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Feds to S&L criminals: Never mind

Published Oct. 10, 2005

Taxpayers have won $84-million from 55 criminal convictions linked to the savings and loan scandal, but a Justice Department team that includes the IRS and the FBI hasn't bothered to collect it. Only $365,000 has been retrieved to date _ less than a penny for every dollar in court-ordered fines and restitution.

The General Accounting Office (GAO) presented this sorry balance sheet to Congress last week, along with a verbal demand that "someone in the federal government" be held accountable. Justice Department officials, the GAO found, don't even have a system for tracking what few dollars have dribbled in from this sample of white-collar schemers who have been caught, charged and convicted.

The "someone" accountable here is Ira Raphaelson, Justice Department special counsel for financial institutional fraud. In response to pointed criticism from top GAO officials, Raphaelson told Congress that it was just too hard to keep track of the payments coming in through the courts and various federal agencies and financial institutions.

Gee, that does sound tough. It's a good thing Raphaelson has hundreds of U.S. attorneys, FBI agents and regulatory experts on his team. It's a good thing he has the IRS, an agency with a daunting reputation for separating errant taxpayers from their money. It's hard to imagine what fraction of a penny taxpayers might get if Raphaelson had to follow up on 55 big-ticket convictions with, say, a few dozen Justice Department staffers.

Raphaelson's other excuse is that many savings and loan offenders are broke by the time they are sentenced. Yet as GAO officials were quick to point out, pre-sentencing information on defendants' ability to pay comes from sources such as the Federal Deposit Insurance Corp.

"We think there is money there to be collected," GAO Assistant Director Edward Stephenson was quoted as saying. "They don't set these fines and restitutions in a vacuum."

Congress should act on the GAO's demand that Raphaelson figure out what it would take to organize a tracking system. Congress has already invested $550-million in a three-year push to bring bank fraud convictions, a sum that hardly seems worth it given the low rate of return. Of the 4,030 major banking convictions since 1987 resulting in $1.3-billion in fines, the GAO estimated, federal agents have managed to recoup a mere $20-million. With 4,300 additional investigations now in process and a strong conviction record, the fines should eventually total several billion dollars.

These banking fines are a paltry sum, of course, compared with the staggering debt that innocent taxpayers will be forced to make good in the years ahead. That does not mean that the Justice Department should take the liberty of writing them off. Anything less than an aggressive, fully accountable collection effort is a fresh blow to the public's already badly shaken faith.