[Congressional Record Volume 155, Number 30 (Friday, February 13, 2009)]
[Senate]
[Pages S2315-S2316]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
FINANCIAL FRAUD HEARING
Mr. KAUFMAN. Mr. President, I want to bring my colleagues' attention
to an important hearing held this past Wednesday by the Judiciary
Committee. We have been focused on the economy over the past few weeks,
and particularly on the recovery bill that will soon start saving and
creating jobs.
But there are more steps we need to take to restart our economy. One
step is to renew confidence in our markets, by cracking down on the
kind of criminal behavior that has contributed to our current crisis. I
am talking about fraud in our financial markets.
On Wednesday, Chairman Leahy convened a Judiciary Committee hearing
on financial fraud. We heard testimony from John Pistole, Deputy
Director of the FBI; Rita Glavin, Acting Assistant Attorney General for
the Criminal Division; and Neil Barofsky, Special Inspector General for
the Trouble Assets Relief Program.
I will ask to include in the Record, following my remarks, three
articles reporting on the hearing.
Two things became clear at the hearing: First, that the Justice
Department's Criminal Division, the FBI and the Special Inspector
General are deadly serious about finding and prosecuting financial
fraud.
FBI Deputy Director Pistole told the committee that the agency is
investigating 530 open corporate fraud investigations, including 38
directly related to the current financial crisis. He said the total
number of fraud investigations has nearly doubled, from 881 in fiscal
year 2006 to 1,600 in fiscal year 2008.
Second, we learned that Federal law enforcement needs additional
resources to do so effectively.
According to Deputy Director Pistole ``The increasing mortgage,
corporate fraud and financial institution failure case inventory is
straining the FBI's limited white collar crime resources.''
The FBI's very necessary shift of resources to counterterrorism
efforts has had a significant impact on its ability to investigate
sophisticated financial crime.
Currently, the FBI has only 240 agents investigating complex
financial fraud.
During the savings and loan crisis in the 1980s, the FBI had more
than 1,000 agents investigating financial fraud connected to that
scandal.
Mr. President, it is clear we need to scale up dramatically the
number and training of FBI agents investigating financial fraud,
because the financial meltdown of 2008 is much bigger than the savings
and loan crisis.
That is why I was proud to join with Chairman Leahy and Senator
Grassley to introduce S.386, the Fraud Enforcement and Recovery Act of
2009.
Mr. President, I look forward to working with Chairman Leahy and
Senator Grassley to pass this important legislation, and I applaud them
for their leadership.
Mr. President, I ask unanimous consent to have the three articles to
which I referred printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[From CQ Today, Feb. 11, 2009]
Spike in Fraud Investigations Taxing Law Enforcement Resources,
Officials Testify
(By Seth Stern)
More resources are needed to combat financial fraud, which
has soared amid the meltdown of financial markets, officials
told lawmakers Wednesday.
FBI Deputy Director John Pistole told the Senate Judiciary
Committee that the agency is investigating 530 open corporate
fraud investigations, including 38 directly related to the
current financial crisis. He said the total number of fraud
investigations has nearly doubled, from 881 in fiscal 2006 to
1,600 in fiscal 2008.
``The increasing mortgage, corporate fraud and financial
institution failure case inventory is straining the FBI's
limited white-collar crime resources,'' Pistole said in his
written testimony to the committee.
Others noted that the problem was likely to worsen as
criminals target funds from the financial bailout (PL 110-
343) and the economic stimulus measure being considered by a
House-Senate conference (HR 1).
``We stand on the precipice of the largest infusion of
government funds over the shortest period of time in our
nation's history,'' testified Neil M. Barofsky, the special
inspector general for the Troubled Assets Relief Program.
``Unfortunately, our history teaches us that spending so much
money in such a short period of time will inevitably draw
those seeking to profit criminally.''
Patrick J. Leahy, D-Vt., the Judiciary Committee chairman,
and Charles E. Grassley, R-Iowa, have introduced legislation
(S 386) to extend federal fraud laws to cover more mortgage
lenders and funds expended under the financial bailout and
authorize the hiring of additional federal prosecutors and
FBI agents.
