Prosecutions Drop for US White-Collar Crime ; They're Down 28 Percent from Five Years Ago, as Homeland Security Cases Rise in Priority

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It's the kind of announcement that should put white-collar criminals on notice. The Securities and Exchange Commission (SEC) is now investigating more than 80 companies in the growing stock- option scandal.

The government has charged officials at two companies for backdating options - a practice that funneled guaranteed profits to executives. More indictments are expected.

But far from ratcheting up the fight against financial wrongdoing, the federal government is actually shifting resources away from it. The number of white-collar crime prosecutions is down 28 percent from five years ago, according to an analysis of federal data by the Transactional Records Access Clearinghouse at Syracuse University.

The reason? The government's focus on homeland security, experts say. In the same period white-collar crime prosecutions fell, for instance, immigration prosecutions more than doubled.

"There's been a shift of priorities since Sept. 11 at the [Federal Bureau of Investigation], in the sense that they've moved bodies from fraud and white-collar crime units to terrorism units," says James Sanders, a partner at McDermott Will & Emery in Los Angeles and a former federal prosecutor. "At the same time, the [white-collar crime] cases have gotten bigger and more complex."

During the 1980s and 1990s, many of the white-collar crime cases involved things like bank fraud, insider trading, and stock manipulation, many of which were not document-intensive. Trials could take as little as four or five days, says Mr. Sanders. But cases like Enron and WorldCom involved complex financial manipulations at high levels. Prosecutors had millions of documents to wade through, which in some cases took years to do.

"Those are very, very complex, document-intensive cases," says J. Boyd Page, senior partner at Page Perry LLC in Atlanta, which was involved in some civil litigation connected to the WorldCom case. "The documents that were made available for our review were something like 1,250 boxes packed one end to the other."

The Enron and WorldCom convictions, as well as the passage of the Sarbanes-Oxley Act in 2002, which holds CEOs directly accountable for their public financial statements, may have had a deterrent effect on some wrongdoers in corporate America, say experts. But they doubt that the drop in white-collar prosecutions reflects an equivalent drop in financial wrongdoing.

Instead, they say, the drop is a reflection of changed priorities. One key factor: The staff available to investigate such cases has shrunk. …