(B) They are disputes for which other remedies appear to be available, such as consumer mediation agencies, Better Business Bureaus, etc.

(C) “We have no jurisdiction.”

Law enforcement agencies, whether their principal focus is on criminal or non-criminal enforcement, should recognize that any wrongful activity, such as merchandising frauds for example, will have both criminal and non-criminal enforcement implications. It will often be the case that a complaint is more appropriate for mediation or civil action than for criminal investigation and prosecution, and should be referred elsewhere, but each such complaint or referral should be carefully scrutinized to determine whether it should not be handled by the agency which first received it, or whether referral elsewhere will truly be the most appropriate way to help the victim and to enforce the law.

Subject matter rationalizations are particularly troublesome in two situations:

• Where personnel making such rationalizations lack knowledge of the broad range of other services in their communities and simply take the easy way out by saying, “it’s a private matter,’etc., which leaves complainants with no remedies.
• Communities where there are not a number of specialized agencies to which victims can be referred, such as consumer protection agencies, ombudsmen, etc.

Passing the buck where there is some basis for action is bad enough; it is even worse where the victims are left with nowhere to turn.

Rationalizations Related to Victim Character

The easiest “out” of white collar crime enforcement is to regard the victim as the party at fault, because he was gullible and should have known better, or because his own greed involved him in his predicament, or because all the victim is interested in is getting his money back, which presumably means he will not maintain a cooperative attitude during investigation or prosecution.

Every investigator working in the field of white collar crime has seen victims who are gullible, or greedy, or who have no staying power. But this is true of victims in any criminal justice area, and is rarely advanced in other areas as a rationalization for not meeting law enforcement responsibilities. Fraud and other white collar crime operators should not have a license to steal from those who are less alert, or wary, or even greedy.

Terms such as gullible, greedy, etc., are also relative terms. Fraud artists are specialists in the business of deceit, who have developed great skill in exploiting the trust the needs of others. Many victims are old, ill, and otherwise disadvantaged. They run the entire gamut from the proverbial man who “buys the Brooklyn Bridge,” to sophisticated investors who are taken, notwithstanding highly professional and well-meant advice from their attorneys, accountants, and independent investment advisors. When asked, white collar crime investigators can even point to people in their own organizations, and members of their families who were victims of frauds, particularly in merchandising fields.

It is not “greed” when a retired person on a limited income seeks to get a bargain price for a home repair, or to supplement his or her income by taking money from a bank where it earns 5% interest and putting it in “guaranteed” mortgage participations at 9%. And there is no reason to believe that a fraud victim is any more interested in getting his or her money back than is the victim of a holdup, though the amounts are likely to be considerably larger and more significant to the fraud victim.

In a market place where we rely on the expertise of such as television and auto repairmen, and where we buy merchandise in closed packages, one does not have to be stupid to be swindled. The old rule of caveat emptor (let the buyer beware) lost its justification when the makers of goods started packaging their products and erecting barriers of distributors and retailers between themselves and ultimate buyers.

And the fraud operator will frequently pick on those least likely to have anyone to turn to for advice, as targets for exploitation. The plain and simple fact is that white collar crime operators cast broad nets which catch victims who have a variety of motives and capabilities, and who deserve protection.

When the “victim” is a large institution, public or private, there is often a desire to seek an “out,” on the rationalization that the institution’s procedures are sloppy, that it opened itself wide to fraud, that it has attorneys to pursue the matter civilly, that the institution can afford it, etc. This rationalization is often easy to adopt because many such institutions are less than fully cooperative, and will often work to cover up the fact that they have been defrauded in order to preserve their reputations, or to guard against political consequences (if public institutions} or against litigation, for example; against officers or directors of corporations who might be held liable for negligence.

There is often very legitimate agency concern about being used as collection agencies, e.g., by credit card companies, or distaste at being called in after the victim has used the threat of such referral to intimidate the thief into making restitution. Such considerations are, of course, valid issues to be considered in deciding whether to proceed with an investigation or prosecution, but law enforcement agencies should not use them as an “out” to avoid responsibility.

IMPACT OF WHITE COLLAR CRIME

Agencies involved in or contemplating enforcement activity against white collar crime must have a comprehensive and clear view of the impact and cost of white collar crime for four basic reasons:

• To develop agency objectives by identification of the range and level of activities to be combatted
• To infuse their personnel with a sense of the worthwhileness of the mission, in both human and simple dollars and cents terms
• To provide a basis for evaluating performance in terms of service to victims and potential victims
• To provide a basis for budget justification for agencies and sub-agency units engaged in combatting white collar crime.

The costs of white collar crime investigation and follow-up litigation or prosecution are substantial, both in absolute dollar terms and in terms of the demands placed on law enforcement agencies which are already harassed by many other demands for manpower and resources. The essential question is, however, whether these costs are worthwhile and should be borne, and whether particular law enforcement agencies should assume the burdens as well as the opportunity to grapple with the challenges of this significant law enforcement activity. There must be a balancing of the costs of combating white collar crime against its cost to the community.

The costs or impacts of white collar crime can be considered either in terms of dollars or in terms of the effects of such crime on individual victims, communities, and government. Obviously these costs cannot be precisely measured, in fact, the best we can do is to describe the kinds of costs and make some very rough guesses about their magnitude.

Dollar costs obviously staggering. In 1974 the Chamber of Commerce of the United States, after surveying various sources, came up with a figure of approximately $41 billion annually, not taking into account the cost to the public of price-fixing illegalities and industrial espionage. In 1996 annual losses from white collar crimes are estimated at $426 billion to $1.7 trillion, according to the National White Collar Crime Center white paper titled How Much Does White Collar Crime Cost? The FBI currently estimates the cost of white collar crime at $300 billion per year. There are varying estimates due to how crimes are defined and the methodology of estimating crime.

Quite clearly figures of this magnitude dwarf into insignificance the total dollar costs of common crimes. While it would be irresponsible to argue that an armed robbery in a grocery store should be compared with a merchandising fraud, for example, in strictly dollar terms, personal trauma cannot be measured in dollars, either for victims of armed robbery or consumer fraud, it is certainly relevant to consider such comparisons as justifications for raising the level of response to white collar crimes while maintaining or even increasing attention to common crimes. More important, the dollar costs of white collar crime are reflective of a whole range of special costs to victims, human and societal costs. These human and societal costs (only sometimes measurable in dollars) should be considered both with respect to categories of victims and the ways in which these victims are affected. While there are many overlaps in these categories, they can be generally divided into:

• Individual Victims
• Business Victims
• Communities as Victims
• Governments as Victims

These are discussed in very general terms below. The list of impacts or consequences is meant to be illustrative only, and not exhaustive.

Victim groups can constitute an important part of a white collar crime enforcement effort around which a unit can be organized, goals set, and the effort evaluated.

Individual Victims

Individuals are being victimized by white collar crime in ways which directly deprive them with respect to their (i) human needs , for example, those things necessary to their existence, (ii) aspirations, for example, their seeking for improvement in the quality of their lives, and (iii) property, for example, their money or other assets.

