What would you do if one night after a long day at work you came home to find your house ransacked and that you had been robbed? Now, what would happen if you called the police and no one came to investigate or were told to call someone else? You would be shocked and dismayed. Don't think this could happen? It already is happening and it's not just you, it's happening to your neighbors and friends as well. The thieves are getting away with millions of dollars and the Bush Administration is allowing it to happen.
The New York Times ran a story buried deep in their business section on October 19th about how the FBI is understaffed and overwhelmed because of the economic crisis the US is in right now. They simply cannot handle the flow of white collar crime cases coming in. The problem with this is not the fact the bureau is understaffed but that the alarm bells went off over four years ago and the Department of Justice and the Bush Administration did nothing about it.
After the September 11th attacks, because of the criticism the FBI received for it's failing to detect the events of that day, the bureau slashed its criminal investigative workforce by 1,800 agents and transferred them to terrorism and counterintelligence duties. Former and current officials say this has left the bureau seriously exposed in areas like white collar crime. The pressure on the FBI increased in the past several months due to the disclosure of criminal activity by executives at some of the largest firms in the financial collapse, including Fannie Mae and Freddie Mac.
Because of the depletion of the bureau's white collar investigators, business executives have been having difficulty attracting the FBI's attention in cases involving potential multimillion dollar fraud cases. Even Sam Antar, who helped mastermind one of largest securities frauds in the 1980s wrote on his blog, "As the heartless cold blooded criminal CFO of Crazy Eddie, the FBI was respected adversary that filled my stomach with butterflies and caused me many a sleepless nights as I feared their tenacity to successfully investigate my crimes. Unfortunately, the white collar criminals of today have less to fear from the FBI."
Another problem the bureau is having is top-notch, experienced FBI agents are leaving the agency for higher paying jobs in the private sector as soon as they qualify for retirement causing a brain drain within the bureau. Since 2001, internal documents from the FBI indicate that staffing for white collar crime has dropped 36% or 625 agents. The number of total criminal cases that the bureau has brought to Department of Justice for prosecution has dropped 26% since 2001. While prosecutions for fraud against lenders and banks has dropped 48% from 2000 to 2007.
According to the NYT article:
"In addition to the investigations into Fannie Mae and Freddie Mac, the FBI is carrying out investigations of AIG and Lehman Brothers as well as 1,500 other mortgage related investigations. Some FBI officials worry privately that the trillion dollar federal bailout of the financial industry may itself become a problem because it contains inadequate controls to deter fraud."
The FBI is planning on reassigning about 400 agents but some people inside and outside the Department of Justice have questioned out loud where these agents would come from and if they would be enough to handle the avalanche of cases being handled. Even if the FBI increases the number of agents handling white collar crimes, it doesn't necessarily solve the problem of effectively investigating these cases. White collar crime cases are becoming increasingly more complex and require enormous resources, time and experienced agents. Too often, these types of complicated cases fall apart because agents lack the patience, knowledge and experience to manage a successful criminal investigation.
These problems are not entirely the fault of the policies at the bureau. FBI officials realized of the growing danger posed by financial fraud in the housing sector back in 2003 but were rebuffed by then Attorney General John Ashcroft and the Congressional Budget Office when the bureau attempted to acquire more resources. From 2001 to 2007, the FBI sought an increase in funding to hire over 1,000 agents for criminal investigations not connected with national security. According to the New York Times, the bureau instead suffered a decrease of 132 agents while asking the Justice Department and Congress for an increase of $800 million but only received $50 million.
In 2004, the FBI warned publically that a flood of fraudulent mortgage deals had the potential to become an epidemic. Yet, the following year the FBI only had 15 full time agents devoted to mortgage fraud out of an estimated 13,000 agents in the bureau.
The FBI has increased the number of agents who handle white collar crime including mortgage fraud to 177 agents who have opened 1,522 new cases. It is still well below the staffing levels the bureau had during the S&L crisis in the late 1980s.
In their white-collar crime division, the bureau claims it has only given up lower level cases of marginal significance like cases from consumers and homeowners that might have never been prosecuted any way. They would then pass these cases on to other agencies that they have increasingly become dependent on such as state and local authorities. The bureau has created joint task forces with these agencies and local law enforcement. This however, creates a serious dilemma. Many of these state enforcement agencies are in the same position as the bureau, they are understaffed, overwhelmed and most don't have the experience to investigate detailed white collar crime.
Individuals and companies victimized by fraud are increasingly turning to private investigators, forensic mortgage auditing firms and accountants because they are unable to attract the attention of the FBI. The situation has gotten so bad that private investigative and accounting firms are now collecting evidence, conducting Forensic Audits, taking statements from witnesses and even testifying before grand juries. Thus preparing courtroom ready prosecutions they can take to prosecutors.
The New York Times article quoted Alton Sizemore a former FBI agent and fraud examiner for Forensic Strategic Solutions, "Anytime you bring to the FBI a case that is thoroughly investigated and reduce the amount of work for investigators, the likelihood is that they will take the case and present it for prosecution."
Daniel Karson, an executive managing director for Kroll Inc., was quoted in the New York Times as saying, "The FBI no longer has the resources to take on such lower-level cases by itself. When you come in with a garden variety, plain vanilla crime, you have to stand in the queue."
Sam Antar commented on his blog, "In other words, in order for the FBI to give serious consideration to many cases, they must be presented to them neatly gift wrapped on a silver platter. The criminals of today are elated by an under-resourced and relatively inexperienced FBI. As a result, the cancer of white collar crime continues to destroy the integrity of our great capitalist economic system."
Critics inside the federal government believe that this problem may be not just a lack of resources but an attitude by the White House that the Department of Justice and the FBI are being anti-business. The White house feared such an anti-business attitude could affect corporate risk taking.
Attorney General Michael Mukasey rejected congressional calls for a national task force to investigate abuses in the financial industry, especially in the lending industry. Attorney General Mukasey dismissed these cases as "white-collar street crime" that could be handled best by the local U.S. Attorney's offices.
Paul McNulty who served in the Justice department during the tenure of Alberto Gonzalez was commented in the New York Times piece as saying, "There's no question that the department has been stretched thin when it comes to resources and that has affected white-collar enforcement in a variety of areas."
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