Objectives

• Analyze the approach to evaluating the effectiveness of the white collar crime effort
• Assess designed for self-evaluation of a white collar crime unit
• Identify methods of establishing performance criteria in a white collar crime unit

Introduction

Having looked at the tactics and techniques of white collar crime enforcement and at the organization required to accompany such efforts, it is important to review and discuss another task essential to efficient management and continuity of existence of a white collar crime effort. This task is evaluation. Too often when evaluation is spoken of, it is seen as a troublesome requirement imposed upon activities, but of little intrinsic value to them. To share this view is to totally misunderstand evaluation.

Whenever choices are made between competing uses for scarce resources, there is a need for a comparative assessment of the relative merits of the competing uses. This comparative assessment (or evaluation) occurs both before choices are made as well as once they have been made. In the first instance, evaluation serves as a decision-making tool; in the latter case, as a validation mechanism, confirming or rejecting the soundness of the original decision.

Many of the decisions made with regard to law enforcement resources are so automatic that they are not thought of as constituting evaluative choices. Thus, nearly all police agency of relevant size employs both uniformed and plainclothes divisions in order to accomplish its overall goals, implying relative values attached to a visible uniform presence and a plain clothes or undercover investigative capacity. Some choices do not involve evaluative assessments, but rather reflect larger moral and social choices pursued independent of evaluative findings. In this area we might place the maintenance of specialized homicide units. Homicide is not a frequently occurring event in every jurisdiction, and yet no one would seriously argue that law enforcement agencies should not create and have available specialized resources to respond to so serious, though rare, crime event. The point is that the organization of law enforcement agencies implies a series of evaluative decisions about their mission and short and long-term goals. Because many of these decisions were made long ago they are taken now as givens and not subjected, rightly or wrongly, to close scrutiny and assessment.

In many agencies, however, white collar crime enforcement does not have such an established and accepted status, and will be subjected to critical evaluation, both of a decision-making and validation nature.

EVALUATION AS A MANAGEMENT TOOL

Recognition that a white collar crime effort necessarily will use resources that otherwise might be deployed elsewhere and therefore that it will attract intensive scrutiny does not mean that those engaged in such a unit or in making the decision to create such a unit should adopt a defensive posture. On the contrary, the pressure for evaluation should be viewed as a management asset, producing positive benefits for the unit staff in their relationship with the agency administrator and with external funding sources. In addition, such a posture will prove beneficial to the unit supervisor and unit members as they go about their work.

Evaluation Needs of the Agency Administrator

An agency administrator for whom white collar crime enforcement is a new venture must be armed with considerable information in order to decide to embark on such an effort. But his needs will not stop there. Once having decided to go the white collar crime route, he will continue to need information, evaluative in nature, which provides him with feedback concerning his decision. The unit which pursues self-evaluation carefully and seriously will be at some advantage in relating to the needs of the chief administrator of its parent agency.

Evaluation needs of External Funding Sources

Many white collar crime efforts will be undertaken with the support of external grants. Grants carry with them evaluative requirements that too often are viewed as troublesome meddling. This is not a healthy interpretation of such requirements. Funding sources, like operating agencies, have hard choices to make concerning where they will expend their limited resources. Like all decision-makers, they need both prior information and on-going feedback concerning their funding choices. A sound self-evaluation plan can assist a white collar unit both in meeting the evaluative needs of an external funding source and in fulfilling its own information needs.

Evaluation Needs of the White collar Crime Unit

Because efforts in the area of white collar crime enforcement are sometimes novel ventures for an agency, the roles and expected performance criteria for those participating in them can be somewhat ambiguous. Therefore it often will be unclear to unit members what expectations their agency has of them, not to mention what specific expectations they should have of themselves. This can easily cause the white collar effort to bog down.

Avoidance of such situations by supplying both the unit supervisor and unit members with adequate and continuous feedback concerning their efforts should be the goal of a sound self-evaluation plan. What follows is a design for self-evaluation of a white collar crime enforcement effort. Its purpose is to provide general guidelines applicable to many kinds of white collar crime enforcement efforts, to highlight general information needs related to self-evaluation; and to describe the process of evaluative efforts.