Human Needs

Consumer frauds undercut the ability of individuals to use their assets to meet basic needs in the areas of food, shelter, transportation, and employment. Most people have little economic leeway to make duplicate purchases to meet such needs. The elderly, minorities, and the poor are particularly affected, every loss means additional deprivation for them.With respect to food, for example, poor people victimized by being cheated on weights and measures or food quality frauds will literally have less food for the table, not to mention erosion of trust in the “system.”

With respect to shelter, a home improvement fraud may not only deprive the victim of dollars, but may also cause the victim to lose a home because of maintenance costs; “block-busting” by unscrupulous real estate speculators will simultaneously deprive victims of their homes and incite racial fears and antagonisms; landlord and tenant violations cheat tenants out of heat, services, and rental deposits.

The auto repair fraud may deprive a victim of his car, possibly making employment difficult because of lack of transportation. The looting of an insurance company by corporate officers may expose a policy holder to claims, without any protection, wiping him out, and at the same time leaving a disabled claimant with no way to obtain full compensation for his injury.

Beyond elemental needs, there are needs which affect the quality of life. The poor, for example, have few entertainment outlets other than television, which can be affected by TV repair frauds. Consumer frauds in the sale of toys can affect both the safety of children and provide them with unwholesome messages about the trustworthiness of society at a very early and impressionable age.

Anti-trust or price-fixing violations raise the prices of goods, commodities, and services (including medical services and funeral services which often impoverish the poor) to every sector of the population.

One white collar crime can expose the victim to additional and continued victimization. Thus the victim, burdened by debts as a result of merchandising or other schemes, is an easier prey for the operator of a debt consolidation scheme or the con artist who promises a financial solution through a phony work-at-home scheme.

Human Aspirations

We all aspire to improve ourselves, with respect to our occupations, our appearance, our relationship to others, and our hopes for our children. These aspirations make us all targets for the white collar thief, who not only takes money, but makes the victim something less than he or she was before.

Victim hopes for improvement in employment are dashed and frustrated by phony trade and occupational schools, correspondence courses, talent schools and agencies. The lonely, and particularly the elderly, are cheated in lonely hearts club frauds and perpetual dance courses which have been known to financially destroy even relatively well-off aged persons. Misrepresented medical and health nostrums promise much, deliver nothing, but often deceive victims beyond the opportunity to get quality medical help till it’s too late, a problem which particularly afflicts the elderly who suffer from chronic ailments such as arthritis.

Self-employment opportunities are misrepresented, dashing hopes for a business of one’s own, through franchise frauds, pyramid schemes, vending machine frauds, etc.

Property Frauds

Some people have extensive property or money for investment, some have a “nest egg” which is their economic cushion, and others have no more than some very small amount, or their homes, to keep them at some marginal level of existence. These assets are a prime target for the white collar thief.

One large class of frauds involves investments of victim’s “surplus monies.” These investment frauds are based on many kinds of misrepresentations. Stocks, bonds, and other investment interests are peddled by promises of great returns, assurances of security and worth of investments, and substantial tax advantages. These frauds may involve interests in land, cattle, or commodities.

The Ponzi scheme, where old investors are paid off from the investments of newer ones, must inevitably collapse. Variations afflict the less affluent, such as interests in so-called “guaranteed” mortgage participations, looting of state-chartered savings and loan institutions which are not federally insured and purport to carry deposit insurance, but where the private insurer may merely be a shell. Land misrepresented as having a dual purpose, retirement home site and investment, is peddled by energetic and glib sales techniques to unwary buyers.

The particularly gullible are taken by grifters who steal their victims’ savings through such schemes as the “pigeon drop” which is a familiar form of con to every police department.

These property frauds may be no more than an inconvenience to the well-to-do, but they seriously impact the lives of others. Often the investment lost is all that stands between the victim and charity or welfare, and if the victim is middle-aged or retired there is usually no opportunity to replace the loss through hard work and saving.

Business Victims

Business enterprises suffer from white collar crime in three ways: i) as the direct victims of fraud, (ii) by being placed at a competitive disadvantage, and (iii) as indirect victims through public loss of trust in business institutions.

Business as Direct Victims

Business enterprises suffer consequences from white collar crime which range from relatively minor financial losses, up to and including massive financial hemorrhaging which cause their insolvency and destruction. The most serious of these consequences stem from the activities of employees or other insiders, who frequently act in concert with outside confederates.

The most common white collar crime against business is embezzlement, a form of theft which is very familiar to the law enforcement community. Amounts may be small in some instances, and in others large enough to collapse businesses in which embezzlers are employed. Rivaling embezzlement in impact, though not in law enforcement statistics, is commercial bribery, where business employees or officers take bribes from those who sell goods or services to their employers, or bankers who make loans to those who give them bribes or other incentives. Insider dealings will also involve conflicts of interest, for example where a corporate officer or employee causes his company to enter into contractual relationships with outside firms in which he has an ownership interest, or where a banker causes his bank to lend money to an enterprise in which he has an ownership interest.

These and similar insider operations are, in essence, ways in which the assets of a business can be looted. Pension funds, which are really enterprises set up to manage beneficiaries funds on a businesslike basis, are sometimes similarly looted through the device of making risky investments in return for special kickbacks and participations in potential profits.

Businesses are also the direct victims of a host of white collar thefts by outsiders which, in total, probably rob our economy of billions of dollars. Common examples would be fake insurance claims, credit card frauds, and the occasional gigantic swindle involving many tens of millions of dollars, such as the Equity Funding case in which several of the nations major insurance companies were sold fraudulently concocted insurance contracts.

With the onset of electronic transfers of funds, both nationally and internationally, the way has been opened to massive thefts, one New York bank, for example, avoided losses in the millions in such an electronic transfer only by the accident of an unclear transmission which triggered a very routine and non-suspicious request for a repeat of the original message. Many business frauds are, of course, on a much smaller scale. Rip-offs such as advanced fee schemes, false directory advertising bills, and padded employee expense accounts, cumulatively cost the business community vast sums of money.

The increasing dominance of computers in our business systems has greatly increased the potential impacts of fraud, since it is now possible for white collar thieves to stage and keep track of vast numbers of fraudulent transactions almost instantaneously since computer programming techniques have given thieves the capability to simultaneously generate both fraudulent book entries and back-up concealment systems. Few computer frauds of any magnitude have been discovered by routine internal audits; most have come to light by accident, by nervous scheme participants, or by a scheme developing to a scale beyond that of the participants’ capacity to control.

Such direct losses to the business community do not come only out of business profits. In many instances they actually have caused the destruction of businesses, contributed to multi-million dollar insolvencies and reorganizations. In all cases these white collar thefts represent costs of doing business (both the thefts themselves and the costs of guarding against and detecting them) which are ultimately passed on as additions to the prices of the goods and services consumers buy.

Finally, the increasing sophistication of organized criminal syndicates makes businesses vulnerable to mixed white collar crime/extortion assaults. Organized criminal groups have demonstrated the ability to get their hooks into legitimate businesses or employees of such businesses through such avenues as loan-sharking, enforced collection of gambling debts, and purchases of businesses, and have used such control to execute traditional white collar schemes such as bankruptcy frauds (scams), and the marketing of stolen securities through the device of using them as loan collateral at banks.

