[Senate Hearing 112-357]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 112-357

        OVERSIGHT OF THE FINANCIAL FRAUD ENFORCEMENT TASK FORCE

=======================================================================

                                HEARING

                               before the

                     SUBCOMMITTEE ON ADMINISTRATIVE
                        OVERSIGHT AND THE COURTS

                                 of the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 30, 2011

                               __________

                          Serial No. J-112-32

                               __________

         Printed for the use of the Committee on the Judiciary















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                       COMMITTEE ON THE JUDICIARY

                  PATRICK J. LEAHY, Vermont, Chairman
HERB KOHL, Wisconsin                 CHUCK GRASSLEY, Iowa
DIANNE FEINSTEIN, California         ORRIN G. HATCH, Utah
CHUCK SCHUMER, New York              JON KYL, Arizona
DICK DURBIN, Illinois                JEFF SESSIONS, Alabama
SHELDON WHITEHOUSE, Rhode Island     LINDSEY GRAHAM, South Carolina
AMY KLOBUCHAR, Minnesota             JOHN CORNYN, Texas
AL FRANKEN, Minnesota                MICHAEL S. LEE, Utah
CHRISTOPHER A. COONS, Delaware       TOM COBURN, Oklahoma
RICHARD BLUMENTHAL, Connecticut
            Bruce A. Cohen, Chief Counsel and Staff Director
        Kolan Davis, Republican Chief Counsel and Staff Director
                                 ------                                

        Subcommittee on Administrative Oversight and the Courts

                   AMY KLOBUCHAR, Minnesota, Chairman
PATRICK J. LEAHY, Vermont            JEFF SESSIONS, Alabama
HERB KOHL, Wisconsin                 CHUCK GRASSLEY, Iowa
SHELDON WHITEHOUSE, Rhode Island     MICHAEL S. LEE, Utah
CHRISTOPHER A. COONS, Delaware       TOM COBURN, Oklahoma
         Paige Herwig, Democratic Chief Counsel/Staff Director
           Danielle Cutrona, Republican Acting Chief Counsel












                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Blumenthal, Hon. Richard, a U.S. Senator from the State of 
  Connecticut....................................................     3
Grassley, Hon. Chuck, a U.S. Senator from the State of Iowa......     4
Kobuchar, Hon. Amy, a U.S. Senator from the State of Minnesota...     1
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont, 
  prepared statement.............................................    49

                               WITNESSES

Adkins, Robb, Executive Director, Financial Fraud Enforcement 
  Task Force, Washington, DC.....................................     8
Jones, B. Todd, U.S. Attorney for the District of Minnesota, 
  Minneapolis, Minnesota.........................................     7

                         QUESTIONS AND ANSWERS

Responses of B. Todd Jones and Robb Adkins to questions submitted 
  by Senators Coburn and Sessions................................    25

                       SUBMISSIONS FOR THE RECORD

Jones, B. Todd, U.S. Attorney for the District of Minnesota, 
  Chairman Attorney General's Advisory Committee, and Robb 
  Adkins, Executive Director, Financial Fraud Enforcement Task 
  Force, Department of Justice, Washington, DC, joint statement..    33

 
        OVERSIGHT OF THE FINANCIAL FRAUD ENFORCEMENT TASK FORCE

                              ----------                              


                        THURSDAY, JUNE 30, 2011

                                       U.S. Senate,
    Subcommittee on Administrative Oversight and the Courts
                                Committee on the Judiciary,
                                                     Washington, DC
    The Subcommittee met, pursuant to notice, at 10:08 a.m., 
Room SD-226, Dirksen Senate Office Building, Hon. Amy 
Klobuchar, Chair of the Subcommittee, presiding.
    Present: Senators Blumenthal and Grassley.

 OPENING STATEMENT OF HON. AMY KLOBUCHAR, A U.S. SENATOR FROM 
                     THE STATE OF MINNESOTA

    Senator Klobuchar. I am pleased to call this hearing of the 
Senate Judiciary Subcommittee on Administrative Oversight and 
the Courts to order.
    Good morning, everyone. Thank you for being here.
    Senator Sessions said to go ahead, and we may be having 
other Senators joining us later in the morning.
    Today, we are going to focus on the oversight of the 
Financial Fraud Enforcement Task Force, which is the largest 
coalition of Federal, state and local partners ever assembled 
in this country's history to combat fraud.
    This issue is vital to our country as a whole and to 
individuals and families for a multitude of reasons. First of 
all, mortgage fraud caused many Americans to end up in homes 
they could not afford, which helped lead to the financial 
crisis and recession. Certainly, we saw that in my home State 
of Minnesota early on that that was the canary in the coal 
mine; people starting to get in trouble on their homes because 
they took mortgages out from people that did not have their 
best interests in mind.
    The proliferation of Internet scams has made many 
vulnerable citizens at risk of being swindled by false claims 
of easy money and cash prizes.
    Fraud on government programs can undermine confidence in 
government and diminish the benefit of cruical public 
investments at a time where you have senior citizens that could 
barely afford the health care. The thought that there are 
storefronts set up where people are receiving Medicare checks 
that they do not even deserve, that they do not even qualify 
for just can make anyone want to scream.
    So the idea here is to cut back on that and do something 
about fraud, and that is what the task force is about.
    Fraud and Medicare and Medicaid has cost the Nation 
billions of dollars, something we can ill afford, given the 
dire fiscal situation we are in today.
    In the investment realm, we have seen what criminals like 
Bernie Madoff can do to the savings and the finances of 
families, schools, and charitable organizations.
    For all of these reasons, it is critical that our antifraud 
efforts be effective, efficient, and comprehensive.
    As a former prosecutor, I know that this is no easy task. 
We must ensure that we are providing adequate tools and 
resources to law enforcement and that we have the necessary 
laws and policies in place to deter this kind of fraud.
    We must have well trained prosecutors and other government 
officials, and we must promote the public awareness of the 
dangers of financial fraud.
    Finally, we need collaboration among law enforcement and 
regulatory agencies at all levels of government. It has always 
been my experience, when I was county attorney, that if there 
was a major fraud committed, the citizens really did not care 
who prosecuted, whether it was the local prosecutor's office or 
the state attorney general's office or the U.S. attorney's 
office, they just wanted us to get the job done.
    And the other thing we have learned is that these crooks do 
not respect boundaries. They do not care if they are doing 
something in another country or another county or another 
state. And so that is why combining our resources so that we 
are better able to tackle crimes and to be as sophisticated as 
the crooks that are breaking the law is so critical in the area 
of white collar crime.
    President Obama formed the Financial Fraud Enforcement Task 
Force in late 2009. The task force includes more than 25 
Federal agencies, the 94 U.S. attorneys' offices, the National 
Association of Attorneys General, and the National District 
Attorneys Association.
    I think it is very important that local prosecutors be 
represented. So many crimes, especially since 9/11, when our 
U.S. attorney's office, understandably, focused on many of 
these terrorism crimes, so many of the regular white collar 
crimes, including crimes involving millions and millions of 
dollars, were handled on the county level by the local 
prosecutors, by the DAs' offices. So they have to have a part 
of this task force and be a part of the task force.
    The task force seeks to harness the capabilities of its 
member agencies and foster coordination in the fraud 
enforcement efforts. Its work covers a wide variety of 
fraudulent activities in the areas of mortgage lending, 
Recovery Act stimulus funds, securities, commodities, and 
government procurement and grants.
    The task force recently came out with its first year 
report, and we will examine that report today. We will discuss 
the operations of the task force, how it has enhanced antifraud 
efforts at the Department of Justice, and the steps that it has 
taken to increase coordination among government agencies.
    We have with us today two excellent representatives of the 
task force. First, we have B. Todd Jones, the U.S. Attorney 
from the great State of Minnesota, who sits on the steering 
Committee of the task force. This is Todd Jones' second round 
as U.S. attorney. So he brings a lot of experience to the job 
and to our state.
    And, second, we have Robb Adkins, who is the executive 
director of the task force.
    I will give a more complete introduction of our witnesses 
before they testify.
    Senator Klobuchar. And I would like to turn it over to 
Senator Blumenthal, if he would like to make some opening 
remarks.
    I also see we have been joined by Senator Grassley of Iowa, 
and I am sure he has a few things he would like to say, as 
well.
    Senator Blumenthal.

