Today, the Senate Judiciary Committee held a hearing on “The Need for Increased Fraud Enforcement in the Wake of the Economic Downturn.” The hearing focused on increasing resources to defend against mortgage fraud and fraud relating to Troubled Assets Relief Program (TARP) funds, as well as a discussion of the proposed Fraud Enforcement and Recovery Act of 2009 (FERA), which the Committee has not yet marked up. Committee Chairman Patrick Leahy (D-VT) reiterated the overarching theme of the hearing in his opening remarks: “we must give law enforcement agencies the tools and resources they need to root out fraud so that it can never again place our financial system at risk.”
Testifying before the Committee were:
- John Pistole, Deputy Director, Federal Bureau of Investigation
- Neil Barofsky, Special Inspector General, Office of the Special Inspector General for the Troubled Assets Relief Program (SIGTARP)
- Rita Glavin, Acting Assistant Attorney General, Criminal Division, U.S. Department of Justice
Mr. Pistole discussed the FBI’s National Mortgage Fraud Team, which was created in December 2008. However, this required the FBI to divert “resources from other white collar crime and criminal programs in order to appropriately address the crime problem.” Mr. Pistole echoed the concern of the other witnesses that greater resources are needed, including more law enforcement and training to address the increasingly sophisticated mortgage fraud schemes.
Mr. Barofsky warned that large outlays of government funds “will inevitably draw those seeking to profit criminally” and that “it is essential that the appropriate resources be dedicated to meet the challenges of deterring and prosecuting fraud in connection with these programs.” Mr. Barofsky mentioned several initiatives that SIGTARP is considering:
- Detailing SIGTARP investigators to existing and future multi-agency task force activities at select locations in order to maximize efficiency and achieve timely and substantial investigative results;
- Supporting joint criminal intelligence initiatives with the objective of proactively identifying potential areas of exploitation by those who would commit fraud against the TARP;
- Utilizing a flexible investigative model in order to achieve the most significant results, by employing a multidisciplinary team of experienced special agents, attorney advisors and analysts; and
- Providing the necessary tools to the investigative team so that it can achieve program objectives in the most efficient and effective manner possible.
Finally, Ms. Glavin discussed support for the FERA and detailed the proposed changes sought by the new legislation:
- Expanding the scope of financial institution frauds to include mortgage lending businesses;
- Criminalizing false statements to mortgage lending businesses;
- Amending the major fraud statute to include activities relating to TARP funds;
- Amending the securities fraud statutes to include commodities options and futures trading;
- Amending the money laundering statute to define the “proceeds” of illegal activity;
- Amending the money laundering statute to apply to tax evasion; and
- Clarifying the Civil False Claims Act.