Business Victimization Through Restriction of Competition

The area of anti-trust violations, price-fixing, and restraint of trade represents a major area in which damage is inflicted on the business community and, as a consequence, on the public who are the customers of the business community. Where suppliers of goods and services are able to control their markets, it is inevitable that many will be placed at a competitive disadvantage because they will be unable to seek new business in the marketplace by offering better services or lower prices. Retailers and wholesalers will be unable to shop for lower prices, and will be at a competitive disadvantage if their suppliers give lower prices to favored customers through such devices as kickbacks, rebates, and phony advertising or promotional allowances. In many instances such practices are subject to criminal sanctions; in all cases they are unlawful, and the overall dollar costs of these violations may well equal that of all other white collar crimes and related abuses combined.

In most instances the consequences of such unlawful activity are strictly economic, confined to rising costs, elimination or hobbling of business competitors, and retarding innovation and development of new and efficient services. In other cases, where organized criminal syndicates combine white collar crimes with strong-arm tactics, actual physical harm to people and physical damage to property will occur.

Damage to the Reputation of Business

The business community’s reputation is important on four levels: within the individual enterprises; among customers; in relationships with other businesses; and in the general community (politically).

Within individual enterprises the existence of white collar criminal activity, even on a relatively petty level (such as padding of expense accounts) tends to undercut the overall integrity of an enterprise and to encourage other illegal activity, such as commercial bribery or pilferage, and will substantially contribute to poor administration of the businesses so affected. There is no way to measure the impact of this, but it is clearly a significant cost. Internal corruption, as well as negligence in dealing with it, have led to increases in the frequency of large-scale stockholder suits against directors and officers of corporations who are charged with conflict of interest or incompetence. Such litigation may produce difficulties in acquiring the services of well qualified corporate directors, geometrically increasing premiums for liability insurance to protect officers and directors, and a more pervasive erosion of stockholder confidence in officers and directors generally.

Many white collar crimes and related abuses, such as commercial bribery, misrepresentations concerning the quality and utility of merchandise, the true costs of installment payments, or the serviceability of products, result in cynicism (often justified) about business ethics. This cynicism reflects on and harms not only those who engage in wrongful practices but also their honest competitors who are not guilty of such practices. These honest competitors must suffer the costs of anticipating and responding to the suspicions of the marketplace.

Disclosures of past abusive practice may also seriously affect the future of a business trying to “go straight.” For example, a company which manufactures airliners and is exposed for payment of bribes to airline executives will have a special and costly burden in making subsequent sales, because prospective purchasing agents will not want to be suspected as being bribe takers.

Business enterprises operate in relationship not only to their customers, but also in relationship to suppliers, to organizations (e.g., bankers, underwriters, factors) who provide financing and credit. Any activity which indicates lack of integrity and control, such as substantial commercial bribery or a large-scale internal computer fraud, must undercut the confidence of others in such an enterprise and obligate the firm to additional expenses tied to auditing, internal investigation, and management changes to meet such problems.

Many of the greatest costs of white collar crime to business are those which business suffers in the community at large. The perception of wide-scale consumer fraud in ghetto areas, for example, is believed to have been a significant factor in the urban riots of the 1960s. Concerns as business credit practices led to development of “Truth-In-Lending” legislation, and undercutting of the “holder in due course” doctrine so important to financing of legitimate commercial transactions. Other disclosures have led to state legislative and congressional investigations and, for example, to ever more stringent restriction and control of business financing through detailed state and federal regulatory monitoring of sales of securities. These necessary regulatory steps were the natural consequence of white collar crime and related abuses. Their costly consequences to current legitimate business operations (and through business, to the customers of business) reflect both past abuses and also the fear of such abuses and law violations in the future.

Governments as Victims

Local, state, and federal governments are white collar crime victims in these ways: i) with respect to collection of revenue, (ii) by procurement frauds and corruption of government, and (iii) by wrongful exploitation of government programs.

Collection of Revenue

Every governmental entity, whether the township, city, county, state, or federal government, is supported by taxes, which may be levied against income, real or personal property, sales and payroll taxes, excise taxes on items such as cigarettes or fuel, or be based on license fees. To the extent that these governments are cheated in the collection of such taxes, the taxpaying public as a whole must make up the difference, either through increased taxes or through loss of the opportunity to have taxes lowered.

The dollar costs, running into billions, must be considered also against the backdrop of necessary services which cannot be provided or must be curtailed, since taxpayers already perceive themselves to be heavily burdened by current levels of taxation.

Procurement Frauds

Governments purchase billions of dollars worth of goods and services every week. Investigations, audits, and prosecutions make it clear that very substantial portions of this procurement process are tainted by favoritism and corruption, through influencing or bribing of public officials, claims for payment where goods and services are not delivered, and through collusion among contractors and suppliers to frustrate competitive bidding processes by setting prices and determining amongst themselves who will share the public’s business.

Such fraud, or commercial bribery, may operate across national or international lines as well as at the level of local school districts which may be starved for revenue while board members or administrators take kickbacks from sellers of school supplies.

Corruption of Government

Beyond the procurement process impacts described above, white collar crimes involving bribery and corruption affect numerous other government processes, and have the effects of increasing citizen costs for services and of frustrating public objectives. For example, collusively or corruptly negotiated waste collection and disposal contracts, which set prices and give route monopolies to contractors, may not only result in higher prices to businesses and individuals, but may mean poorer service or subsidization of organized criminal syndicates. Favoritism and corruption with respect to zoning ordinances, franchises to conduct businesses on public property, (for example, refreshment stands or restaurants in parks or other facilities, distribution of irrigation preferential agreements at low prices to extract publicly owned resources as timber or minerals) not only deprive the public of revenue but also of the opportunity to develop their communities and manage their resources to best advantage.

Some elaborate schemes involving the theft of license fees have already been uncovered.

A (Driver’s) License to Steal
Corruption in a San Diego Motor Vehicle Office

02/25/14

You could call this scam a license to steal, and it certainly was-until it all came crashing down on the corrupt state employees and their accomplices who were selling California driver’s licenses for cash.

For at least three years, though, between 2009 and 2012, the scammers had a nearly seamless operation that netted a tidy profit. Here’s how it worked:

A man who owned a driving school let his students know that-for a price-he could guarantee them a license, even if they had already failed the driving test. Often they didn’t even have to take the test, thanks to the man’s connections at the Department of Motor Vehicles (DMV) office in El Cajon, California. Those willing to pay anywhere from $500 to $2,500 to corrupt DMV employees could get a license with no questions asked. The driving school catered mostly to Middle Eastern immigrants, and soon word of easy licenses in that community spread north to Los Angeles and beyond.

https://www.fbi.gov/news/stories/2014/february/corruption-in-a-san-diego-motor-vehicle-office/corruption-in-a-san-diego-motor-vehicle-office

Wrongful Exploitation of Government Programs

Program frauds are an aspect of white collar crime corruption of governmental processes which merit special attention, particularly when we are considering the impact of fraud, for beyond dollar costs there are real intangible costs of program frauds which must be considered literally in terms of human suffering and deprivations.

