White-Collar Crime: Keeping Cases Out of the Courtroom

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Several years ago, a philatelist was being investigated for securities fraud based on an alleged false valuation of collectible stamps that were used as collateral for investments.

At a meeting with a formidable team of agents, prosecutors and Securities and Exchange Commission litigators, the client made a presentation describing how these stamps are valued, auctioned, privately sold, etc. The presentation included exhibits from auction house catalogues, completed sales and commercial offerings for sale and purchase.

Weeks passed while the government digested the materials.

Eventually, the government team decided that the art of valuing collectible stamps was too subjective to be amenable to a “beyond a reasonable doubt” analysis and did not bring the prosecution.

That points to an unassailable truth. The best result possible for the target of a criminal investigation is never to be charged with a crime.

Law is like medicine in that regard: The earlier you are involved in a case, the more opportunities exist to cure or restrain the spread of the disease.

When and how much engagement is appropriate depends on the particular circumstances of each matter. There is no one-size-fits-all strategy.

As soon as the authorities are aware that your client is represented by counsel all attempts to contact him, get statements and physical evidence directly will cease. Montego v. Louisiana holds that all contact by the authorities with a person must cease upon his invocation of his desire to be represented by counsel.

Not only does this eliminate the potential of harmful statements being secured, it also protects the client from unwelcome and unpleasant encounters with the authorities.

Once a relationship is established with the prosecution, a request to be allowed to present evidence to the grand jury should be instituted.

Department of Justice regulations require that a prosecutor put substantial evidence which negates guilt before a grand jury. [DOJ Manual §9-11, 122(a) 9-268 (1992-1 Supp.)] In New York, a demand to be a witness before a grand jury when “a person is being or is about to be or has been submitted to a grand jury…” must be honored [CPLR 190.50 5(a)].

This will result in learning whether or not a grand jury is considering the matter and if so an opportunity to influence its outcome. Whether or not one actually makes such a presentation is again fact-specific.

Since grand juries are totally controlled by the prosecutor, a determination always has to depend on the nature and quality of the evidence, and whether it is better to be withheld and used later, or if it could have an effect on the proceeding.

In addition to the grand jury aspect of the investigation, a proactive relationship with the prosecution can result in making an attorney’s proffer to wit: meeting with them and putting forth evidence that will benefit the client. The proffer is pursuant to an agreement that nothing put forth by the attorney can be used as evidence by the prosecution in their case.

However, leads from such information can be used to find additional evidence. Therefore, it is essential that only exculpatory information be transmitted.

Such engagement during the investigative stage is akin to “trying the case in the prosecutor’s office.” Supplying them with exculpatory evidence creates a broader understanding of the facts, and increases the prosecution’s awareness of the difficulties they will have in proving their case as well as making them aware of any mitigating circumstances that are favorable to the client.

Another of our clients was arrested by a police officer who saw a gun protruding from under his jacket as he was walking down the street. After stopping him and determining that he did not have a license to carry a weapon he was arrested. The DA believed this was a slam dunk for conviction.

But after agreeing to our request to allow the defendant to testify in the grand jury no charges were brought. The client testified that he had been visiting an apartment building he owned where he found the gun in a garbage can and was on his way to the police precinct to turn it in, when stopped by the police officer.

After hearing his testimony, the grand jury refused to indict.

Since this testimony would have been the same at trial there was nothing to lose by putting it before the grand jury.

Proactive engagement during the investigative stage requires balancing whether or not the information put before prosecutors is better saved for trial. This is often determined by whether you believe that advance notice of the information will give the prosecution time to develop a way to ameliorate the effectiveness of it.

For example, making a potential witness available to the prosecution will give them time to investigate that person as well as lock them into statements. On the other hand, if the statements they make will be the same at trial and an investigation will be favorable to the client, this may have a salutary effect.

In the event charges are brought (often less than originally intended), one can usually work out a surrender of the client to the authorities. This avoids the embarrassment of a public arrest at home or the work place. A voluntary surrender also will be considered by the Court as evidence that the client has shown his intent to abide by the Court’s orders and is not a bail risk.

Title 18 §3142(9) 3A includes the factors to be considered for bail, and there are conditions of release…” that will reasonably assume the appearance of the person…” the “…record concerning appearance with court proceedings;”.

This is typically reflected in low bail as part of the surrender package. In addition to decreasing the amount of time the client spends incarcerated upon arrest, it can also affect geographic, economic and other terms and conditions of bail.

By interacting with the prosecution during the investigation we often receive early discovery.

In addition to being able to rebut and/or explain such information to the investigators, the building blocks to a trial defense including finding fact witnesses, documents and expert testimony can begin.

Another positive affect of pre-arrest negotiations is discovery of the prosecutor’s case at the earliest time. This allows for informed decision making i.e. whether or not to accept a plea deal or move forward to trial is always best decided early.

A better deal is typically available early in the process.

Knowing the prosecutor’s case helps determine whether the matter can be put to trial when balancing it against the plea offer. Even when the prosecution decides to move forward with charges, they will often offer a much more reasonable resolution based on the information they received from the defense.

In most white collar prosecutions, the defendant’s state of mind is a relevant factor.

In Elonis v. United States (2018) Chief Justice John Roberts wrote that” the basic principle that ‘wrongdoing must be conscious to be criminal’ and that a defendant must be “blameworthy in mind before he can be found guilty.”

After Elonis, it remains “the general rule” that evidence that a defendant acted with “a guilty mind” is “a necessary element in the indictment and proof of every crime” even if a statute omits that element. [Source: The Supreme Court on Mens Rea: 2008-2015 by Paul Yarkin, Jordan Richardson and John Michael Seibler.]

Usually the government uses circumstantial evidence to support a mens rea requirement. If an attorney senses that the prosecution is having trouble with this issue, it may be wise to have the client submit to a private polygraph test.

The attorney can then determine whether or not to use the result based on the polygrapher’s report. While such evidence is not admissible, a favorable result often convinces the investigators that the client was not acting with bad motives.

Jeffrey Hoffman

Jeffrey C. Hoffman

This results in a more critical re-evaluation of the evidence supporting the case and often results in a better disposition.

In short, “early diagnosis and treatment” will result in the best outcome.

Jeffrey C. Hoffman is Counsel at Windels Marx, a Manhattan-based law firm. He has been involved in a large number of white collar cases, including banking fraud, money laundering and Medicare/Medicaid fraud. Readers’ comments are welcome.

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