 STATEMENT OF HON. RICHARD BLUMENTHAL, A U.S. SENATOR FROM THE 
                      STATE OF CONNECTICUT

    Senator Blumenthal. Thank you, Madam Chairwoman, Madam 
Chairman. And first of all, thank you for having this hearing 
and, again, demonstrating your leadership in the area of 
combating financial fraud and related issues that undermine so 
importantly the integrity, as well as trust of the public in 
our financial system.
    These crimes are more than just superficial or passing in 
their impact. They are enduring because they go to the core of 
what people trust and need to have confidence in.
    I want to begin by saying that I have reviewed the task 
force first year report, which outlines increased prosecutions 
and convictions associated with mortgage fraud and related 
kinds of criminal activity. Those developments are very 
positive, and I really want to commend your efforts in this 
area.
    Twice as many defendants were charged in mortgage fraud 
cases in 2010 as in 2009, and twice as many convictions and, 
roughly, twice as many people were sentenced at every level of 
criminal severity, and that is very good news in sending a 
message, a deterrent message about the severity and seriousness 
of this Administration in dealing with this kind of crime.
    The 533 defendants that were found guilty of mortgage fraud 
last year are a dramatic increase from the 235 the year before, 
but I think everyone here, and I know both of you, being very 
experienced and expert prosecutors, agree that the scope of the 
problem and the magnitude of what remains to be done is 
certainly very daunting and important.
    And that is partly why we are here today, to make sure that 
the progress continues and, also, that the public understands 
the difficulty of doing these cases, and that is the second 
point I want to make here.
    Not only have you made progress, but I think you have 
amassed the infrastructure and the cooperation that is 
necessary to address these problems going forward. A lot of 
people simply do not understand these are very document-
intensive, resource-demanding cases.
    They are not like the bank robberies that we used to do 
when I was United States attorney in Connecticut years ago, 
which were relatively simple cases. We moved to white collar 
crime fraud, which was more demanding, and the kinds of crimes 
that you are investigating and prosecuting are much more 
demanding and difficult to investigate and prosecute, because 
you need not only dedicated and skilled professionals, which we 
have always had in the FBI and the U.S. attorneys' offices, 
but, also, individuals who are really schooled and trained in 
the kinds of investigation that needs to be done.
    So I want to thank you for your efforts so far and say that 
I look forward to working with you, cooperating with you, 
aiding you in Minnesota, where I know you are doing great work 
as the United States attorney and in Washington, DC, Mr. 
Adkins, where you are bringing together the kinds of resources 
that we need to do not only on mortgage fraud, but, also, the 
gasoline price spikes that we have seen and crimes that may be 
related to them.
    And as you know, I have advocated even more aggressive 
action in that area, and look forward to working with you. 
Thank you for being here today.
    Senator Klobuchar. Thank you very much.
    Senator Grassley from the State of Iowa.

STATEMENT OF HON. CHUCK GRASSLEY, A U.S. SENATOR FROM THE STATE 
                            OF IOWA

    Senator Grassley. Thank you very much, Madam Chairman, and 
I congratulate you on your leadership of this committee.
    It is a Committee that, when I chaired it in the 1980s, the 
subcommittee, I should say, when I chaired it in the 1980s, we 
established a record that was able to help us get the false 
claims bill passed, and that bill, as you know, has brought $28 
billion back into the Federal Treasury.
    Senator Klobuchar. Those are big shoes to walk in there, 
Senator Grassley. Thank you.
    Senator Grassley. You bet. Today's hearing provides us the 
opportunity to fulfill our constitutional duty and a continuing 
basis to conduct oversight. It is also an opportunity to 
further address fraud against American taxpayers, an issue that 
is not a partisan one. It is one that, obviously, a lot of us 
take very seriously.
    Most recently, this Committee held a hearing on fraud 
enforcement efforts of the Justice Department in January. 
Unfortunately, we just received responses to our written 
questions from that hearing last night after 5 p.m., nearly 5 
months after the questions were submitted.
    While I am glad the Justice Department was able to finally 
get answers to these questions returned to the committee, it 
does a disservice to all members of the committee, Republican 
or Democrat, to get them after 5 p.m. the night before the next 
hearing on the same subject.
    Notwithstanding the 5-month delay in receiving those 
written answers to our questions, Senator Leahy and I, joined 
by Senator Klobuchar, introduced the Fighting Fraud to Protect 
Taxpayers Act in May. This important legislation provides a 
number of fixes to the criminal code to assist in fraud 
enforcement, as well as providing additional resources to the 
Justice Department to combat fraud.
    It provides these resources from fraud recoveries without 
utilizing taxpayers' resources. The Committee reported the bill 
by a strong bipartisan vote, and it is now on the Senate 
calendar.
    While our bill addresses important legislative changes to 
help combat fraud, important work remains. This hearing is a 
part of that continued work. By conducting continued oversight, 
we can ensure that the Justice Department is targeting fraud 
aggressively on behalf of our taxpayers.
    This is especially important given the significance of 
annual government expenditures in programs like Medicare and 
Medicaid, Defense Department procurement, not to mention the 
increased expenditures over the last few years, including the 
President's $1 trillion stimulus spending, the AIG bailout, the 
auto industry bailout, the government conservatorship of Fannie 
Mae and Freddie Mac, and the TARP program.
    Understanding the significant expenditures of taxpayers' 
dollars, President Obama signed an executive order in November 
2009 creating the Financial Fraud Enforcement Task Force. The 
task force is ``designed to strengthen the efforts of the 
Department of Justice to investigate and prosecute significant 
financial crimes and other violations relating to the current 
financial crisis and economic recovery efforts.'' That is the 
end of a quote about the establishment of the task force.
    General Holder stated that the task force will, ``wage an 
aggressive, coordinated and proactive effort to investigate and 
prosecute financial crimes.'' He added, ``not just hold 
accountable those who helped bring about the last financial 
meltdown, but to prevent another meltdown from happening.''
    While I appreciate the Attorney General's comment on the 
task force, I want to know more about how the task force is 
operating and whether it is achieving the stated goals of the 
President and AG.
    Also, all too often, here in Washington, task forces and 
commissions are created to make people think that they are 
doing more than they actually are. It is a way for public 
servants to tell the American people they are addressing a 
problem, when nothing really changes. I want to hear from 
witnesses about how the task force has furthered the fraud 
fight.
    For example, I am concerned that the task force may, in 
fact, be too broad in its missions. The task force is made up 
of a steering Committee chaired by the deputy attorney general, 
vice chaired by associate attorney general. There is also a 
training and information-sharing committee. Then there is a 
separate victim rights committee. There are also five separate 
working groups within the task force. Each of those separate 
working groups has no less than three participating Federal 
agencies.
    It appears that a lot of time and effort could be expended 
just meeting and coordinating all these task forces and working 
groups. This is time that could be spent actually investigating 
and bringing prosecutions, and I want to hear some specific 
examples of how this has added value and not simply facilitated 
a more bureaucratic process combating fraud.
    I am also concerned that the task force may be a press 
release collection agency utilized by the Justice Department to 
collect examples of investigations and prosecutions that would 
otherwise have been brought.
    My staff has heard this specific accusation from agents and 
attorneys in the field. So I would like to learn a bit more 
about why the task force is necessary and about how taxpayer 
dollars are utilized to facilitate all meeting and coordinating 
it has added to the fighting of the fraud process.
    I thank you, Madam Chairman.
    Senator Klobuchar. Thank you very much, Senator Grassley.
    Can the witnesses please stand to be sworn?
    [Witnesses sworn.]
    Senator Klobuchar. Thank you. As I mentioned, we are 
pleased to be joined today by, first of all, B. Todd Jones, who 
is the U.S. Attorney for the State of Minnesota. He also serves 
on the steering Committee of the task force and chairs the 
Attorney General's Advisory Committee of U.S. Attorneys.
    Mr. Jones also served as U.S. Attorney from Minnesota from 
1998 to 2001 and served on active duty with the United States 
Marine Corps from 1983 to 1989, and again in 1991 during 
Operation Desert Storm.
    He graduated from Macalester College in 1979 and the 
University of Minnesota Law School in 1983.
    When I was the county attorney, the DA in Minnesota, he and 
I worked extensively together.
    And, Mr. Adkins, you will be happy to know that Todd Jones 
and I actually went together once to the White House, my very 
first visit to the White House--I had not even been on a tour 
before--and we were invited in to talk about the introduction 
of a crime bill, the hate crimes bill.
    And during the speeches where President Clinton spoke and I 
spoke, I mentioned Todd Jones and mentioned our coordination 
and I said, ``Mr. President, we work together so well, we talk 
on the phone nearly every day.'' And so then the next day, I 
got home and it was a Saturday and I got a phone call and it 
was from Todd Jones.
    I go, ``Why are you calling me on a Saturday? '' He said, 
``You told the President of the United States we talk on the 
phone nearly every day and I am taking it seriously.''
    [Laughter.]
    Senator Klobuchar. So he is truly an honest man.
    Next, we have Robb Adkins, who has been the executive 
director of the task force since February 2010. Mr. Adkins 
became a Federal prosecutor in 2001 and was named chief of the 
U.S. Attorney's office in Santa Ana, California in 2007.
    He is a recipient of the Attorney General's Award for 
Exceptional Service, the highest commendation in the Department 
of Justice, and was once named one of the top 20 lawyers in 
California under the age of 40.
    He graduated from Stanford University and the Georgetown 
University Law Center.
    Mr. Adkins, I understand you are leaving the task force in 
July, and I would like to thank you for your tireless work. I 
know you have done a tremendous job in combating fraud and I 
wanted to make sure that we all thank you for your service over 
the last year and a half, as well as your time as a prosecutor.
    I look forward to hearing more about your work with the 
task force.
    Mr. Jones, if you would like to begin.