``If we don't address this head-on, we'll have a hard time
chasing taxpayer money,'' Grassley said.
Pistole said the scale of the potential fraud dwarfs the
savings and loan crisis of the 1980s. He said 240 FBI agents
are currently involved in investigating mortgage fraud, as
opposed to the 1,000 agents and forensic experts who
investigated the savings and loan crisis.
``More must be done to protect our country and our economy
from those who attempt to enrich themselves,'' Pistole said.
``We're going to see demands on law enforcement really
increase'' with the stimulus package and financial bailout,
Rita M. Glavin, the acting assistant attorney general of the
Justice Department's Criminal Division, told the panel.
____
[From Newsday, Feb. 12, 2009]
Rise in Fraud Cases Is ``Straining'' FBI
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 yesterday in Washington.
The FBI also has more than 530 open corporate fraud
investigations, including 38 linked to the financial crisis,
he said.
``The increasing mortgage, corporate fraud and financial
institution failure case inventory is straining the FBI's
limited white-collar crime resources,'' Pistole said in
prepared testimony.
Yesterday's Senate Judiciary Committee hearing focused on
whether there should be beefed-up enforcement to cope with
the economic decline. The panel's chairman, Sen. Patrick
Leahy (D-Vt.), 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 corporate cases linked to the financial crisis have
the potential to be as complex as that of Enron Corp., which
collapsed in 2001. The cases involve companies that
``everybody knows about,'' Pistole said without naming them,
and 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 the proposed economic stimulus legislation likely will
result in increased criminal activity, Neil Barofsky, special
inspector general of the TARP program, said in prepared
testimony.
[[Page S2316]]
____
FBI Probes 530 Corporate Fraud Cases
(By Devlin Barrett)
(Washington)--The FBI is conducting more than 500
investigations of corporate fraud amid the financial
meltdown, FBI Deputy Director John Pistole told the Senate
Judiciary Committee on Wednesday.
Investigators are tackling an even bigger mountain of
mortgage fraud cases in which hundreds of millions of dollars
may have been swindled from the system, he told lawmakers.
Pistole says there are 530 active corporate fraud
investigations, and 38 of them involve some of the biggest
names in corporate finance in cases directly related to the
current economic crisis. Additionally, the FBI has more than
1,800 mortgage fraud investigations, more than double the
number of such cases just two years ago.
There are so many mortgage fraud cases to investigate, he
said, that the bureau is not focusing on individual
purchasers, but industry professionals generating fraud
schemes that could total as much as hundreds of millions of
dollars. ``It is a matter of lawyers, brokers or real estate
professionals that are systematically trying to defraud the
system,'' Pistole said.
Agents have even seen some instances of organized crime
getting involved in mortgage fraud, he said.
Also appearing before the committee was Neil Barofsky, the
watchdog of the government's $700 billion Wall Street rescue
package passed last year.
Senate Democrats are urging more spending to expand the
ranks of the FBI's financial fraud investigators.
After the 2001 terror attacks, about 2,000 FBI agents were
moved to counterterrorism work, and Pistole said they are
considering moving some of them back to buttress anti-fraud
efforts.
Senate Judiciary Committee Chairman Patrick Leahy, D-Vt.,
urged the FBI and the Justice Department to put people who
have committed mortgage fraud behind bars. ``Most people are
honest,'' Leahy said. ``The ones who are not honest in this
field are creating economic havoc and I want to make sure
that we're able to go after them. ``I want to see people
prosecuted . . . Frankly, I want to see them go to jail,'' he
said.
Barofsky, who was appointed the inspector general of the
ongoing financial bailout plan, suggested the best way to
clean up mortgage fraud is to pursue licensed professionals
in the industry, and make examples of them. ``They have the
most to lose, they're the most likely to flip, and they make
the best examples,'' said Barofsky, a former federal
prosecutor in New York.
____________________