The Untouchables Are Back!
Texas Association of Counties, 12/21/2004
Widespread political corruption, undercover agents, government informants, secretly taped backroom deals and hundreds of felony convictions – it sounds like the makings of a good Hollywood movie, except that it's a true story and it happened throughout Oklahoma counties more than twenty years ago. Back in the early 1980s, agents with the Federal Bureau of Investigation began investigating what they believed was a fraud scheme involving the owner of a rural lumber company who was giving out false invoices to buyers in return for kickbacks. The case soon erupted into the biggest political corruption case in FBI history with county commissioners from across Oklahoma and north Texas caught in the scandal.
Hank Gibbons, a retired FBI agent in Oklahoma who worked on the case, said investigators were tipped off to the kickbacks in 1980 and suspected some county commissioners were involved, but had no proof. The case got a break when
Internal Revenue Service agents confronted the lumberyard owner and she confessed to the scheme and turned government informant. Working undercover for several months, investigators nabbed all of the vendors involved in the scheme and got the names of sixty or seventy commissioners who were taking kickbacks from bogus purchases they made for gravel, lumber, heavy equipment, paving and numerous other materials and supplies.
The scheme usually worked in one of two ways, Gibbons said. One of the vendors would contact a commissioner who would agree to buy so many dollars worth of lumber or other supplies. The commissioner would sign a purchase order for the amount and take 10 percent when the goods were delivered. Or, the commissioner would sign off on the supplies, but the goods would never be delivered and the vendor and commissioner would split the money fifty-fifty.
In the spring of 1981, with tape recordings and plea agreements in hand, FBI agents fanned out across the state and gave commissioners the chance to turn themselves in. In the first week, Gibbons said thirty or forty commissioners agreed to plead guilty to one count of conspiracy to commit mail fraud and obstructing the IRS. By July 1981, 100 people had signed a plea agreement. In most cases, commissioners who agreed to cooperate with the government received probation or one or two years in jail. Others who decided to take their cases to trial ended up serving jail time anywhere from seven up to 20 years.
The list of suspects grew longer and longer and investigators saw the pattern of fraud winding its way down from northwest Oklahoma to the southwest part of the state and then into north Texas. By the end of the investigation several years later, there were around 280 total fraud convictions, including thirty or forty people in Texas.
"Number wise, this was the biggest political corruption case in FBI history," Gibbons said.
Gibbons also said the case lead to legislative changes in government purchasing practices in Oklahoma. During the fraud scheme, all it took was two out of three county commissioners to sign off on a purchase order. The commissioners controlled the budget and there was very little oversight into what was purchased. Although the Oklahoma corruption case was unique in its sheer size, allegations of corruption, fraud and theft in public offices continue to be a challenge for law enforcement officials, said David Bennet, a special agent with the FBI in the Oklahoma City office. Bennet works in a special FBI squad in Oklahoma that investigates cases of public corruption, government fraud, security fraud and computer crimes, or basically any case in which someone in a position of power misuses that position for personal gain.
During a recent Auditor's Institute conference, Bennet spoke to Texas county auditors about fraud investigations, how they work and the need for better communication and cooperation between the FBI and county auditors. During an
FBI investigation into government corruption, county auditors are often a vital link, he said. Auditors have a better understanding of county operations and can spot any suspicious or unusual activity faster than a detective looking from the outside in. County auditors also help provide a checks and balance system by overseeing what other county employees are doing and how money is being spent.
Political corruption and fraud cases are especially difficult to investigate because the activity is done secretively and evidence is often hard to obtain, FBI agents say.
"That's why assistance from auditors is so essential. They are in a position to know if there's a problem, especially in an area that we might not know about," Bennet said.
For example, during a fraud investigation involving federal grant money in Dallas County, FBI agents worked closely with the auditor's office to try to trace the criminal activity back to the culprit. Dallas County Auditor Virginia
Porter said her staff cooperated fully with the FBI, provided all the documentation and worked with federal agents to analyze the information. Because Porter and her staff were more familiar with the financial records and county operations, both the county and the FBI agreed that the auditor's staff were better equipped than the federal agents to notice any irregularities or find a clear paper trail, she said.