 STATEMENT OF B. TODD JONES, U.S. ATTORNEY FOR THE DISTRICT OF 
               MINNESOTA, MINNEAPOLIS, MINNESOTA

    Mr. Jones. Thank you and good morning, Madam Chair, Senator 
Grassley, Senator Blumenthal. It's a privilege to be here with 
you today.
    As you all know, the financial crisis has, in some way, 
impacted virtually every American across the country, and the 
underlying purpose of the Financial Fraud Enforcement Task 
Force is to address that crisis with an equally comprehensive 
response.
    Senator Klobuchar, you have already talked about it. I know 
you understand the value of collaboration and, as you had 
mentioned, 12 years ago, when we worked together on a number of 
issues of mutual concern, including fraud, when you were the 
county attorney and I had the privilege of first serving as the 
United States attorney, the importance collaboration was always 
at the forefront.
    As we learned then and we know now, different partners, law 
enforcement partners have different resources, they have 
different tools in their box, and the goal overall of effective 
law enforcement is to bring everything we have collectively to 
bear on the issues at hand.
    That is what this multiagency task force is about. It is 
not, in strict terms, an operational traditional task force. We 
have task forces like that all across the country, composed of 
agents and prosecutors working every day, making cases across 
the country.
    This task force operates at the 30,000-foot level, so to 
speak, providing coordination and training, sharing information 
and expertise among all the partners who are all on the same 
side working toward the same goal.
    The President created this task force, as has been said, in 
November of 2009. It is composed of more than 25 Federal 
agencies, as well as state and local partners, and it is one of 
the largest coalitions ever brought to bear in confronting 
fraud.
    It is chaired by the Attorney General of the United States 
and includes the criminal and civil divisions of the Department 
of Justice, as well as all 94 United States attorney offices.
    But this is not just a DOJ initiative. The task force 
includes, just to name a few, Department of Treasury, HUD, 
Commerce, Homeland Security, numerous Federal inspectors 
general, the FDIC, the FTC, the SEC, the IRS, special inspector 
general for TARP, and the Recovery Accountability and 
Transparency Board, as well as numerous states attorneys 
general.
    The executive order directs us to use the full criminal and 
civil enforcement resources of all these different agencies to 
do five things: first, investigate and prosecute; second, 
recover criminal proceeds; third, address discrimination in the 
lending and financial markets; fourth, enhance coordination 
among Federal, state and local authorities; and, last, to 
conduct training and outreach to the public.
    As Chairman of the Attorney Generals Advisory Committee, I 
am honored to serve on the steering committee, along with 
representatives from the other agencies. However, the 
leadership of this group extends beyond the Beltway.
    For example, my colleague in the Southern District of New 
York, Preet Bharara, the United States attorney, along with 
Lanny Brewer, the Assistant Attorney General of the Criminal 
Division, representatives from the FTC and the CFTC, chair the 
Securities Fraud Working Group.
    On the West coast, the Mortgage Fraud Working Group is co-
chaired by another one of my colleagues, U.S. Attorney Ben 
Wagner in the Eastern District of California, and he knows 
firsthand the impact of the mortgage crisis because his 
district has one of the highest foreclosure rates in the 
country.
    To give you an idea as to the multiagency approach of the 
task force, he chairs that group with representatives from our 
civil division here in Washington, DC, the FBI, HUD OIG, and 
the National Association of Attorneys General.
    The task force also has developed a comprehensive network 
establishing financial fraud coordinators in every United 
States attorneys' office. The task force has equipped this 
network with more tools and better trained personnel by 
compiling and distributing a resource guide of financial 
databases, and information is important, holding national 
training conferences, launching a Website with fraud reporting 
and distributing information about emerging fraud trends.
    I know firsthand the value of having this kind of 
individual in the offices, because all of the civil and 
criminal assistant U.S. attorneys that work with me can rely on 
our fraud coordinator to literally wire them in nationally in a 
way that hasn't really occurred before with all of the best 
practices and provide the governmentwide network that has got 
the complete alphabet soup of financial regulators at their 
disposal.
    Many of those agencies my folks have never worked with 
before.
    I see my time is running out. I will pass it off to Robb 
Adkins, and look forward to addressing any of the questions 
that you have.
    Thank you.
    [The prepared testimony of Mr. Jones appears as a 
submission for the record.]
    Senator Klobuchar. Thank you.
    Mr. Adkins.

