Former FBI director Louis Freeh addressed the ever-growing problem of financial fraud in a speech before the Association of Certified Fraud Examiners at the ACFE's annual conference in San Antonio, Texas, on Monday, pointing out that some of the original FBI members were accountants.
Freeh worked at one time in the same office as ACFE founder Dr. Joseph Wells and noted that Certified Fraud Examiners continue to play a key role in FBI investigations. “In all of the matters that Joe mentioned, I had CFE members accompanying me and involved very, very heavily in investigations,” he said. “What's critical about your organization and your reputation is the interaction and the interconnectivity that you bring between the government and the private anti-fraud community and establishment. That did not exist for many years. For most of the history of my great organization, the FBI, the interaction—not just with our state and local counterparts, but with private industry—was very meager. As a result, a lot of great results and a lot of great achievements were not able to take place.”
Freeh noted that the ACFE has many foreign members and pointed out that he was able to open up dozens of FBI offices abroad, which turned out to be a great advantage to the United States, particularly after 9/11. “Just as importantly, all of the cases that we work, whether it's a money laundering case or a drug case or even a corruption case today, requires tremendous cooperation and interaction between many multiple, complex, and at even at times adverse foreign police forces and security services. Being able to do that, and you to do it, on a private level is very, very critical.”
Freeh, who now heads the risk management firm Freeh Group International Solutions, discussed some of the ways that financial investigations have changed over the years, especially with the technology available to investigators.
In one organized crime case in the 1970s, FBI investigators asked the crime lab to send them their best hidden microphone that they could plant on one informant. “They sent up a pair of shoes,” said Freeh. “The microphone was embedded in a shoe. The problem was it was a 12 and a half quadruple-E shoe. The first statement by a subject on the tape was, 'John, what's the matter with your feet?'”
In another case, he was able to give a wireless transmitter to an informant to wear. “Unlike a lot of the adversaries you deal with, we had thankfully some not-so-sophisticated adversaries,” said Freeh. “We had a case once in Miami where the witness had a T4 transmitter in his pocket. We were outside in the car listening to the conversation. In the course of his discussion in the men's room, he loses the T4 and it goes bouncing across the marble floor. He's with a very powerful, very bad organized crime guy. The lucky part is he was very smart and he said, 'Oh, my goodness, that's my pacemaker.' And the subject picked it up and said, 'Oh, I'm sorry. I didn't know you had a heart condition.'”
In another case, the FBI got a court order for a wiretap, but were warned by an informant that they would never be able to get a recording of an incriminating phone call between the suspects. “The informant told us, 'You're wasting your time. These guys will never talk on the phone because they realize you're probably recording them.'” For the next four months, the FBI recorded them on the phone talking to each other in a whisper.
“There were some advantages which you don't have today dealing with the Bernie Madoffs of the world and some of the other very sophisticated cases,” said Freeh.
Freeh pointed out that the ACFE brings experience and depth to investigations and that many members of the FBI and the IRS are CFEs. “The synergies and the ability to share information is unprecedented in our history,” he said.
Freeh reviewed the history of the FBI, noting that it was formed in 1908 by President Theodore Roosevelt, who had once been New York City's police commissioner. “When he asked around in the Department of Justice, 'Who does our investigations?' they said, 'The people over in the Treasury Department do them.' So the first [employees of the] Bureau of Investigation were not gunslingers or bank robbery investigators, they were accountants. They had no weapons. They had no authority to arrest anybody. That didn't come until 1933, but it evolved due to the necessity of being able to deal with financial crime.”