It is public policy to provide support and help to those who for one reason or another are disadvantaged, or who have some special needs. This is true at local, state, and federal levels. Hence we have large numbers of welfare programs to provide the needy with subsistence and shelter, medical programs to assist the needy and the elderly, housing programs to provide decent shelter to veterans and those at different income levels, subsidies to encourage farming, food stamp programs, and employment and training programs for the disadvantaged. When such programs are exploited by false claims for benefits, by false claims for medical or other services provided, by housing frauds, by creation of nonexistent “employees” or beneficiaries to whom salary checks are issued, all this not only costs taxpayers money but also cuts off public support from such programs, depriving eligible beneficiaries of jobs or other benefits, greatly increasing public audit costs and red tape which lowers the level of services provided, and in some cases may actually destroy such programs.

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These impacts of white collar crime should be continuously considered by agencies which combat white collar crime because they are crucial to making decisions on which cases to investigate and prosecute, in setting priorities among them, in budget justifications, and in evaluation of agency performance.

RELATIONSHIP BETWEEN WHITE COLLAR CRIME AND OTHER LAW ENFORCEMENT AREAS

The tools, techniques, and approaches of white collar crime investigation and prosecution represent a major alternative approach with respect to a number of other enforcement areas. There are many areas of wrongful activity, or enforcement areas of public concern, where white collar crimes and related abuses may take place, either alone or in combination with other illegal or wrongful activity. In this section we address the relationship between white collar crime and (1) organized crime, and (2) general compliance enforcement.

Organized Crime

Criminal syndicates are compelled to commit white collar even though the commission of other kinds of crimes may be their principal objective. They must commit white collar crimes in order to conceal their other crimes, and in many instances to realize their gains and complete their crimes. White collar crimes also represent an attractive source of alternative or additional criminal activity for such syndicates. It is thus important that law enforcement groups combatting organized crime consider examination of possible white collar crimes, and not be limited to narrower ranges of investigative and prosecutorial activity.

Tax Violations

Income received from illegitimate channels cannot normally be declared as income. It therefore follows that those deriving considerable income from illicit activities are extremely likely to commit tax violations at federal, state, and local levels. Such violations will usually involve income taxes, but will often involve other taxes such as local and state sales taxes, gross business taxes, inventory taxes, and excise taxes on cigarettes, liquor, or fuel.

In such instances escaping apprehension for illicit activity compels commission of white collar crime by such individuals. Further, the necessity to safeguard and invest the proceeds of other crimes compounds the problem for these offenders, since declarations of income legitimately earned on investment of criminal proceeds will open up the possibility that their prior criminal activities will be exposed.

Completing Other Criminal Activity

Where property is stolen, whether by force as in the case of hijacking, or by deception as is often the case with respect to stolen securities, it must usually be marketed in what are ultimately legitimate business channels if profits are to be realized. In order to do this, some fraudulent means must be used to establish what looks like legitimate title to property. Often, of course, this is a service provided by the fence. Kinds of activity involved, for example, might be such things as: false declarations of ownership or origin in connection with exports or other regulated shipments, false statements to banks in connection with use of stolen securities as collateral for loans, falsifications in applications for issuance of title papers and registrations for stolen vehicles, or false entries in books or records of financial institutions in connection with “write-offs” of “uncollectible” loans.

White Collar Crime as Chosen Field of Organized Crime Activity

Organized criminal groups normally have opportunities and incentives to move into white collar crime through power obtained over businessmen or their employees who get into debt through gambling, dealing with loan sharks, or intentional purchases of stolen goods from fences. This has led to such crimes as major bankruptcy frauds and embezzlement of large quantities of securities from brokerage houses, probably converted into cash by being used as loan collateral. Organized criminal groups have not been content to wait for targets of opportunity, and have moved forward to initiation of white collar criminal activities. For example, businesses have been purchased with the intent that they be vehicles for bankruptcy fraud; or clerks have been placed in stock brokerage houses where they gained access to securities.

It should also be noted that even the most blatant of criminal activities, such as those involved in gambling and narcotics, will involve restraints of trade to restrict competition, where organized criminal elements are unwittingly assisted by criminal justice enforcement agencies who apprehend and prosecute less well organized and capable competitors.

Infiltration of Legitimate Business

Organized criminal activities frequently generate cash surpluses which cannot effectively be employed as capital for criminal operations; or criminal syndicates may consciously elect to diversify operations into legitimate business channels. This may occur through setting up of new businesses, investing in existing enterprises, or forcing their way in through other pressures. This is not a new phenomenon. It started long ago in areas such as trucking, restaurants, and vending machines. With the steady growth of experience and exposure to new business opportunities, such criminal elements have entered new fields, even business areas carefully monitored by regulatory agencies such as banking and the securities industry. No business area has immunity from such infiltration.

Special dangers face business competitors of organized criminal groups, since such groups may make well-financed entries into a business area and, if they encounter difficulties, may adopt anticompetitive methods, for example, “Strong-arm tactics,” which can be quite uncomfortable to legitimate businessmen accustomed to more usual forms of competition.

Organized Crime – A Summary

Careful observation of organized crime activities with respect to their white collar crime aspects can be most productive in combatting the business of rackets, because of possible organized crime vulnerability on this front. To exploit this vulnerability, where it is found, particular stress should be placed on techniques such as those which involve tracing of funds, net worth analyses, determination of true ownership of business enterprises, and persistent scrutiny of transfers of property. Most important however, is alertness to possible alternative white collar crime violations while other aspects of organized crime activity are being investigated or considered for prosecution.

Case Study: La Cosa Nostra – Lengthy Prison Terms for Lucchese Crime Family Members

09/08/15

In a world inhabited by international cyber criminals and violent terrorists, it would be easy to think of La Cosa Nostra-the Mafia-as a throwback to a bygone era. But a recent New Jersey case involving the Lucchese crime family is proof that traditional organized crime can still be a potent threat.

Members and associates of the Lucchese organized crime family — one of the families traditionally associated with La Cosa Nostra (LCN) — were recently sentenced to lengthy prison terms in New Jersey for a financial fraud scheme that illegally netted millions of dollars.

Nicodemo “Nicky” Scarfo, Jr., whose imprisoned father was an LCN crime boss in Philadelphia, was sentenced in July to 30 years in prison for racketeering, securities and wire fraud, and other charges related to the 2007 illegal takeover of FirstPlus Financial Group Inc. (FPFG), a publicly held company in Texas. His associate, Salvatore Pelullo, also received a 30-year term. Brothers William and John Maxwell received 20- and 10-year terms, respectively.

“Essentially, Scarfo and Pelullo used extortion and other illegal means to gain control of the company,” said Special Agent Joe Gilson, who investigated the case from the FBI’s Atlantic City Resident Agency in New Jersey. “And then they systematically looted the company.”

FPFG, once a billion-dollar financial organization that specialized in mortgages, had filed for bankruptcy. The company was dormant, said Special Agent Bill Hyland, who assisted in the investigation, “But still had assets, thanks to the continued proceeds from all the mortgages it had financed.”

