Probe of Local S&Ls; Hindered by Shortages : Thrifts: The FBI complains that a lack of computers and personnel is making it difficult to investigate massive claims of fraud at Southland financial institutions.
The FBI office in Los Angeles has 14 new accountants to help investigate fraud at financial institutions--where the smoking gun is usually a file cabinet full of paper. But the accountants have a major problem.
They must share two computers.
That’s part of the problem that the office is encountering as it combats fraud in banks and savings and loans throughout its seven-county district.
“We’re out of the era of yellow (paper) spreadsheets,” said Lawrence G. Lawler, special agent in charge of the local FBI office. “We’re talking Lotus 1-2-3 software, and our guys have to take turns using two computers.”
The lack of automation support is just one problem hampering the FBI’s effort to crack down on financial institution fraud, which has become a rallying cry for the Bush Administration in the past month.
With investigations of 35 failed institutions, mostly in Los Angeles and Orange counties, and a plethora of probes involving healthy banks, thrifts and credit unions, Lawler says his office lacks the personnel and equipment to adequately tackle the fraud cases.
“If I had an additional 70 agents on bank fraud, I’d still have to assign them 30 cases apiece just to get rid of the backlog, and that’s a ridiculous number,” he said in a recent interview. “I already have 70 agents working full time on bank fraud and I could use 100 more.”
The numbers can be staggering, especially considering the amount of referrals--formal written requests for criminal investigations--that the Justice Department gets.
The department, for instance, received 21,147 referrals in the past 2 1/2 years, and more than 16,000 involved California financial institutions.
“We’re getting 200 referrals a month,” Lawler said. “Our best estimate is that bank fraud referrals won’t bottom out for five to seven years.”
About 83% of all referrals involve amounts less than $25,000, a department spokesman said. Those cases are handled by local police or by the institutions themselves, usually through reimbursement, firing and, often, a guilty plea that the FBI or police can move through the courts quickly, Lawler said.
Agents from Orange County to San Luis Obispo County are working on 370 cases, including seven top-priority cases involving failed thrifts. An additional 286 are pending, Lawler said. Each case involves losses of more than $100,000.
Although a single agent may handle several routine investigations at once, some cases--the failure of Lincoln Savings & Loan in Irvine, for example--are so complex that they require full-time work by several agents.
“Lincoln impacts one heck of a lot of people and places and businesses, and it has a potential loss of $2.5 billion. That’s big bucks,” Lawler said. “It’s the biggest case we have here, and I wouldn’t be surprised if it’s the biggest (thrift fraud) case in the country.”
The FBI’s effort to investigate the cases is hampered by a series of problems.
First, it doesn’t have enough tools, such as computers, to do the job. The federal law that bailed out the thrift deposit insurance system last year provided additional personnel for the department, including 27 agents and 14 accountants for the FBI district in Los Angeles.
“In the past three years, Congress has authorized the FBI to do things but has not appropriated the money for us to do it,” he said. “We have to take the funds out of the existing budget.”
Also, though Congress authorized funds to hire more agents, the FBI still must recruit and train personnel, who usually don’t start on bank fraud cases. Lawler’s 525-agent staff has other serious crimes to investigate, including about 2,000 bank robberies a year.
Another problem is that the relatively modest salaries paid to agents don’t stretch as far in Southern California, with its high housing and living costs. Senior agents, including Lawler’s best bank fraud investigator, have transferred to less costly districts in the nation’s heartland.
“We have people transfer to L.A., go house hunting and quit because they can’t afford to move here,” he said. Many agents live in Lancaster and Palmdale where housing is cheaper, but the commute takes hours out of a day.
