White Collar Crime Prof Blog

It's Not You - White Collar Cases Are Down

If you are in Washington, DC, and practice white collar criminal defense, you have probably seen an uptick in representing individuals related to ongoing investigations from the Special Counsel's Office.  But outside of the city, and actual cases, white collar criminal defense is way down. So if you are not getting the cases - it is not you.

According to TRAC Reports (here), white collar cases are down 40.8 % from 1998, and 31.3% from 2008. Looking just five years ago, it is down 33.5%. Looking at the lead charge in the cases being brought, wire fraud (section 1343) comes in as number one.  And if you are in the Southern District of New York or Southern District of Florida, the number of cases is higher in these areas than in other parts of the country.

One caveat here - These numbers may not accurately represent white collar cases being brought, as many white collar matters may be brought under "shortcut offenses" such as obstruction of justice, false statements, or perjury and may not accurately be reflected in white collar numbers (see here).  Also the use of RICO can skew these numbers as it may not be reported as a white collar offense even though the predicate acts are fraud related.(see here)

(esp)(w/ disclosure that she is a B.S. graduate of Syracuse U.- home of the Trac Reports). 

2016 ABA White Collar Crime Conference - Hon. Paul Friedman

This year marked the 30th Anniversary of the ABA White Collar Crime Conference. Hon. Paul Friedman gave a wonderful talk in which he looked at three decades in white collar practice. He noted how initially there was “no focus on white collar crime.” In 1970 a fraud unit was created, and it was the first time anyone decided to focus on this area of law. Initially the main charges one saw were mail and wire fraud. But then came RICO, FCPA and others.  He noted that in practice, firms did not have major white collar crime sections. Now they do, with initiatives in export controls, forfeiture, health care, and other areas. He also noted the rise of deferred prosecution agreements.

Judge Friedman  focused in his talk on four things: 1) increased power of federal prosecutors – especially with regard to sentencing – which he noted was higher in white collar cases today than it used to be; 2) vanishing jury trials – with more pleas and a smaller number of cases going to trial – which in turn results in fewer lawyers with trial experience; 3) electronic discovery- and the need to confront the new technology; 4) Brady – and the need to eliminate a requirement of having a materiality element, with all potentially favorable information being disclosed. He suggested that judges need to play a more active role in discovery. Finally, he emphasized the growing imbalance of power from the judicial branch to the executive branch.

(esp)

White Collar Prosecutions - Are They Really Down?

TRAC (Transactional Records Access Clearinghouse) is reporting a decline for 2013 of white collar prosecutions. (see here). Their statistics, which I assume to be accurate, demonstrate  a decline of 45% from 10 years ago and 6.8 % from last year.  TRAC does a superb job of providing current statistics as provided to them from the DOJ. 

But one has to question these statistics for several reasons.  Most importantly is the fact that a solid definition of white collar crime is lacking.  Will it include RICO?  How about RICO with mail fraud counts?  How about RICO with robbery counts?  And the typical "short-cut" offenses used by the government, like obstruction of justice, perjury, and false statements.  These could be economic crimes underlying the conduct, or they could easily be street crimes.  The problem is the statistics do not offer that insight.

So before we start saying that the administration is prosecuting less white collar offenses, we need to determine how they are compiling the statistics and what is and is not being included as a white collar offense.

(esp) (w/ disclosure that she is a B.S. graduate of Syracuse U.- home of the Trac Reports). 

Corporate Sentencing Statistics With Commentary

Some have been claiming that corporate prosecutions are down in numbers.  It certainly has not seemed that way, so I was glad to see the numbers, which demonstrate that corporate sentencings have been average over the past few years.

Lisa Rich, Director of the Office of Legislative and Policy Affairs at the United States Sentencing Commission provided the following corporate statistics for the recent Federal Sentencing Conference (although I have reworded some of what she provided): In FY 2011, there were 160 organizational cases and 151 pled guilty and 9 were convicted after jury trials. Probation was ordered in 111 cases and 31 had court ordered compliance/ethics programs. Three cases received credit for self-reporting and 44 received credit for cooperating with the government. But of the approximately 74 cases in FY2011 for which the Commission had Chapter 8 culpability information, there were no entities receiving full credit for having an effective compliance program. Not one of the 74 cases received credit under subsection (f).