In 2007, Pelullo and Scarfo used threats and other tactics to intimidate and remove FPFG’s management and board of directors. They were replaced with Mafia associates, including the Maxwell brothers-William was named special counsel to FPFG, while John became the company’s CEO.

“Within several weeks of gaining control,” Gilson said, “Pelullo and Scarfo had lined their pockets with $7 million. Before they were arrested in 2011, more than $12 million was illegally funneled to them-money that rightfully belonged to the company’s stockholders.”

The investigation revealed that between 2007 and 2008, Scarfo received $33,000 per month from FPFG as a “consultant”-at a time when he was on home detention in New Jersey for violating his parole from a previous conviction. The money was being paid to a shell company controlled by Scarfo. Pelullo, using a different shell company, had a similar deal. With their ill-gotten gains, the mobsters purchased an airplane, a yacht, and expensive jewelry.

“Complicated financial crimes are not normally the strong suit of LCN,” Gilson noted. But Pelullo, who had two previous federal fraud convictions, “Was a persuasive con man. He could maintain an air of legitimacy, but behind the scenes everything was a fraud.”

Using a variety of investigative techniques, including a court-ordered wiretap (monitored by retired FBI agents, some of whom had helped put Scarfo’s father behind bars), investigators unraveled the scam with the help of federal partners including the Department of Labor and the Bureau of Alcohol, Tobacco, Firearms, and Explosives. During the more than five-year investigation, a million pages of paper documents were analyzed and the contents of more than 100 computers were searched.

Scarfo, Pelullo, the Maxwells, and others associated with the fraud were convicted in 2014. “We feel great that our team was able to put a stop to these crimes and bring the subjects to justice,” Gilson said. “The FBI remains vigilant against all types of organized crime, including LCN.”

Compliance Violations

Enforcement against compliance violations is a traditional area of white collar investigation and prosecution. This can be seen most clearly with respect to enforcement against government procurement frauds, program frauds involving such areas as housing and welfare, and regulatory agency activity with respect to banking and security frauds.

The usefulness of white collar enforcement techniques should, however, be given increasing attention with respect to newly developing areas of enforcement, such as environmental protection, technology crime, and civil rights. In most instances the available sanctions are civil, and criminal sanctions usually provide for misdemeanor rather than felony prosecutions. In either case, proofs will require techniques of white collar investigation such as identification of ownership of facilities, following paper trails to determine responsibility for policies and patterns of activity with companies being investigated, and investigations to determine whether false and misleading documentation has been created to cover up patterns of violations. Attempts to avoid laws with respect to public health and safety, environmental protection, and civil rights will necessarily involve guile and deception and coverups, which are the essence of white collar crime.

THE ELEMENTS OF WHITE COLLAR CRIME

It is important that the investigator and prosecutor of white collar crime recognize that these crimes invariably display certain characteristics, and that it is possible to analyze the execution of these schemes and note that these offenders have certain common objectives. This holds true as well for investigations directed at supporting civil, regulatory, or administrative cases. Familiarity with these elements can serve as a general framework for planning and under-taking action to combat white collar crime; this chapter seeks to provide that general framework.

There are five principal elements in white collar crimes and related abuses. They are:

• Intent to commit a wrongful act or to achieve a purpose inconsistent with law or public policy
• Disguise (of purpose)
• Reliance by the offender on ignorance or carelessness of victim
• Voluntary victim action to assist the offender
• Concealment of the violation

While it is not necessary that proof be obtained as to each of these elements in preparation of a white collar crime case (even though all these elements will be present) it will be necessary to obtain substantial evidence with respect to the first, intent, and some evidence with respect to one or more of the other elements. This discussion is not, it must be repeated, a legal analysis of white collar crime, but rather is a structural analysis designed to assist law enforcement personnel. Each of these elements is defined and discussed below.

Intent to Commit a Wrongful Act
Achieving a Purpose Inconsistent with Law or Public Policy

In every white collar crime or related abuse, it is usually clear the offender knows that he or she is involved in an activity which is wrongful or very much in a grey legal area, whether or not the offender has an awareness of a particular statute which is being violated.

This intent may be to avoid that which is required by law, such as disclosure of facts which would make a particular transaction undesirable for the victim, or to act to deceive the victim by some explicit and affirmative deceitful conduct.

Intent is usually inferred from the behavior or statements of the subjects of investigation, and from the presence of proof of the remaining four elements discussed below.

Disguise of Purpose or Intent

The first element, intent, involves the presence of some wrongful purpose or objective. This second element, disguise of purpose, involves the character of the offender’s conduct or activity in implementing his plan. When a common crime is committed, the wrongful intent is followed by some overt implementing act, such as an armed attack which is clearly observable. In a white collar crime situation the offender deliberately avoids force or the threat of force. He disguise, which is the facade of legitimacy with which he covers the actions he undertakes to implement his scheme.

Disguise may be written or verbal. In a bank, for example, the loan officer who creates a fictional borrower complete with promissory note, a purported borrower financial statement, perhaps a false background check on the nonexistent borrower, has created a facade of reality intended to deceive other bank personnel and bank examiners to cause them to believe that they understand the transaction they are approving or reviewing. In white collar schemes, pieces of paper are not what they appear to be, notwithstanding the fact that they may bear all indications of legitimacy. Verbal disguise is usually employed in combination with written materials, as in the case of con games such as a pigeon drop, or a merchandising fraud where an oral sales pitch is deceptively made to induce a signature to a document which imposes obligations on a victim without indicating the misrepresentations made to obtain the signature.

Reliance by Offender on Ignorance or Carelessness of the Victim

While intent and disguise, the first two elements, are clearly elements which originate with and are controlled by the white collar offender, involving the offender’s own objective and chosen method of execution. Reliance on ignorance or carelessness of the victim is a victim-related element, since it is based upon the offender’s perception of victim susceptibility. The offender will not go forward unless he feels he can depend upon the inability of the victim to perceive deception.

In view of the existence of widespread administrative and regulatory protections for consumers and investors, the offender will often have to rely not only on the inability of the proposed victim to pierce his disguise, but also on the procedures of such protective agencies to fail to uncover the omissions and misrepresentations which make up this disguise. This reliance is grounded on the knowledge that regulatory and administrative agencies cannot fully investigate the accuracy and completeness of every piece of paper filed with them. For example, many land sales and securities sales must be preceded by filing of registration statements with state and federal agencies, which purportedly provide full disclosure of facts which buyers should have in order to make their decisions. The seller who is willing to risk criminal or other action if he is subsequently found out, can reasonably depend on being able to file less than a full disclosure. The agency relies on the deterrent power of criminal prosecution, and (unfortunately) most investors assume that the copy of the registration statement they receive is some indication of governmental approval, even though most agencies require that registration statements contain an up-front, bold-faced warning against any such assumption.