DESIGN FOR SELF-EVALUATION

A sound self-evaluation involves consideration of four fundamental steps:

1. Determination of unit goals and objectives

2. Clear statement of criteria bearing on achievement of goals and objectives

3. Development of plan for collection and analysis of information related to performance

4. Statement of expectations concerning goal attainment

Both the timing and necessary participants involved with each of these evaluative steps will vary and will be included in the discussions below.

Determination of Goals

To be most useful, self-evaluation of a white collar enforcement effort should begin at the planning and pre-implementation stage. This is because it is at this point that careful enunciation of reasonable goals and accompanying objectives capable of being measured or otherwise assessed, can occur. Unless specification of goals and objectives is undertaken, there is little basis on which an evaluation can proceed. Clarification of the unit’s mission, in other words, must occur in order to assess its performance in relation to that mission.

Goal determination is not ordinarily an evaluative step that can be undertaken in a vacuum. Participants in such a determination should include relevant agency and administrative staff, the designated unit supervisor, representatives of the agency’s planning section, and (if feasible) members of the unit staff. Unfortunately, there is no recipe for selection of “proper” goals by agencies. Situations vary greatly among jurisdictions, as do the powers of enforcement bodies and resources available to them.

In addition, white collar crime enforcement has some unique dimensions that make the determination of goals and objectives a particularly difficult undertaking, beginning with the term white collar crime. It represents a complex and extremely varied range of conduct. One cannot, then, merely set the goal of an effort of “reducing white collar crime” because that would be meaningless. Instead, it is necessary for evaluative purposes to settle on what white collar crime activities, or specific types of conduct does the unit seek to reduce? Second, white collar crimes in general are believed to go substantially unreported. Add to this the number of agencies and levels of government which have a responsibility of some kind to deal with various white collar abuses, and it is highly unlikely that anyone agency could possibly be the repository of even the events that are reported in a given jurisdiction. Instead, the reported events are likely to surface in many different agencies. To approach white collar crime as an enforcement problem with a view to reducing it is to set a goal, performance toward which is impossible to measure or adequately assess. Finally, because of the variety of acts and actors embraced within the concept of white collar crime, it is unlikely that even the most talented, well-staffed and organized enforcement unit could successfully respond to more than a few segments of the activity.

Setting goals and related objectives in the white collar crime area, then, is largely a process of specifying and limiting the focus of an enforcement effort to some manageable portion of this crime area. Recognizing that the enforcement effort cannot do everything, there must be some determination of what best can be done and what can be done well with the staff, resources, and time available and the jurisdictional powers possessed.

What can be done well, is largely a function of staff characteristics and resources. What can best be done, on the other hand, must relate primarily to an assessment of what is occurring in the agency’s environment. Such an assessment should seek to answer the following questions: What abuses are taking place and with what frequency? How are these being responded to?

An agency interested in white collar crime enforcement should review carefully the major abuses affecting its jurisdiction as against the current responses to these abuses. Where a major abuse is not met with a response, or is inadequately met, the agency should then determine if it can appropriately and effectively provide the response needed.

Below, three examples of the kinds of goals and accompanying objectives that might be chosen for a white collar crime effort are described. It should be stressed that these are merely examples. Their appropriateness to a given agency must be carefully weighed.

Setting goals with reference to victim groups

In some jurisdictions, assessment of white collar crime problems will reveal that some segments of the population are especially victimized by specific kinds of fraud abuses. In such situations, one method of setting goals for a white collar crime enforcement effort is to relate that effort to identified groups who are specially victimized with the hope of favorably impacting on that victimization by deterring or preventing it and/or by seeking justice for such groups should they be victimized.

Setting unit goals with respect to identified victim groups has several advantages. First, it gives the effort a clear focus. Second, because the group selected to benefit from the effort is believed to experience a high level of victimization, the prospect for showing impact is also high. This serves not only to motivate unit investigators but also to provide them with satisfaction in their accomplishments. Finally, by focusing specifically on the victimization of a particular group in the population, the effort is likely to limit the range and kind of cases it deals with. This is particularly advantageous for a new and inexperienced white collar crime unit, since it will allow unit members to develop a depth of expertise in a limited number of areas that can give them the confidence to go forward into less familiar investigative territory.

