The Director on the Financial Crisis

Back to Basics
The Director on the Financial Crisis

06/02/09

When our New York agents busted 13 people last week for mortgage scams involving properties worth more than $10 million, many of those arrested claimed they were just making money the same way as everyone else.

Really?

“The individuals involved in the scams consistently stated that everyone in the mortgage industry was doing this, so they assumed it was the norm and therefore legal,” said one of our case agents.

And what were they allegedly doing? Lying to homeowners—tricking them into selling their homes to help erase their debts, but in the end often causing them to get evicted. Deliberately putting false information on loan applications so they could flip properties for a profit. Promising straw buyers the moon (We’ll make your mortgage payments for months!) only to renege and cause the buyers to default on their loans. And on and on, all while pocketing big bucks.

Has it gotten that bad—that people believe such deceptions and crimes are just the normal way of doing business?

Apparently so, and on Tuesday, Director Robert Mueller was in New York—the financial capital of the world—to talk about this very issue: the lack of integrity in the marketplace, the boardroom, and the halls of government…and the FBI’s role in combating it, including using our intelligence gathering capabilities to help prevent new financial threats.

“The prevailing thought process seemed to be, ‘Everyone is making money, why should we miss the boat?’ But few ever believed that the boat might sink.”

The Director on the financial meltdown


Podcast: A special agent shares how we address mortgage fraud.

“This is by no means the first financial crisis we have had, nor is it the first instance of bad business judgment or unadulterated greed,” Mueller said at the Economic Club of New York. But many of today’s financial crimes, he noted, involve losses “that once would have been unthinkable.”

From our perspective alone, the numbers are sobering:

We are currently investigating more than 2,400 mortgage fraud matters—more than double the number from two years ago. And we have doubled the number of agents working these cases.
We have more than 580 corporate fraud and 1,300 securities fraud investigations open—some (like the Madoff case) representing billions in losses.
In the area of public corruption, we have more than 2,500 pending cases. In the past two years, our investigations have helped convict nearly 1,700 officials who have violated the public trust.

Our approach throughout has been to use our full suite of investigative tools to identify key players and dismantle larger criminal rings…to pull together specialized expertise where we need it (such as our specially-trained Corporate Fraud Response Team that can respond at a moment’s notice to complex cases nationwide)…and just as importantly, to use our intelligence capabilities to spot trends on the horizon.

One trend that the Director spoke of in detail involves what he called “the next wave of cases” for the FBI: fraud and corruption involving TARP funds and the stimulus package. He said that we are working with a variety of partners to identify where the money is going and for what purpose to head off potential problems.

Going forward, Mueller stressed the need for “independent board members, auditors, and outside counsel” to help keep organizations honest. “If this financial crisis has taught us anything,” he said,” it may be that it is time for a cultural shift—a ‘back to basics’ approach that incorporates sound business judgment, risk assessment, and integrity, from the top down.”

Indeed.

Resources:
- The Director’s remarks
- New York mortgage fraud case press release
- Related webpages: White-collar crime | Mortgage fraud | Public corruption

07.13.10