In general, as more and more consumer and investor protection activities are set in motion, and as more and more attention is directed against embezzlement, fraud against the government and other crimes of deception, white collar offenders may find it easier to depend on the inability of victims to pierce their disguise–because the victim is aware that government agencies are watching advertisements, sales literature, and business practices to protect them. To counter against this, and to discourage victim affirmative action (the next element to be discussed, below), education of consumers, investors, businessmen, and government officials, as to the methods and modus operandi of the white collar offender, is one of the highest crime-prevention priorities in the white collar crime area.

Voluntary Victim Action to Assist the Offender

The successful execution of a white collar scheme is not a matter fully under the control of the scheme operator. He must induce t h e victim to voluntarily undertake some act for the scheme to be successfully completed. This element is most important for those with detection and enforcement responsibilities. Measures designed to prevent inadvertent victim cooperation may be more important than other deterrent measures.

In a common crime the victim does not willingly cooperate. A man with a gun at his head will comply with a demand that he surrender his wallet, but it is generally both foreseeable and predictable that the victim will not resist; the perpetrator thus controls the entire situation. In contrast, in a white collar crime, the perpetrator employs disguise to deceive the victim, and relies on his judgment of the inability of the victim to pierce the disguise in order to obtain the voluntary victim action (such as signature on a contract or payment of money) which closes the deal.

This voluntary victim action may involve the action by the victim who will be defrauded of money or property, but it also may involve an intermediate victim, such as the government agency which accepts a land or securities registration statement for filing and requires the delivery of the registration statement to prospective individual buyers, or the accounts payable officer of a business or government which approves a voucher for payment on the that the facts represented in the voucher are accurate.

Concealment of the Violation

When a violent or other common crime is committed, the offender will give very careful consideration to shielding his identity. He will act in the dark, wear a mask, perhaps even kill to prevent the survival of a witness who can point him out in a lineup. In some rare instances such offenders may have concealment of the crime itself among their objectives, such as the rare and mostly fictional instance where a murder is arranged to look like an accident or suicide. More common is the pilferer who steals small amounts which he hopes will not be missed. Concealment of the crime itself, from the victim as well as from law enforcement agencies, is always an objective of the white collar offender as well as an element of the crime itself.

Note that the victim’s failure to investigate before taking his voluntary action may raise a question as to his or her judgment, but it is in no way a defense where the suspect can be shown to have had the requisite intent to defraud.

The ideal white collar crime, from the point of view of the offender, is one which will never be recognized as a crime or wrongful act. A charity fraud is ideal from this point of view: small amounts are taken from large numbers, and no individual victim has a sufficient interest to pursue the matter even if he suspects he has been defrauded. In antitrust or price-fixing cases, every effort is made by co-conspirators to make the public, regulators, and law enforcement agencies, believe that normal market forces determine the prices they pay, rather than illegal agreements. Some investment frauds are predicated on the perpetrators assumption that they can use the scheme proceeds to “make a killing” on some speculative investment, square accounts with their victims, and thus prevent the day of reckoning.

Concealment is especially important to-the white collar operator because he operates in the open. He cannot obtain victim cooperation by wearing a mask, and his objectives are only sometimes short-run. Embezzlers often work at their thefts over periods of years, and sometimes decades, making concealment essential. In one major fraud case counsel for the defendant argued that his client had a clean record, was a regular church-goer and pillar of the community. The judge responded: “Who else could have committed this kind of crime? A street criminal?”

The operator will often be a respectable member of the community with strong personal, professional, and business ties. Concealment is essential to his ability to maintain his position in the community, his ability to repeat his crimes, or both.

The white collar operator may recognize that he cannot always permanently cover up his crime, and so concealment may become an objective of flexible dimensions. If the crime cannot be concealed forever, can it be concealed long enough to amass sufficient funds to finance a short or long-term foreign haven? Some fugitive financiers were able to prolong their Brazilian havens fur many years after discovery. Fugitive Robert Vesco established a sufficiently strong economic base in Costa Rica to withstand the most strenuous efforts of the US Government to extradite him or recapture funds missing and believed to be stolen.

Sometimes the scheme itself is based on the expectation that a sufficiently expanding group of victims can be lured into the net, so that the money obtained from later victims will be used in part to keep earlier victims from knowing they have been cheated. This is called a Ponzi Scheme, named after one of its early famous practitioners. These schemes must eventually fail because of the mathematical progression involved, but some such schemes have continued for many years.

In white collar crimes, concealment only sometimes involves hiding one’s true identity. More often its purpose is to hide the fact that any crime has been committed. It differs from disguise, the second element discussed above. Exceptions would be small bunco schemes such as the “pigeon drop.”

The purpose of disguise is to consummate the crime; it is part of the manner and means by which the fraud is committed. To the extent that the fraud is a continuing one, concealment and disguise will overlap, since putting off pursuit and maintenance of the facade of respectability is the manner and means by which repetitions of the fraud may be inflicted on old and new victims. Even where there is no intent to commit further white collar crimes however, concealment will be a continuing element of the crime. It may result in new crimes to cover up old crimes, for example, continuous repetitive alteration and falsification of records or, as discussed above, new thefts to payoff old victims.

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This book stresses the importance of the elements of white collar crime because full understanding of them will assist the law enforcement professional to analyze a set of incidents to determine whether there is a case for enforcement and to identify the proof needed to make a case, and, perhaps as important, to see the relationship between differing aspects of an investigation or prosecution. Thus, any proof developed on elements of disguise, reliance, voluntary victim action, and concealment will tend to support proof of criminal intent. A showing of how the offender procured victim affirmative action will in turn help to develop an understanding of the methods used by the offender to develop disguise on which he could base reliance that the victim would voluntarily cooperate with the fraud. Similarly, a focus on the element of concealment, and what the offender did to provide for this element, would contribute to proving intent, disguise, reliance, and how voluntary victim action was procured. A case thus developed will constitute an integrated whole, rather than a series of isolated facts which a jury must be persuaded to knit together; a case thus seen in its initial and fragmentary stage is more likely to be effectively assessed as a candidate for special attention and investigation.

WHITE COLLAR CRIME CLASSIFICATIONS

In most cases of criminal enforcement, considerations of motives is considered helpful in identifying possible suspects for further and more detailed investigation and, subsequently, to convince a court or jury of the guilt of the accused. In the white collar crime area there is far less need to examine those with possible motives for the purpose of identifying suspects, since the essential question is not likely to be “Who did it?” but rather “What was done?” “With what intent was it done,” and “ls it a crime?” For these latter purposes, questions of the motivation of already identified suspects will be highly important, since motivation will be of analytic significance in determining the possible modus operandi of the suspect, whether he would have employed confederates, his possible defenses, and most important, what evidence must be gathered on the essential element of intent.

A classification of white collar crimes along lines of motivation should serve as a helpful starting point. The classifications suggested are:

• Crimes by persons operating on an individual, ad hoc basis, for personal gain in a nonbusiness context (hereinafter referred to as “personal crimes”)
• Crimes in the course of their occupations by those operating inside businesses, government, or other establishments, or in a professional capacity, in violation of their duty of loyalty and fidelity to employer or client (hereinafter referred to as “abuses of trust”)
• Crimes incidental to and in furtherance of business operations, but not the central purpose of such business operations (hereinafter referred to as “business crimes”)
• White collar crime as a business, or as the central activity of the business (hereinafter referred to as “con games”)

Examples of crimes within each of these categories would include but not be limited to the following categories.

