The economic crisis has sparked an increase in criminal fraud, including an “exponential rise” in mortgage scams that is straining the FBI’s resources, a leader of the agency said.
The Federal Bureau of Investigation has more than 1,800 open investigations into mortgage fraud, more than double the number in fiscal 2006, Deputy FBI Director John Pistole told a U.S. Senate hearing today in Washington. The FBI also has more than 530 open corporate fraud investigations, including 38 linked to the financial crisis, he said.
“The FBI has experienced and continues to experience an exponential rise in mortgage fraud investigations,” Pistole said in prepared testimony. “The increasing mortgage, corporate fraud and financial institution failure case inventory is straining the FBI’s limited white-collar crime resources.”
Today’s Senate Judiciary Committee hearing focused on whether there should be beefed-up enforcement to cope with the economic decline. The panel’s chairman, Senator Patrick Leahy, a Vermont Democrat, is pushing legislation to authorize funds to hire fraud prosecutors and investigators. The bill, backed by the Justice Department, also would strengthen financial crime laws.
The 38 cases linked to the financial crisis have the potential to be as complex as the one involving Enron Corp., which collapsed in 2001, and the number of them could increase into the hundreds, Pistole said. The cases involve companies that “everybody knows about,” Pistole said without naming them.
Fraud, Insider Trading
The corporate investigations include possible manipulation of financial statements, accounting fraud and insider trading, he said.
The FBI has reassigned some agents from terrorism cases to financial crimes.
The government’s $700 billion Troubled Asset Relief Program, and proposed economic stimulus legislation, likely will result in increased criminal activity, said Neil Barofsky, special inspector general of the TARP program, in prepared testimony.
“History teaches us that an outlay of so much money in such a short period of time will inevitably draw those seeking to profit criminally,” he said.
To contact the reporter on this story: Justin Blum in Washington at [email protected]
