February 11th, 2009
05:49 PM ET

Even more federal investigations of corporate and mortgage fraud

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/images/02/09/art.getty.leahy.jpg caption="Sen. Patrick Leahy's comments are likely to re-ignite a simmering debate about how actively to focus on past political and legal policy disputes."]

Terry Frieden
CNN Justice Department Producer

The FBI has now launched 38 major corporate fraud investigations stemming from the nation's financial crisis, and that number could grow sharply, a top FBI official testified Wednesday.

The disclosure by FBI Deputy Director John Pistole (Pis-tul) reveals an increase of at least a dozen newly-opened investigations of large financial institutions since the FBI last year reported it was looking into about two dozen major firms. And the scope of the criminal probes is certain to grow.

"It could potentially rise into the hundreds. It is an exponential potential," Pistole told a Senate panel.

The undisclosed targets of the investigation were described as "significantly large" and "businesses we all know about".

Pistole said the total number of corporate fraud investigations nationwide, including some apparently unrelated to the current economic crisis, already totals 530.

Pistole's testimony to the Senate Judiciary Committee accompanied a warning from the panel of top federal law enforcement officials that the massive government expenditures being approved by Congress will make inviting targets for perpetrators of financial fraud.

"We're going to see the demand on law enforcement resources increase," said Rita Glavin,(GLAY-vun) Acting Assistant Attorney General of the Justice Department Criminal Division. Glavin cited the glut of fraud cases that followed government expenditures designed to help Katrina victims, which involved far less federal money. She said she welcomed Congressional offers to increase resources to help battle financial fraud.

Neil Barofsky, Special Inspector General for the TARP (Troubled Assets Relief Program), echoed the need for resources, but praised the FBI for its level of assistance in pursuing potential fraud with TARP funds.

Pistole promised the panel that if more funds were directed to the FBI to combat white collar crimes, they would be used only for that purpose. He said currently the FBI is trying to decide whether it can afford to move some of the 2,000 FBI agents and analysts who were shifted to counterterrorism following 9/11 to help fight fraudsters without harming national security.

On mortgage fraud investigations, Pistole said the FBI has 240 agents working cases along with roughly an equal number of task force members. But the FBI has opened more than 1,800 mortgage investigations, and is swamped as the number of mortgage-related probes continues to rise.

Glavin said the Justice Department was considering whether to form a National Mortgage Fraud Task Force. Her division already oversees the Hurricane Katrina Fraud Task Force and the National Procurement Fraud Task Force.

The officials said they are focusing mortgage-related investigative efforts almost entirely on licensed professionals because that provides the greatest deterrent.

"They have the most to lose, they're the most likely to flip and they make the best examples," Barofsky said.

Senators from both political parties expressed unanimous support for current efforts to fight white collar crime, and vowed to push proposed bipartisan legislation to curtail financial and mortgage fraudsters.

"Frankly, I want to see them go to jail," said Chairman Patrick Leahy, D-Vermont, as he concluded the hearing.

Filed under: 360° Radar • Justice Department • Raw Politics
soundoff (16 Responses)


    February 12, 2009 at 3:02 pm |
  2. Art

    Hi Terry, As the president said, no one is above the law. I hope they follow through. Art

    February 12, 2009 at 8:05 am |
  3. Running Bear Knight

    Tell me Anderson why do you have Suzie Orman on your show? Like she knows anyhting about finances. I am not saying she doen't or maybe I am. I do know if you look on the front of MSN.com you will see a full spread article on her. I have said for years ever since she was on Opra, that where did she come from and what makes her experenced in finances. Less than 2% of her 32 million in the market, I have over 225K in the market. Why do people lisen to her. She sound like one of my professors who can teach you from a book how it should be, but never lived in the world of reality and actully done it.

    February 11, 2009 at 11:58 pm |
  4. Kirk

    Larry, Don't forget about Barney Frank and the other Dems that said fannie and freddie were doing a great job while they were actually bankrupting the government sponsored companies, cooking the books, and stealing the leftover millions in the form of multi-million dollar bonuses. They all played a major role in the collapse of the housing market and ultimately our economy, and should all be prosecuted and do time in prison!

    February 11, 2009 at 11:29 pm |
  5. Deb

    Why doesn't CNN set up a confidential 800 number where people within the banking industry can "enlighten" us on misuses of the TARP funds. It could be under the Keeping Them Honest of They Just Don't Get it Sections. I bet there's plenty to report on. Then the White House could follow up with investigations/phone calls to get that $$$ used for the reasons it was intended. It may well save people's homes and lives.

    February 11, 2009 at 11:27 pm |
  6. leah seidler

    One does not have to be a rocket scientist to figure out that some of the mortgage brokers had the borrowers falsify the applications to get the mortgage, especially when loans were made to people who were not working and had much less income the stated.
    Any investigation should go after the brokers. If fraud was committed then the broker should have a choice, buy back the mortgage at face value or go to jail.
    How come you have jumped off the VIP loans to Rep. Barney Frank and Sen. Dodd ( not sure of spelling). Why don't you investigate Congresses part in forcing banks to give these mortgages that are so bad. All experts seem to say the financial crisis was caused by the mortgage problem. Please do job as investigators.