This method carries with it some affirmative requirements that may prove troublesome for some agencies. First, a focus on victim groups is likely to obligate the commitment of resources and time to a substantial public education effort, both to inform targeted groups of the unit and to encourage complaint reporting. While some degree of public education will be a part of any white collar crime effort, the obligations of the victim oriented enforcement effort are likely to be greater than usual. White collar crime units located in agencies for which public education is not a major activity, such as police departments, may not, then, be prepared for the kind of educative tasks required, or to meet demands for attention flowing from rising expectations on the part of the identified victim group.

Consumer affairs offices, on the other hand, may find the public education requirements of a victim-oriented effort more consonant with overall agency functions and more consistent with their view of their mission.

The targeting of victim groups, then, provides a method of setting goals that can contribute a specific focus and agenda to a white collar crime effort. While providing these, however, the method also demands a commitment to a range of activities and roles that can contribute greatly to the investigative role but which lie outside it. Agencies unprepared to recognize, plan for and reward these additional functions might better use another method for setting goals.

Having weighed the advantages and disadvantages and chosen a victim-oriented focus for the white collar crime effort, the agency must then formally enunciate its goals and define objectives it believes will assist in attainment of those goals. An example of a victim-oriented goal and accompanying objectives would be the following:

Goal:

1. To reduce and prevent the victimization of elderly persons residing in this jurisdiction resulting from white collar criminals engaged in home repair fraud, medical quackery and medicare abuses

Objectives:

1. Informing elderly citizens on how to avoid being victimized by such frauds

1. Increasing the reporting rates of elderly citizens victimized by such crimes

1. Assisting elderly victims in filing complaints and pursuing official redress in their behalf

1. Securing appropriate remedial action (restitution and mediation outcomes) for elderly citizens who have been victimized.

Selecting goals with reference to specific abuses

Another method of setting the goals or focus for a white collar crime effort is to target particular abuses, or groups of abuses for special attention. Once again the singling out of specific abuses should be based on some assessment of the offenses being committed in the agency’s jurisdiction and implies that such an assessment has been undertaken. It would be foolish, for example, for a white collar crime unit to select land fraud as a focus of attention, where there is little evidence that such frauds are occurring there or that its public is experiencing victimization from such acts. Similarly, the selection of abuses for enforcement attention should reasonably reflect the resources available to the unit and the jurisdictional constraints under which it will operate. Thus, for example, even where land fraud victimization appears staggering in an agency’s jurisdiction, if the agency has neither the resources nor the statutory authority to intervene appropriately, the singling out of land frauds for attention will be ill-advised.

It should be underscored that setting goals on the basis of selected offenses relies heavily on two factors: (1) the presence of adequate information from which intelligent selections can be made; and (2) the planning of the subsequent effort to provide the resources necessary to adequately address the offenses selected. Lacking either of these factors, use of this method for goal determination is reduced to a hollow exercise that will provide little guidance or sense of mission for a subsequent white collar crime unit.

An example of abuse-related goals and attendant objectives would be the following:

Goal:

1. To reduce the incidence of land fraud within this jurisdiction

Objectives:

1. Thoroughly investigating real estate and land transfer practices in this region

1. Alerting the public to tactics of the land fraud specialist

1. Increasing the reporting of questionable practices concerning sale of land by public

1. Enlisting the aid of real estate professionals to report abuses in their industry

1. Seeking criminal prosecution and maximum criminal penalties in land fraud cases developed by the unit

1. Assisting other jurisdictions in prosecuting land fraud operators that come to the unit’s attention but are not within its jurisdiction

Setting goals with respect to the development of expertise

One final method for goal selection may be used by a white collar crime unit, and this concerns the setting of objectives related to the development of expanded expertise in the unit to respond to a range of white collar crime activities. Often this goal is combined with other more specific goals such as those described above. Clear statement of expertise development as a goal can be particularly important for a newly constituted white collar crime unit, since it logically constitutes a first-phase goal designed to enhance the achievement later of more specific offense-related goals, while at the same time facilitating on-going enforcement efforts.