CATEGORIES OF WHITE COLLAR CRIMES

(EXCLUDING ORGANIZED CRIME)

Crimes by persons operating on an ad hoc basis

• Identity theft
• Purchases on credit with no intention to pay, or purchases by mail in the name of another
• Individual income tax violations
• Credit card frauds
• Bankruptcy frauds
• Home improvement loan frauds
• Frauds with respect to social security, unemployment insurance, or welfare
• Unorganized or occasional frauds on insurance companies (theft, casualty, health, etc.)
• Violations of Federal Reserve regulations by pledging stock for further purchases, flouting margin requirements
• Unorganized “lonely hearts” appeal by mail

Crimes in the course of their occupations by those operating inside business, government or other establishments in violation of their duty of loyalty and fidelity to employer or client

• Commercial bribery and kickbacks, for example, by and to buyers, insurance adjusters, contracting officers, quality inspectors, governmental inspectors and auditors, etc.
• Bank violations by bank officers, employees, and directors
• Embezzlement or self dealing by business or union officers and employees
• Securities fraud by insiders trading to their advantage by the use of special knowledge, or causing their firms to take positions in the market to benefit themselves
• Employee petty larceny and expense account frauds
• Frauds by computer, causing unauthorized payouts
• “Sweetheart contracts” entered into by union officers
• Embezzlement or self-dealing by attorneys, trustees, and fiduciaries
• Fraud against the government

(a) Padding of payrolls

(b) Conflicts of interest

(c) False travel, expense or per diem claims

Crimes incidental to and in furtherance of business operations, but not the central purpose of the business

• Tax violations
• Antitrust violations
• Commercial bribery of another’s employee, officer, or fiduciary (including union officers)
• Food and drug violations
• False weights and measures by retailers.
• Violations of Truth-in-Lending Act by misrepresentation of credit terms and prices
• Submission or publication of false financial statements to obtain credit
• Use of fictitious or over-valued collateral
• Check-kiting to obtain operating capital on short-term financing
• Securities Act violations, for example, sale of non-registered securities, to obtain operating capital, false proxy statements, manipulation of market to support corporate credit or access to capital markets, etc.
• Collusion between physicians and pharmacists to cause the writing of unnecessary prescriptions
• Dispensing by pharmacists in violation of law, excluding narcotics traffic
• Immigration fraud in support of employment agency operations to provide domestics
• Housing code violations by landlords
• Deceptive advertising
• Fraud against the government:
  • False claim
  • False statements
    • To induce contracts
    • AID fraud
    • House Fraud
    • SBA frauds, such as SBIC bootstrapping, self-dealing, cross-dealing, etc., or obtaining direct loans by use of false financial statements
  • Moving contracts in urban renewal
  • Labor violations (Davis-Bacon Act)
• Commercial espionage

White Collar Crime as a business or as the central activity

• Medical or health frauds
• Advance fee swindles
• Phony contests
• Bankruptcy fraud, including schemes devised as salvage operation after insolvency of otherwise legitimate businesses
• Securities fraud and commodities fraud
• Chain referral schemes
• Home improvement schemes
• Debt Consolidation schemes
• Mortgage milking
• Merchandise swindles
• Gun and coin swindles
• General merchandise.
• Buying or pyramid clubs.
• Land frauds
• Directory advertising schemes
• Charity and religious frauds
• Personal improvement schemes
  • Diploma Mills
  • Correspondence Schools
  • Modeling Schools
• Fraudulent application for, use and/or sale of credit cards, airline tickets, etc.
• Insurance frauds
  • Phony accident rings
  • Looting of companies by purchase of over-valued assets, phony management contracts, self-dealing with agents, inter-company transfers, etc.
  • Frauds by agents writing false policies to obtain advance commissions
  • Issuance of annuities or paid-up life insurance, with no consideration, so that they can be used as collateral loans
  • Sales by misrepresentations to military personnel or those otherwise uninsurable
• Vanity press and song publishing schemes
• Ponzi schemes
• False security frauds
• Purchase of banks, or control thereof, with deliberate, intention to loot them
• Fraudulent establishing and operation of banks or savings and loan associations
• Fraud against the government
• Organized income tax refund swindles, sometimes operated by income tax “counselors.”
• AID frauds, i.e. where totally worthless goods shipped
• Home finance frauds
• Obtaining guarantees of mortgages on multiple family housing far in excess of value of property with foreseeable inevitable foreclosure
• Home improvement frauds
• Executive placement and employment agency frauds
• Coupon redemption frauds
• Money order swindles

Note that certain crimes may fall in more than one category, depending on the motive of the offender and on the context in which he commits a violation. Thus tax evasion may be committed by a person with no motive other than to have more money in his pocket, a personal crime, but also by the owners of an enterprise trying to retain capital for corporate expansion, a business crime. A bankruptcy fraud could be undertaken by a genuine bankrupt seeking to avoid turning some assets over to his creditors, a personal crime, but also it could be a con game, executed by a scam artist who creates or takes over businesses and then collapses them in order to exploit suppliers who give him credit.

These classifications will also be useful in considering relationships between white collar crimes and other crimes. For example, a craving for narcotics or the need to meet a gambling or loan shark debt may motivate an offender to commit abuses of trust, and embezzle from his employer.

The relationship between these classifications and the elements of white collar crime discussed previously should also be carefully noted. In the case of personal crimes, such as an individual income tax violation, disguise will consist principally of omissions, reliance is based on automatic voluntary victim action (the tax return is accepted for filing), and concealment rests not on something necessarily done by the offender but on the offender’s ability to rely on the statistical odds against an audit of the return or that the auditing process would have difficulty establishing the violation. In abuses of trust situations, where the white collar offender is an employee or fiduciary who has taken advantage of employer or client there is likely to be a rather elaborate facade involving disguise and concealment. Where the white collar offender has committed a crime incidental to and in furtherance of business operations, but where crime is not the central purpose of his business operation (e.g., an antitrust violation), disguise and concealment will be undertaken in a subtle and sophisticated fashion, all the more so because the offender does not conceive of himself as a criminal and his wrongful acts will be inextricably intertwined with entirely legitimate business operations. In con games, where the white collar offender has no business other than to use guile and deception to take the money or property of others, disguise will be more blatant, concealment more contrived, and the con artist will be likely to be highly mobile, moving from place to place to find new victims.

Summary

These classifications of white collar crime, based on the motivational structure of offender activity, can be exploited to positively support investigative efforts. As in any criminal offense analysis, the development of a carefully defined motive for the crime will be of great importance in persuading a jury or court. Beyond this, however, consideration of the classification in which an alleged offense falls will assist the investigator to better piece together the particular modus operandi of the crime, to determine where evidence may be found (for example whether in personal or business records), and to identify offender relationships with others amongst whom witnesses may be found. Taken together with consideration of the elements of white collar crime discussed above, an analytic approach to determining motivational structures of suspects will substantially contribute to successful investigation of white collar crimes.