    February 11, 2009 at 11:26 pm |
  7. kathy koplen

    Here we go again ! - 19 years later! – 1990 Bailout – They named it the "Resolution Trust Corporation" to clear the bad assets of mortgage (S & L) lenders – fraud was rampant.. .. "trust " is what the politicians (Republicans & Democrats ) made us believe they got it right with the way lenders did business!!! .... Instead they allowed the wealth of lobbyists to make the rules of our financial system.

    2009 Bailout - " Financial Stability Plan" - What are the plans to regulate to stabilize? - giving more taxpayers money ( 1990 – $158 billion still paying that bailout ) to clear bad bank assets is putting a band-aid on a wound that needs surgery!! Stop the bleeding !

    STOP THE BAILOUTS !! – give the taxpayers a plan that shows us you can be leaders.

    February 11, 2009 at 11:17 pm |
  8. Lynn(Hudson,NC)

    Would somebody do something to regulate cable and satellite tv companies. I have watched this mushroom into one of the biggest scams since the government made the telephone companies become competetive. It breaks down for people who make less than , 12,000 dollars a year into do you want to eat or watch tv.

    February 11, 2009 at 10:35 pm |
  9. Jen in maryland

    Wells Fargo has violated RESPA playing a "game" to get business from mortgage brokers like the one I used Aames Home Loans, and many many others. WF gave away cars, trips, TVs as prizes for making their shady loans. This violates RESPA!!! Don't bail them out lock them up!!

    February 11, 2009 at 10:26 pm |
  10. May from Tennessee

    Hi Anderson! It's about time...I hope they all go to jail! Oh and don't even get me started on the first place I think they should look...just tell the FBI to send me an e-mail...i found stuff from just doing my own research that will make your hair curl. One of your posters was right...if they're short-staffed, there are plenty of capable right here in the US that need jobs. And the outsourcing of jobs off-shore to India needs to stop as well. Maybe something will finally be done now that we have a new administration.

    February 11, 2009 at 9:29 pm |
  11. Rose from Muscoy, Calif

    And we are surprised, AGAIN?

    February 11, 2009 at 8:03 pm |
  12. Larry

    Hopefully they will investigate the origins of the sub-prime mortgage put together thru Barack Obama, ACORN, Bill Clinton, Penny Pritzker, Fannie & Freddie and their efforts in 1999.

    February 11, 2009 at 7:49 pm |
  13. Pam W (Tampa)

    Yes....outsourcing/off-shoring. The only msm person that I've heard bring this topic up was Lou Dobbs. Kudo's to Lou.

    The big 'O' should get back the 3 billion jobs back for off-shoring and if Corp America continues to outsource, should get NO TAX BREAK.

    I don't build houses or bridges. I am in IT, so what jobs will be created for those of us in this field? I was an employee of a major bank (yes one on the look and see list) that let me go in Oct after 15 years service. Part was the financial crisis and part was oursourcing.

    So much for being having a good work ethic, being dependable and an asset. Those of us first on the cutting block were part of what I call the 50/50 club. 50 YO or more and makes $50,000 or more, out you go and send your job to India where they will do it for 1/2 the wage.

    February 11, 2009 at 6:28 pm |
  14. JC- Los Angeles

    Since the second plane hit on 9/11 and with each ensuing Greenspan rate cut, the mortgage fraud factories cranked up production of 100% pure uncut American fraud.

    Once Wall Street saw that oversight was nowhere to be seen, they wanted in and their secondary markets added fuel to the fraudulent fire.

    The only difference between the fraudulent mortgage trade and the illegal drug trade were the absence of scales in the offices.

    To prevent the collapse of America, all anyone had to do was spend one afternoon here in California with a sales representative for a mortgage lender or spend one day inside the offices of a mortgage lender; the fraud was ubiquitous.

    Countrywide, Bank of America, Wells Fargo, WAMU and countless other lenders printed so much fraud that it actually took down Wall Street, Fannie Mae and Freddie Mac.

    Our current unemployment numbers accurately reflect how many people were actually employed by the real estate scam.

    While the American people should be held accountable for living over their means, the heads of fraudulent mortgage lenders should pay the highest price.

    February 11, 2009 at 6:21 pm |
  15. Pam W (Tampa,Florida)

    I say in the next week we will see the name game going on. This whole thing smells fishy and we are about to find out why. I can't wait. I have a personal vendetta.

    February 11, 2009 at 5:56 pm |
  16. Annie Kate

    Perhaps the FBI instead of moving agents from national security where they are needed could hire some of the laid off financial people to investigate these frauds – they would at least know the subject matter very well. With off-shoring there are a fair number of accountants/auditors out there looking for work too. This whole mess could generate a big batch of new jobs to investigate it.

    February 11, 2009 at 5:56 pm |