By Randall Mikkelsen
WASHINGTON (Reuters) - The FBI's caseload of fraud investigations into major corporations and banks could climb from 38 into the hundreds as the economic crisis deepens, a bureau official told Congress on Wednesday.
U.S. officials also told a Senate hearing several criminal investigations related to the $700 billion federal bailout program were already in progress.
The comments came as Congress moves to tighten fraud laws and demands that the Justice Department prosecutes financial crimes more aggressively to safeguard public money used in financial bailouts that could reach trillions of dollars.
"I want to see people prosecuted," said Senate Judiciary Committee Chairman Patrick Leahy said. "Frankly, I want to see people go to jail."
The Vermont Democrat has proposed legislation to hire more investigators and tighten laws against financial fraud. Aides said his committee could act within weeks.
Government officials told the hearing they needed more money and other resources to investigate fraud.
The FBI's caseload of 38 corporate fraud and financial-institution investigations linked to the crisis represents an increase from 24 publicly reported last year. But the effort has yielded few major prosecutions.
FBI Deputy Director John Pistole declined to say who was being investigated, but compared the investigations to the collapse of the Enron energy trading company in 2001.
"These are companies, businesses that everybody knows about," he said. "We see that number potentially rising into the hundreds."
He said the 240 FBI agents and a similar number of agents from other agencies and jurisdictions working on corporate fraud cases represented only about half of the roughly 1,000 who investigated the collapse of the U.S. savings and loan industry in the 1980s, although the scale of the current crisis is far larger.
PROBES UNDER WAY
Probes related to the $700 billion Troubled Asset Relief Program, or TARP, were already under way, Neil Barofsky, special inspector general for the program, said.
"We have already opened several criminal investigations involving multiple jurisdictions, and ... are closely coordinating our executive-compensation oversight efforts with the New York State Attorney General," he said.
Trillions of dollars in government money will be potentially at risk of fraudulent activity in the many rescue programs to address the financial crisis, Barofsky said.
"These huge investments of taxpayers money, made over a relatively short time period, will require close oversight and will invariably provide an inventive to those seeking to profit criminally," Barofsky told the committee.
Officials said the growing caseload was straining budgets, and said the FBI was considering whether resources could safely be shifted from security budgets.
In the seven years since the September 11 attacks, Barofsky said, counterterrorism efforts had diverted resources from white-collar crime probes.
"We saw areas of coverage shrink and prosecutorial thresholds rise. The Department of Justice's recent shift of focus to mortgage fraud has left other areas of white-collar crime underfunded and under-prosecuted," he said.
The Justice Department backs Leahy's proposed legislation, said the acting head of the department's criminal division, Rita Glavin.
The proposals include covering mortgage lenders under bank-fraud laws, criminalizing false statements to mortgage lenders and extending U.S. fraud laws to cover activities related to the TARP bailout as well as commodities options and futures trading.
"These changes would enhance our ability to investigate and prosecute mortgage fraud and other types of investment fraud," Glavin said.
(editing by Deborah Charles and Frances Kerry)
