Helping Victims of Fraud Navigate the Criminal Process

You’ve started a business from scratch and grown it to a successful and profitable operation. You’ve recruited and trained a trusted professional staff. Your workplace is a commercial enterprise, but it’s also a family. Contracts, projects, engagements, cases – some years are better than others – but generally you make money and life is good. Periodically your auditors comb through the books and reassure you that everything is spick and span.

Then one day an eagle-eyed employee spots something amiss. The credit card bills don’t quite add up. The signatures on some checks don’t look right. Project files contain paid invoices that don’t have anything to do with the project. Even the petty cash fund is out of whack. The more you dig, the worse things get. One of your most important employees in the finance department, someone you’ve trusted without hesitation, is a thief. And not just petty theft, but hundreds of thousands – even millions – of dollars.

What do you do? You check your insurance policies, talk to your insurance company, and perhaps talk to your bank and your regular outside counsel. But how do you get the perpetrator brought to justice – not just sued for damages, but prosecuted, convicted, and sent to prison?

Calling the local police station and asking them to dispatch a squad car hardly solves the problem. Patrol officers are very good at apprehending masked men who stole money from a bank with a gun, but financial crimes require lengthy, careful analysis of voluminous documents. Patrol officers lack the time, training, and expertise to solve crimes committed with laptops, online access to accounts, or even old-fashioned pens. You’ve read articles in the paper about successful prosecution of major fraud schemes by the U.S. Attorney’s Office, working with the Federal Bureau of Investigation or other law enforcement agencies. Is there some way other than calling the switchboard to get their attention?

The short answer is that getting the proper investigators interested in your case requires help from someone who knows the system from the inside. Only that kind of experience a rapid assessment of the following threshold issues:

  • Is this a criminal case? Not every dispute about who took what money is a crime. Some questionable transactions are tortious or breaches of contract, but criminal fraud requires a heightened level of intent: knowledge, willfulness, and/or intent to defraud, depending on the nature of the offense. Moreover, while complexity does not preclude criminal prosecution, too much ambiguity does. Prosecutors can only charge complex cases if they believe they can prove them beyond a reasonable doubt – the highest standard in the law, and much higher than the preponderance of the evidence standard that applies in civil cases.
  • Is this a federal or state case? Almost any substantial fraud case can be prosecuted in federal or state court. Federal jurisdiction is relatively easy to establish. Most large transactions eventually involve the use of the mails or interstate wires (such as wire transfers between bank servers located in different states or clearing checks through the Federal Reserve System), and trigger the federal mail and wire fraud statutes. But even where the mails or interstate wires are involved, federal authorities are generally only interested in cases that involve substantial amounts of money. If your employee stole $1 million, it’s a federal case. If he or she stole $10,000, it’s better to go directly to the state and local authorities.
  • Which agency should you contact? U.S. Attorney’s Offices generally open investigations based on referrals from law enforcement agencies. If you call the prosecutors directly, the “duty assistant” will usually just tell you which agency to call and provide a phone number. In that case, the next question is who to call. The Federal Bureau of Investigation is the best-known federal law enforcement agency, but it may not be the best place to start. If the local FBI office is too swamped with violent crime or terrorism matters to handle a complex white-collar case, it might be wiser to contact the U.S. Postal Inspection Service, which has a long history of investigating and prosecuting matters far more sophisticated than theft from mailboxes. So does the Secret Service, which does much more than protect the President and chase down counterfeiters. If your employee pocketed money set aside to pay payroll taxes and sent phony documents to the Internal Revenue Service, jurisdiction resides with the IRS Criminal Investigation Division. If he or she misappropriated funds that came from a government contract, it’s often best to contact the Inspector General for the department or agency.
  • What does law enforcement need? Before that call to law enforcement gets made, it’s often helpful to have a cover memorandum and key documents ready to deliver on short notice. A successful referral requires a variant on the Goldilocks Principle: not so many facts and documents that the reader is drowned, but enough so that the possible criminal conduct is clear. Equally important is preparing you and your employees to meet with investigators. The thought of being interviewed by FBI agents and Assistant U.S. Attorneys can be terrifying, but agents and prosecutors are invariably polite and professional, with extensive training in dealing with victim witnesses, including victims of financial crimes.

In one recent case, our firm represented a firm whose vice president of administration stole more than $4 million over a four and a half year period. Working with the company’s president, comptroller, and outside accountants, we were able to promptly persuade a white collar squad of the FBI’s Baltimore Division and the U.S. Attorney’s Office to open an investigation. By carefully coordinating interaction between the victim company and law enforcement, we helped the investigation move along at near-record pace. Within six months, the defendant had pleaded guilty to a felony charge of wire fraud and forfeited vehicles, real property, and money. A few months later, she was sentenced to more than four years in federal prison.

We represent a number of other victim entities in matters that are still the subject of federal or state investigation. In other instances, we help clients understand that they may be better off not seeking relief through the criminal process.

Needless to say, every business owner hopes and prays that none of these issues ever arise at his or her business. If they do, however, making the correct choices about that initial contact with law enforcement can spell the difference between securing justice and spinning wheels in frustration.

Stuart Berman brings the ability to see all angles of a case to his white-collar criminal defense, civil litigation, and appellate work. He represents businesses and individuals facing criminal investigation and prosecution or civil enforcement action by federal and state authorities in Maryland and around the country. For more information on navigating the criminal process in a fraud case, contact Stuart at 301-657-0729 or [email protected].