Course Introduction
Course Content

The Investigative Phase

To help business leaders appreciate the need for a compliance strategy and ongoing training, our team at Compliance Mitigation created this lesson to teach how investigations evolve. Generally speaking, many investigations begin with some type of complaint. As stated earlier, the complaint may come from disgruntled customers, competitors, suppliers, or the business community.

Employees, too, may alert government officials to what they perceive as wrongdoing by acting as internal whistleblowers. They may even file civil whistleblower lawsuits, also known as qui tem cases, going after the massive rewards that result from successful whistleblower lawsuits. In that sense, investigators and aggressive lawyers consider employers as lead-generators that can bring, potentially, massive fines and billable hours.

In the macro sense, we know that high-pressure prosecutorial tactics lead to many government investigations. With our nation’s commitment to mass incarceration, investigators feed the ecosystem that leads to more prosecutions and builds population levels in prison.

Every year, our nation spends more than $100 billion to fill our nation’s jails and prisons. To keep them full, investigators work to bring charges against more people and businesses for white-collar crimes. Although some people have a criminal mindset and begin businesses with an intent to deceive or defraud victims, many people commit “crimes” without any intention or knowledge that they are violating laws. For example, the crime of cash structuring has led many people to prison, despite those people not having had any intent to break the law.

Cash structuring makes it a federal crime for any person to make cash deposits in certain circumstances. If prosecutors can prove that a person made a series of deposits that were under $10,000 for the specific purpose of evading the requirement to file a currency transaction report (whether that was actually the intent or not), the prosecutors may bring criminal charges for cash structuring.

As an example, let’s say a car dealer sells cars for $9,000. Let’s say that the car dealer sold five cars each day. Each time he sold the car, he brought the money to the bank and made a deposit. If the person filled out a currency transaction report, the person would be in compliance with the law—even though he did not deposit $10,000. If the person did not complete the cash transaction report, that individual could be liable for a felony conviction, because authorities may accuse him of making a pattern of deposits that amount to less than $10,000 in order to avoid completing a cash-transaction report.

The person in the example above did not intend to violate the law. He completed an invoice system and he paid appropriate tax. The money lawfully belonged to him. Yet as a result of his failure to complete the necessary cash transaction report, prosecutors could bring felony charges; a judge could sentence him to prison. Members of our team have served time in prison alongside several people because they violated cash structuring laws. Those people did not intend on violating the law; they did not know laws restricted the way they could access or deposit their money.

In the law-and-order system of the United States, investigators have massive power. They may question individuals and government attorneys may depose them under oath. The answers those witnesses give during government investigations can lead to further problems. Government investigators may incentivize people to talk by offering immunity in exchange for testimony, thereby putting more people under scrutiny and bringing more people into the system.

A hypothetical example may help to illustrate how a government investigation can begin. Let’s say a policeman pulls a car over for erratic driving. The person driving the car may be a professional of some sort, a physician, for example. The physician may be driving under the influence.

Understanding that driving while intoxicated could threaten his license to practice medicine, the doctor may request to speak with a detective. The doctor may offer evidence of a fraudulent billing system to overcharge insurers. The detective may have authority to drop the driving offense in order to secure the physician’s cooperation if the physician would help to build a bigger case against someone else. The threat of punishment, or loss of earnings, leads many people to become government informants that launch new investigations.

Investigators with various government agencies, including the FBI, the SEC, the FTC, the DHS, the ICE, or any other agency will make an initial determination on whether to advance the investigation. They may choose to proceed with a civil investigation, or they may work with law enforcement to launch a criminal investigation. Agencies have the authority to conduct civil investigations on their own. Criminal investigations, however, require prosecutors; those prosecutors may work with either with the US Attorney’s Office, or with the state Attorney General’s office.

Both civil and criminal investigations bring enormous pressure on a person. Every person on our team at Compliance Mitigation has personal experience with those investigations and the consequences that follow. A case may begin with a civil investigation. As evidence surfaces, the investigation may turn criminal, which brings more stress, more expense, and higher levels of risk.

Once investigators choose to advance, they begin to subpoena documents related to the suspected activity. They may want to review bank and brokerage accounts, phone records, email records, social media etc.  They can also request warrants to listen in on phone calls and review electronic activity in real time. Again, targets may or may not know that they’re being investigated.

Investigators typically do not want a potential target to know anything about the investigation at the outset and will ask people they interview to be discreet and not mention anything. In some cases, investigators make their investigations obvious. They may want to push the target to act inappropriately, while the investigators gain or create additional evidence or charges.

At some point, a target becomes aware or suspicious that an investigation is underway. Whether investigators identify a person as a potential witness, subject, or target, the person would be well advised to understand his or her options. People can take specific actions to minimize potential exposure. 

The primary focus during the preliminary phase of a white-collar crime investigation is “what was done” and not “who did it.”  The earlier a person can persuade investigators or prosecutors that a crime did not take place, the more likely a person would be to get a better outcome.

As investigators and prosecutors spend more time on a case, they become more vested in getting the “win,” which doesn’t always equate with justice. They want a finding of guilt.