Cutbacks hamper FBI investigations of financial crimes

Seattle Times by Eric Lichtblau, David Johnston, Ron Nixon | Oct. 21, 2008 (News Report)

The FBI is struggling to find enough agents and resources to investigate criminal wrongdoing tied to the country's economic crisis

The bureau slashed its criminal-investigative work force to expand its national-security role after the Sept. 11 attacks, shifting more than 1,800 agents, or nearly one-third of all agents in criminal programs, to terrorism and intelligence duties.

Current and former officials say the cutbacks have left the bureau seriously exposed in investigating areas such as white-collar crime, which has taken on urgent importance in recent weeks because of ... Full Story »

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by Marsha Iverson - Oct. 21, 2008

In case you don't have enough to worry about already, this report will help fill any gaps. It seems that federal budget priorities didn't include maintaining adequate investigative staff to track, document and prosecute white collar crime. This might not seem too alarming until you begin to seek connections between the absence of oversight and scrutiny of financial transactions to today's corporate financial collapse. This story will become an interesting link in retrospect, as the details of the current economic crisis become known.

The follow-up piece I'd like to see would be a parallel report on the effectiveness of FBI attention on national security. While white collar crime ran amok because dwindling resources were turned to "national security," precisely how successful has the "national security" effort been? Have there been any successful investigations, arrests, prosecutions and convictions for threats to national security? Is our national security more, um, secure than it was before? What was the impact of the cost of the "war" in Iraq and Afghanistan on our ability to maintain economic stability and security at home? What, twenty or so years from now, will be the "big picture" of this episode in our nation's history?

“Clearly, we have felt the effects of moving resources from criminal investigations to national security,” said the FBI’s assistant director, John Miller. “In white-collar crime, while we initiated fewer cases overall, we targeted the areas where we could have the biggest impact. We focused on multimillion-dollar corporate fraud, where we could make arrests but also recover money for the fraud victims.” But Justice Department data, which include cases from other agencies, such as the Secret Service and Postal Service, illustrate the impact. Prosecutions of frauds against financial institutions dropped 48 percent from 2000 to 2007, insurance-fraud cases plummeted 75 percent, and securities-fraud cases dropped 17 percent. Statistics from a research group at Syracuse University, the Transactional Records Access Clearinghouse, using somewhat different methodology and looking only at the FBI, show an even steeper decline of nearly 50 percent in white-collar-crime prosecutions during the same period. … Some FBI officials privately worry that the trillion-dollar federal bailout may itself become a problem because it contains inadequate controls to deter fraud.

I can’t shake a creepy feeling that there is more to this than it seems. If this were a mystery novel, I’d jump to the last chapter right now to find out how this comes out.