Blue Collar Tactics in White Collar Cases Part I

Posted by Chris Morales on Wed, Jul 24, 2013 @ 08:00 AM

Criminal defense lawyers are familiar with law enforcement's use of confidential informants and cooperating witnesses in the prosecution of organized crime, drug trafficking, and other "blue collar" offenses. In the past few years, however the use of these tools has been broadly expanded to investigations of securities fraud, tax fraud, and other traditional white collar crimes. It is clear that the prosecutorial successes achieved through the expanded use of these tools mean they are going to become the norm, not the exception. Lawyers can expect white collar cases to be less about the paper and more about the snitches and their tape recording. 

This article examines recent uses of confidential informants use of confidential informants, whistleblowers, and cooperating witnesses. It outlines potential dangers and opportunities, as this emerging trend becomes an ongoing reality.

Snitches: Confidential, Informants, Whistleblowers, and Cooperating Witnesses

The expansion of the government's use of Title III warrants authorizing wiretaps in financial crimes has been widely noted. However, electronic eavesdropping is not the only undercover technique that law enforcement will be using with increasing frequency in white collar cases. The Department of Justice (DOJ), Securities and Exchange Commission (SEC), and the Internal Revenue Services (IRS) have demonstrated, through statements and action, that they will be turning to the use of undercover operatives to assist their investigating witnesses. These operatives come in three basic flavors: confidential, informants, whistleblowers, and cooperating witnesses. The most troubling of these is the confidential informant, cited in search warrant affidavits and indictments simply as the "CI." 

Confidential Informants: Hidden From View and Inherently Unreliable

According to the FBI's Manual of Investigative Operations and Guidelines (MIOG), CIs are classified in each of the following categories: organized crime, general criminal, domestic terrorism, white collar crime, confidential source, drugs, international terrorism, civil rights, national infrastructure protection/computer intrusion program, cyber crime, and major theft and violent gangs.  A CI is "any individual who provides useful and credible information to a law enforcement agent regarding felonious criminal activities and from whom the agent expects or intends to obtain additional useful and credible information regarding such activities in the future." CIs pose a special problem because their identities may never be revealed and have frequently been protected from disclosure by the courts 

In Roviaro v. United States, the Court held that disclosure of the informant's identity may be required if it is "relevant and helpful to the defense of an accused, or is essential to a fair determination of a cause." The determination requires the court to balance "the public interest in protecting the flow of information against the individual's right to prepare his defense." In conducting this balance, the Court stated that courts should consider "the crime charged, the possible defenses, the possible significance of the informer's testimony, and other relevant factors." However, in cases where the CI is not testifying disclosure of the CI's identity has difficult to obtain.

The inherently secretive nature of the relationship between the confidential informant and the law enforcement agency for which he works serves as a significant barrier to obtaining helpful information for the defense. Without court supervision or public scrutiny the informant's deal is negotiated, often on an ad hoc basis, to serve immediate investigative needs rather than systemic goals of fairness and justice. It is no surprise that the DOJ's Office of the Inspector General (OIG) found significant and troubling deficiencies in the FBI's management of confidential informants. In 104 of the 120 confidential informant files examined, the OIG found, "failure to document the agent's evaluation of one or more suitability factors in the initial or continuing suitability evaluations, failure to give the required instructions to CIs or to do so at the required intervals, failure to obtain proper authority to permit CIs to engage in otherwise illegal activity, issuance of retroactive approvals of otherwise illegal activities, failure to report authorized illegal activity in accordance with the Guidelines, and failure to document deactivation of CIs." As the DOJ itself acknowledges, these failures provide opportunities for the defense to argue that it has failed to preserve or provide exculpatory or impeachment information, in violation of a defendant's constitutional rights.

Despite the inherent problem of reliability, credibility and transparency, the use of confidential informants white collar cases has increased dramatically as demonstrated by these recent examples: 

- In conjunction with a Medicare fraud investigation, which ultimately resulted in the arrest of three men for allegedly bribing assisted-living facilities, home health care agencies, patient recruiters and patients for referrals, the FBI had a confidential informant (a.k.a "Fancy") pose as a patient recruiter. She wore a video camera in a button on her blouse and carried another in her purse. Fancy, who knew the defendant's family from Cuba and South Florida, had a cocaine-trafficking record in her past and was introduced to the FBI by a former Drug Enforcement Administration agent who worked with the state Attorney General's Office on health care fraud. 

- A confidential informant served as a check runner in a wide-scale bank fraud/aggravated identity theft conspiracy in New York.

- Acting on instructions from the Office of the Inspector General of New York City's School Construction Authority, an informant bought false OSHA training certification cards from defendant on two occasions. 

- At trial, a co-conspirator testified she connected the defendant with an FBI confidential informant who sold co-conspirator and defendant fraudulent invoices to support fraudulent bills they submitted to Medicare. The defendant was found guilty on one count of conspiracy to commit health care fraud and six counts of health care fraud. 

- An indictment alleged that a stock promoter paid kickbacks to a confidential informant in return for the CI's persuading purported investors to buy promoter's stock at inflated prices. 

The Morales Law Firm would like to thank The National Association of Criminal Defense Lawyers Champion (September 2011 Issue) for sharing this information with us.

describe the image

Tags: white collar crime, Whistle-Blower, white collar crimes