 STATEMENT OF ROBB ADKINS, EXECUTIVE DIRECTOR, FINANCIAL FRAUD 
             ENFORCEMENT TASK FORCE, WASHINGTON, DC

    Mr. Adkins. Good morning, Chairman and distinguished 
members of the subcommittee. It is a privilege for me to appear 
before you today to talk about the Financial Fraud Enforcement 
Task Force and our continuing fight to address fraud.
    I'm honored to appear before you today with Todd Jones, the 
U.S. Attorney for Minnesota, who is a national leader of this 
effort on the task force and is also a national example for the 
fraud enforcement that he does in his home district in 
Minnesota.
    As U.S. Attorney Jones has described, the task force has a 
broad membership and mandate to focus on the full array of 
financial fraud. That includes mortgage fraud, investment 
fraud, securities and commodities fraud.
    It also includes those efforts that are designed to help 
the economy recover and to address those who would seek to 
defraud those efforts around the country.
    As more fully detailed in the task force's annual report, 
which the Chairman described, there are many ways in which the 
task force has been very successful within its first year. I 
want to highlight a few of them and discuss more of them with 
you.
    As Senator Grassley correctly noted, the task force is very 
broad. That breadth comes with challenges, but it also comes 
with strengths.
    One of the great strengths of the task force is training 
and information-sharing, which is critical to unlocking the 
strength from such a large coalition. In pursuit of that goal, 
the training and information-sharing Committee of the task 
force has been active in its first year. It has brought 
together financial fraud coordinators, including the one in 
Todd Jones' district, to a national training in October 2010, 
bringing together a robust set of white collar professionals 
from around the country to discuss trends and how to move 
forward.
    The Mortgage Fraud Working Group is tasked with addressing 
mortgage fraud, which, as Senator Blumenthal correctly noted, 
is a broad array of fraud. From loan origination fraud to 
reverse mortgages to short sale schemes to builder bailouts, 
loan modification scams and foreclosure rescue scams, it is a 
wide array of fraud that is addressed by that group.
    And mortgage fraud trends show that the fraud evolves with 
the cycles of the housing market and varies by geographic 
region. The working group has held regional summits around the 
country with enforcement officials at the operational level.
    I have seen in concrete ways how collaboration at these 
summits has led to better enforcement. For example, at these 
summits, representatives FinCEN and from HUD's office of 
inspectors general combine their datasets in order to produce 
essentially a target list of individuals who are engaging 
potentially in fraud.
    This serves a valuable purpose to those in the field. One 
of the great challenges they face in addressing mortgage fraud 
is its atomistic nature and the great prevalence of it.
    In crude terms, it allows them to get the best bang for 
their buck in terms of where to focus those resources to 
address that problem in a targeted and efficient way.
    Another area of focus for the task force is potential 
fraud, waste and abuse of Recovery Act funds. Because the task 
force was established at a time when these stimulus funds were 
still at the stage that they were being distributed, much of 
the work of that working group has focused on fraud prevention 
and detection.
    At the close of 2010, more than 100,000 professionals 
responsible for awarding and overseeing Recovery Act fund 
disbursements, as well as investigators, prosecutors and agents 
were trained as part of this effort, which we believe is one of 
the largest fraud prevention training efforts in history.
    The task force is, similarly, focused on efforts to combat 
fraud, waste and abuse with respect to the TARP program. They 
have engaged in successful efforts to partner the special 
inspector general of the TARP program with U.S. attorneys' 
offices around the country, and there have been good results in 
this area.
    SIGTARP, along with other task force members, have brought 
cases, including Park Avenue Bank, which was one of the--which 
was the first conviction of an individual who was attempting to 
defraud the TARP program of $11 million.
    Another working group of the task force focuses on 
securities, commodities and investment fraud, and brings 
together a broad array of impressive subject matter experts, as 
described by U.S. Attorney Jones.
    In its first year, the working group members conducted 
workshops on important issues such as the Dodd-Frank Wall 
Street Reform and Consumer Protection Act, investigations and 
prosecution of investment fraud schemes, and parallel criminal 
and civil proceedings.
    During 2010, working group members investigated and 
prosecuted numerous securities and commodities fraud involving 
large, complex cases against executives at the highest levels. 
For example, different task force members, including the 
criminal division, the U.S. Attorney in the Eastern District of 
New York, as well as SIGTARP, charged Lee Bentley Farkas, who 
was the Chairman of a company called Taylor, Bean & Whitaker, 
for a fraud of more than $2.9 billion. That contributed to the 
failures of one of the 25 largest banks in the United States 
and one of the largest privately held mortgage lending 
companies.
    Farkas was convicted at trial on all counts in April 2011, 
and is, in fact, scheduled to be sentenced this morning in the 
Eastern District of Virginia.
    Last, and definitely not least--and I see that I am over my 
time--the task force believes that we cannot prosecute our way 
out of this crisis. Public outreach, consumer financial 
literacy, and assisting those to prevent themselves from being 
victimized is important. We have an online consumer-based 
Website, stopfraud.gov, that is designed to do that.
    Thank you, Chairman. I look forward to any questions that 
any of you have.
    [The prepared testimony of Mr. Adkins appears as a 
submission for the record.]
    Senator Klobuchar. Thank you, Mr. Adkins. I think people 
learned, especially 9/11, the importance of exchanging 
information and having people aware of things, whether it is a 
terrorist network or whether it is a white collar crime network 
right here in the United States.
    So I am a big fan of trying to exchange this information 
and trying to get after some very sophisticated crooks. But you 
know Senator Blumenthal is a former prosecutor and Senator 
Grassley is certainly someone who counts the money and makes 
sure the taxpayers get the bang for the buck.
    So I am very focused on what we have seen in terms of 
prosecutions coming out of the efforts. We understand the task 
force--the U.S. attorneys' offices and the county attorneys' 
offices are prosecuting those on the frontline, but the job of 
the task force, I figure, is to get out all that information so 
that they can do their jobs better and quicker.
    According to the first year report of the task force, the 
number of mortgage fraud prosecutions went up significantly in 
the task force's first year. I know it is hard to quantify the 
precise impact of a task force, but generally speaking, how has 
the existence of the task force helped increase the number of 
prosecutions?
    Mr. Adkins. Thank you, Chairman. My background, as you 
noted, is also as a Federal prosecutor and I am well aware that 
prosecutions occur at the line level throughout the country, in 
the U.S. attorneys' offices and in the field offices of the FBI 
and elsewhere.
    And you are correct that the task force, as U.S. Attorney 
Jones mentioned, is designed to help them, that is the model, 
to support them in the cases that they bring; not as an 
overarching agency that would duplicate their efforts, but 
rather to help enable them through cooperation, information-
sharing, training, and coordination.
    The information-sharing efforts and the training efforts in 
the mortgage fraud arena are very important. I don't think that 
you should look to the increase in mortgage fraud prosecutions 
and say that those were directly caused, each and every one, by 
the task force, because that is not the model. It is a metric, 
though, to see success and it is the important metric, which is 
enforcement.
    We want to get out there not just criminally, although that 
is certainly important because it serves the most valuable 
deterrent that you can have, but, also, with respect to other 
tools that we can use.
    As you saw in the annual report, one of the greatest 
success stories of the task force has been bringing together 
some of these other entities that previously had not been as 
coordinated or brought into the fight in mortgage fraud.
    I am talking about state attorneys general working very 
closely with U.S. bankruptcy trustees, with the FTC, with the 
FBI and the U.S. attorney's offices, and even within the 
Department of Justice, not just criminal prosecution, but 
FIRREA and very important civil enforcement that can be 
brought, not to the exclusion of criminal cases, but to 
complement it, because we know that we can't just criminally 
prosecute all these cases away and we need to bring every tool 
we have to the toolbox.
    And so specific things that the task force has done, in 
addition to that targeted data compilation that I described 
earlier, which is very valuable to the field, we have taken 
that show on the road, so to speak, to those areas that are 
hardest hit around the country in mortgage fraud in order to 
interface with the 94 different mortgage fraud working groups 
and task forces at the operational level so that we can get 