"But, the FBI also had abilities to do things that we couldn't," Porter said. "They can subpoena bank records. In the course of the investigation, if we find missing funds, we can't track it any further, but they can take the investigation further from there."
By pooling their resources, the county and the FBI had more tools at their disposable to work the case, Porter said.
And, working with federal agents provided the auditor's office with valuable training into how fraud investigations work.
"We had an excellent relationship with (the FBI) and I think we're better equipped now on how to proceed when fraud is discovered as opposed to before this investigation," she said.
Bennet said the best way auditors can help identify acts of fraud or theft is to be on the look out for anything suspicious or out of the ordinary. If auditors notice any irregularities or red flags they should ask questions and investigate further. There should be a system of checks and balances in place so the buyer for the county does not have complete control. Someone should oversee what the buyer is purchasing and verify the supplies or materials purchased actually come in, Bennet said.
In Baker County, Georgia a few years ago, Bennet said the county auditor noticed irregularities in the checks the local tax-assessor collector was writing and started asking questions about where the money was going. Suspicious about the activity, the auditor contacted local authorities and the FBI got involved. After a full investigation, authorities discovered that the tax-assessor collector was embezzling thousands of dollars by writing checks to herself and pretending she was being reimbursed for purchases she made. Bennet said this just one example of how the careful and trained eyes of an auditor helped bring a criminal to justice.
The FBI traditionally begins an investigation of a public official or government employee after they have been tipped off by a source that there is some kind of wrongdoing taking place. Sometimes individuals within the organization who have come across information will contact the FBI, or sometimes it is citizens with allegations or complaints of abuse. Or, the FBI will receive referrals from other law enforcement agencies. Once an allegation has been made, the FBI attempts to gather evidence or find information that corroborates any suspected wrongdoing.
There are usually two types of investigations law enforcement officials will use when tackling corruption or fraud cases.
Proactive investigations take place when the illegal activity is continuing to occur while historical investigations are used when the illegal action has stopped and investigators have to recreate the crime.
If an auditor believes there is something illegal taking place, it is important for him or her to contact law enforcement authorities
or the FBI regardless if the employee is fired or not. Bennet said if there are safety or security concerns involved, it is understandable
for the county to terminate someone's employment right away, however, investigators have more opportunities to build a case if the illegal action is still taking place.
"We have a better chance of recovering or finding evidence in a proactive investigation because we can catch the person in the act and capture evidence using undercover work or other investigative techniques," he said.
Contrary to popular opinion, FBI agents say fraud cases don't always involve large amounts of money. In fact, Bennet says he is continually amazed at how cheaply some people will sell out.
"People will risk quite a bit, risk their positions, their jobs, for small amounts of money," he said. "There is a combination of things that will motivate people to start stealing. Sometimes people live above their means and need additional money to supplement their lifestyle or it might be a matter of someone having a vice, such as gambling, and they need money for that. Or, a lot of times, it's just greed."
Many times, an individual will start by embezzling small amounts and promise themselves they will pay it back. But, once they start, it's increasingly difficult to stop, FBI agents say.
"I've heard a lot of statements to the effect that they never intended to keep doing it, that they just needed money at the time but the amount they owed kept growing," Bennet said. "Some officials feel that they're untouchable, meaning that no one will find out. A lot of times these are people with no criminal record that are respected in their communities and they think that they won't get caught."
Gibbons agreed with this assessment, saying most of the people involved in the Oklahoma fraud scheme were upstanding, hard working and very religious people.
They would justify it to themselves," Gibbons said. "They said they didn't get paid enough and that this is expected that they take 10 percent."
Gibbons also said the practice of taking kickbacks sometimes just becomes routine or tradition. He said he heard rumors after the Oklahoma case that taking kickbacks had been going on since the early 1900s.
Sometimes, auditors don't realize that they can turn to the FBI if something suspicious arises, Porter said. Bennet and other federal agents encourage county officials to contact them if they have questions or run into something unusual and need an expert opinion on whether an illegal activity is taking place.
"It's just another access to legal advice," Porter said. "Sometimes (FBI agents) have the ability to pursue a resolution to the problem more quickly than we can."