Catch Us If You Can

By RICHARD BEHAR

In Texas' pine-covered Eastern District, where failed thrifts are about as common as pickup trucks, U.S. Attorney Robert Wortham has a problem. Some 30 financial institutions have already gone belly-up or come under Government supervision; 59 more are under investigation for fraud. But Wortham, with a team of five FBI agents, doesn't have the manpower needed to unravel the bankers' dastardly deeds. "I've begged. I've pleaded. I've complained up the ladder," said Wortham at a hearing last week before the House Commerce, Consumer, and Monetary Affairs Subcommittee. "I could ask my mother to do it . . . but I don't know if she would really know what to look for."

Last year President Bush pledged "every effort" to lock up the white- collar criminals who had helped cause the nation's savings and loan disaster. Indeed, with studies showing that insider misconduct has contributed to 60% to 75% of all thrift failures, the search for banking's bad guys is one of the largest criminal manhunts in U.S. history. But, like Bush's war on drugs, the war on S&Ls has completely overwhelmed prosecutors and investigators. There are more than 3,500 major criminal cases pending, yet 1,500 of them are inactive and gathering dust. Indeed, the backlog is growing so quickly that some prosecutors have stopped investigating cases that involve less than $100,000.

While the entire S&L bailout is expected to cost taxpayers as much as $300 billion, the dire shortage of sleuths is partly caused by the Bush Administration's unwillingness to lay out a measly $25 million. Last year the Administration requested $50 million for the assault on S&L villains. Congress upped the authorization to $75 million, but the Administration balked. "If the violators don't believe they're going to be caught and stiffly sentenced, they're going to keep doing it," warned Georgia Democrat Doug Barnard Jr., the subcommittee's chairman and a former banker himself. "We will give the Administration the tools to put the crooks in jail. All they have to do is put in a budget request."

The consequences of budgetary stinginess are being felt nationwide. The FBI had sought money for 425 additional agents to investigate bank scams but received only 201. In Dallas, where a team of investigators is drowning in 7 million documents, the U.S. Attorney received just 37 of the 64 new FBI agents he had requested. Some scam-packed cities like San Diego, which asked for five agents and five prosecutors, received none.

Even without needed resources, the Justice Department insists it is making some headway. The FBI boasts 770 convictions involving major bank fraud in 1989, with $361 million in restitution ordered by courts, up 200% from 1987. A five-year extension of the statute of limitations, obtained last August, should help prosecutors. Even so, investigators agree that many of the biggest scoundrels are still at large. Besides lack of manpower, prosecutors must contend with the enormous complexity of the crimes, the murkiness of the line between fraud and ineptitude, and the difficulty of conveying all this to juries.

Even when convictions are obtained, misused funds can be difficult to recover. Most of the S&L con men have lost the money, says Wortham. "It's easy come, easy go." That may be why regulators are moving quickly to apprehend another class of villains: the accountants who, out of negligence or complicity, helped cause the S&L disaster. The Government has filed ten lawsuits against the country's biggest accounting firms, totaling $2 billion, and that figure is expected to rise dramatically. Gripes Joseph Mauriello, a partner with the second largest accounting giant, KPMG Peat Marwick: "They are going after us because we've got the big pockets."

With reporting by Michael Riley/Washington and Richard Woodbury/Houston