TABLE 2

Summary of Number of Agencies and Respondents Identifying Various Types of Illegal Activity as Priority/Problem Areas

Fraud and Corruption involving federal procurement

Insurance fraud (including arson for profit)

E22, E25, E34, E47, others Corruption of state and local officials

71-529 081 25

TABLE 3

Illegal Activities Most Frequently Identified As Significant Problem Areas By FBI
Field Offices - February 1980

Number of Field Offices
Identifying as Problem Area

43 (71%)*

Priority/Problem Area

1. Corruption of state and local officials, including kickbacks to purchasing

agents, inspectors, legislators, members of judiciary, etc.

2. Bank fraud and embezzlement

3. Labor-related corruption

4. Housing/HUD frauds, including VA/FHA frauds

5. Copyright matters

6. Procurement-related corruption of federal officials, including GSA and Defense 7. Advance fee schemes

37 (61%)

-28 (46%)

28 (46%)

28 (46%)

27 (44%)

8. Fraud involving health, rehabilitation and welfare programs, including Medicare/ Medicaid

23 (38%)
23 (38%)

23 (38%)

22 (36%)

21 (34%)

21 (34%)

18 (30%)

16 (27%)

15 (25%)

9. Fraud involving CETA funds and other Department of Labor Programs 10. Wire fraud/mail fraud, scheme unspecified

11. Bribery, corruption of federal officials other than procurement-related corruption 12. Bankruptcy Act/bust out schemes

13. Fraud involving SBA loans or benefits

14. Overbilling, fraud against the government involving construction and service contractors

15. Investor fraud generally, including Ponzi schemes, franchise fraud, business opportunity fraud

* Figures in parentheses indicate percentage of total number of responding offices (61) identifying the illegal activity as a significant problem.

white collar crime provided by these agencies and collected from other sources. The discussion below is based on that information; however, it is limited to what appear to be the most significant attributes of each crime, consistent with the criteria described earlier for choosing national priorities.

A. Criminal Activity Threatening the Integrity of
Government Institutions and Processes

This category includes four broad areas of illegal activity:

1. Corruption of federal officials, other than GSA corruption

2. GSA corruption

3. Corruption of state and local officials

4. Bribery of foreign government officials

GSA corruption is treated separately from other federal corruption at the suggestion of the Public Integrity Section, which reviewed and summarized all public corruption-related data. The focus of this category is on corrupt activities that threaten the integrity of government institutions and procedures. These corrupt activities are often connected with fraud against the government by outsiders, particularly procurement and program fraud. The latter type of abuses, which have a major impact on government and taxpayer costs, are treated in more detail in the next section of this report.

1. Corruption of federal officials, other than GSA corruption

This type of illegal activity involves procurement-related kickbacks and bribery, corruption related to federal programs and the awarding of grants or subsidies, bribes to federal inspectors, and bribes to various law enforcement officials. It also includes corruption of federal elected officials and members of the federal judiciary, although corrupt activity among these officials was less frequently reported than Executive Branch corruption.

Corrupt activity among federal employees was reported nationwide, but was particularly present in the larger cities where federal regional offices are located and federal programs are administered. Program fraud involving corruption was widely reported. Every major federal department and agency seems affected. Procurement-related corruption affects all agencies, but GSA and the Department of Defense were most frequently mentioned. Inspection-related corruption was most-mentioned in connection with the Department of Agriculture and HUD. Bribery of officials for other favors was mentioned in connection with a number of federal agencies.

Some organized crime involvement is indicated, but most corrupt activity involves individual offenders in government and individuals or businesses outside government, independent of other criminal activity. The immediate victims of corrupt activity are honest contractors and seekers of federal business or assistance who lose business or benefits. The ultimate victims of this activity are government institutions and processes as a whole: public respect declines, morale among government employees suffers, and legitimate government programs and activities are curtailed. Taxpayers also lose, due to increased government costs, inefficient use of tax dollars, and ineffective government operations. The general public loses to the extent that laws aimed at protecting their health, safety or economic well-being are circumvented or ignored.

