Remarks prepared for delivery

Thank you, Penny, and good afternoon everyone. I am glad to be in Miami and grateful for the invitation to speak here today.

I was intrigued upon learning that I would meet with you at a place called “Jungle Island.” As FBI Director, I have been fortunate to speak at many interesting venues. But never before have I been surrounded by alligators, leopards, and other predators—except perhaps when I am testifying before Congress.

Of course, predators lurk not only here on Jungle Island or in the broader animal kingdom. We also find them among our fellow human beings. Some people will always look to make a dishonest dollar by preying on another person’s trust or by cheating the system. And their crimes affect all of us.

Today I want to speak about the most prominent financial frauds the FBI investigates. I want to describe how the FBI is using intelligence and partnerships to combat financial crime. Finally, I want to discuss how you can help us uncover and stop financial predators. 

FBI Transformation and Financial Crimes

The FBI has investigated financial crimes from its beginnings. For decades, we worked most cases that came our way—even relatively small cases like bank teller embezzlements.

That changed after the September 11th attacks, as the FBI underwent a major transformation. By necessity, we shifted resources and emphasis to counterterrorism and other national security priorities. 

But we have not neglected our criminal responsibilities. What has changed is that we make greater use of intelligence and partnerships to better focus our limited resources where we can have the greatest impact—for example, on large-scale financial fraud.

Health Care Fraud

Let me begin, though, with one type of financial crime of great concern to Floridians—health care fraud. 

Health care spending currently makes up about 18 percent of our nation’s total economy—and that percentage will continue to rise as our population ages. These large sums present an attractive target for criminals—so much so that we lose tens of billions of dollars each year to health care fraud.

These frauds are becoming increasingly complex. Providers bill the government and insurers for excessive or unnecessary services—and even for services they never provide. They file duplicate claims to be paid twice for one service. They take kickbacks for referring patients for services covered by Medicare or Medicaid. 

Providers and medical suppliers also “upcode.” For example, they might send a patient a hand-powered wheelchair but bill the patient’s insurance plan for a more expensive motorized chair—and pocket the difference. 

We also see recruiters targeting low-income areas and homeless shelters, asking individuals if they have a red, white, and blue Medicare card. They pay these individuals to serve as fake patients so they can use their cards fraudulently and keep money for themselves.

One recent case here in Miami exemplifies today’s large-scale health care fraud. The American Therapeutic Corporation, the largest owner of community mental health centers in Florida, preyed on patients with severe dementia. Company officials forced patients to undergo unneeded treatment to inflate the amount of money the company received from Medicare. In some cases, owners of assisted living homes—and even patients themselves—received kickbacks to go along with the scheme. 

Over an eight-year period, company officials submitted over $200 million in fraudulent Medicare claims. Our investigation led to the indictment and arrest of 24 defendants. Last September, the corporation’s two owners were sentenced to 50 and 35 years in prison, respectively.

We in the Bureau have jurisdiction over both federal and private health insurance programs. We have more than 500 agents and analysts using intelligence to identify emerging schemes, and we are developing new techniques to fight health care fraud. Our field offices also target fraud through task forces and strike teams as well as undercover operations.

Indeed, the FBI’s Miami Field Division has led the way in fighting health care fraud. It created our first Health Care Fraud Strike Force, which has now become a national initiative. Through this initiative, we work closely with our federal partners at the Department of Health and Human Services to uncover fraud and recover taxpayer funds. The FBI also works with state and local agencies as well as national groups and associations to stop health care fraud. Last year, our combined efforts returned $4.1 billion to the U.S. Treasury, to Medicare, and to other victims of fraud. 

Health care fraud is not a victimless crime. Every person who pays for health care benefits…every business that pays higher insurance costs to cover their employees…every taxpayer who funds Medicare—all are victims. 

As health care spending continues to rise, the FBI will use every tool we have to ensure our health care dollars are used to care for the sick—not to line the pockets of criminals.

Mortgage Fraud

Turning to mortgage fraud—another financial crime that has greatly affected Florida during the past decade. Our Miami Division ranks second among all FBI field offices in this area. And Florida is just part of the larger national picture. At the end of last year, the FBI had nearly 2,600 mortgage fraud investigations nationwide—and a majority of these cases included losses greater than $1 million.

Today, the world of mortgage fraud is shifting. During the housing boom, loan origination fraud was our biggest problem. This included buyers who would lie about their identities or income on loan applications and appraisers who would artificially inflate home values so buyers could obtain larger loans.

Since the collapse of the housing bubble, tighter lending standards have helped to decrease loan origination fraud. But criminals are adapting to the down market. 

We are seeing an increase in schemes aimed at distressed homeowners, such as loan modification scams and phony foreclosure rescues. So-called “rescue services” claim they can expose errors by lenders that might allow owners to keep their homes. In reality, it is just a clever way to lure nervous consumers into giving up sensitive personal information and paying thousands of dollars in fees for false hopes. Indeed, in some cases, these criminals convince homeowners to sign away the deeds to their homes.

The FBI has made mortgage fraud a top priority because we recognize its negative impact on homeowners, neighborhoods, and the national economy.