One advantage of making skill development an object of unit achievement is that it will encourage the white collar crime effort to undertake cases of greater significance and impact on the public, which frequently will be cases of greater complexity and difficulty, more time consuming and demanding of investigative resources. Enhanced skills and related willingness to take on new challenges in familiar areas is also likely to encourage unit personnel to exercise these skills in the challenge presented by new forms of white collar crime which emerge in their jurisdictions. In addition the capacity to deal with particular white collar crimes often will facilitate their recognition as prosecutable offenses.

The disadvantage of such a goal, especially when used in isolation, is that no clear focus is provided the unit. This raises the danger that such a unit may too easily drift from one investigative area to another with little sense of a coherent set of priorities. Unless, then, such a goal is carefully guided by more substantive concerns, the record of a white collar crime effort easily could lead to a situation in which the unit brushes by many white collar crime abuses, victims, and offenders, but fails to do very much at all in anyone area.

An example of an expertise-development goal and accompanying objectives is provided below.

Goal:

1. To substantially improve the capacity of this agency to respond successfully to problems of white collar crime

Objectives:

1. Taking advantage of special training programs designed to enhance or impart white collar crime investigative skills

1. Improving the quality of investigative and case preparation materials for official processing

1. Undertaking investigations in novel and complex cases and bringing them to satisfactory conclusions

1. Completing complex investigative tasks in cooperation with other agencies

1. Improving the satisfactory delivery of services to victims of white collar crime

Setting goals

The first step in any self-evaluation should be the setting of unit goals (at the pre-implementation stage if possible). Without clearly enunciated goals and objectives and a sense of overall mission, a white collar crime effort will be hard pressed to evaluate its performance. Lacking evaluative capacity, the unit will fail to benefit from the guidance provided by self-assessment and may flounder, knowing neither where it has been nor where it is going.

Establishment of Performance Criteria

Once goals and objectives have been selected for a white collar crime effort, the next step is to establish acceptable criteria by which performance can be evaluated in relation to those goals. The term “acceptable criteria” is not meant to imply that some standards are better than others, but rather to suggest the process by which they should become established. Performance criteria must be agreed to, accepted and understood by all concerned in order for the evaluative effort to be useful and valid, Thus, performance criteria, like goals and objectives, should be established (before implementation of a new unit) and should involve maximum participation of the unit staff as well as agency supervisory and planning personnel.

It is obvious that acceptable criteria must reasonably relate to the goals and objectives to which they will be applied. Thus, if the major objective of a unit is to secure criminal penalties for particular abuses, then an acceptable criterion of performance should relate to cases accepted by a prosecutor, rather than those to which civil or mediation outcomes were applied. Similarly, where a unit has stated one objective to be the seeking of maximum criminal sanctions, an acceptable criterion would not be calculation of the actual penalties but rather would more appropriately be documentation of the steps taken to assure strong sanctioning, such as comprehensive preparation of information for inclusion in pre-sentence reports which fully document the gravity of the violation and its impact on victims. Sound performance criteria should seek to measure not only outcomes, but also the consistency and rigor of the processes by which particular outcomes were achieved. This is why the mere counting of numbers of investigations, convictions or cases and/or the tallying of the dollar total of restitutive settlements do not serve as sound evaluative measures.

Instead such measures must be combined with other criteria in order to be interpreted properly. Thus, the raw number of investigations must be grounded in some framework which adjusts for quality and significance of investigations so that the supervisor can distinguish quality, time-consuming investigative efforts from the mere spinning of investigative wheels to drive up the tally. Sound performance criteria, then, can provide managerial guidance to supervisors as well as contributing to unit evaluation.

It should be noted that performance criteria are related specifically to objectives rather than to goals. This is because while goals generally constitute hoped-for results of an effort, objectives represent statements of concrete and controllable steps the agency proposes to take in order to reach a particular result. It is more practical to attempt to gauge success in meeting objectives which are more concrete than to measure ultimate consequences to a community. This is not to suggest that performance criteria do not contribute to an evaluation of the extent to which goals are achieved. To the extent that stated objectives are logically, positively, and determinatively related to achievement of goals, it is clear that successful performance with regard to a unit’s objectives will result in satisfactory progress toward goals.

