White Collar Crime’s Surge – Mortgage Fraud – FBI Director’s Comments

May 2, 2008

As a white collar crime speaker, most of my presentations on the subject centered around corporate fraud and how to prevent it. Lately, however, more and more organizations from real estate firms, to associations, to mortgage companies are interested in the new hot topic – MORTGAGE FRAUD. They want to know how it happens, what to look for and how to prevent it.

Below are comments reprinted from the FBI web-site. The entire document can be found here.

A day after warning the Senate about a “tremendous surge” in the FBI’s mortgage fraud investigations, Director Robert Mueller talked in more detailed terms about the growth in both corporate fraud and public corruption cases at the annual conference of the American Bar Association’s Section of Litigation in Washington, D.C.

Despite limited resources, Mueller said that the FBI’s corporate fraud cases have grown more than 80 percent since 2003. Last year, we had more than 490 corporate and securities fraud convictions.

He predicted that the problem will only worsen because of the “ripple effect of the sub-prime crisis and its impact on the credit market.” The FBI, he said, has already “identified 19 corporate fraud matters related to the sub-prime lending crisis … targeting accounting fraud, insider trading, and deceptive sales practices.” And, we’re currently investigating more than 1,300 mortgage fraud matters.

Years past, the FBI was involved in other forms of white collar crime. Today, that is shifting. That is not to say that corporate and public corruption do not exist – they do, but this new wave of crime seems to have caught on right under the public’s nose as mortgage money came easy.

Mueller goes on to say, In my days as defense counsel with a firm representing corporate targets, I met a number of executives who could rationalize every bad decision. They would say it was “business as usual”—that they were acting in the best interests of the company, given financial constraints and the pressures of running a business.

And I would think to myself, “You broke about 14 laws before breakfast. How could you fail to see you were doing anything wrong?”

I saw executives who did not start out intending to break the law. They would argue they were playing by the same rules as everyone else. They began to believe their own explanations. But it is a slippery slope from behavior that skirts ethical or legal boundaries to behavior that crosses the line completely.

It calls to mind the saying: If you jump out of a window on the 100th floor, and you seem to be doing fine as you pass the 40th floor, that doesn’t mean you don’t have a big problem. Rationalization will not provide much padding when you hit the pavement.

Mueller points out a valuable truth that often comes out in my business ethics presentations, just because some one else does some thing does not mean that it is ethical, right or that you should make the same choice. Every choice has a consequence.

If your organization deals with the sale of real estate it is worthwhile to explore MORTGAGE FRAUD – how it happens, what to look for and how to avoid the outcome – PRISON. For more information contact me through my web site: www.chuckgallagher.com

Mortgage Fraud Speak – Chuck Gallagher – signing off…