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Prevention cheaper than bailout, Rep. says
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February 11, 2009 | 02:46 PM
With the weakness of government financial oversight made glaringly apparent by the Madoff scandal, a local congressman is calling for greater federal investment in uncovering and prosecuting white-collar crime.
Rep. Steve Israel (D-Dix Hills) plans to sponsor a bill to provide $200 million to federal, state and local law enforcement agencies to crack down specifically on financial crimes, he announced Friday. Far from afflictions of the super-rich alone, white-collar crimes — illegal investment schemes, mortgage fraud and identity theft, to name a few — are increasingly targeting the life savings or even livelihood of middle class families, Israel said.
"It would be much cheaper, rather than bailing people out ... to stop those crimes from occurring in the first place," the congressman said.
Israel's legislation would strengthen enforcement by multiplying enforcers to bolster financial-crimes unit ranks that have become depleted, he said. For example, since 2001 the Federal Bureau of Investigation has lost 625, or 36 percent, of its white-collar crime investigators, according to the congressman.
And despite whistle-blower warnings, the Securities and Exchange Commission was unable to uncover Bernard Madoff's Ponzi scheme before it led to the $50 billion loss to investors. "The SEC didn't have or lacked the full resources to do an investigation or audit," Israel said. "This legislation will take care of that."
The $200 million would fund more financial crimes investigators and prosecutors at the state and local levels; expansion of the Treasury Department Crimes Enforcement Network, a multi-source financial intelligence and analysis network; and cover the hiring of several hundred FBI agents as well as additional Department of Justice and SEC staff, all dedicated to financial law enforcement, according to Israel.
The perception that government has adequate resources to hunt down perpetrators could deter would-be financial criminals, Israel said. "If people understand that the federal government is drawing a line in the sand and saying, we're not going to allow this ... maybe they'll think twice about committing those crimes."
Municipalities have struggled as well to counter financial crimes. Suffolk County has been hard pressed to prosecute a recent "explosion in mortgage fraud," District Attorney Tom Spota said.
In June 2008, Spota siphoned off three prosecutors, five investigators and a forensic auditor from his financial crime unit to focus on mortgage fraud, he said. The team's investigations thus far have led to 27 arrests and indictments involving around 180 properties, according to the district attorney.
But that's just the beginning; the economic crimes unit is tasked with prosecuting everything from environmental crimes to identity theft, from labor law infractions and insurance fraud to computer crimes. And Suffolk has its own investment schemes, such as the alleged fraud of Nicholas Cosmo of Agape World. Spota said Suffolk was investigating the Hauppauge investment firm, but then handed the case off to federal agents.
The entire Suffolk corporate crimes bureau has only six forensic auditors and 17 attorneys, Spota said, "and we can't possibly handle all of it." A state-of-the art unit capable of comprehensively countering Suffolk's economic crime would require about $1 million, he added.
"The seizure and review of paper and electronic records, the culling of information from computer hard drives, the inspection of bank and other financial statements are all time-consuming tasks that require specialized training," Spota stated in a release. "More funding for additional investigators, forensic auditors, assistant district attorneys and staff is essential to continue to successfully investigate these schemes."
If the bill is unsuccessful, Israel said he would seek the funding through his role on the House Appropriations Committee. The congressman also announced Friday that he was appointed to the House Select Intelligence Oversight Panel.
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