Over the past four years, we have nearly tripled the number of special agents investigating mortgage fraud. Our agents and analysts are using intelligence, surveillance, computer analysis, and undercover operations to identify emerging trends and to find the key players behind large-scale mortgage fraud.

Again, partnerships are crucial. We work closely with the Department of Housing and Urban Development, Postal Inspectors, the IRS, the FDIC, and the Secret Service, as well as with state and local law enforcement offices.

Together, we are making progress. In June 2010, we announced the arrest of nearly 500 persons in the nation’s largest mortgage fraud takedown to date, called Operation Stolen Dreams.

More recently, our Miami Division initiated Operation Versailles, an investigation of systemic fraud in the Versailles property development in Wellington, Florida. The development attracted at least seven separate mortgage fraud rings that inflated prices and flipped properties to straw buyers. To date, our efforts have resulted in 10 convictions and restitution of more than $30 million.

Corporate and Securities Fraud

Let me turn now to complex corporate and securities fraud—another area where our investigations have increased substantially in recent years.   

Regarding corporate fraud, the FBI focuses its efforts in two main areas. The first concerns accounting schemes that deceive investors, auditors, and analysts about the true financial state of a company. You are no doubt familiar with some notable cases of this type: Enron, Tyco, and WorldCom, to name a few.

The second area concerns self-dealing by executives—better known as insider trading.

One of our largest insider trading cases centered on the Galleon Group, a $7 billion hedge fund based in New York. Through evidence the Bureau obtained through court-approved wiretaps, attorneys and corporate insiders at several Fortune 500 companies were convicted for leaking proprietary information. The owner of the Galleon Group was convicted of multiple counts of securities fraud and sentenced last October to 11 years in prison—the longest sentence ever for insider trading.

We also target market manipulation schemes and high-yield investment fraud such as Ponzi schemes. You are probably familiar with Fort Lauderdale attorney Scott Rothstein—known as the “Bernie Madoff of South Florida”—for his role in running a $1.6 billion Ponzi scheme. Rothstein sold shares in purported structured insurance settlements with guaranteed rates of return on those investments. As part of the scheme, he even forged the signatures of federal judges. 

Of course, there were no insurance settlements. After pleading guilty to five counts, Rothstein is now serving a 50-year prison sentence.

As financial crimes such as these evolve and become more sophisticated, the FBI must evolve as well. In addition to devoting more agents and analysts, we established a forensic accountant program three years ago. Under this program, we have hired almost 250 forensic accountants who are trained to catch financial criminals.

We have teams ready to respond quickly to high-profile financial investigations across the country. We think of them as SWAT teams of accountants—just substitute calculators for handguns and pocket protectors for body armor. 

Intelligence and Partnerships

As I mentioned earlier, the FBI has changed greatly during the past decade. One of the most important changes we have made is to emphasize the use of intelligence to drive our investigations. 

In the post-9/11 world, we often discuss this evolution in the context of national security. But it is equally important to our efforts against crimes such as financial fraud.

Three years ago, we established the FBI’s Financial Intelligence Center to strengthen our financial intelligence collection and analysis. This center helps us to see the entire picture of financial crimes. It provides tactical analysis of financial intelligence data, identifies potential criminal enterprises, and enhances investigations. It also coordinates with FBI field offices to complement their resources and to identify emerging economic threats.

The FBI is also placing enhanced emphasis on partnerships and information sharing. In this era of tight budgets, working together is essential to make the most of limited resources and to unravel these complex schemes.

For example, in 2010 the FBI began embedding special agents at the SEC. This allows us to see tips about securities fraud as they come into the SEC’s complaint center. And that enables us to identify fraud trends more quickly and to push intelligence to our field offices so they can begin criminal investigations where appropriate.

Conclusion

Today, we have discussed criminals who prey on seniors to steal from Medicare, criminals who take advantage of homeowners facing foreclosure, and criminals who bilk investors out of their life savings.

This is a much darker picture of financial crime than what we see in popular culture. Hollywood often portrays con men as charming rogues who prey on deserving victims—think of Paul Newman and Robert Redford conning the mob boss in “The Sting” as an example. 

This does make for great entertainment. But as we have seen, in real life, individuals who commit financial fraud are not so charming or so selective in their victims. They take advantage of our need to place trust in others during some of life’s most serious and complex tasks—such as buying a home, investing for retirement, or seeking medical care.

This betrayal of trust poses a great challenge, because our free-market economy and, indeed, our whole way of life, are built on trust—trust in the markets and trust in our fellow citizens. 

Financial fraud undermines that trust, with severe consequences. Consequences such as wasted taxpayer dollars, higher insurance premiums, and increased business costs—to say nothing of the harm to the victims themselves. When today’s financial criminals commit their own versions of the “Big Con,” we all lose.

The FBI will continue to evolve and to work with our partners to uncover and to prevent these increasingly sophisticated crimes. 

As business and community leaders, your help is also vital. You can learn to recognize financial fraud and unscrupulous business practices to better protect yourself and your companies. And you can alert us when you see these activities take place.

As we all know, it really is a jungle out there, even beyond the confines of Jungle Island. But working together, we can defend our economy and our fellow citizens from today’s financial predators. 

Thank you for having me here, and God bless.