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NORTHBROOK, ILL. – U.S. Representatives Mark Kirk (R-Ill.) and Chris Carney (D-Pa.) today called on the Federal Bureau of Investigation (FBI) to triple its investigations into corporate frauds related to the current financial crisis. Recent reports indicate the FBI has only 26 ongoing major corporate fraud investigations into possible criminal activity at companies such as Fannie Mae, Freddie Mac, Lehman Brothers and the American International Group (AIG).
“Global markets have lost more than $5 trillion in value, and millions of Americans are watching as their 401ks and retirement funds lose thousands of dollars,” said Congressman Kirk, a member of the House Appropriations Committee that funds the FBI. “It is clear that our economy is suffering from a failure of regulatory and government agencies to adequately uncover financial problems and prosecute fraud. American families deserve accountability – we need to prosecute and jail those subprime lenders who criminally boosted their profits at the expense of the taxpayer.”
“We need to understand all aspects of the economic crisis- including greater investigation into whether criminal activity occurred,” said Congressman Carney, Chairman of the House Homeland Security Management, Investigations and Oversight Subcommittee. “Americans are seeing their 401ks and savings plunge in the stock market, while CEOs are walking away with multi-million dollar compensation packages. More than ever, our financial markets need greater oversight, not less. We need the FBI to triple its capacity to investigate possible occurrences of corporate corruption.”
Congressmen Kirk and Carney also called for the U.S. House to triple funding for investigations into federal mortgage fraud at major financial institutions. In the current draft of the 2009 Commerce, Justice and Science appropriations bill, the U.S. House appropriates $10 million to the FBI to expand its investigations into mortgage fraud. The House adjourned before action was taken on the legislation.
The letter to Director Mueller is below.
October 10, 2008
The Honorable Robert S. Mueller III
Director
Federal Bureau of Investigation
J. Edgar Hoover Building
935 Pennsylvania Avenue, NW
Washington, D.C. 20535-0001
Via Facsimile
Re: Tripling of FBI Investigations of Financial Crime
Dear Director Mueller:
It is clear that our economy is suffering from a failure of regulatory and government agencies to adequately uncover financial problems and prosecute fraud. As the lead federal agency responsible for investigating white collar crime, we urge the FBI to redirect substantial resources to uncover and prosecute financial crime on Wall Street.
We understand that the Bureau is currently investigating 26 major corporate frauds. Given the erosion of public confidence in the management of public companies, we believe that this effort must be tripled to instill confidence in U.S. markets.
Given the economic difficulties that America and her people face, the FBI should play a critical role in nailing corporate criminals, forcing refunds to small investors and sending the leaders who committed crimes to prison for years. To fix our system and prevent a repeat of the events we now see, we have got to set an example by bringing the full might of federal law enforcement against the people who illegally profited or destroyed companies at the expense of our country.
As the Bureau reported to Congress, Financial Institution Fraud (FIF) is now one of our nation's top concerns involving mortgage fraud and money laundering. The Bureau reported to Congress that:
"[A]as publicly traded subprime lenders have suffered financial difficulties due to rising defaults, analyses of company financials have identified instances of false accounting entries, and fraudulently inflated assets and revenues. Investigations have determined that many of these bankrupt subprime lenders manipulated their reported loan portfolio risks and used various accounting schemes to inflate their financial reports. In addition, before these sub prime lenders' stocks rapidly declined in value, executives with insider information sold their equity positions and profited illegally."
FBI reporting also indicates that some corporate leaders backdated executive stock options, inflating their value to the holder at the expense of regular shareholders. Some corporate executives have also changed their stock option exercise dates to avoid paying income tax.
We believe that a substantial increase in the investigation and prosecution of white collar crime in financial markets will lead to the forfeiture of ill-gotten assets, sending the right signal to small investors and seniors whose retirement savings are invested in the market. Particular attention should be paid to accounting schemes, self-dealing by corporate executives, and obstruction of justice.
The Bureau is uniquely positioned to step up the investigation and prosecution of insurance and investment frauds because it can operate across state lines and has built outstanding relationships with law enforcement agencies in other countries. The expertise of the Bureau in investigating anti-trust offenses and bankruptcy fraud give your team the capability to quickly ramp up staffs needed to reassure markets.
We look forward to working with you on this matter.
Sincerely,
Mark Steven Kirk Christopher P. Carney
Member of Congress Member of Congress
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