These statistics do not reach the full corporate efforts by DOJ since they fail to include non-prosecution agreements or deferred prosecution agreements that have not gone through chapter 8.  So some bottom line observations: 1) if the government decides to prosecute a corporation - it has an incredibly high chance of success; 2) more emphasis needs to be put into teaching corporations how to operate an effective compliance program; 3) studies need to examine whether by using deferred and non-prosecution agreements the government is increasing prosecutions against corporate individuals (it certainly seems likely that this would be the case).

(esp)  

Ethics Resource Center Report on Sentencing Guidelines

A Blue-Ribbon Report calls for changes to sentencing guidelines implementation. They advocate for "more consistent promotion and recognition of compliance and ethics programs by the U.S. enforcement community" as this "would incentivize businesses to invest more fully in self policing efforts against corporate crime." The Advisory Group on this report is most impressive with folks like Mancy Higgins (VP and Chief Ethics & Compliance Officer for Bechtel), Michael E. Horowitz who served on the group prior to being appointed Justice Department's (DOJ) Inspector General; former Deputy Attorney General Paul NcNulty who joined Baker & McKenzie LLP in 2007; Hon. Diana E. Murphy of the United States Court of Appeals for the Eighth Circuit; Michael Oxley, former Congressman and Chairman of the House Financial Services Committee; and Former Deputy Attorney General Larry Thompson, who retired as senior vice president of government affairs, general counsel, and secretary for PepsiCo.  Others who are part of this independent advisory group are equally as impressive.

(esp)

White Collar Prosecutions Are Up

According to TRAC the February 2011 statistics show an increase of 50.3% increase in white collar prosecutions from the prior month. (see here) More interesting is that white collar prosecutions are reported as being up 23.5 from levels reported in 2006. What is particularly good to see is that "aggravated identity theft" is the leading charge of the white collar charges in magistrate courts.  But there are several deficiencies in this reporting process, such as what is considered within the category of white collar crime- see here.

 (esp) (w/ disclosure that she is a B.S. graduate of Syracuse U.- home of the Trac Reports). 

Identity Theft Crimes Increase

The Bureau of Justice Statistics Website, in a Report authored by Katrina Baum and Lynn Langton, is reporting that 2007 statistics show that identity theft is increasing.  Specifically they note that "[t]he number of households with at least one member who experienced one or more types of identity theft increased 23% from 2005 to 2007."  One can only imagine what the figures will show for 2010.

(esp) (w/ a hat tip to Ted Gest) 

Law Review Articles or Amicus Briefs - The Skilling & Weyrauch Cases

In a post-Skilling entry, the question is raised on this blog as to whether "[i]n adopting a position expressed by a law professor in an amicus brief, is the Court saying that law professors should focus on writing amici briefs and not law review articles?" (see here) Tony Mauro, in a Brief of The Week: Weyrauch v. U.S., National Law Journal, discusses why Professor Albert Alschuler chose to write an amicus brief in Weyrauch v. United States, as opposed to expressing his position in a law review article.

But the question raised on this blog continues to be one of importance for several reasons: 1) law review articles traditionally involve an exposition of legal theory that captures all facets of an argument; 2) law review articles may advocate for a particular position, but most often this occurs after a consideration of arguments in opposition to the position being taken; 3) some law professors disregard 1 and 2 above and believe that law review articles are best when pieces of advocacy; 4) amicus briefs are written to advocate a particular position,even when it is being written by a neutral party.

Clearly Professor Alschuler's brief assists in changing the legal landscape - a criteria often used in reviewing a legal work for purposes of tenure. So, should amicus briefs be more accepted in the tenure process?

(esp)

When the Law Is the Perp

Guest Blogger - Op Ed

By Cynthia Hujar Orr, President, National Association of Criminal Defense Lawyers (NACDL)

With more than 20 years as an American criminal defense lawyer, I have witnessed the drafting and enforcement of innumerable federal criminal laws and regulations that patently fail to meet the basic requirements of fairness and justice. More and more, ordinary, hard-working people are being prosecuted for doing seemingly lawful, everyday things that run afoul of federal authorities or the tax collector. And then their nightmare begins.

