White Collar Crime

During my 26-year journey as a person in federal prison, I served time in prisons of every security level. From 1987 to 1994, I spent time in high-security prisons. I spent 1995 and 1996 in medium-security prisons. I spent 1997 through 2003 in low-security prisons. From 2004 until my release in 2013, authorities confined me in minimum-security, federal-prison camps.

Regardless of where authorities held me, I spent time alongside people convicted of every type of crime. We should understand that there is a difference between white-collar crime, and what I would call more typical crimes.

While in graduate school, I studied many courses that taught theoretical concepts of criminology and the criminal justice system. Theorists from the middle ages held that there were two types of crimes: 1) Mala in se, and 2) Mala prohibita

Basically, those theorists described Mala in Se crimes as the type of actions that we would consider criminal in any era, regardless of the political climate. For example, we would always consider acts like murder, robbery, burglary, and arson to constitute criminal behavior. Those crimes victimize people or damage property values.

The theorists refer to Mala prohibita crimes, on the other hand, as behavior that may be against the law in one era, but not in a different era. For example, in Ancient Greece, lawmakers imposed the death penalty on people for anyone from the higher class to teach people from the slave class—as Socrates learned.

When I began my term in 1987, I met many people that were serving life sentences for selling marijuana. Today, many states have legalized marijuana for recreational use.

Times change in many jurisdictions. Consider the following:

• When Hitler reigned over Germany, the law made it a crime to provide safe harbor to Jewish people; yet Hitler’s law made it legal to kill Jewish people.
• American law once made it illegal to provide safe harbor to a person that had escaped from slavery; but our laws made it legal to enslave other human beings.

History shows us that political leaders may deem certain behavior criminal. But their decisions are not always right, or just. They have discretion to choose.

Similarly, as representatives of the Executive Branch of government, prosecutors have enormous discretion. They may choose to bring charges against some people but decline to bring charges against other people. For example, prior to becoming president, Donald Trump participated in a venture known as Trump University. Through Trump University, the venture collected millions of dollars from gullible consumers. Those consumers believed the marketing materials that Trump distributed, which pledged to help them become millionaires. The consumers went into debt, and they felt deceived.

Thousands of people that did not have political power serve time in federal prison as a result of convictions for deceiving consumers. Despite having ample evidence against him, prosecutors chose not to prosecute Donald Trump. When the voters elected Trump, he paid a $20 million settlement, and the case involving Trump University went away. Other people without political power were not so fortunate.

Our system isn’t always fair. Prosecutorial discretion results in some people facing charges that powerful people do not face. Consider the real estate housing bubble that led to the great recession. Many relatively small-time people served time in federal prison for mortgage fraud, yet few powerful bankers or lenders faced criminal prosecution for white-collar crimes.

What are White-Collar Crimes?

While studying crime and criminology, I read a sociological theory by Edward Sutherland, proposed decades ago. At the time, conventional theorists held that poverty and despondency caused crime. Professor Sutherland disagreed. He argued that it wasn’t only poverty or desperation that caused crime. Sometimes greed caused crime. He referred to business leaders and people of high social status that manipulated transactions to their benefit. Professor Sutherland identified those types of behaviors as “white-collar” crimes.

The law does not provide an official definition for “white-collar crime.” Broadly speaking, the system categorizes white-collar crimes as nonviolent, illegal activities that, for the most part, use deceit, deception, fraud, or misrepresentation to obtain money, property, or some other advantage, or to conceal other wrongdoing.

Crimes and Investigations:

Both white-collar crimes and investigations share certain characteristics, including intent. Theoretically, all criminal cases require prosecutors to prove beyond a reasonable doubt that the defendant had bad intent. Yet, again, thousands of people serve time in federal and state prisons, despite their insistence that they did not intend to break the law, and that they did not even know they were breaking a law.

In other types of crime, like street crime, or violent crime, the investigations take place at the scene of the crime. Law enforcement officials get a report and then they collect evidence on the scene.

With white-collar crimes, the evidence usually flows from a paper trail, including:

• Emails
• Bank statements
• Contracts,
• Marketing Materials
• Websites
• Transactions

Investigators have a solid body of evidence they can assess. It can lead them to call upon people as witnesses to an investigation, subjects of an investigation, or targets of an investigation. A witness may be able to shed some light on the evidence. A subject may or may not be a part of the crime. If investigators identify a person as a target, it’s more likely than not that the person will face criminal charges.

Once investigators conclude that a person or a company has engaged in criminal behavior, they will begin to work with a prosecutor. The prosecutor will likely convene a grand jury. The grand jury consists of a panel of several ordinary citizens. They listen and observe while prosecutors present the evidence.

The grand jurors may also ask questions of the witnesses. Defense attorneys will not be present to argue on behalf of the corporation, or the targets. The grand jury serves the purpose of determining whether probable cause exists to charge individuals or corporations with crimes. Prosecutors will ask the members of the grand jury to return an indictment that officially charges specific crimes.

If the grand jury indicts a corporation or an individual, in most cases, the defendant will accept a plea agreement in exchange for a lighter sentence. Those who choose to plead not guilty may face a bench trial in front of a judge, or they may face a regular jury, also known as a “petit” jury.

Sanctions and collateral consequences can be enormously severe after a finding of guilt, including:

• Fines
• Injunctions
• Forfeitures
• Disgorgement
• Imprisonment
• Loss of professional licenses
• Reputational damage
• Personal devastation

For these reasons, it behooves business leaders to learn more about options they can use to avoid criminal charges, or to qualify for leniency if the government begins to investigate wrongdoing.

