FBI Says 38 Firms Directly Involved in Current Financial Crisis Could Expand to Over 100 firms
Currently Over 500 Ongoing Corporate Fraud Investigations; TARP IG Warns of Fraud
(ABC News Photo Illustration)
The FBI has opened investigations into more than 500 cases of alleged corporate fraud, including 38 that involve major firms and are "directly related" to the national economic crisis, FBI Deputy Director John Pistole told Congress today.
The surge in white-collar investigations is putting such a strain on the FBI that Pistole said the bureau is considering reassigning agents from national security, which has been the bureau's priority since the 9/11 attacks.
"The FBI has more than 530 open corporate fraud investigations, including 38 corporate fraud and financial institution matters directly related to the current financial crisis," Pistole told the Senate Judiciary Committee today.
The 38 companies, he said, "are significantly large companies, businesses everyone knows about but I cannot comment publicly."
Pistole's comments suggested widespread criminal activity among many of the nation's corporate giants.
"These are significantly large, similar to Enron," Pistole said. The number of firms under scrutiny could eventually top 100, as the investigations widen, he said.
Only one major criminal case has come from the FBI's investigation of the major subprime lending outfits, when two Bear Stearns hedge fund managers were indicted in May 2008 on fraud, conspiracy and insider trading charges. They were the first executives to be charged as a result of the FBI probe.
The two hedge funds in question were heavily invested in subprime lending and debt obligations connected to risky subprime mortgages that lost $1.8 billion in 2007.
"These corporate- and financial institution-failure investigations involve financial statement manipulation, accounting fraud and insider trading," Pistole said.
Large firms such as AIG, Countrywide Financial, Washington Mutual, Bear Stearns, Lehman Brothers, UBS AG, New Century Financial, Freddie Mac and Fannie Mae have been targets of FBI and Justice Department investigations, according to federal law enforcement officials and Security and Exchange Commission filings reviewed by ABC News.
The amount of corporate fraud "dwarfs" the Savings and Loan scandal of the 1980s, Pistole told the committee.
"I don't think we've paid enough attention to the mortgage and financial fraud that have so dramatically contributed to the economic downturn," Senate Judiciary Chairman Patrick Leahy, D-Vt., said. "It is now becoming clear that unscrupulous mortgage brokers and Wall Street financiers were among the principal contributors to this economic collapse."
"I want to see people prosecuted…Frankly, I want to see people go to jail," Leahy said of suspects in mortgage fraud schemes.
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