Solomon L. Wisenberg is a partner and co-chair of the white collar criminal defense practice group of Nelson Mullins Riley & Scarborough, LLP.
At the heart of most white-collar crime investigations is an Assistant United States Attorney with a bevy of federal agents working under him. The prosecution team is aided by an investigatory grand jury, a group of 16 to 23 citizens empowered to subpoena individuals to appear before them in order to answer questions or turn over documents. The grand jury also issues indictments. All individuals coming into the orbit of the prosecutor and grand jury fall into one of three categories: witness, subject or target. A target is someone who stands a 50% or more chance of being criminally charged. As a practical matter, once an individual has been branded a target, the prosecutor has decided that the individual is guilty. The prosecutor is simply looking for strong enough evidence to indict. A witness is not under any suspicion, as yet, but simply has information of interest to a grand jury. A subject is somewhere in-between a target and a witness. He has engaged in conduct that may look suspicious or unethical, but the prosecutor is not certain that a provable crime has been committed and wants to do more investigating in order to be sure.
Even though your status as a witness, subject or target may be important in guiding your strategy during a particular phase of a federal white-collar crime investigation, the key thing to remember about these categories is that they are ultimately meaningless and offer you no protection. Why? Because even if you are currently a witness or subject, there is no guarantee that your status will remain unchanged. A prosecutor's written statement to your attorney that you are a mere witness, and should thus have no qualms about talking to investigators or testifying before the grand jury, is not worth the paper it is written on. A witness appearing before the grand jury (or in front of a federal agent) appears utterly exposed, unless he or she is testifying under some additional form of protection such as use or transactional immunity. It is necessary therefore, from the outset of a white-collar crime investigation, to base any strategy on a realistic assessment of your potential criminal exposure, rather than on the crumbs and empty promises thrown at you by an Assistant United States Attorney.
There are many intangibles involved in federal white-collar crime prosecutions. There is much unfairness as well. A corporate insider who has knowledge of a white-collar crime may, in one federal district, turn and blow the whistle and be hailed as a hero, becoming in the process a star prosecution witness. A virtually identical insider, in another federal district, may be required to enter a felony guilty plea and serve time as part of his co-operation agreement with the government. These breathtaking disparities in treatment may be accounted for by many factors, such as: the character of individual prosecutors; the differing policies of various United States Attorney's offices; or, the speed with which a defense attorney first approaches the government.
No one plan of action can protect you against all of these intangibles and injustices that occur every day in the criminal justice system. This white-collar crime primer doesn't pretend to do so or to sugarcoat a thing. But it is a brief roadmap to the official and unofficial rules of white-collar crime inquiries, which may: 1) keep you from committing deadly mistakes during the critical stages of an investigation; 2) make you a more intelligent consumer of legal services and advice; and, 3) turn you into a strategist and tactician capable of significantly aiding your own case.
The white-collar crime crash course will focus on the real-world defense of individuals, as opposed to corporations, during the pre-indictment stage of a federal white-collar crime investigation. Most large companies can avoid indictment by cooperating with the federal government, waiving the attorney-client privilege and turning over the results of corporate internal investigations to the United States Department of Justice ("DOJ"). Today, more than ever, it is the individual businessperson, corporate employee or government official who is in need of personal representation from the very start of a white-collar crime inquiry.
1. WHERE DO WHITE-COLLAR CASES COME FROM?
A. The Traditional Model
White-collar crime is typically described as financial, economic or corporate crime, often carried out by sophisticated means. In the old days, most large scale white-collar crime cases were referred to federal law enforcement authorities (primarily the FBI) by regulatory agencies. If the alleged white-collar fraud was committed by a few rogue employees, company management usually notified the appropriate regulatory body. If management itself participated in the alleged crime, an appropriate regulatory body (such as the Office of the Comptroller of the Currency in cases involving federally insured banks) would notify law enforcement authorities. This notification would sometimes happen after the affected company had failed. Individuals or small companies accused of white-collar crimes were also reported to the FBI by their alleged victims.
Most fraud cases were initially worked on by the FBI (or the Secret Service or Postal Inspectors) and an offense report was generated by the main case agent. That offense report would summarize the allegations against a white-collar suspect and the steps the agent had taken to verify the allegations. A copy of the offense report, with supporting documentation, would then be sent to the United States Attorney's Office for the federal district in which the alleged offense was committed. The offense report would eventually wind up on the desk of an Assistant United States Attorney ("AUSA"), the line prosecutor assigned to decline or prosecute the case.
B. The New Model
Today, the old methods of generating white-collar crime referrals are still used, but many new avenues have opened up as well. Alleged financial fraud often comes to light through shareholder law suits and/or securities class actions against the officers and directors of publicly traded companies. Most publicly traded companies now have virtually automatic compliance mechanisms in place to report and investigate allegations of wrongdoing, even when the allegations involve top management. (There are several reasons for these virtually automatic reporting requirements and corporate internal investigations, including: the Sarbanes-Oxley Act; the United States Sentencing Guidelines for Organizations; and, the United States Department of Justice's Thompson Memorandum.) Whistleblower and/or Qui Tam lawsuits, in which an individual can report an alleged fraud and reap some of the eventual monetary reward obtained by the government, also account for a number of federal white-collar crime referrals. State Attorney Generals are now more aggressive in investigating and exposing alleged fraud, but many of their cases are ultimately referred to federal authorities. Finally, investigative reporters, news media outlets and various watchdog groups have become quite sophisticated in uncovering and publicizing alleged political corruption and financial scams.
The law enforcement community investigates white-collar crime cases differently today as well. There is usually no offense report, and the AUSA is involved from the very beginning of the case, carefully planning an overall strategy. The prosecutors often work in tandem with regulatory agencies, encouraging the agencies to conduct parallel civil investigations. The advantage to this approach is that regulatory agencies have more leverage to force individuals to cooperate with investigations, because the failure to cooperate with a regulatory investigation can cause a person to lose his or her professional license. As previously mentioned, today's federal prosecutors can also coerce corporations into waiving the attorney-client privilege and turning over the results of internal investigations. This allows the government to save prosecutorial resources by hijacking the prior work product of private company attorneys.
In summary, there are many more opportunities in today's environment for alleged white-collar crimes to come to the attention of federal criminal authorities. And once the federal authorities start to focus their attention, they wield more prosecutorial power than at any time in our nation's history.