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FBI's Corporate, Mortgage and Securities Probes on the Rise
The National Law Journal
May 23, 2008
Corporate, mortgage and securities investigations by the FBI rose last year, while the number of health care fraud cases remained flat, according to a just-released financial crimes report.
The FBI reported it had 529 corporate fraud investigations, nearly double the number five years earlier. The number of mortgage fraud investigations pending nearly tripled, up from 436 in fiscal year 2003 to 1,204 in 2007. The bureau also reported 321 mortgage fraud indictments and 839 health care fraud indictments in FY2007.
The FBI's just-issued financial crimes report details corporate fraud investigations under way that allegedly account for more than $1 billion in losses to public investors.
Through FY2007 the FBI reported 183 indictments and 173 convictions of corporate criminals through plea bargains or trials. At the top of its list of significant cases for the year was Brocade Communications Systems Inc., a technology company based in San Jose, Calif., with former executives accused of stock options backdating.
In August, a federal jury in San Francisco convicted former Brocade CEO Gregory Reyes of 10 counts of conspiracy and securities fraud in the first backdating criminal case to go to trial. He was sentenced to 21 months in prison in December.
Among the securities and commodities fraud cases, FY2007 saw an increase in the last five years from 937 cases in 2003 to 1,217 last year. The FBI recovered $24 million and the government won $1.7 billion in restitution orders.
With mortgage fraud getting increased attention in the wake of the national mortgage default crisis, the FBI had 1,204 cases under investigation, resulting in 321 indictments and 260 convictions for mortgage fraud.
One significant case against an Atlanta attorney, Raymond J. Costanzo Jr., accused him of closing millions of dollars in fraudulently inflated mortgage loans for unqualified straw borrowers. In February, Costanzo was sentenced to three years in prison and gave up his law license and was ordered to pay $7.8 million in restitution.
Health care fraud investigations have included illegal activity in medical transportation, durable medical equipment, hospital cost reporting, pharmaceutical fraud and other investigations.
In FY2007, the FBI health care fraud cases produced $1.12 billion in restitution orders, $4.4 million in recoveries and $34 million in fines.
One of its biggest returns has come from the Miami Medicare strike force investigations, which have so far resulted in 120 arrests and 111 indictments in a variety of Medicare billing frauds.