Obstacles confronting law enforcement efforts directed at federal corruption include the extensive commitment of resources usually required for investigation and prosecution, and, in some instances, turnover and consequent lack of continuity among federal investigators and prosecutors. Public interest in rooting out and punishing corrupt officials creates a favorable atmosphere for increased federal emphasis, but also fosters demands for tangible, significant and swift results.

The harm inflicted on society by these types of illegal activity is, for the most part, immeasurable. There is, however, little disagreement that the impact is great and that federal law enforcement emphasis is a necessity. A series of national priorities focusing on different types on federal employee corruption is appropriate.

2. GSA Corruption

GSA corruption is not different in character from the procurement-related corruption that takes place in other agencies. Because of the central authority that GSA retains in procuring office equipment and other goods for federal agencies and departments, the dollar losses associated with GSA corruption probably exceed those of many other types of public corruption. Because of recent publicity, the impact of GSA corruption on the public's respect for government institutions and officials may also be greater than the impact of other kinds of federal corrupt activity. This same publicity has also heightened public and Congressional interest in focusing law enforcement efforts on GSA corruption.

Notwithstanding all of the above factors, we are not convinced that GSA corruption deserves separate treatment in terms of law enforcement priorities. The type of harm resulting from this illegal activity does not appear to differ sufficiently in degree or character from other federal corruption to merit a special priority designation.

3. Corruption of State and Local Officials

As indicated earlier in this discussion, corruption of state and local officials is one of the most frequently identified white collar crime problem areas. This kind of corruption was among the top five problem areas identified by respondents to the Information Request, with seven different agencies and thirty-eight (38) different respondents designating it as a priority area (see Table 2). It was the most frequently mentioned problem area in the recent FBI survey, with 71% of the field offices reporting it as one of their most significant problems (see Table 3).

This category of corruption involves a large number of different types of illegal activity by different types of state and local officials. It involves extortion by or bribery of elected, appointed and civil service officials in connection with awarding contracts for goods and services, introducing favorable legislation, providing a license or permit, falsifying inspection reports, lowering tax assessments, and other favorable acts. It also involves bribery of court officials, police officers, and other law enforcement officials in return for favorable treatment.

The impact of state and local corruption is similar to that of federal corruption, but in many ways is more severe. In terms of public respect for government institutions and processes, local and state governments are much more visible and present in the public's everyday life, than is the federal government; corruption affecting these governments is therefore likely to be more widely perceived and more damaging than federal government corruption. In addition, as large as the federal budget and federal expenditures are, state and local budgets and expenditures are much larger. The dollar losses and increased taxpayer costs involved in local and state procurement-related corruption may thus be much higher.

Many state and local law enforcement agencies address public corruption effectively themselves or work in conjunction with federal investigators and prosecutors in doing so. However, other local and state agencies lack adequate resources to address corruption problems. Also, in some instances, local officials participating in corrupt activity may effectively foreclose local law enforcement efforts. The need for and degree of federal involvement thus will vary from locality to locality.

The information we have gathered indicates that federal investigators and prosecutors are keenly aware of local and state corruption problems and are widely involved in addressing them. Given the clear magnitude and the impact of local and state corruption, we think it has to be included in some form in a list of national white collar crime priorities.

As indicated, local and state corruption takes many forms and involves many different types of officials. These differences in types of crime and offenders may be very significant when it comes to defining district priorities or designing enforcement strategies for local and state corruption. However, for purposes of defining national priorities, it seems sufficient and desirable to define state and local corruption as a law enforcement priority when major state or local officials are involved or when there is systemic corruption of other state or local employees.

4. Bribery of Foreign Government Officials

The investigation and prosecution of bribery of foreign government officials by United States-based businesses has been a priority of the Department's Criminal Division since 1972 when the Task Force on Overseas Payments of Transnational Corporations was established in the Fraud Section. The Foreign Corrupt Practices Act of 1977 (FCPA) prohibits, among other things, the use of interstate facilities in furtherance of a bribe or offer of a bribe to foreign government officials by