Recently, I represented a physician who with other physicians and a medical supply company were involved in what can only be described as a profound personal and professional nightmare for them. Federal prosecutors decided to publicly investigate the clients for making treatment referrals that were not covered by Medicare or Medicaid. The patients in question, a number of whom were injured on the job and on worker’s compensation, came to the clients seeking to be made well again. When the clients made referrals for special treatment for patients with private insurance, sometimes the claims would be covered and honored by the insurance carrier, and sometimes they would not. It would depend on the carrier and the individual’s circumstances. To be sure, the treatment in question in this case has been covered by multiple insurance carriers whose names we all recognize.

Well, buried deep in the criminal code and the accompanying regulations, there are criminal penalties for making certain types of medical referrals when the patient’s medical care is covered by, in this case, (federally funded) Texas Medicaid or Medicare. In fact, a referral for more than $100 of the particular treatment in this case for a Medicaid/Medicare-covered patient can result in many years in prison – if dishonesty is involved. But today, the federal prosecution bar is set much lower than the bar for ordinary crimes such as theft.  Even a mere paperwork mix-up can result in a major criminal investigation where federal regulations are concerned.

After three years of search warrants, subpoenas, interrogations, public embarrassment and scrutiny in the media, threats to their professional licenses, and significant legal and other expenses, it was determined that, as the clients knew all along, they had done nothing wrong. No indictments were issued. Their lives, the lives of their patients, and necessarily the lives and practices of other physicians and professionals seeking nothing more than to do right by their patients and clients, will never be the same. They must now live with the knowledge of what we as criminal defense attorneys have been watching unfold for decades – we are all potential victims of poorly drafted laws that can be improperly and selectively applied by prosecutors. The irony has not been lost on me.  These doctor-clients were prosecuted not because they harmed anyone, but because they tried to help people.

To be sure, health care fraud is a pretty big business in America, with significant costs to all of us. But when the laws passed to deter and punish those who are actually committing those crimes are so poorly crafted that they lead to honorable, decent, everyday people becoming ensnared in our criminal justice system, there is no better evidence that we have a serious problem that must be addressed at the highest levels.  We have reached a point where the federal criminal code rivals or exceeds the federal tax code in volume and complexity.

For nearly two years, the National Association of Criminal Defense Lawyers and the Heritage Foundation have studied this problem, and its causes, in great depth. Noting that the federal criminal code alone now has an estimated 4,450 federal crimes, with an estimated tens of thousands more criminal provisions buried in the federal regulatory code, our organizations set out to see how defective laws, specifically those lacking adequate intent requirements, actually get enacted. The conclusions of this study, and the common sense recommendations to stop and reverse this trend and return the federal criminal law to its rightful role in our free nation, are set forth in a recently released report, "Without Intent: How Congress Is Eroding the Criminal Intent Requirement in Federal Law."

As a practicing member of the criminal defense bar, I know that a lawyer’s job is to protect everyone’s rights, not just those of the criminally accused. Congress makes that job harder when it fails to recognize that a criminal law that no one understands – particularly one that can be violated accidentally, with no intent to hurt anyone – disserves society. Congress is eroding a core element of the criminal law – the intent to do harm or unjustly enrich one’s self. I hope members of Congress and their staff will consider that, and our report, the next time someone says, “There oughta be a law.”

(cho)

Well Done DOJ - StopFraud.gov

A DOJ Press Release announces the new website StopFraud.gov. It comes out of the Financial Fraud Enforcement Task Force.  DOJ describes it as, "a one-stop shop for the American people to learn how to protect themselves from fraud and to report it wherever - and however - it occurs. It will also serve as a hub of information about the task force’s work."

One finds on this website, a running list of news releases from DOJ that describe some of the criminal activities out there. It has clear tabs giving guidance on how to protect oneself from fraud and how to report fraud. It does exactly what is needed to meet the new generation of students by providing a tab with multimedia links that can help with education on identity theft, dealing with debt collectors, scams, and foreclosure scams.

This is first class website and should be recognized by everyone as a step forward in educating against fraud.

What needs to happen now is that middle school and high schools teachers need to look at this website and incorporate it into their lesson plans so that students can avoid being victims of fraud.

