received a check was a man working as a line cook and a Republican state representative who says he lost $2 million in the scheme.

"We’ll get about $190,000," the lawmaker, Harry Bean, told a local New Hampshire publication in January. "That’s about 10 cents on the dollar. I’m too tired to fight. This has taken my whole life away since 2008."

Delaney’s closest allies on Capitol Hill, New Hampshire Democratic Sens. Maggie Hassan and Jeanne Shaheen, did not respond to a request for comment. Sen. Dick Durbin (D., Ill.), who chairs the Senate Judiciary Committee, did not respond to a request for comment, nor did the White House, which has defended Delaney in the past.