Government agencies are limited by their resources, both money and people. It came as no surprise to me that the Federal Bureau of Investigation is struggling to investigate cases of financial fraud. They simply don’t have enough investigators. I see the same problem with the SEC and FTC… not enough people to investigate all the allegations of fraud and shady dealings.
What are agencies to do when they can’t investigate everything that they think merits attention? Sadly, many cases go away with no action.
The FBI’s problem with financial fraud is multi-faceted:
- After September 11, 2001, many agents were moved from criminal investigations to terrorism and intelligence
- Agents are retiring in large numbers, resulting in brain drain… loss of the most knowledgeable agents
- Cutbacks mean that the FBI has to prioritize, and white collar crime is further down the list than other issues
It’s reported that criminal cases referred to prosecutors by the FBI has dropped 26% in the last seven years. 11,029 cases were referred seven years ago. Just 8,187 were referred last year.
What happens when cases of fraud aren’t investigated by the FBI? Clearly the fear of being discovered decreases for the would-be criminals. But what if your company is a victim of fraud? Many companies are left to their own devices to investigate fraud. They have to pay attorneys and fraud investigators (like me) to dig into the fraud allegations and pull together the evidence. A fraud examiner puts together a report and supporting documentation, and hopefully the FBI or the U.S. Attorney’s Office agree to take a look at the case.
Because it’s fully investigated and packaged for them, there’s a greater chance that they might consider prosecution. There’s still independent work that these agencies will have to do for any case they accept, but by doing the bulk of the legwork for them, a company has a better shot at action by the federal government.
This seems a little wrong, doesn’t it? As taxpayers, we believe that these watchdog agencies have a responsibility to enforce the laws and investigate financial fraud. They simply can’t do it all, and if an individual or company wants a criminal case pursued, they may have no choice but to bear the cost of much of the investigative work.