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article imageOp-Ed: White collar crime - FBI investigations trashed by spreadsheet politics

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By Paul Wallis     Oct 19, 2008 in Crime
The great cosmic dinosaur butt of ancient administrative concepts has done America a equally great disservice. Law enforcement agencies have been budgeted out of any hope of doing their jobs. The FBI has been on the wrong end of this method since 2001.
The big mistake in government is the theory that competing priorities will wait for you to get around to them. Everything is plural, all the time. The FBI lost a lot of its crime budget and human expertise and resources in the process of fighting the War on Terror, which, ironically, has turned out cheaper than the economic terror of the meltdown.
National security has therefore helped create a problem of national insecurity unparalleled in American history.
In fairness, it’s unlikely anyone back in 2004 would have made a connection between the securities industry and an economic situation worse than the war. The National Security Agency was being welded together, with administration and the shattered morale of agencies like the CIA and others taking up more space on the meeting schedules and headlines.
Even so the Bureau has definitely got the short end of the stick. Its crime fighting ability is nothing like what it was. As the Federal agency with a huge responsibility for crime across all 50 states, that’s an impasse that can’t be allowed to remain.
White collar crime, with the added bliss of unsanitary political ideologies about regulation it carries, has obviously benefited from the FBI’s lack of resources. So now a furious public and Congress have an agency which would dearly like to do its job, but can’t, thanks to cutbacks and the priorities of 2001.
The New York Times
…Current and former officials say the cutbacks have left the bureau seriously exposed in investigating areas like white-collar crime, which has taken on urgent importance in recent weeks because of the nation’s economic woes.
The pressure on the F.B.I. has recently increased with the disclosure of criminal investigations into some of the largest players in the financial collapse, including Fannie Mae and Freddie Mac. The F.B.I. is planning to double the number of agents working financial crimes by reassigning several hundred agents amid a mood of national alarm.
...According to previously undisclosed internal F.B.I. data, the cutbacks have been particularly severe in staffing for investigations into white-collar crimes like mortgage fraud, with a loss of 625 agents, or 36 percent of its 2001 levels.
Over all, the number of criminal cases that the F.B.I. has brought to federal prosecutors — including a wide range of crimes like drug trafficking and violent crime — dropped 26 percent in the last seven years, going from 11,029 cases to 8,187, Justice Department data showed.
Not wishing to give hindsight any more credit than it deserves, this is a pretty strange set of priorities, even with a few nice wars to help it along.
Crime has been one of the single biggest priorities in America for decades. A 26% drop in prosecutions, unfortunately, doesn’t mean a 26% drop in crimes. Crime is a major political issue, too, and the noisy Law and Order Brigade seem to have missed the Bureau in their bills, as well as their rhetoric.
Despite all of which, the Bureau did what it could:
“Clearly, we have felt the effects of moving resources from criminal investigations to national security,” said John Miller, an assistant director at the F.B.I. “In white-collar crime, while we initiated fewer cases over all, 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, like 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.
So the finance sector couldn’t have had the scrutiny it needed from the Bureau. There was nobody to do the scrutinizing. Estimates of the drop in FBI prosecutions in white collar crime by Syracuse University estimate a 50% reduction in cases.
Just to clarify: Regulation is a formal legal process. There are only so many agencies with the authority to undertake investigations. In a Federal system, that power usually defaults to the Federal agency responsible. Meaning some of this stuff could either be investigated by the FBI, or not investigated, period.
Investigation at any level of government is far from simple. The tendency is to produce investigators literally buried under the cases. If you’re using paper records, you can be in danger of being killed outright by falling files. Just to make things even more fun, these investigations have to be conducted under a very strict set of statutory guidelines.
I’ve worked in places where a person can become a government records repository with one case, let alone hundreds. It’s hard to describe how whole offices disappear under the flotsam.
For the FBI, with a caseload like the Pyramids on a good day, the obvious inference is the whole agency needs not only resources, but methods and systems to allow it to do the work.
Add to this Washington’s sickly sweet myopic coyness about regulation of any kind since 1980, and you get a general picture that the Bureau isn’t the only thing in need of some panel beating with its methods.
From 2001 to 2007, the F.B.I. sought an increase of more than 1,100 agents for criminal investigations apart from national security. Instead, it suffered a decrease of 132 agents, according to internal F.B.I. figures obtained by The New York Times. During these years, the bureau asked for an increase of $800 million, but received only $50 million more. In the 2007 budget cycle, the F.B.I. obtained money for a total of one new agent for criminal investigations.
That’s realism.
This, for want of a tolerant expression which hasn’t yet been invented, is the old asset stripping of agencies to pay for porkbarrels, nice plump lobbyists and earmarks.
At some point in their lives budgets are supposed to look “nice”. So real cuts are buried at agency level like this, in situations where even the idea of increased expenditure is reduced to an obituary notice.
If it turns out somebody spent that $800 million on new paper napkin clips for their laptops, laminated name tags for pigeons, or wheels for non-existent statues of future bureaucrats, don’t be surprised.
Oversight of current expenditure is based on rosy views of sunsets, not actual spending. It devolves around not advertising, or blurring, information about misspending of public money, and it’s an industry in administration at all levels. While someone’s talking about “our children’s children”, if you listen closely you can hear millions a second going down the tube.
It's so bad people have been hiring private investigators to do the legwork. The NYT piece is full of grim facts, but this is the one that stands out as most indicative of real need:
In 2004, one senior F.B.I. official, Chris Swecker, warned publicly that a flood of fraudulent mortgage deals had the potential to become “an epidemic.” Yet the next year, as public warnings about fraud in the subprime lending markets began to approach their height, the F.B.I. had the equivalent of only 15 full-time agents devoted to mortgage fraud out of a total of some 13,000 agents in the bureau.
That number has grown to 177 agents, who have opened 1,522 cases.
Doesn’t need a lot of explanation, does it? For the next administration, the problem will be fix the calculator, as well as the mindsets of budgeting.
The great cosmic dinosaur butt needs a bit of liposuction, itself.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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