Some of the Biggest Names in Corporate Finance are Under FBI Investigation for Corporate Fraud

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WASHINGTON – The FBI is conducting more than 500 investigations of corporate fraud amid the financial meltdown, FBI Deputy Director John Pistole told the Senate Judiciary Committee on Wednesday.

Investigators are tackling an even bigger mountain of mortgage fraud cases in which hundreds of millions of dollars may have been swindled from the system, he told lawmakers.

Pistole says there are 530 active corporate fraud investigations, and 38 of them involve some of the biggest names in corporate finance in cases directly related to the current economic crisis.

Additionally, the FBI has more than 1,800 mortgage fraud investigations, more than double the number of such cases just two years ago.

There are so many mortgage fraud cases to investigate, he said, that the bureau is not focusing on individual purchasers, but industry professionals generating fraud schemes that could total as much as hundreds of millions of dollars.

“It is a matter of lawyers, brokers or real estate professionals that are systematically trying to defraud the system,” Pistole said.

Agents have even seen some instances of organized crime getting involved in mortgage fraud, he said.

Also appearing before the committee was Neil Barofsky, the watchdog of the government’s $700 billion Wall Street rescue package passed last year.

Senate Democrats are urging more spending to expand the ranks of the FBI’s financial fraud investigators.

After the 2001 terror attacks, about 2,000 FBI agents were moved to counterterrorism work, and Pistole said they are considering moving some of them back to buttress anti-fraud efforts.

Senate Judiciary Committee Chairman Patrick Leahy, D-Vt., urged the FBI and the Justice Department to put people who have committed mortgage fraud behind bars.

“Most people are honest,” Leahy said. “The ones who are not honest in this field are creating economic havoc and I want to make sure that we’re able to go after them.

“I want to see people prosecuted…. Frankly, I want to see them go to jail,” he said.

Barofsky, who was appointed the inspector general of the ongoing financial bailout plan, suggested the best way to clean up mortgage fraud is to pursue licensed professionals in the industry, and make examples of them.

“They have the most to lose, they’re the most likely to flip, and they make the best examples,” said Barofsky, a former federal prosecutor in New York.