Bush Declares War on Thrift Fraud; Democrats Scoff

With congressional Democrats trying to tar him with the savings and loan crisis, President Bush convened a rally of 88 U.S. attorneys Friday and declared war on S&L; fraud.

“We will not rest until the cheats and the chiselers and the charlatans spend a large chunk of their lives” behind bars, Bush told the prosecutors, brought in from across the country for a one-day meeting on S&L; fraud.

“It is your sacred duty to right these wrongs, to stand up for the vulnerable against the unscrupulous, the guileless against the conniving,” Bush said.

Bush endorsed legislation that would authorize wiretapping in investigations of bank fraud and related offenses; reduce barriers to restitution for victims of financial fraud, and permit lawyers, investigators and accountants from elsewhere in government to be assigned to the Justice Department’s drive against fraud at financial institutions.

Within hours of Bush’s speech, six Democratic senators accused him of staging an elaborate “photo opportunity” and rehashing old proposals to escape blame for the debacle.

Sen. Tim Wirth (D-Colo.) contended that the President merely “re-announced” the same program for a 27-city drive against fraud that Atty. Gen. Dick Thornburgh unveiled Dec. 7 in a four-page press release.

“It’s absolutely devastating that the President is warming over this proposal,” Wirth told a press conference.

The partisan bickering over S&L; prosecutions moved to the Senate floor when Minority Leader Bob Dole (R-Kan.) charged that Democrats had launched “a carefully orchestrated political attack” against the President on the issue.

“It’s the first 30-second spot of the 1990 campaign,” he said, before declaring that the Democratic-controlled Congress is responsible for the crisis. “While Congress was snoozing, the American taxpayers were losing,” Dole said.

The clashing rhetoric illustrated that both parties have seized on the savings and loan crisis as a potentially prime issue with congressional elections only five months away.

Although they covered old ground to some extent, the speech by Bush and related announcements by Thornburgh and Treasury Secretary Nicholas F. Brady, who shared the platform with the President, included several new elements. The new moves, which do not require legislative authorization and will take effect in the near future, will:

- Form “rapid response teams” of attorneys and auditors drawn from five government agencies to move against criminal activities in financial institutions. Bush said that the teams would be made up of “razor-sharp prosecutors and auditors . . . that will jump right into the paper chase . . . that will hit the trail while that trail is still hot.”

- Elevate the fight against S&L; fraud by establishing a special counsel to coordinate investigations and prosecutions and report to the deputy attorney general. The special counsel will be backed up by a unit in the deputy attorney general’s office that will coordinate the full range of law enforcement, prohibition, damage and restitution actions.

- Establish a senior interagency group to pinpoint the most significant S&L; and bank fraud cases--those involving high losses, potential insider fraud and weakening of a financial institution--to focus investigative and prosecutorial resources on them.

The legislative proposals endorsed by Bush included some pending measures as well as some proposals that have not yet been introduced. However, the Administration plans to combine them into a single proposed amendment to an omnibus crime bill currently under consideration.

Several of the U.S. attorneys attending the Justice Department meeting indicated in interviews that they had needs other than the new S&L; rapid response teams of auditors and attorneys.

Bob Brosio, acting U.S. attorney in Los Angeles, for example, said that his greatest need is for additional experienced FBI agents to conduct the complex investigations required to counteract S&L; fraud. But efforts to add such agents are hampered by the lack of a pay differential to offset the high cost of living in Los Angeles.

“Very substantial numbers (of additional agents) will be required to handle the vast number of S&L; cases of $500,000 on up,” Brosio said.

The usefulness of expanding court-authorized wiretapping to cover S&L; and other financial institution fraud also was questioned by several prosecutors.

Marvin Collins, U.S. attorney for the Dallas-Ft. Worth region that is the current focal point of the Justice Department effort against S&L; fraud, said he had not seen a case in which wiretapping would have helped.

Collins and other prosecutors noted that the S&L; fraud investigations are “historical” rather than “ongoing criminal activity” inquiries, limiting the need for wiretapping.