‘SWAT Team’ to Ferret Out White-Collar Crimes

Just six weeks ago, the FBI announced plans to move dozens of agents out of white-collar crime probes and into counter-terrorism as part of a new post-Sept. 11 mandate.

But that was before the latest wave of corporate scandals hit Washington. On Tuesday, President Bush delivered a very different message, creating a “financial crimes SWAT team” to investigate white-collar crimes to try to win back the public’s shaken confidence.

Rather than de-emphasizing white-collar crime investigations by federal law enforcement, Bush said he wants his newly created corporate fraud task force--made up of senior law enforcement officials--to better guide and coordinate investigations across different federal departments.

The president’s creation of the high-level task force, along with a litany of tough new penalties for corporate criminals that he also announced Tuesday, signal a significant change for the administration in its law enforcement priorities.

Implicit in his message was the sense that federal agencies have not been doing a good enough job in marshaling their collective resources to go after major fraud in corporate America. Some critics questioned why it should take a scandal at WorldCom Inc. or Enron Corp. to make that happen.

“I have no objection to forming a task force,” said Sen. Patrick J. Leahy (D-Vt.), chairman of the Senate Judiciary Committee, “but the administration should already be requiring federal agencies to cooperate on corporate fraud cases, and it should not take a task force to make that happen.”

Leading the redoubled effort will be Deputy Atty. Gen. Larry Thompson, a former federal prosecutor in Atlanta who is the top deputy to Atty. Gen. John Ashcroft.

Bush named Thompson to head a task force that will include other top officials of the Justice Department, the Treasury Department, the FBI, the Securities and Exchange Commission, the Federal Communications Commission and other agencies.

The committee’s charge is to “strengthen the efforts” of the federal government in investigating financial crimes, coordinate cross-agency probes and develop new policies and priorities, according to Bush’s order.

Thompson already has a lengthy resume in the area of white-collar crime. He worked extensively in defending white-collar crime cases as a private attorney in Atlanta, and he has personally overseen the Justice Department’s ongoing Enron investigation because Ashcroft recused himself from the case, citing contributions he received from Enron executives.

Campaign finance activists have called on Thompson to step down from the Enron investigation as well because his former law firm in Atlanta represented both Enron and Arthur Andersen, the accounting firm convicted of obstruction of justice in the Enron probe. But Thompson has rejected that suggestion, saying he has no conflict in running the case.

“Larry’s 16 years of white-collar [defense] work make him uniquely qualified for an assignment like this,” said an administration official who asked not to be identified. “His integrity is beyond question, and he calls it as he sees it.”

One of Thompson’s toughest tasks will be finding the resources to expand the investigation of white-collar crime even as the administration is stepping up the fight against terrorism.

In late May, when FBI Director Robert S. Mueller III announced a reorganization of the bureau to better combat terrorism, white-collar crime was one of the casualties. Mueller’s plan will redeploy 59 agents from white-collar crime, plus another 59 agents from violent crime and 400 agents from narcotics, and commit them to an expanded counter-terrorism operation.

FBI officials, who admitted that they were caught off-guard by Bush’s announcement, said they have no plans to send the redeployed agents back to white-collar investigations. But the FBI and other law enforcement officials acknowledged that the White House plan raises the stakes in probes of financial wrongdoing and gives it a much higher visibility.

“For the last 15 or 20 years, white-collar crime has not been given the priority it should have had in law enforcement.... There’s simply been no great pressure from the outside to deal with white-collar crime,” said Robert S. Litt, a former Justice Department official who is now in private practice in Washington.

Litt said the public clamor surrounding recent billion-dollar earnings adjustments and allegations of corporate wrongdoing is driving the move. “This wasn’t proposed six weeks ago or six months ago,” he said. “It was proposed now because I think people are suddenly saying ‘Gee, there’s a problem here,’ and that’s because there’s been so much about it in the media.”

Bush’s plan calls for increased funding at the SEC for investigators. But Litt and other legal observers said that the impact of his new corporate crime task force will be muted unless the administration comes up with significant new resources to dedicate FBI agents and federal prosectors to the task of cracking down on corporate crime.

“There are many white-collar crimes that are going unprosecuted right now” because federal authorities do not have enough investigators and prosecutors to pursue them, said Paul Fishman, a former federal prosecutor who now handles white-collar defense work in New Jersey.

Ashcroft, in a statement, did not indicate whether the department would commit new resources to financial crimes. But he said Bush’s plan “will bring a new measure of accountability to American businesses” by deterring crimes through stiffened penalties.

“With the added weight of the Corporate Fraud Task Force,” Ashcroft said, “we will continue to hold accountable those individuals and entities who violate the public trust, undermine our free enterprise system and put at risk the retirement savings of American workers.”