(esp)

Criminal Defense Counsel - Business Should Be Picking Up

According to the latest figures, white collar prosecutions are up.  The December 2009 figures of Trac Reports here  shows a 9.2 increase from last month and a 19.9 increase from 5 years ago including magistrate court and 1.8 increase excluding magistrate court. But again, these statistics need to be examined carefully. (see here and here), especially with regard to how the term "white collar crime" is defined.

(esp) (w/ disclosure that she is a B.S. graduate of Syracuse U.- home of the Trac Reports). 

White Collar Crime - Up and Down

Trac Reporting here is saying that white collar crime prosecutions for November 2009 show a decrease of 25.0% from the prior month.  But on the other hand, when compared with a year ago, it is up 6.6 % and the percent change from 5 years ago is 18.6. (including magistrate court). The most telling increase is seen in the number of convictions.  Matched with 5 years ago, it is up 24.9% (see here). But again, these statistics need to be examined carefully. (see here and here), especially with regard to how the term "white collar crime" is defined.

(esp) (w/ disclosure that she is a B.S. graduate of Syracuse U.- home of the Trac Reports). 

Corporate Fraud Task Force Moves Into the Financial Fraud Task Force

In a recent press release, President Barak Obama announced that he was establishing an interagency Financial Fraud Enforcement Task Force. The executive order (13519) lists a long list of individuals offices that will be represented on this task force (e.g. Homeland Security, FTC, SBA). Yes, TARP is also at the table. At the head of the task force is the Attorney General with the Deputy AG directing the work of the task force. The task force clearly has a mission of coordinating efforts for financial fraud prosecutions. Perhaps the most interesting aspect of the task force is found near the end of the executive order - "The Task Force shall replace, and continue the work of, the Corporate Fraud Task Force" which had been created by a 2002 Executive Order.  The use of a task force is not new for DOJ.  In addition to the Corporate Fraud Task Force, we have seen task forces like the Katrina Hurricane Task Force that focused on fraud. (see here). 

One aspect that is particularly good to see as an aspect of this task force is its "Outreach" section.  It states:

Outreach. Consistent with the law enforcement objectives set out in this order, the Task Force, in accordance with applicable law, in addition to regular meetings, shall conduct outreach with representatives of financial institutions, corporate entities, nonprofit organizations, State, local, tribal, and territorial governments and agencies, and other interested persons to foster greater coordination and participation in the detection and prosecution of financial fraud and financial crimes, and in the enforcement of antitrust and antidiscrimination laws.

 AG Holder comments on this new task force here.

(esp)

2008 Florida Report Shows White Collar Prosecutions

The Annual Report of Statewide Prosecutor William N. Shepard, from the Office of the Attorney General in Florida, presents prosecutions of some white collar crimes.  With respect to white collar crime, the Report states that "Fighting fraud is an integral part of the Statewide Prosecution mission and mandate. We target three specific areas: (1) mortgage fraud, (2) health care fraud, and (3) securities fraud."  The Report details some of the prosecutions in these three areas, as well as in non-white collar areas.

(esp)

Madoff Report - No Corruption, Just Incompetence

The investigation into what happened that allowed a Bernie Madoff fraud to exist is now complete and the bottom line is that there was no corruption on the part of SEC personnel.  But the sad fact is that the ball was dropped on more than one occasion. The Executive Summary of the report states:

"The OIG investigation did not find evidence that any SEC personnel who worked on an SEC exmination or investigation of Bernard L. Madoff Investment Securities, LLC (BMIS) had any financial or other inappropriate connection with Bernard Madoff or the Madoff family that influenced the conduct of their examination or investigatory work." ....

"The OIG investigation did find, however, that the SEC received more than ample information in the form of detailed and substantive complaints over the years to warrant a thorough and comprehensive examination and/or investigation of Bernard Madoff and BMIS for operating a Ponzi scheme, and that despite three examinations and two investigations being conducted, a thorough and competent investigation or examination was never performed."

Chair Mary L. Schapiro (to my chagrin, the SEC continues to list her as chairman) issued a press release that acknowledges "that the agency missed numerous opportunities to discover the fraud." It is impressive that the agency is recognizing the importance of transparency here, recognizing the importance of learning from past mistakes, and recognizing the importance of putting into place a set of controls that will keep this from happening again.

