Stimulus, bailout will lead to more fraud: FBI

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http://news.yahoo.com/s/nm/us_financial_fraud_fbi

Stimulus, bailout will lead to more fraud: FBI

By Andy Sullivan Andy Sullivan

WASHINGTON (Reuters) – The FBI is bracing for a wave of fraud and corruption cases stemming from the government's multitrillion-dollar effort to get the economy moving again, the agency's chief told Congress on Wednesday.

The expected surge in economic crimes will place further strain on an agency already stretched thin as it investigates mortgage fraud, terrorism and corrupt politicians, FBI Director Robert Mueller said.

"Our expectation is that economic crimes will continue to skyrocket," Mueller said.

After the September 11, 2001 hijacking attacks, the FBI moved more than 2,000 investigators out of its criminal division to place greater emphasis on national security.

But that reduced the agency's ability to cope with a subsequent explosion in corruption, fraud and gang-related cases, Mueller said.

Over the past three years the FBI has more than doubled the number of agents investigating mortgage fraud to 254 to keep up with its doubled caseload, he said. Bank data suggest that the pace will continue to increase.

Public corruption cases have increased by more than half since 2003 to 2,500 pending investigations, he said.

Gang-related cases have doubled since 2001 as the agency has had to cope with the emergence of international criminal groups like MS-13 and Mexican drug-smuggling cartels.

The agency's caseload will only increase as federal dollars flow from the $787 billion economic stimulus package and several bank bailouts, he said.

"The unprecedented level of financial resources committed by the federal government to combat the economic downturn will lead to an inevitable increase in economic crime and public corruption cases," Mueller said.

Mueller noted that the FBI had more than 1,000 agents to cope with the last financial crisis, the savings-and-loan debacle of the late 1980s and early 1990s, roughly double the number it has now for economic crimes.

The agency has stepped up its recruiting efforts this year, Muller said, but was set back when the House of Representatives cut out a provision of the stimulus package that would have paid for 165 new FBI agents.

Senate Judiciary Chairman Patrick Leahy said the Senate is expected to take up legislation in April that would give $245 million a year to the FBI and other law enforcement agencies to fight financial fraud.

Mueller said the FBI was working with a number of U.S. attorneys and the Justice Department for what he called fast-track prosecutions in a number of areas. "We're prioritizing our cases to hit the most egregious early and put those persons away," he said.

(Editing by Cynthia Osterman)