Key Justice Department Lawyer Speaks in San Diego : Official Seeks More Anti-Fraud Probes in State

Faced with a disproportionate number of bank and investment frauds, California should receive increased attention from federal investigators and prosecutors, the nation’s chief fraud fighter said at an economic crime conference here Thursday.

“California ought to get a bigger cut of the pie,” according to Robert Ogren, chief of the U.S. Justice Department’s fraud division.

Putting the rhetoric into practice may prove difficult, however. Earlier this year, the 3,000-member U.S. attorney’s office asked for a 20% increase in staff, but that was halved by a deficit-minded Congress, Ogren said.

Nonetheless, Ogren said that bank fraud, defense contract procurement fraud and investment and securities schemes will remain top priorities for his division.

Jailing corporate executives who violate federal laws is a goal, Ogren said, but it is not his division’s main objective. “We’re not after a body count of how many people” are put in jail, he said. “We really want to clean up the (bad business) practices.”

Corporations, Ogren said, “can create a scapegoat and throw a couple of people to the wolves, but nothing will change. You’ve got to have the corporation change.”

Bank fraud could be uncovered before a financial institution collapses if Congress approves changes to the Right to Financial Privacy Act, according to Victoria Toensing, deputy assistant attorney general in the Justice Department’s criminal division. The act preserves the confidentiality of customer records and allows federal prosecutors to examine the records only through subpoena. The proposed changes would allow banking regulators to disclose suspected criminal behavior to prosecutors before a formal case is brought, Toensing said.

The right to privacy, Ogren said, “is a legitimate concern. But the only amendment we asked for is, if (banks or S&Ls;) have knowledge of a crime, that they report it.”

The changes, both Toensing and Ogren insisted, will not give the federal government carte blanche entry into banking records.

“On major insider fraud cases, it could have an impact, “ Ogren said. “But it will have (a greater) effect on low- and mid-level (management) fraud.” About 60% of all bank failures from 1980 to mid-1983 involved fraud, Ogren said.

Increased cooperation between various federal agencies could also help fight bank fraud, according to Assistant U.S. Atty. Robert D. Rose, who heads the federal fraud division in San Diego and was one of the organizers of the three-day economic crime conference.

An agreement reached last April that calls for bank and S&L; regulators to share information with federal prosecutors already has aided in bank fraud investigations, Rose said.