Fraud and Insider Abuse

Allison Tussey —  May 21, 2010 — 1 Comment

Mortgage fraud investigations by the FBI increased 400% in 2009, according to an Office of Thrift Supervision (OTS) report on fraud and insider abuse.

According to the report, “Difficult economic times often lead to an increase in fraud and insider abuse. During the market downturns of the late 1980s and early 1990s, fraud and insider abuse significantly contributed to thrift failures and caused substantial losses at many others. Since the recession began in 2007, there have been increases in white collar crime as well as changes in the way fraud scams are carried out. Although certain crimes such as, investment fraud and Ponzi schemes are not new, they are increasing as a result of market deterioration.

The difficult times of the past year have lead the federal government to commit considerable amounts of financial resources through the Troubled Asset Relief Program and other stimulus programs to spur the economy. Inevitably, the flow of massive amounts of federal assistance lends itself to various forms of fraud. In an effort to safeguard the use and expenditure of public dollars, Congress passed the Fraud Enforcement and Recovery Act of 2009 (FERA) on May 20, 2009. FERA’s amendments to the civil False Claims Act broadens the risk of liability in a manner that warrants the attention of not just fraudsters, but to anyone doing business with the federal government.

The Department of Justice (DOJ) labels financial fraud “one of the most glaring threats” facing the US economy and has prioritized the fight against fraud to a level that merits the close attention of American corporate leaders. Following a wave of major corporate scandals, Congress established the President’s Corporate Fraud Task Force to restore public and investor confidence in American businesses. In 2009, the President elevated the fight against mortgage fraud to a cabinet-level priority and expanded the taskforce to include OTS, OCC, the Federal Reserve, The Federal Housing Finance Agency, HUD, and the Special Inspector General for the Troubled Asset Relief Program. The President’s task force joins the work that the Federal Trade Commission has already begun with their “Operation Stolen Hope” to crack down on mortgage foreclosure rescue and loan modification scams. The latest effort to expand the taskforce emphasizes the continued need to crack down on mortgage fraud, particularly with regard to ongoing investigations into securitization fraud. In addition to the President’s taskforce, several other federal agencies work together to combat fraud and insider abuse at financial institutions.

The Securities and Exchange Commission (SEC) adopted rules to enhance shareholder disclosure and improve safeguards to protect the public after the Madoff Ponzi scheme and other fraudulent activities caused investors to question whether their assets are safe. The SEC amended its custody rules to increase the protections for investors who turn their money and securities over to investment advisers registered with the SEC. The amended rules provide safeguards where there is a heightened potential for fraud or theft of client assets. The SEC also approved new rules to enhance the information provided to shareholders so they are better able to evaluate the leadership of public companies.”

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Allison Tussey

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One response to Fraud and Insider Abuse

  1. We are mortgage fraud victims which was from a joint collusion with a builder, title company and bank. There is proof that they have gotten away with over $20 million in mortgage fraud however, authorities will not investigate or go after them. We are in civil litigation however are going broke fighting three companies and an attorney helping cover the title company. Is there any resources?

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