data from DC sometimes that doesn't always get to the field 
directly in their hands to assist with prosecution.
    Senator Klobuchar. Could you also tell me about Operation 
Broken Trust, which targeted fraud against investors?
    Mr. Adkins. Yes. Operation Broken Trust was an effort in 
December of 2010. One of the issues that we were hearing, for 
example, when the financial fraud coordinators came together in 
October of last year, was that there is an incorrect perception 
that investment schemes, such as Ponzis and the like, what we 
often refer to and I am sure you have referred to as affinity 
frauds that rely upon a level of trust and relationship between 
the victim and the fraudster, that there is an incorrect 
perception that when the economic tide receded, it left all 
those flopping fish on the beach.
    And by that, I mean all those Ponzi schemes unwound, such 
as Madoff, and that there are no such schemes occurring today.
    That is incorrect and we wanted to draw a focus to that in 
the most powerful way we could to get into the hands of 
potential victims, but even current victims who could report 
fraud, that they are occurring and that it is an increasing 
problem, especially as people look potentially to publicly 
traded markets and look for other ways to invest their money, 
through PPMs and other means.
    And so we put together a snapshot, a window of 3.5 to 4 
months to find how prevalent it was and to get that message 
out, and we found startling results, over 120,000 victims in 
cases that were brought during that period.
    It's part of the outreach. It's part of the effort to reach 
the public, because as I said in my opening remarks, we know we 
can't just prosecute our way out of it. We need the public's 
help.
    Senator Klobuchar. Well, I have also found, specifically in 
the white collar area--I remember when we prosecuted some 
pilots for tax fraud. Once you start doing that, I think of no 
other area that is quite like this, and people see examples, 
suddenly, in the case of Minnesota, millions and millions of 
dollars suddenly got paid into the treasury, because other 
people that might have been engaging in schemes that we did not 
have the information on suddenly decided to pay up.
    So I think it can have not only the prevention of the 
fraud, but actually can help fiscally better than any other 
area that I can think of when you show the examples that you 
are willing to go to bat and put people in jail.
    U.S. Attorney Jones, could you just talk about some 
examples from the frontline in Minnesota of some of the white 
collar cases that have been particularly successful and how 
many millions of dollars they involved?
    Mr. Jones. Senator, we have been very busy in the district 
of Minnesota, as a lot of my colleagues around the country 
have, on the fraud front, and it's not always obvious.
    So I think that to address Senator Grassley's concern about 
slapping a label on a press release and taking credit for work 
that really isn't related to the Financial Fraud Enforcement 
Task Force is a misplaced notion. A lot of this work is in the 
pipeline. Anyone that has been out in offices know that these 
cases are complicated, they take time.
    And so we have a fully stoked pipeline of fraud cases, many 
of which are generated by the increased focus and the 
collaboration and coordination that is going on right now as a 
result of the Financial Fraud Enforcement Task Force effort.
    Senator Klobuchar. Can you give me some examples of ones 
that either have been finalized----
    Mr. Jones. There are two examples.
    Senator Klobuchar. People are in jail.
    Mr. Jones. Well, you know that we have some people in 
jail----
    Senator Klobuchar. Yes.
    Mr. Jones--from the district of Minnesota. First and 
foremost is Tom Petters, who is the CEO of a corporation that 
was involved in a massive Ponzi scheme, $3.5 billion ponzi 
scheme. And within a period of 18 months, we went from an FBI/
IRS investigation to a full-blown trial, to a sentencing in 
April of last year, where Tom Petters received the largest 
fraud sentence ever of 50 years, and he is now in the custody 
of Bureau of Prisons in Fort Leavenworth. And that was all done 
in 18 months.
    More recently, to get to the point of this collaboration 
that is going on, Trevor Cook, another person who was involved 
in foreign exchange that we worked very closely with the SEC 
and the CFTC, in part, through the efforts of this, to not only 
criminally prosecute Trevor Cook, and he received a sentence of 
25 years, but also to take civil recovery action for assets, 
appoint a receiver, and protect what we could recover for the 
victims of his fraud.
    Those are just two examples from Minnesota, but that has 
been replicated across the country.
    Senator Klobuchar. Thank you very much. It was a good 
answer.
    Senator Grassley.
    Senator Grassley. Well, thank you, Madam Chairman.
    This task force was created in November of 2009. Senator 
Leahy and I wrote the Fraud Enforcement Recovery Act of 2009, 
signed into law May of 2009.
    The legislation increased the resources available to the 
Justice Department to combat criminal and civil fraud. It also 
provided additional resources to the FBI and the SEC.
    Combating fraud was on Congress' radar before the creation 
of the task force. Given that, regardless of the existence of 
the task force, fraud-related crime was being investigated and 
prosecuted.
    Consequently, it is difficult to determine exactly what 
investigations and prosecutions are directly attributable to 
the task force.
    So, Mr. Adkins, I would like to have you answer these 
questions. And they are not accusatory, they are just trying to 
get some information.
    How does the task force determine what cases were 
investigated and prosecuted as a direct result of the task 
force? And then I will have a couple other questions.
    Mr. Adkins. Well, thank you, Senator Grassley. And I should 
tell you that--and I do want to thank you, also, as well as 
Senator Leahy, for FERA. As you know, and I'll talk about--
hopefully, later, I will have an opportunity to talk about how 
directly the extension of financial institution definitions to 
non-bank lenders is a direct causal effect between that and one 
of the policy proposals that FinCEN, through the task force 
policy committee, has put out as a rule, which is to extend 
suspicious activity reporting not just to financial 
institutions, but then to extend it to those non-banking 
lenders.
    Your question is a good one. As I said before, my 
background and my personal view of the task force is that we 
need to support the AUSAs in the field, as well as the non-DOJ 
staff attorneys at the SEC and the FBI agents.
    The way that we determine which efforts and press releases 
and announcements that we highlight through the task force is 
dependent upon the executive order, which we have filtered into 
different working groups.
    You mentioned earlier, correctly, that there can be some 
bureaucracy involved in such a broad effort. The working groups 
are designed to try to address that, to try to put in place the 
subject matter experts that are at the point of the spear in 
those focused areas.
    And so mortgage fraud, securities and commodities fraud, 
Recovery Act fraud, which, as you know, relates to procurement 
and grant fraud in the Recovery Act area, TARP fraud, largely 
worked by SIGTARP, and certain nondiscrimination cases, those 
are the areas that the task force has prioritized through the 
executive order. Those are the areas we coordinate with the 
financial fraud coordinators, and those are the areas that we 
try to highlight and push out to get the maximum deterrent 
value.
    Senator Grassley. If you can answer this question. How 
often do the different working groups of the task force meet?
    Mr. Adkins. That is actually hard to answer. There are--it 
depends on the working group. For some of them, like the 
securities and commodities fraud working group, which is 
chaired by Preet Bharara in the Southern District of New York, 
Rob Khuzami, the director of enforcement with the SEC, David 
Meister, the director of enforcement at the CFTC, as well as 
Lanny Brewer, who you know well, each of them hosts meetings on 
a rotating basis, and the last one was actually hosted by the 
FTC up in New York a couple of weeks ago.
    That group, because of its size--and as you noted, we 
didn't start prosecuting fraud back in November 2009. That's a 
group that has been working together for some time.
    They meet regularly, typically, 2 to 3 months, but they 
also have individuals who are at a lower level within those 
organizations that I interface with on a weekly basis offline, 
outside of those more formalized groups. I find that to be very 
productive.
    Other groups meet much more regularly. In the mortgage 
fraud working group, they would have meetings, but they also 
would hold summits around the country. They have subgroups that 
would get together on particularized issues.
    And so some meet on a more regular basis, every few months, 
others meet much more frequently.
    Senator Grassley. We have the press releases that I have 
referred to. We have an annual report that I characterize as a 
summarization of those press releases.
    What other official work product is derived from the 
activities of the task force and the various working groups?
    Mr. Adkins. We put together, through the information--the 
training and information-sharing committee, compilation of the 
different fraud databases, fraud enforcement databases. This, 
surprisingly, had not been done previously.
    Amongst the alphabet soup of the Federal enforcement 
family, there exists many different types of datasets, and we 
