1,000 Bank, S&L; Fraud Cases Go Uninvestigated, Lawmaker Says : Thrifts: A congressman says there aren’t enough FBI agents and U.S. attorneys to do the job right. He blames Administration spending priorities.

The federal government is failing to investigate and prosecute more than 1,000 cases of financial fraud involving savings and loan associations and banks because of a shortage of FBI agents and U.S. attorneys, a congressional subcommittee chairman said Wednesday.

Rep. Doug Barnard Jr. (D-Ga.) was deeply critical of the Bush Administration’s decision to spend only $50 million to combat financial fraud instead of seeking the full $75 million approved by Congress in last year’s S&L; rescue legislation.

“The public is asking Congress, ‘What are we doing to the individuals who got away with millions and millions of dollars? Are they escaping justice?’ ” Barnard said at a hearing of the consumer affairs subcommittee of the House Government Operations Committee.

“Justice is not being served,” said Rep. Matthew G. Martinez (D-Monterey Park), echoing the concerns of other committee members.

“This question of spending another $25 million must be weighed against the hundreds of billions of dollars that the S&L; debacle will cost the taxpayers,” Barnard said. The cost of closing insolvent S&Ls; and paying off their depositors will reach an estimated $285 billion over the next 30 years.

Barnard’s criticism was generally supported in testimony by Robert Wortham, the U.S. attorney for the Eastern District of Texas, and by a top FBI official. However, two other U.S. attorneys, for the Northern District of Texas and for Minnesota, told the subcommittee that they had enough resources to do an effective job.

Barnard said the Justice Department has 1,298 major inactive cases involving fraud and embezzlement of amounts exceeding $100,000. The government does not have the necessary FBI agents to conduct investigations or U.S. attorneys and support personnel to handle the indictments and prosecutions, the subcommittee chairman said.

Atty. Gen. Dick Thornburgh announced a special effort last December to prosecute S&L; and bank frauds but allocated only half the agents and attorneys previously requested during an internal department survey, according to a study by Barnard’s staff.

A Justice Department spokesman said, “The President’s budget proposed $49.2 million, and we are spending every penny of that to deal with the problem.” Although Congress had approved $75 million, the Administration requested and the legislators appropriated the lower amount.

Wortham told the subcommittee he had been pleading in vain for the assignment of additional FBI agents to S&L; and bank cases in his largely rural region.

“We have many unaddressed (financial) failures,” Wortham said. “There’s no one to go out and do the work.” He noted that he must depend on agents assigned to the Dallas and Houston FBI offices, outside his region.

“The only way a major bank or S&L; case can properly be handled is with extremely close coordination between the agent and prosecutor,” Wortham said. “With a 2 1/2-hour drive each way to Tyler from Dallas or a 1 1/2-hour drive each way from Dallas to Sherman, it leaves very few hours for productive time for the agent and the prosecutor.”

Describing his attempt to get additional investigators, he said, “I begged, I pleaded, I called them nasty names.”

Oliver B. Revell, associate deputy director of the FBI, said his agency has thousands of potential cases it cannot review because of lack of personnel.

“We’re robbing Peter to pay Paul,” he said. He added that although Wortham believes his district to be undermanned, Texas is getting 35% of the entire nation’s financial fraud investigative effort.

Revell said the FBI had requested money for 400 additional agents but had received only 150. “We wouldn’t have asked for them if they weren’t needed,” Revell said.

“The problem still looms,” Barnard said. “I can’t understand why the Department of Justice has not used the full” funding of $75 million provided in the S&L; rescue law.

Marvin Collins, U.S. attorney for the Northern District of Texas, called for the creation of additional courts in Dallas, Ft. Worth and possibly Lubbock to handle a growing volume of financial fraud cases.

However, Collins said his office has sufficient money and personnel to bring the cases to court. Speaking of the $50 million approved last year, Collins said, “I am confident that in the next several years we will be able to address much more fully the massive criminal fraud in our savings and loan and banking industry in the Northern District of Texas.