This is indeed a sad chapter, and one that hopefully will never be repeated.  It probably serves little to assist those who were the victims of this fraud, but it does represent the importance of presenting to this country and the outside world that the US is going to crack down and regulate fraud with sufficient scrutiny.

(esp)

Addendum - Amir Efrati, WSJ Blog, A First Look at the Big Ol’ Madoff SEC Report

Two Interesting Discussions on the Web

Over at PointofLaw.com, Professor Mike Seigel (Florida) and Professor John Hasnas (Georgetown Business) are part of a Manhattan Institute exchange  on "Criminalizing Corporate Conduct: How Far Is Too Far?" It is a fascinating discussion with two very divergent views.  But I  find it particularly interesting to see both professors focusing on whether there should be corporate criminal liability and the value or lack of value that it serves. As usual the word "punishment" is under consideration. This is an important discussion, but it also needs to be considered from another angle.  Wouldn't it be a more positive approach for the government to expend more resources on "educating compliance" then on a reactive model that punishes misconduct. My next essay will explain more in this regard.

Over at ProfessorBainbridge.com, Professor Stephen Bainbridge takes on Professor Henning's Wall St Jrl blog entry regarding the SEC v. Mark Cuban opinion.  The WallSt Jrl blog does post a correction on one point.  But I guess I am still fascinated at how computerization raises new legal considerations.  In this regard I am speaking about the second case Professor Henning discusses - SEC v. Dorozhko.

(esp)

Federal Sentences Increase

An interesting statistic is reported by TRAC (Transactional Records Access Clearinghouse) (here)-

"In 2004, there were 10,056 individuals who were sent to prison as a result of an FBI investigation and the median or typical sentence — half got more, half got less — was 30 months. In  FY 2008, while the number sent to prison decreased to 9,789, the typical sentence rose to 41 months."

Although this number is not exclusive to white collar crime, it does demonstrate the increased level of incarceration in the United States.

(esp) (w/ disclosure that she is a B.S. graduate of Syracuse U.- home of the Trac Reports). 

The Numbers Confirm that Sotomayor is "Tough on White Collar Crime"

I previously blogged on my review of 100 white collar related cases of Judge Sotomayor here. TRAC reporting now confirms empirically what I found. See here. They conclude that

"A case-by-case examination of the sentences imposed by Judge Sonia Sotomayor during her six years as a trial judge in the Southern District of New York has determined that she was more likely than her colleagues to send a person to prison. . . this was particularly true for convicted white-collar criminals."  

They provide charts and numbers that confirm their findings.  They used a definition of white collar that may have been more restrictive than I used as they compared only 47 of her cases with a total of 1,570 of all judges in New York's Southern District.  They found that

"For this group of criminals, Judge Sotomayor's colleagues sent 43% to prison, with only one out of three of the total receiving a sentence of six months or longer. Judge Sotomayor, in contrast, handed out prison time more often. In her case, a bit more than half (52%) were given some prison time and nearly half (48%) -- rather than one-third (34%) -- were given a prison sentence of 6 months or more."

Hats off to TRAC for providing this empirical evidence. 

(esp) (w/ disclosure that she is a B.S. graduate of Syracuse U.- home of the Trac Reports). 

Handling the Financial Crisis

Interesting article can be found on the Brookings Website (here), with testimony from Robert Litan who calls for Congress to consolidate all federal financial regulatory acitivities into two agencies. He states - "--Do we need a systemic risk regulator (SRR)?  Yes."

Our world is more specialized, and meeting issues with consolidation and specialization is important.

(esp)

White Collar Statistics

The numbers for December 2008 have been released by TRAC (see here) and white collar prosecutions were down 17.3 % from five years previous. The jurisdictions with the largest number of prosecutions per capita were the Southern District of Mississippi, the Middle District of Louisiana, and the District of Montana. But again, these statistics need to be examined carefully. (see here and here), especially with regard to how the term "white collar crime" is defined.

The question now will be whether the new administration brings in higher numbers when it comes to white collar prosecutions and convictions.

(esp) (w/ disclosure that she is a B.S. graduate of Syracuse U.- home of the Trac Reports).