The FBI is investigating 38 cases of corporate fraud or financial institution wrongdoing tied to the economic crisis, and the federal bailout watchdog has already opened several criminal probes, officials told Congress Wednesday.
U.S. officials also said in testimony prepared for a Senate hearing that fraud cases were straining resources for investigating white-collar crime, and that the U.S. Justice Department backs proposed legislation to tighten financial-fraud laws.
Neil Barofsky, special inspector general for the $700 billion U.S. Troubled Asset Relief Program, or TARP, told the Senate Judiciary Committee that several criminal investigations related to the program were already under way.
"We have already opened several criminal investigations involving multiple jurisdictions, and … are closely coordinating our executive-compensation oversight efforts with the New York State Attorney General," he said.
Trillions of dollars in government money will be potentially at risk of fraudulent activity in the multiple rescue programs to address the financial crisis, he said.
"These huge investments of taxpayers money, made over a relatively short time period, will require close oversight and will invariably provide an inventive to those seeking to profit criminally," Barofsky said.
The FBI’s caseload of 38 corporate and financial institution investigations linked to the crisis represents an increase from about two dozen publicly reported last year.
"The increasing mortgage, corporate fraud and financial institution failure case inventory is straining the FBI’s limited white-collar-crime resources," FBI Deputy Director John Pistole said.
He said the FBI increased to 180 the number of agents working on mortgage fraud cases, from 120 in 2007.
Barofsky said counterterrorism efforts since the Sept. 11 attacks seven years ago had drained resources from white-collar crime probes.
"We saw areas of coverage shrink and prosecutorial thresholds rise. The Department of Justice’s recent shift of focus to mortgage fraud has left other areas of white-collar crime underfunded and underprosecuted," he said.
The Justice Department backs legislation proposed by Judiciary Committee Chairman Patrick Leahy to hire more federal investigators and prosecutors and tighten laws against financial crime, said the acting head of the department’s criminal division, Rita Glavin.
The proposals include covering mortgage lenders under bank-fraud laws – Glavin cited a Wall Street Journal report that more than half of subprime mortgages made in 2005 were made by lenders that did not fall under such laws.
Other measures would criminalize making a false statement to mortgage lenders, amend the major U.S. fraud law to include activities related to TARP bailout money, and include commodities options and futures trading in securities fraud laws.
"These changes would enhance our ability to investigate and prosecute mortgage fraud and other types of investment fraud," Glavin said.
(Reuters)
