White-Collar Crime: The Crash Course (page 2)

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.


A. What Your Federal White-Collar Attorney Must Know

To competently handle a federal white-collar crime case, your attorney must, at a minimum, be thoroughly grounded in the law of federal criminal procedure as well as the substantive criminal law or laws that you are suspected of having violated. Over and above this, your white-collar crime lawyer needs to know the operational basics, that is, how the rules of criminal law and procedure really operate during the various stages of a federal white-collar crime investigation. The competent white-collar crime practitioner should also be acutely aware of the ever-increasing use by the government, against corporate and individual defendants, of civil enforcement tools, including regulatory investigations (by entities such as the Securities and Exchange Commission), asset forfeitures and actions under the False Claims Act.

B. Will Your Real Attorney Please Stand Up?

If your company’s attorney interviews you as part of an internal corporate investigation, does the attorney represent you as well? The answer is almost always no. The company attorney conducting the interview will probably tell you that: 1) he represents the company; 2) the interview is privileged; 3) the privilege belongs to the company; and, 4) the company has the option of waiving the privilege at some time in the future. (In fact, most authorities agree that the company attorney is ethically obligated to tell you this.) If this is all that the company attorney tells you, however, you might go into your interview with a false sense of security. Why? Because, what the attorney has not told you, in the above example, is that, in the current white-collar climate, the company will almost certainly waive its privilege and turn over the results of the internal investigation, including a summary of your interview, to federal prosecutors. You should obviously be aware of this before deciding whether to participate in an interview which is part of an internal corporate investigation. Knowing the stakes involved, you can then decide, in consultation with your own white-collar lawyer, whether to participate in the interview. Your failure to participate might result in the company firing you, but that may be preferable to increasing your criminal exposure through an interview with company counsel who has become, in effect, an agent for the government.

C. Attorney Honesty

A white-collar crime client, no matter how outwardly sophisticated, is usually scared when he first contacts a criminal defense attorney. In many cases he is already in serious trouble. He wants to be told that things aren’t that bad, or that he might not be charged with a federal white-collar crime at all. Seasoned counsel can often provide sincere reassurance as to some of these matters. But your attorney should never downplay your potential criminal exposure or minimize the legal and factual situation at hand. Credibility is one of the criminal defense attorney’s most potent weapons. If he cannot establish credibility with his own clients, how can he be expected to do so with government attorneys during plea negotiations or with juries during trial? If you cannot trust your own attorney-if he seems to have a different answer every time you ask a question, if his attitude toward you changes after he receives your up-front retainer funds, if he fails to return your phone calls without adequate explanation-it is time to consider a new lawyer.


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Securities Book

He Wrote The Book

Provides a concise review of relevant statutes and real-world guidance for navigating a white collar case.

He Wrote The Book

Provides a concise review of relevant statutes and real-world guidance for navigating a white collar case.

Securities Book

Solomon L. Wisenberg defends clients throughout the U.S. in a wide range of white collar criminal cases. Recent Successes

Because of his experience and extensive knowledge of white collar criminal law, Mr. Wisenberg is routinely sought out by prominent national print and broadcast media to provide expert analysis of complex white collar legal issues. Read More

Mr. Wisenberg’s book, White Collar Crime: Securities Fraud (3rd Ed. 2016), is published by Thomson Reuters–one of the world’s leading legal publishing houses. His articles and essays have appeared in the Washington Post, the National Law Journal, Corporate Counsel, the White Collar Crime Prof Blog, and other leading publications. See Article Links