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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.
