L.A.'s Top Feds.

HEADS OF LOCAL FBI FIELD OFFICE DISCUSS BOOM IN WHITE-COLLAR CRIME 

THERE'S a new No. 1 G-man in town -- James V. DeSarno Jr., who took over in late August as director of the FBI's field office in Los Angeles.

It's no small task for the new arrival, considering that Los Angeles remains the nation's white-collar crime capital, as well as the bank robbery capital. Add to that terrorist threats, increasingly sophisticated cyber-crooks plying the Internet, drug traffickers, street gangs and a close-knit network of Russian criminals.

The FBI's L.A. office has 681 agents and 450 support staff, as well as millions of dollars worth of state-of-the-art surveillance equipment.

Prior to being assigned to L.A., the 53-year-old DeSarno investigated fund-raising abuses in the 1996 presidential campaign. In 1998, he was named to head the FBI's criminal Justice Information Services Division in West Virginia.

DeSarno talked to the Business Journal last week. He was joined by Ronald Iden, special agent in charge of white-collar crime, and Richard Wade, assistant special agent in charge of white-collar crime.

Question: Violent crime has been declining, but what about crime overall? Are we seeing a corresponding uptick in white-collar crime?

DeSarno: Violent crime has certainly decreased in the last few years. But I think we find some of the same people who were involved in violent crime now getting involved in white-collar crime.

We have seen some increase in the rate of white-collar crime. And our emphasis on dealing with white-collar crime has increased. Last year we had about 185 agents in Los Angeles working white-collar crime and now we have about 190. And we have 140 agents working violent crime.

Q: Why are violent criminals going into white-collar crime?

DeSarno: They see themselves going to jail for a longer time for such things as drug trafficking. We see them moving into check fraud and credit-card fraud. When the convictions come, they don't get the same kind of time they get as violent criminals.

Q: Are there any particular L.A. gangs that are switching over?

Wade: I would say they all are. The average take on a bank robbery is approximately $4,000. The average check fraud scheme is $24,000. You don't need to be a rocket scientist to know where the money is. And there is less risk in terms of doing the crime itself.

Q: What types of white-collar crime are they getting involved in?

Wade: Primarily financial institutional fraud, whether it is ATMs, checks, credit cards. That is what we are primarily seeing now. I think we will see more involvement in health care fraud. There is a big pot of money there.

Q: Health care fraud?

Wade: Yes, there is almost an unlimited number of scams: overbilling, false billing, and hooking up with a cooperative clinic or cooperative doctor.

DeSarno: As a nation, we are spending a trillion dollars in health care and it is going to continue to go up. And there is not a whole lot of regulation.

Q: What about the so-called Russian Mafia? Are they truly organized?

Wade: It is not as organized as the La Cosa Nostra, which almost had a centralized organization all over the United States. It is more isolated groups that are involved, and there is interconnectivity between those.

DeSarno: Various factions will come together to run some scam, but I don't think we see the same kind of organization as we saw in the traditional Mafia.

Q: Are there new technologies that make your jobs more difficult?

Wade: Crooks adopt a new technology as soon as it comes along. Years ago the camera in the ceiling over ATMs would be a typical way they would steal customers' PIN numbers. Now they are getting a little more sophisticated. Take credit cards. You can lose sight of that credit card if you give it to a waiter or a gas station attendant. They can swipe it into a reader that they own themselves, and then they swipe it through the regular reader that does the transaction. But once they swipe it through their own reader, they have captured the information. So we are seeing more of that.

Q: Has the Internet complicated your fight against white-collar crime?

Wade: I don't know if it has complicated it a great deal, except for the fact that, if you really know what you're doing on the Internet, you can disguise your identity easier. If I tell you, in order to cash a stolen check, you physically have to go into the bank and interact with the teller, a lot of people are not willing to do that. But if you can sit on your computer and nobody knows who you are, is that going to encourage people? I think it probably will.

Q: Are a lot of people capable of hacking into financial records and using those?

Wade: That is not the real problem. It is extremely difficult to hack into financial records. However, if you have someone on the inside who is able to give you that password, then it's easy. Much of the check fraud we see is facilitated by bank insiders who are cooperating with a criminal. It's the same with computer fraud.

Q: As for Y2K, how concerned are you about December 31 possibly making the U.S. vulnerable to terrorist activity?

DeSarno: I think nationwide law enforcement at all levels are all concerned about what might occur at the end of the year. Not the Y2K issue of whether the elevator will go up or down, but what could occur in terms of criminal or terrorist activity. I think the key is the intelligence network we have established, not only within the FBI, but with law enforcement at all levels. And we are going to be fully staffed. I was talking to (Los Angeles Police Department) Chief Bernard Parks. He is going to be fully staffed. I think all cities are going to be fully staffed to react to whatever December 31 brings us. And I don't think anybody knows what it is going to bring us. I think it is a matter of being prepared, and I think we are.

Q: Isn't identifying cyber-criminals difficult, given privacy laws and Internet companies' reluctance to reveal identities?

Wade: Like other agents, they spend a lot of time out in the field. The PairGain (online securites fraud case) is a good case to talk about. That case involved FBI agents contacting the Internet service providers and determining from them information they needed. They spend a lot of time talking to various businesses and people involved in the backbone of the Internet. You get, that information through subpoenas and court orders, just as you do with any other kind of investigation. We can't obtain that information without going to court.

DeSarno: That's why the encryption issue is so important to law enforcement -- to have a key. Encryption is a two-edged sword. We like it and we hate it. We like it because it encrypts our information, but we hate it because it makes it much more difficult to conduct an investigation.

Q: What computer expertise do your agents have?

Wade: It's much different from our average agent. It is a very high level of computer expertise. They all come to that position with a computer background and a computer knowledge of some level. And then they receive very extensive training the whole time they are on that squad.

DeSarno: Part of our recruiting in the last five to 10 years has been looking at people with computer backgrounds, degrees in computer science and engineering, especially to put on squads like this.

Q: Is it very difficult to recruit those folks given the salaries they could earn in the private sector?

DeSarno: Yes, just as it is difficult to find other specialties we need, such as linguists, because they are in high demand. We have an advantage. We are recruiting people to become special agents of the FBI. And there are folks out there who, despite the limitations of salary, will want to serve the nation as an FBI agent.

Q: So how much would someone like that get paid?

DeSarno: A brand new agent with a background in computers makes the same as an agent with a background in history. It is $50,000 to $60,000 a year, to start.

Q: What are your staffing levels lately in L.A.?

Iden: Our white-collar staffing level is up a bit, from 185 (agents) last year to 190 this year. Our violent-crime staffing has remained pretty stable. Our drug staffing has remained pretty level. In white-collar crime we've seen the biggest increase.