Student Case Study One – Identity Theft

Assignment

• Read the FBI case study then search local news media for identity theft cases in your area. Summarize your findings.
• What special skills would an investigator need to investigate this type of crime?

Overview

What is identity theft fraud? The short answer is that identity theft is a crime. Identity theft and identity fraud are terms used to refer to all types of crime in which someone wrongfully obtains and uses another person’s personal data in some way that involves fraud or deception, typically for economic gain. Unlike your fingerprints, which are unique to you and cannot be given to someone else for their use, your personal data ­ especially your Social Security number, your bank account or credit card number, your telephone calling card number, and other valuable identifying data ­ can be used, if they fall into the wrong hands, to personally profit at your expense. In the United States and Canada, for example, many people have reported that unauthorized persons have taken funds out of their bank or financial accounts, or, in the worst cases, taken over their identities altogether, running up vast debts and committing crimes while using the victims’s names. In many cases, a victim’s losses may include not only out-of-pocket financial losses, but substantial additional financial costs associated with trying to restore his reputation in the community and correcting erroneous information for which the criminal is responsible.

In one notorious case of identity theft, the criminal, a convicted felon, not only incurred more than $100,000 of credit card debt, obtained a federal home loan, and bought homes, motorcycles, and handguns in the victim’s name, but called his victim to taunt him — saying that he could continue to pose as the victim for as long as he wanted because identity theft was not a federal crime at that time — before filing for bankruptcy, also in the victim’s name. While the victim and his wife spent more than four years and more than $15,000 of their own money to restore their credit and reputation, the criminal served a brief sentence for making a false statement to procure a firearm, but made no restitution to his victim for any of the harm he had caused. This case, and others like it, prompted Congress in 1998 to create a new federal offense of identity theft.

With enough identifying information about an individual, a criminal can take over that individual’s identity to conduct a wide range of crimes: for example, false applications for loans and credit cards, fraudulent withdrawals from bank accounts, fraudulent use of telephone calling cards, or obtaining other goods or privileges which the criminal might be denied if he were to use his real name. If the criminal takes steps to ensure that bills for the falsely obtained credit cards, or bank statements showing the unauthorized withdrawals, are sent to an address other than the victim’s, the victim may not become aware of what is happening until the criminal has already inflicted substantial damage on the victim’s assets, credit, and reputation.

Congress passed the Identity Theft and Assumption Deterrence Act . This legislation created a new offense of identity theft, which prohibits “knowingly transfer[ring] or us[ing], without lawful authority, a means of identification of another person with the intent to commit, or to aid or abet, any unlawful activity that constitutes a violation of Federal law, or that constitutes a felony under any applicable State or local law.”

This offense, in most circumstances, carries a maximum term of 15 years’ imprisonment, a fine, and criminal forfeiture of any personal property used or intended to be used to commit the offense.

Schemes to commit identity theft or fraud may also involve violations of other statutes such as identification fraud, credit card fraud, computer fraud, mail fraud, wire fraud, or financial institution fraud. Each of these federal offenses are felonies that carry substantial penalties ­ in some cases, as high as 30 years’ imprisonment, fines, and criminal forfeiture.

Recent cases:

Central District of California. A woman pleaded guilty to federal charges of using a stolen Social Security number to obtain thousands of dollars in credit and then filing for bankruptcy in the name of her victim. More recently, a man was indicted, pleaded guilty to federal charges and was sentenced to 27 months’ imprisonment for obtaining private bank account information about an insurance company’s policyholders and using that information to deposit $764,000 in counterfeit checks into a bank account he established.

Central District of California. Two of three defendants have pleaded guilty to identity theft, bank fraud, and related charges for their roles in a scheme to open bank accounts with both real and fake identification documents, deposit US Treasury checks that were stolen from the mail, and withdraw funds from those accounts.

Middle District of Florida. A defendant has been indicted on bank fraud charges for obtaining names, addresses, and Social Security numbers from a Web site and using those data to apply for a series of car loans over the Internet.

Southern District of Florida. A woman was indicted and pleaded guilty to federal charges involving her obtaining a fraudulent driver’s license in the name of the victim, using the license to withdraw more than $13,000 from the victim’s bank account, and obtaining five department store credit cards in the victim’s name and charging approximately $4,000 on those cards.

District of Kansas. A defendant pleaded guilty to conspiracy, odometer fraud, and mail fraud for operating an odometer “rollback” scheme on used cars. The defendant used false and assumed identities, including the identities of deceased persons, to obtain false identification documents and fraudulent car titles.

FBI press release – Fake Hospice Nurse Treated More Than 200 Patients 10/08/15

Imagine the emotional difficulty of arranging in-home hospice care for a terminally ill family member. Now imagine learning after the fact that your loved one had been cared for not by a nurse but by a medical imposter.

That is exactly what happened in more than 200 cases in the Dallas/Fort Worth area over nearly a three-year period when a woman who had stolen the identity of a registered nurse used those credentials to gain employment with multiple hospice companies.

“Jada Necole Antoine had absolutely no nursing experience or medical training,” said Special Agent Brian Marlow, who investigated the case out of the FBI’s Dallas Division. “The thought of having someone who is not a nurse taking care of your parent or loved one is not only criminal, it is morally outrageous.”

The Bureau’s investigation began in 2013 as a result of a local traffic stop in Texas. When the patrol officer asked for identification, Antoine produced her own driver’s license, and it turned out there was a warrant for her arrest on another matter. She also had other identification in the car-including documents belonging to the victim nurse-along with a number of medical records. That information was forwarded to the Medicare Fraud Strike Force team in Texas, which consists of the FBI, the Department of Health and Human Services, the Texas State Attorney General’s office, and local law enforcement. The strike force is part of a larger, nationwide effort aimed at combating health care fraud and abuse.

As the strike force team began to investigate the paperwork found in Antoine’s car, “We learned about the hospice companies Antoine had been associated with,” Marlow said. “In all, we found eight different hospices she had worked for using the nurse’s stolen identity.”

During the time she was carrying on this fraud-from approximately January 2009 through April 20, 2012-Antoine was paid more than $100,000 from the various companies who unwittingly employed her. She had direct responsibility for patient care and submitted documents to the hospice companies that falsely indicated care was provided by a registered nurse. Those false statements caused the hospice companies to submit false claims to Medicare and Medicaid totaling approximately $800,000.

Antoine victimized 243 hospice patients by depriving them of legitimate health care from a properly licensed individual, Marlow said. Court records show that Antoine treated patients who were mentally ill, comatose, asleep, and otherwise unresponsive to sound and touch, and in those instances, she made her own assessments of the patient’s pain and comfort levels, digestive function, and breathing.

She also had access to patients’ medical charts and detailed personal information, which, said Marlow, “Was greatly concerning because of her history of identity theft crimes.”

With investigators on her trail, Antoine fled Texas but was apprehended in Georgia in 2014 and charged with fraud and identity theft. She pled guilty, and this past August, a federal judge sentenced the 34-year-old to four years in prison.

“Many of the patients she allegedly cared for were completely at her mercy,” Marlow said. “Now that she is behind bars,” he added, “she will not be able to victimize anyone else.”