Financial Scams Are on Rise in Region : Fraud: The nature of the crimes is changing, however. Trend toward small business and real estate is outlined at seminar.

Southern California’s position as the financial fraud capital of the nation appears to be more entrenched than ever, but the nature of the white-collar crimes is changing, law enforcement officials said Tuesday.

Failures in the fraud-ridden savings and loan industry are declining, but law enforcement officials say there has been an upswing in crimes relating to small-business and real estate lending.

The Los Angeles office of the FBI had 1,003 criminal cases pending on March 31, involving frauds with potential losses of more than $5.6 billion, according to Joseph T. Woodall, a supervisory agent in the Los Angeles office.

At a gathering of 400 financial security officers at a Santa Monica hotel, Woodall said the FBI’s Los Angeles office handles far more financial crime cases than any other office in the nation, including twice as many as New York.

Moreover, Woodall said that 79% of the cases in the bureau’s seven-county jurisdiction, stretching from Riverside to San Luis Obispo, involved losses of more than $100,000. Those counties have 6% of the nation’s population but received 27% of the white-collar crime referrals from Oct. 1, 1992, to March 31, 1993.

Representatives of banks, savings and loans and other financial institutions heard the assessment at a daylong seminar sponsored by the FBI, the U.S. attorney’s office and eight other federal and state regulatory bodies, including the Internal Revenue Service, the Office of Thrift Supervision, the Resolution Trust Corp. and the California Banking Department.

Charlie J. Parsons, who heads the FBI’s Los Angeles office, described the gravity of the problem by drawing a comparison with bank robberies.

“All the loot taken in all the bank robberies in the United States in 1992 amounts to only 3%” of the $2.6-billion loss in the failure of Irvine-based Lincoln Savings & Loan, he said.

To combat the fraud, Parsons said, he now has 27% of his 614 agents working on these crimes--more than twice as many as a few years ago.

Law enforcement officials said the meeting was designed to bring them into direct contact with possible fraud victims and foster cooperation in an attempt to combat the scams. “We’re facing a 9% cutback in our staff,” said U.S. Atty. Terree A. Bowers. “It’s even more important that you work with us.”

Woodall said 110 financial institutions--banks, savings and loans and credit unions--have failed in the seven-county area in the last decade. Serious crime played a key role in about a quarter of the failures and led to the conviction of 80 people.

According to John F. Walsh III, who heads the major frauds unit of the U.S. attorney’s office in Los Angeles, the number of failures is abating. However, he said, there has been an upsurge in mortgage fraud and advance-fee loan scams.

In these frauds, Walsh said, con men induce small-business people who cannot obtain conventional financing to pay large “up-front” fees, with promises that banks in Switzerland, Belgium or Luxembourg will issue “standby letters of credit” on their behalf. In reality, neither the banks nor the letters of credit exist, he said.

Speakers from several agencies explained to the bankers how their offices handle criminal referrals.

The general theme was “if in doubt, send it to us.”

Southland’s the Place...for Financial Fraud

Southern California is the financial fraud capital of the nation, judging by the total number of such cases under criminal investigation by the Los Angeles office of the FBI, which covers Los Angeles, Orange, Ventura, San Luis Obispo, Santa Barbara, Riverside and San Bernardino counties.

Office Cases pending Los Angeles 1,003 New York 520 Dallas 434 Chicago 363 Boston 348 San Francisco 345 Philadelphia 321 Newark, N.J. 293 Tampa 272 Detroit 243

Source: FBI