FBI Executive Asst. Director Ashley on Interrnal Audits and FBI Priorities

Institute of Interntal Auditors addressed by FBI's Ashley during fraud seminar


Once the corporate fraud scandals erupted, we decided not to extend the life of the problem, but to snuff it out decisively. Once we identified the fraud, we did not plan to negotiate. Too much was at stake, and protecting employees, investors, and the economy was paramount. Our goal was to work with cooperating employees, gather evidence, make arrests, and secure indictments.

We established a Corporate Fraud Reserve Team, composed of special agent accountants and financial analysts who fan out across the country, working on investigations such as Enron, Qwest, and HealthSouth. We participate on the President's Corporate Fraud Task Force, which was established in July 2002.

We also collaborate extensively with affected companies, federal partners, and private organizations like the American Institute of Certified Public Accountants. And we have further leveraged our resources in corporate fraud investigations by working side-by-side with our civil regulatory partners, most notably the Securities and Exchange Commission.

We often work with the SEC in a parallel investigation mode, whereby although we in no way direct their efforts, we share the results of our investigative efforts, as long as they did not stem from the grand jury process. At the end of these investigations, the civil investigation is stayed while the criminal case moves forward for adjudication.

This aggressive, interagency approach has been highly successful. Our collaborative efforts have produced 545 indictments, 365 convictions, and over $1 billion in restitutions in corporate fraud matters related to accounting fraud and insider trading.

The Enron Task Force has charged 34 individuals to date, including 21 executives, and has seized over $227 million. Andrew Fastow, Enron's former chief financial officer, pled guilty to conspiracy charges. He will serve a 10-year sentence and will cooperate with investigators concerning the role of other Enron executives. Additionally, Enron Chairman Kenneth Lay, CEO Jeffrey Skilling, and Chief Accounting Officer Richard Causey were indicted on an array of charges, including multiple counts of securities fraud, wire fraud, bank fraud, insider trading, and conspiracy.

In another example, the WorldCom investigation has resulted in six indictments and six convictions so far, including those of CEO Bernard Ebbers and CFO Scott Sullivan. And the Rite-Aid investigation has also netted six indictments and six convictions, including those of the chairman, president, and chief counsel.

We have made significant progress. In 2002, Jay Leno joked about the president calling for doubling the punishment for corporate fraud, saying, "That means they'll slap you on both wrists." Times have certainly changed--and so has federal legislation.

As you know, the Sarbanes Oxley Act, which Congress passed in July 2002, imposed new specific criminal felonies for securities fraud violations. It enhanced the penalties for mail fraud/wire fraud violations, which are charges typically filed in corporate fraud investigations, from five-year felonies to 20-year felonies. It also requires CEOs and CFOs to certify financial statements.

In addition, Sarbanes-Oxley made it a felony to obstruct justice in corporate fraud investigations by prohibiting anyone from altering, destroying, or otherwise impeding a federal law enforcement or regulatory investigation. In other words, if a secretary knowingly shreds something that should be sent to regulators, that secretary is just as culpable as the CEO who directed the action.

The old "I told him to ship the documents to the feds, but he heard 'rip the documents to shreds'" excuse will not work. CEOs and corporate managers have seen that we will not tolerate collusion and fraud and that corruption will be rooted out and punished severely.