put together a resource guide and got it out to the field 
through the financial fraud coordinators, allowing those, 
again, at the line level, getting around a bureaucratic 
response, getting it to the line level, where they can form, at 
the line level, those MOUs necessary to get access to that data 
to help with what they do.
    There are other things, like a USA bulletin that goes out 
to all U.S. attorneys around the country. We have put forth 
actually two separate USA bulletins that go out.
    It is a resource and training guide for the field, 
describing ways in which to confront particular difficult 
problems, including mortgage fraud and some of the others that 
I know that we've discussed.
    Senator Grassley. I have a series of questions. I do not 
know if we will get through all of them, but I would kind of 
like to get a handle on budget and financial control.
    According to your written testimony and the task force 
annual report, the mortgage fraud working group has held 
regional summits around the country, including Miami, Detroit, 
Phoenix, Columbus, Fresno, Los Angeles. Further testimony 
discusses training of attorneys and agents at the National 
Advocacy Center. Your testimony also described training 
material.
    Despite all of these deliverables and the travel required 
for these meetings, nowhere in the annual report of your 
testimony is there a discussion of a budget and accountabilty 
of tax dollars expended to fulfill the task force functions.
    I am concerned that by not having a formal budget, 
expenditures for travel could be unnecessarily high.
    Question. The executive order creating the task force 
states the department shall provide funding for the task force 
subject to the availability of appropriation.
    Is there a separate budget at the Justice Department for 
the activities of the task force; and, if there is not, why 
not?
    Mr. Adkins. I don't know that there is a separate budget 
for the task force, and I think the reason for it is the task 
force model.
    The task force, I think, would be ill served if it 
attempted to essentially put in place--and I know you are not 
suggesting this--an agency structure that would be duplicative 
of the efforts that are already ongoing.
    The task force model is one in which we enable those who 
already are the experts--they know how to prosecute these 
cases, they know how to regulate certain markets, but to put 
them in places and to, frankly, co-opt some of the efforts that 
are ongoing so we can take one part of the Federal family and 
put it in touch with another, grab folks at the state level and 
bring them in so they can work better.
    You mentioned the NAC training, the National Advocacy 
Center. That was originally planned--there have been several 
National Advocacy Center trainings that were going to occur 
anyway.
    What we did was we made them better, in my view. We brought 
in Neil Barofsky, the Special Inspector General of the TARP 
program, to speak to the AUSAs in their trainings so they can 
see a broader array of fraud resources that they can use in 
their everyday lives out in the field.
    That is the model. It is not so much to always create, but 
to use the resources and the dedicated individuals who have 
decided to be members of this effort so that we can better use 
the funding that does exist amongst the Federal and state 
families.
    Senator Grassley. I will follow-up with some questions 
later on that. I will stop for now.
    Senator Klobuchar. Thank you very much, Senator Grassley.
    Senator Blumenthal.
    Senator Blumenthal. Thank you, Madam Chairman.
    I have some questions focused particularly on gasoline 
prices and the commodities markets that are related to fuel 
and, soon, heating oil, which, even though now it is pretty 
warm outside, will be a pressing topic pretty soon.
    And as you know, the national average is close to $4 a 
gallon. To be specific, I think it is about $3.54 a gallon. In 
Connecticut, it is $3.92 a gallon, which is way higher than it 
has been.
    In my view, the trends that we have seen lately in the 
markets cannot be explained solely by supply and demand, and 
the creep down in those prices after some developments and 
actions by the Administration and other law enforcers I think 
substantiate my view that speculation and possibly illegal 
manipulation of the markets is to blame, at least to some 
extent.
    And I welcomed and applauded the decision to create the oil 
and gas price fraud working group within your task force. I 
applauded and commended the Federal Trade Commission in 
initiating an investigation, a wide-ranging inquiry, into fraud 
and manipulation relating to gas prices at every level of the 
industry.
    So far, I note, with some regret, the Department of Justice 
has not announced any such investigation.
    So my question is, can you tell us whether the Department 
of Justice has initiated any actual civil or criminal fraud 
investigations into potentially illegal speculative activity in 
the futures markets or any other markets that are related to 
fuel?
    Mr. Adkins. Thank you. The oil and gas price fraud working 
group, which was established some months ago, as noted in the 
title, it focuses on fraud. It's not an energy policy group or 
anything like that and, as you noted, it has brought together 
different partners, like the FTC, the CFTC, states' attorneys 
general, those very same types of relationships that we have 
tried to use to make ourselves better at fraud enforcement.
    I will admit that oil and gas price fraud is not something 
that is part of my personal background as a prosecutor, and so 
it has been a learning experience for me, as well, which is a 
good thing.
    The FTC, it is my understanding, and I have seen the 
announcement about their investigation into potential 
anticompetitive or manipulative conduct in the wholesale oil 
area. The department, as you know, does not announce 
investigations, if there are any, and we aren't in a position 
now to announce if there are any investigations. We typically 
speak when we charge or act.
    Different agencies have different standards in how they 
address that. I can tell you that the department is fully 
engaged in that effort. Different components, including the 
antitrust division, is fully engaged, and I think that we're 
playing a valuable role, especially in terms of the interface 
between the Federal family and the state attorneys general, who 
have very flexible authority in this area.
    Senator Blumenthal. Well, let me just suggest that the 
rule, as I understand it, is that the Department of Justice 
does not announce investigations, but sometimes, particularly 
the antitrust division, makes known its interest and, in fact, 
sometimes makes known its investigations. And the very powerful 
effect of the announced actions so far in bringing down prices 
and convincing the speculators that they are on the wrong side 
of history, on the wrong side of the markets, on the wrong side 
of the bets that they are making, is of benefit to the public.
    In fact, what we have seen, as Bart Chilton of the 
Commodities Futures Trading Commission has said, speculation is 
at an all-time high. Speculative positions are 64 percent 
higher since June of 2008.
    All of the indicia are there to indicate that an 
investigation by the antitrust division or some part of the 
Department of Justice is certainly appropriate and necessary 
here.
    And I understand that, as U.S. Attorney Jones said, your 
task force is looking at this area from the 20,000 or 30,000-
foot level, but you certainly have the authority and, in my 
view, the responsibility to drive those investigations at the 
1-foot level in the Department of Justice, which is where they 
should be driven.
    Mr. Adkins. And I appreciate that. I think that I could 
repeat what the Attorney General has said in this area, which 
is that we are very aware of it. We are looking into it.
    We've brought all those components and agencies and 
regulators together so that we can look at this issue to pursue 
any fraud, if it occurs. And that while we all understand that 
there can be legitimate market forces that change the prices of 
gas or any other commodity, it is an area of concern that we 
want to make sure that we are doing all we can.
    It is just good government to bring the folks together to 
make sure we are focused on exactly the issue that you raised.
    Senator Blumenthal. What is the position of the task force 
on whether there should be position limit? I do not know 
whether you are familiar with that issue in the Commodity 
Futures Trading Commission area, but, obviously, position 
limits would help diminish the power of speculators to corner 
the supply in certain areas, and I believe strongly that we 
should have those limits as soon as possible.
    Mr. Adkins. I would have to defer to my much more 
sophisticated colleagues at the CFTC and elsewhere on position 
limits.
    As I said before, while I have prosecuted some commodity 
fraud cases, this has been a learning experience for me, as 
well, in the oil and gas price area.
    Senator Blumenthal. Well, I would like to suggest and 
request from the task force that it give us a position on 
whether there should be position limits and what other measures 
and steps the Commodity Futures Trading Commission should take, 
because I believe it is part of your task force; is it not?
    Mr. Adkins. Correct, and a part of this individual working 
group.
    Senator Blumenthal. And I would request that the task force 
provide the Committee with a position on that issue.
    Mr. Adkins. Well, thank you. And I will definitely bring 
that back to them, and I appreciate your interest in this area.
