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White Collar Crime
SUNY Buffalo Law School
Gromis, Marc S.

White Collar Crime Gromis Spring 2015

Introduction

– White Collar Crime Defined

o Non-violent, involves deceit/concealment, often motivated by money or greed; rarely repeat offenders; usually arises from lawful business or employment

o FBI definition: “those illegal acts which are characterized by deceit, concealment, or violation of trust and which are not dependent upon the application or threat of physical force or violence. Individuals and organizations commit these acts to obtain money, property, or services; to avoid the payment or loss of money or services; or to secure personal or business advantage”

– Intent is almost always dispositive

– Most prosecution is federal (USAO), because states lack resources for the lengthy investigations and trials WCC entail

– Most common White Collar Crimes:

o Stock fraud;

o Insider Trading;

o Bribery

o Mail Fraud

o Wire Fraud

o Tax Evasion

o Insurance Fraud

o Credit Card Fraud

o Computer Fraud

– Jurisdictional basis for federal WCC statutes (for federal prosecution, must have jx derived from Constitution)

o Commerce Clause

§ Basis for wire fraud and many others

§ Phone, mail, fax overs state lines (even one) gives a federal nexus

o Necessary & Proper Clause (as connected with Commerce Clause or some other enumerated power)

o Federal Interest

o Spending Clause

o Postal power (mail fraud)

o Other basis:

§ Counterfeiting (WCC if sophisticated means involved)

§ Immigration power (WCC to create false work authorization documents)

§ Taking more than $10,000 over US borders without declaring

§ Federal interest in federal property

§ Federal interest in US waterways (confers federal jurisdiction in environmental criminal cases)

§ Health care fraud (because of federal contributions to Medicaid and Medicare)

– Investigative tools

o Grand jury subpoenas

o Interviews

o Search warrants

§ Agent goes to prosecutor and presents evidence; prosecutor prepares search warrant application (show probable cause and be very specific and comprehensive) and presents it to magistrate judge; once magistrate issues warrant, coordinate its execution with the agents

o Pen register—with court order—allows you to view all incoming and outgoing calls (#s only)

§ No probable cause needed

§ May help you identify other victims or co-conspirators

o Wire taps—hard to get, labor intensive, and require frequent reporting to the judge

– US v. Koh (false loan application to Bank of Seoul’s NY office results in mail and wire fraud convictions; D appeals—argues no jurisdiction because the bank not federally chartered or insured)

o Federal interest is a jurisdictional requirement, but it is met here—there is a federal interest in all banks, not just those that are federally chartered or insured

– Gonzales v. Raich (California’s Compassionate Use Act—Commerce Clause allows federal regulation of purely intrastate marijuana cultivation and use)

o Expansive reading of Commerce Clause to justify federal prosecution of intrastate marijuana use and growth—affected IC (Wickard)

o Begs the question of what doesn’t affect IC

– US v. Edgar (hospital executives embezzled money from hospital that received federal Medicare funds from G)

o The statute was enacted under the Spending Power, but N&PC is also a basis for the statute—it is necessary and proper for the fruitful exercise of the Spending Power

o Also, federal interests in ensuring the honesty of state and local officials who oversee the use of federal funds and in the efficiency of federally-funded programs

– Charging instruments in federal court

o Criminal complaints

§ Used when you want to arrest/charge someone quickly

§ Involve sworn statements of agents

§ Can’t try someone on a complaint—must get an indictment or have D plead to information/waive indictment (only for misdemeanors)

o Indictments (returned by GJ)

o Informations (used only when D will plead guilty, as it is a C requirement of an indictment by GJ; signed by US Attorney, not GJ)

WCCs Committed by Individuals

– Mail and Wire Fraud

o Jurisdictional basis is grounded in the commerce clause (wires) and postal power (mail), making the statute apply to even intrastate mail and wire usage

o To allege mail fraud, it is necessary to show that (1) intentional participation in a scheme or artifice to defraud someone of money or property (specific intent to defraud); (2) materiality of misrepresentations; and (3) the defendants used the US mails/wires or caused a use of the US mails/wires in furtherance of the scheme

o Elements:

§ Intentional participation in a scheme to defraud someone of money or property

· Does not require proof that anyone has been defrauded, but such evidence may be used to show that a scheme to defraud existed

· Indifferent to truth; intent

o Reckless disregard for truth is sufficient

o Specific intent to deceive may be found from material misstatement of fact made with reckless disregard of the facts

· Requires a willful act

· Good faith, or absence of an intent to defraud, constitutes a complete defense to a charge of mail fraud (because specific intent to defraud is an essential element)

o Good faith: genuine belief that the information being sent or given is true

o Does not mean an ultimate hope or even faith that eventually the project will come out even or the money being obtained will be put back

§ Materiality of misrepresentations;

· Made to induce action or reliance by another

· Government is not required to show actual reliance

§ Use of mails or wires to further scheme

o US v. Maxwell (fraudulent scheme to obtain government contracts set aside for MBEs)

§ The

testify—contempt

o Subject—suspicion, but need more investigation

o Target—probably guilty, need to get evidence

§ Very rare for D to testify in GJ

– Advantages of GJ

o No probable cause needed for subpoenas

o Compulsory—may put a stop to criminal activity just by GJ subpoena

o Brady doesn’t apply

o No risk of exclusion (search and seizure issues)

– Disadvantages of GJ

o Witnesses don’t have to keep it secret, so may tip off targets

o Search warrants may be better

§ Plain view doctrine

§ Element of surprise—no destruction of evidence or advance preparation

§ Good faith exception to the exclusionary rule

§ Deters others and may stop the conduct

§ Press, victims able to discuss

§ Can detain everyone present, at least long enough to interview briefly

§ But, take more time work and evidence to get

– 5th Amendment

o No person in a criminal case shall be compelled to be a witness against himself

§ Must be incriminating (broadly construed), testimonial, and actually compelled

o Applies in GJ

o Must be a natural person—corporations cannot plead the 5th

§ Even one person corporations (In re GJ Subpoena)

§ What about sole proprietorships?

· Doe: SP can evoke the act of production doctrine—G must agree not to use the act of production as evidence at trial

o Self-incrimination and subpoenas

§ Act of production doctrine—just by producing a document, you can incriminate yourself (admitting you had it and you believe it to be of the type of requested, etc.)

§ G cannot use evidence of that production against you

§ Fisher (records from accountant given to lawyers, who were served and refused to comply)

· SCOTUS held compelled production from attorneys did not violate taxpayers’ 5th A rights

· May have had expectation of privacy, but 5th A does not apply—no testimony, no compulsion

– Immunity

o Often “clean for a day:” nothing you say at proffer can be used against you, but no total bar to prosecution

§ And, if you lie at the proffer, all bets are off

o Can also be “transactional:” receive immunity for entire scheme of activity

o Finally, court ordered “statutory” immunity (Fed’l Immunity Statute § 6002)

§ Holds up in other jurisdictions

§ Requires agreement from Washington