Development of Data Collection and Analysis Plan

The third step that must be taken in a sound self-evaluation is to decide what kinds of information will be needed to determine if performance criteria have been met, who will gather that information, when it will be gathered, and who will be responsible for organizing and presenting it. This may sound like a massive and arduous task, but if the evaluation plan has been sound to this point, it will not be. Instead what a unit and an agency will see is that the information needed for the evaluative effort is largely the same as that required for management of a well-organized and supervised unit. In tact, the files and record keeping mechanisms described earlier when the flow of information in a unit was discussed are likely to be the major sources of information for self-evaluation. Thus, good supervision of a white collar crime unit dictates that investigators keep individual records of their activities for review by the supervisor. Good evaluation requires the same documentation of staff activity. Similarly, maintenance of a complaints-received file which can permit the unit supervisor to observe changes in the pattern of complaints and make decisions concerning the allocation of resources also serves as a valuable source of evaluative data. In this instance, the evaluative and the supervisory purposes are precisely the same.

What a sound self-evaluation plan does in effect is to provide the supervisor with a framework in which to interpret the information he receives, not in the sense of its being good or bad, but rather in the sense of its being where we should reasonably expect to be. Having this framework allows the supervisor to provide feedback to the unit staff; to congratulate where appropriate and to make suggestions or redirect activities that appear unproductive.

A data collection plan for evaluation should provide the unit supervisor with information needed to manage his unit, since his management needs for information will parallel evaluative requirements. The unit supervisor should have available a clerk or analyst to whom can be delegated the preparation of monthly summaries of evaluative data, which regardless of the objectives and criteria involved, will amount to a synopsis of unit activities during the reporting period. This summary should be made available to unit staff and agency administrative personnel. On a less frequent basis (quarterly, for example) cumulative summaries should be prepared and a formal presentation by the supervisor of the unit’s milestones and progress should be considered.

The kinds of information specifically needed to satisfy a particular evaluation-management plan will depend, of course, on the stated goals, objectives and criteria adopted by the unit and its parent agency.

Statement of Expectations

The final step necessary for a sound evaluation design is the formal statement of expectations with respect to both the short and long term. This step often is overlooked, producing much consternation and/or confusion.

What this step essentially requires is that both the parent agency and those involved in the white collar crime effort carefully think through and formally state what they see as the course the effort will take. What do they expect will occur in the first three months as opposed to the last six? What activities are likely to be most prominent at one stage and not at another? And why?

The statement of expectations is particularly important for top agency administrators who probably will not be closely apprised of the unit’s day to day operations, may only see monthly or quarterly activity summaries, and may hold unreasonable expectations for the unit. Such a statement can prepare the agency head not to expect, for example, an immediate round-up of large numbers of white collar offenders, an event quite unlikely to occur. Similarly, it can prepare a new unit for the kinds of painstaking drudgery or growing pains it is likely to encounter. For an already existing unit, it can document what it knows from experience to be the course of things in the white collar crime enforcement area. Finally, the statement of expectations, by stressing the relationships and differences between the short pull and the long haul, helps the unit and its agency to avoid the situations in which an effort is unjustifiably condemned or lauded prematurely.

By setting a steady, defined course, it prevents the kind of recrimination or self-adulation that can prove fatal to overall success.

One example of the kind of information that should be included in a statement of expectations will serve to illustrate its purpose and value. Suppose:

1. That a white collar crime effort chooses as its goal the reduction of the victimization experienced by a particular target population;

2. That it proposes to attain that goal through a public education effort and by increasing the crime reporting by this group. At the end of a particular period it may be found that by fulfilling its objectives, the number of abuses reported has substantially increased, a result somewhat in conflict with the ultimate goal. What the statement of expectations can and should do in this situation is explain that increases in the number of reported abuses is a fully intended outcome of a strong public education and reporting drive among members of the target population.

Rather than confounding the ultimate goal, the unit, by successfully meeting its objectives, will have brought to light many abuses that would have gone unreported and received no official attention. To the extent that the unit can show a stable, new, and higher reporting level for the targeted population, then, it can expect that its ability to reach the ultimate goal will be enhanced since it will be aware of and able to deal directly with a greater proportion of the actual abuses occurring.