    Senator Blumenthal. Thank you. Thank you very much, and 
thank you both for your very good work.
    Mr. Adkins. Thank you.
    Senator Klobuchar. Senator Grassley.
    Senator Grassley. Yes. I thank you, Madam Chairman, for 
letting me go ahead of your second round.
    I would like to continue with you, Mr. Adkins, along this 
budget line. You have answered the first question as best you 
could because of the purpose of the task force. It does not 
have a budget then. So let us move on to the next question.
    From what specific accounts are appropriated funds drawn 
and utilized to fund the activities of the task force?
    Mr. Adkins. I don't know the answer to that question either 
in the DOJ or with respect to the 25 other----
    Senator Grassley. Then let us leave it and you answer that 
in writing. Would you?
    Mr. Adkins. Very well. Thank you.
    Senator Grassley. Let me go on then. Is official travel 
authorized for any of these meetings; and, if so, is there a 
separate budget for the travel?
    Mr. Adkins. I don't believe--I believe official travel is 
authorized. The reason I couldn't say for sure is that you've 
got components within DOJ, for example, the antitrust division, 
the civil division, the civil rights division, the criminal 
division, the executive office of the U.S. attorneys, the 94 
different U.S. attorney's offices.
    I don't know exactly how each of them, even within DOJ, 
handle it. My surmise is they do it through official travel, 
because it is. Oftentimes, what we'll try to do is use, like I 
said before, existing facilities. We will try to use resources 
and dedicated personnel or people that are already in the 
region to represent us at those types of events.
    But there is, of course, official travel and cost 
associated with those efforts. Oftentimes, it's in replacement 
for other efforts that were going to be had, but not on such a 
broad and collective level, where we're really bringing 
together individuals who might be trying to strike out on their 
own to do some of these efforts and do it in a comprehensive 
way, with maybe a bigger target audience and a better way of 
pushing it out to the field.
    Senator Grassley. What I think I will do is--you might not 
have the information for three or four other questions. I think 
I will turn those in to you and let you answer those in 
writing.
    If I could go to Mr. Jones. President Obama's stimulus 
program had a lot of taxpayers' money into it, into various 
projects and programs across the country.
    The Recovery Accountability and Transparency Board was 
created as part of that law to oversee how the funds were spent 
to ensure that they were not subject to fraud, waste and abuse.
    The recovery board and various inspectors general have 
found examples of grantees and contractors abusing Recovery Act 
dollars.
    For example, there was a significant fraud in the 
Department of Energy's home weatherization program in Illinois, 
where an audit found shoddy work and widespread fraud.
    My question to you. Why is the Recovery Act working group 
necessary given the existence of the Recovery Accountability 
and Transparency Board, which is made up of all the inspectors 
general of each agency awarded Recovery Act funds?
    Mr. Jones. Well, I think keeping with the consistency of 
the model, Senator, the Recovery Act working group has focused 
primarily, to date, on training for state, local, and Federal 
folks that are grant administrators. More than 50,000 officials 
and nearly 400 agents and auditors have been spun up through 
our training program, through the information-sharing, to 
investigate this fraud.
    And as Robb said earlier, this grant and procurement fraud 
is something that we would do and be engaged in anyway. I think 
what the working group does, as does the Financial Fraud 
Enforcement Task Force, is it allows us to leverage our 
resources in a more focused way.
    And it will shift over time. We fully expect that the 
Recovery Act training that investigators and auditors got will 
be of use, for example, in Alabama as they start to get 
resources to rebuild after the tragedies there with the 
tornadoes and anyplace else that there are FEMA funds or other 
Federal dollars gone into an area.
    This training lasts forever and it will live beyond the 
Financial Fraud Enforcement Task Force existence.
    Senator Grassley. Mr. Jones, my last question would start 
with the first year report from the task force, this quote. 
``The establishment of the working group last year added the 
full weight of law enforcement community behind the recovery 
board's efforts,'' end of quote.
    As a U.S. Attorney out there in the field working very much 
on the frontlines to prosecute fraud, regardless of the 
existence of the Recovery Act working group, would not the full 
weight of law enforcement already be behind investigating and 
punishing those who commit Recovery Act-related fraud; and, if 
not, then why not?
    Mr. Jones. Well, where we're at up in Minnesota, we have 
been keeping an eye on. I can tell you the one thing that, from 
a practical standpoint, that the Financial Fraud Enforcement 
Task Force has done is really enhance communication between our 
offices and the IGs and between the IGs and the FBI, and it has 
also enhanced our communications between the IGs and our civil 
divisions, and that is true in many U.S. attorney offices.
    You have done a lot of work on False Claims Act legislation 
throughout your career, Senator, and you, more than anyone, 
understand the importance of the civil aspects of the work that 
we do in our offices to recovery money from people who should 
not get that money or who have committed a fraud against the 
government.
    And I can tell you that many U.S. attorney offices have 
enhanced the resources that they have put on affirmative civil 
enforcement.
    Senator Grassley. Mr. Adkins, let me finish with you on 
this budget item. Now, I do not necessarily agree that the task 
force should not have a budget, but I wonder if it would not be 
worth--well, I guess I would kind of like to ask you if you 
would commit to putting together a budget for all the 
activities and operations of the task force, including specific 
budget line items for travel, conferences and training 
materials.
    Would that not be useful? And if you would not want to do 
that, why would that not be a good thing to do?
    Mr. Adkins. That is an interesting question and one which I 
think we would be happy to explore with you. I think that any 
way that we can improve what we do on the task force is 
something that we should embrace.
    My surmise is that there could be some difficulty with it 
once you get outside of the Department of Justice. Most of my 
time is spent with relationships--I would probably say slightly 
more than 50 percent of the time is spent with the alphabet 
soup of the Federal agencies and at the state level, and it 
does become difficult to track because it is different, I 
think, than some of the other task forces, like the Enron task 
force that I served on and some of the others.
    This is different. It is so much broader. That kind of 
tracking is problematic for the task force writ large. But I 
would be happy to explore that question, certainly, if it is 
something that could improve the work we do and be more 
efficient.
    Senator Grassley. Thank you, Madam Chairman.
    Senator Klobuchar. Thank you very much, Senator Grassley.
    Overall, Mr. Adkins, how would you describe the level of 
fraud that seems to have occurred--I think Senator Grassley was 
talking about it with respect to Recovery Act funds. And where 
do you see the level? Is it as much as people anticipated, 
given how much money is at stake?
    Mr. Adkins. Well, it is always hard to know a negative, but 
certainly there have been hundreds of billions of dollars in 
Recovery Act funds that have gone out and, in my view, the 
level of fraud is very low in relation to that.
    That's not to say that there won't be any, but I think that 
great credit is deserving for the Recovery Accountability and 
Transparency Board and its chairman, Earl Devaney, but also for 
the IGs around the country, as well as the historic training 
effort that has taken place.
    You never can tell whether a fraud would have occurred but 
for the training. It's hard to measure. But I believe that it 
has a great effect and I believe that that working group has 
brought in--there was a 4-year effort that you are probably 
familiar with called the National Procurement Fraud Task Force 
that was somewhat recently brought into the recovery fraud 
working group.
    That was done because there was some duplication and it was 
just great leadership at the IG level that we want to bring to 
bear so that we are poised to address the fraud if and when it 
occurs, but probably more importantly to the American public, 
try to prevent it from happening in the first place.
    Senator Klobuchar. Mr. Jones, as we look at potential 
legislation--Senator Grassley mentioned the bill that we have 
to try to get more resources through fines redirected into the 
white collar fraud area--can you think of any legislation that 
would be helpful not only just to the task force, but to you in 
your efforts to prosecute white collar crimes and fraud crimes?
    Mr. Jones. Well, Senator, as you know, the department, 
particularly the office of legislative affairs in the criminal 
division, has routine contact with your staff, with the 
Committee on Judiciary, and we have, on occasion at the AGAC, 
seen proposals for legislative fixes.
    Nothing particular comes to mind beyond some of the things 
that are a result of Supreme Court cases, but I know that there 
is a package of proposed legislation that the criminal division 