First, business leaders should develop a basic understanding of white-collar crime. Members of our team have conversed with countless business leaders who said they did not know they were violating the law.

Many people that worked in a business setting could not conceive of themselves as criminals. They said that they did not have any intent of breaking the law. For these reasons, we want to help more business people understand white-collar crime. The more a business professional understands, the more vigilant a person can be.

To protect the business, leaders may want to implement clear policies to show team members what they should do if they witness behavior that investigators may construe as white-collar crimes.

Such policies can go a long way toward qualifying the business, and leaders, for leniency, mercy, or perhaps even immunity from prosecution with non-prosecution agreements.

Some examples of white-collar crime include:

Mail and Wire Fraud:

Two of the most popular types of white-collar crimes include mail fraud and wire fraud. They’re rather easy to understand, although many business leaders I met in prison said that they did not understand their behavior could lead them to prison. If prosecutors can prove that a person engaged in a scheme to defraud a victim, and at some point, the defendant used the telephone, the Internet, sent or received something through the mail, the prosecutor may prove charges of mail fraud or wire fraud.

Other Kinds of Fraud:

Mail and wire fraud have enormous reach, applicable to any type of business. Most all businesses use the Internet, the telephone, or the mail. If a bank sends a statement, for example, and the statement includes information about bank transactions involving proceeds from a fraudulent transaction, prosecutors may choose the broad category of mail fraud or wire fraud. But prosecutors could choose to bring more specific charges of fraud.

For example, if a person used inaccurate information to complete a mortgage application, prosecutors may charge mortgage fraud. If a person filled an application for a loan at a bank but used deceitful information, prosecutors may charge bank fraud. If a person completed a petition for bankruptcy but chose to deceive the court about assets, prosecutors may bring charges of bankruptcy fraud. If a physician billed a government agency for services that he did not perform, prosecutors may bring charges for health fraud. Prosecutors have many statutes they can draw upon to charge people with fraud.

Honest Services:

Both business leaders and elected officials may face charges for honest-services fraud. Under this statute, prosecutors must show that a person has a duty to provide honest services to constituents. Those constituents may include voters or shareholders. If the person makes deals to benefit himself, or misuses the position, or misallocates assets, or self-deals in any way, prosecutors may allege that the person deprived people of honest services.

Conspiracy Cases:

Prosecutors may charge conspiracy when two people agree to engage in a crime. They don’t necessarily have to complete the crime, they simply have to agree to commit a crime—and then take some kind of step in furtherance of completing the crime. Prosecutors could charge a person with conspiracy if they believe one person helped another person carry out a crime. For example, consider a corporate executive that tries to raise money. If the executive hires a graphic designer to create a pamphlet that provides some type of inaccuracy that could, theoretically, mislead investors, the graphic designer may face conspiracy charges for wire fraud, mail fraud, securities fraud, or anything else. The inaccuracies may include stock photos or fake biographies.

Bribery and Corruption and FCPA:

If a person gives something of value to a politician, or a business leader, with the specific intention of influencing favor or skirting rules, that person may face charges for bribery, corruption, or for violating the Foreign Corrupt Practices Act (FCPA). If a person conspires with someone else to violate rules, laws, or to self-deal in some kind of way, prosecutors may bring criminal charges.

Securities Fraud and Insider Trading:

A person that works in a publicly-traded company has specific duties and responsibilities. Sometimes, violating those duties and responsibilities may lead to criminal charges for violating securities laws. If investigators believe an official misleads investors, prosecutors may bring charges for securities fraud. If someone receives information about a publicly-traded company, and that information has not been made known to the general public, and the person purchases or sells stock based on that information, the person may face criminal charges.

Tax Evasion:

Tax evasion refers to various activities that may result in the willful, deceptive avoidance of paying taxes on income. As with all types of crimes, prosecutors may bring conspiracy charges if they believe that one participant, such as an accountant, willfully participated in helping a person or a corporation to use deceitful means to underpay taxes or avoid paying taxes.

Perjury, Obstruction of Justice, Lying:

The Fifth Amendment of the US Constitution protects a person from having to respond to questions from a law-enforcement officer. If a person feels that responding could potentially lead to self-incrimination, the person may choose not to respond, simply by invoking the Fifth Amendment. But if a person does respond to a law-enforcement officer the person must communicate honestly.

If the government investigators or lawyers think the person is lying, criminal charges can follow; the person does not have to be under oath to face charges for lying to an officer. A person may face charges for obstructing justice, or for violating a specific statute that criminalizes lies to government officers. Perjury, of course, is lying while under oath.

Money Laundering:

Statutes involving money laundering broadly apply to financial transactions involving criminal proceeds. If the transaction promotes criminal activity, evades income taxes, or avoids current reporting requirements, prosecutors may bring criminal charges for money laundering. A simple act of opening a bank account, for example, could be sufficient to support charges for money laundering if prosecutors allege that the money came from an illicit source.

Jurisdiction:

In America, we have many different jurisdictions that can result in criminal charges against people or corporations. The United States Code includes more than 4,000 statutes that can lead to criminal charges. Besides the federal system, every state in the union has its own criminal code. The District of Columbia has a criminal code. The military has a criminal code. Besides all of those statutes, representatives of our government have published more than 1 million pages of regulations that can lead to criminal charges against people or corporations. For these reasons, business leaders should invest the time and energy to understand how the government begins investigations that can lead to sanctions or charges for white-collar crimes. That information would prove helpful for honest business leaders that want to minimize exposure to such investigations.