Summary

Evaluation can be made to seem an onerous and unproductive activity. It is hoped that the design for self-evaluation presented here has provided a different perspective on it. What should be clear is that the steps that make up a sound evaluation, for example, setting of goals and objectives, establishing performance criteria, developing a data collection plan, and stating one’s expectations, are precisely the steps needed for a sound organization and management plan. No mystery need attach to the evaluation process. Most of it is just common sense. After all, the best way to get somewhere is first, to know where you want to go, second to decide how you plan to get there, and finally, to honestly state how far you expect to get over a given period of time. A good evaluation will assist a white collar crime effort not only in attaining its goals, but also in clarifying the process and documenting the milestones that are the substance and tokens of that achievement.

STUDENT CASE STUDY SIX – A Look Back at the Enron Case 12/13/06

Assignment

1. Read and summarize the Enron case. Research and profile the key suspects.

1. What special skills would an investigator need to investigate this type of crime?

Overview

When Enron declared bankruptcy in December 2001 and took with it the nest eggs of thousands of employees and stockholders, the FBI field office in Houston assigned two agents to investigate. Within weeks, the number of agents and support staff assigned to the case grew to 45, many hand-picked from field offices around the country for their expertise in traversing even the most circuitous paper trails.

The case would become the largest and most complex white-collar investigation in FBI history and spawn a unique investigative task force of prosecutors, agents and analysts in Houston and Washington, DC, each uniquely skilled at drilling deep into balance sheets and following the money. Their job: to learn how company officials perpetrated fraud on such a grand scale, build a strong criminal case, and hold accountable those responsible.

The five-year investigation led to jury convictions of top Enron officials who enriched themselves by cheating investors with sham accounting, and guilty pleas from some 16 others who were in on it. Being a major case, it was administered at the highest levels of the FBI and the Department of Justice, as well as the Securities and Exchange Commission. In Houston, Supervisory Special Agent (SSA) Michael E. Anderson, chief of his office’s economic crimes squad, led the investigation on the ground. He describes how agents assembled the case:

1. An FBI storage facility contains seized evidence, including bank and brokerage account records that were critical in seizing assets and supporting insider trading charges against executives.

1. In January 2002, agents executed a consent search of Enron’s 50-story corporate headquarters building. The search lasted nine days as investigators unearthed critical documents and emerged with over 500 boxes of evidence. At the same time, agents conducted more than 100 interviews that helped identify fresh leads for investigators.

1. In February 2002, Enron’s board of directors issued findings from its own internal investigation-the Powers Report, named for William Powers Jr., head of the special investigation committee that wrote it-that said Enron executives reaped millions by violating basic accounting principles. “That was a gold mine,” SSA Anderson said. Agents conducted over 1,800 interviews in the US and overseas.

1. Agents expert at teasing forensic evidence from computers-a Computer Analysis and Response Team-collected over four terabytes (imagine 4,000 copies of an encyclopedia) of data, including e-mail from over 600 employees. Meanwhile, the Regional Computer Forensics Laboratory in Houston processed some 30 terabytes of data, making still more sense of the paper trail and flagging important leads for investigators.

1. Financial analysts combed through hundreds of bank and brokerage accounts to track fraudulent purchases, which proved critical in securing restraining orders, seizing more than $168 million in assets and supporting insider trading charges.

What emerged was a mosaic of inter-related schemes-some hardly more than smoke and mirrors-that toppled a company that once boasted annual revenues over $150 billion. Enron ripped off California, selling energy to the state’s strapped utilities at over-inflated rates. Officials overstated the company’s fledgling Broadband venture, hitching the company’s stock price to the star of the still-nascent Internet bubble. The company overvalued its international assets by billions to generate cash flow and manipulated its quarterly earnings statements to keep Wall Street happy and its stock price afloat.

SSA Anderson said it was the thousands of victims, hard-working employees who lost their pensions, and the desire to hold accountable those responsible for the failure of Enron, that motivated agents, analysts, and others on the Enron Task Force to press ahead on the massive case.

“They lost their retirements, their health insurance, their livelihoods. That kept everyone interested in pressing forward in spite of the huge personal sacrifices inherent in working a major case for over five years,” Anderson says. “If it’s some consolation to them, the people that were responsible for this fraud were punished for it.”