has worked on with your staff and with Senator Leahy.
    Nothing in particular comes to mind and I'm not going to 
get myself in trouble by suggesting something.
    Senator Klobuchar. I was sure we would have some ideas. 
Thinking back to when you were U.S. attorney your first round, 
what years was that, again?
    Mr. Jones. 1998 to 2001.
    Senator Klobuchar. 1998 to 2001. What do you see as the 
differences now, about 10 years later, in the types of white 
collar crimes that we are seeing around the country and the 
approach that our government is taking to those crimes?
    Mr. Jones. Well, three things Senator, and it's kind of 
like Groundhog Day. The evolution of the FBI has been 
absolutely amazing in 10 years to be an intelligence-based law 
enforcement agency, and, at the same time, they've got 
enhancements on their abilities to detect fraud sort of as a 
collateral to things that they have done on the national 
security front.
    They have also lost capacity, because a substantial core of 
the bureau, which, in a lot of districts around the country, is 
sort of a main partner on fraud investigations, has somewhat 
diminished because of the resourcing issue.
    But that has also allowed us to do some things with the IRS 
and with the IGs and look at civil enforcement on the fraud 
front.
    Senator Klobuchar. Part of it is, understandably, after 9/
11, a lot of the focus--I remember Director Mueller showing me 
their numbers--was put on working on some of the terrorism 
issues. And so that has probably contributed to some of the 
changes.
    Mr. Jones. The two other things that I've seen really is 
the volume of information--the volume of information that is 
out there because of technology and the use of the Internet as 
a platform to commit frauds and communicate----
    Senator Klobuchar. Over the last 10 years.
    Mr. Jones. Over the last 10 years. When I left in 2001, it 
wasn't--the Internet was emerging as a criminal platform, but 
it is much more enhanced now and it creates a lot of challenges 
with detecting fraud, with identity theft, and with unanimity 
for criminals globally to try and track down individuals that 
are accountable for perpetrating fraud, and that is a challenge 
that we are trying our best to address.
    Senator Klobuchar. Very good. And in terms of the work with 
the Department of Justice through this task force and others 
for coordinating, has that been enhanced, would you say?
    Mr. Jones. In my personal opinion, it has, because I 
remember the Corporate Fraud Task Force from 10 years ago, 
post-Enron. That was kind of very much a DOJ-driven, lots of 
boxes, lots of top-of-the-charts people sitting around a table 
and talking great thoughts and great plans.
    But this is very much one, because it is such a collection 
of 25 Federal agencies and because it includes a lot of 
outside-of-the-Department of Justice agencies at an operational 
level, the IGs and the auditors and the folks that are actually 
going to generate cases, I think makes this--one, gives it some 
sustainability, because it is adaptable to emerging trends, 
like oil and gas, and it also allows us to have some continuity 
with operators. They are learning from each other.
    That has been probably the biggest benefit that I've seen 
from a U.S. attorney office perspective is the information-
sharing that goes on. Not only are we doing cases in our 
district, we are also now sharing the lessons, modes of 
operation, individuals nationally through the financial fraud 
coordinator network, and we are also sharing some of the best 
practices both in the investigation and prosecution and best 
practices of the crooks, so that we can catch and get ahead of 
emerging fraud trends and maybe, just maybe, cut some things 
off before they emerge into a crisis level criminal justice 
issue.
    Senator Klobuchar. I appreciate that. I just never have 
taken you as someone, from your experience in the Marines and 
as a prospector, wanting to just sit around and be at meetings 
thinking great thoughts, although I am sure you do, Mr. Jones.
    Thank you.
    Mr. Jones. Thank you, Senator.
    Senator Klobuchar. Senator Blumenthal, do you have some 
additional questions?
    Senator Blumenthal. Just a couple of quick questions. And 
thank you, Mr. Jones, by the way, for your service in the 
Marine Corps, as well as as a prosecutor in the Department of 
Justice.
    Focusing, again, on the mortgage foreclosure issue, I 
wonder if you could tell us, either Mr. Adkins or Mr. Jones, 
whether the robo-signing practices that were uncovered some 
months, maybe now a year ago or more, have given rise to any 
criminal investigations and prosecutions.
    Mr. Adkins. You are correct. I think it came to light in 
late September and then increasingly into October of last year, 
what is commonly referred to as the robo-signing, although 
there is more to it than just that in the foreclosure 
documentation issues, as you know.
    The task force--I think this is a benefit. As U.S. Attorney 
Jones said, there are certain things that will hopefully 
outlive the task force. One that I'm most proud of and that I 
think is necessary to effective enforcement at the national 
level is great synergy between state and Federal enforcement 
authorities.
    In my experience, it's not something that we have always 
done as well as we could have, and that has been a primary 
focus. Because of that relationship-building that had already 
taken place as part of the task force, it had a very good 
platform to address this crisis, because so much of what is 
involved in that area is a state issue, but there is also a 
Federal issue with HUD and the FTC and the department.
    And so a working group has been put together that is 
focused on it. We won't discuss potential actions or 
investigations, but they are very focused on it.
    There has been discussion of the negotiations with certain 
financial institutions and loan services.
    And it is impossible to say right now what the result of 
all of that will be, but certainly it is a focus. Certainly, 
the department is committed to looking into it, and, in my 
estimation at least, I think critical to that success is a 
positive relationship between the Federal and state parties.
    Senator Blumenthal. I am aware, as we all are, of the state 
attorney general negotiations, but I am not aware of any 
Department of Justice investigation concerning potential 
criminal charges. The state attorneys general are apparently 
investigating and perhaps negotiating a possible resolution of 
civil claims.
    But is there any consideration to potential criminal 
charges?
    Mr. Adkins. Well, I think as has been stated publicly 
already, the department is committed to looking into this issue 
and being aggressive in pursuing it.
    We can't confirm criminal investigations, if there are any. 
The states have very flexible authorities in this area and, as 
you well know, some have criminal authority, some don't.
    Some have broad authority and there are different ways in 
which foreclosures take place in the different states. And so 
that is an important element of what we do.
    While I can't confirm the existence of a criminal 
investigation, we are certainly focused on it and we certainly 
are interested in continuing to pursue this matter with all the 
resources that we do have.
    Senator Blumenthal. Did you have anything to add?
    Mr. Jones. We have to tread lightly here because of the 
parameters that we're operating on about confirming 
investigations. But I do think it would be fairer to say that a 
number of my colleagues are very alert to the possibilities 
that some of the activities might rise to the level of criminal 
investigations and potentially prosecutions, and that is 
dispersed throughout the 94 U.S. attorney offices.
    And there are certain geographic areas of the country where 
there is a higher likelihood that something could evolve into a 
prosecution and there are areas that they're not. Is that 
cryptic enough, Senator?
    [Laughter.]
    Senator Blumenthal. Well, you are understandably and 
correctly, appropriately cautious.
    Mr. Jones. People are paying attention to the 
possibilities.
    Senator Blumenthal. And the only point I would make is that 
someone who signs a false affidavit that is going to be 
submitted to a court, with the proper evidence, would be in 
violation of Federal law and I would hope that it would be 
under investigation by the Department of Justice.
    Again, I want to thank you both for your very helpful and 
informative testimony today and for your work in this area. 
Thank you.
    Mr. Adkins. Thank you.
    Senator Klobuchar. Well, I want to thank both of you for 
testifying, and, also, both Senator Blumenthal and Senator 
Grassley for being here and sitting through the hearing and 
asking some good questions.
    I know that Senator Leahy would like to submit his 
statement for the record, which I will do.
    [The prepared statement of Senator Leahy appears as a 
submission for the record.]
    Senator Klobuchar. And I also want to thank Senator Leahy 
for his leadership and Senator Sessions in his leadership in 
this area of financial fraud.
    We will leave the record for the hearing open for 2 weeks. 
And I just want to thank--1 week--1 week. We are getting very 
efficient in the Senate now.
    We will keep the record of the hearing open for 1 week. And 
with that, I want to thank both of the witnesses for your work 
and your excellent testimony today.
    Thank you. The hearing is adjourned.
    [Whereupon, at 11:21 a.m., the hearing was adjourned.]
    [Questions and answers and submission for the record 
follows.]




                                 
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