Have You been Arrested for a White Collar Crime?
Have you been charged with a crime in Federal Court? If so, it is important to understand at the outset that there are significant differences between criminal cases in the United States District Court and state court in Arizona and why you need to hire a white collar crimes attorney. First, charges in federal court involve the violation of federal, as opposed to state, laws. In order for any court to hear a case, that court must have jurisdiction over the subject matter. In criminal cases, jurisdiction over the case is acquired by virtue of the alleged violation of a United States statute. In some cases, the particular conduct may constitute a violation of both state and federal law, and may be prosecuted under either system. In other cases, the federal courts, by statute, have exclusive jurisdiction to prosecute criminal violations of those laws. An Arizona lawyer will understand the difference and how the knowledge to defend the different types of charges.
Federal criminal cases are also distinguished from state crimes in that the federal court system is significantly different that the state court system in Arizona. Federal courts operate with their own Rules of Evidence and their own Rules of Criminal Procedure, and each federal district, including the District of Arizona, has its own set of local rules governing everything from the filing of pleadings, to appearances, to motions, to numerous other subjects.
What Are “White Collar” Crimes?
A white collar crime is generally described as one that involves neither violence nor the direct use or trafficking in drugs. They are often economic crimes, which include a broad spectrum of offenses. Some involve fraud, others are crimes committed with regard to a particular economic sector such as production of substandard goods, and still others relate to the violation of a particular law or set of laws. Internet crimes such as identity theft may also be economic crimes. Bribery, jury tampering, and similar offenses are also considered white collar crimes.
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In addition to differences in the venue for federal criminal prosecutions, white collar offenses, since they are often economic crimes, involve proofs that in many cases include a “paper trail” consisting of bank and other financial records. The list of all crimes that fall into the category of federal white collar offenses is substantial, and the following are some of the more commonly charged federal crimes in this area:
Securities Fraud. The primary statutes governing securities are the Securities Act of 1933 and the Securities Exchange Act of 1934. As a general proposition, the 1933 Act governs the issuance of securities (usually stocks and bond, but other securities are included) by companies. The 1934 Act controls the purchase and sale of those securities, as well as the trading of the securities. Both laws have spurred a host of regulations issued by the United States Securities and Exchange Commission. In addition, the various stock exchanges, as well as the National Association of Securities Dealers, all issue regulations of their own. The most well-known of the securities laws is section 10b of the 1934 Act, which prohibits deceptive or manipulative practices in connection with the purchase or sale of any security – in short, securities fraud. Other offenses include stockbroker fraud and insider trading.
Mail Fraud and Wire Fraud. Fraudulent practices that involve the use of the mail or wire communications have been illegal under federal law since at least 1872. Today, the primary federal statutes governing fraud are 18 U.S.C. §§ 1341 and 1343. The first criminalizes the use of the United States Post Office or any other public or private interstate mail carrier in furtherance of any fraudulent scheme. The second is similar but involves the use of wire, radio or television communications. Both carry a potential penalty of up to 20 years in prison, unless the fraud involves a financial institution (see below), in which case the potential prison term is even greater.
Bank Fraud. It is an offense to defraud any financial institution, or to obtain any money, securities or other assets or property in the custody or under the control of any financial institution. A violation is punishable by imprisonment for up to 30 years. 18 U.S.C. § 1344.
Money Laundering. The term “money laundering” gets its name from the concept that you are taking “dirty” money, that is, money derived from illegal activity, and attempting to turn it into “clean” money through the use of a legitimate business. The United States government is concerned about this practice for two primary reasons: first, it is used to conceal illegal activity; second, the effect is often to deprive the government of tax revenue. The practice is prohibited under 18 U.S.C. §§ 1956 and 1957. Both statutes prohibit any person from conducting (or attempting to conduct) a financial transaction involving the proceeds of illegal activities, with the intent to promote the activity, or with the intent to avoid reporting and payment of taxes. Prison sentences range from a maximum of 10 years (§ 1957) to a maximum of 20 years (§ 1956). The lower maximum under § 1957 is due to the fact that there is a lower level of intent under that section; the government does not have to prove that you knew the money was coming from specified criminal activity. Money laundering is considered a white collar crime even though the underlying criminal act(s) may involve violence, drugs or similar conduct.
Identity Theft and Identity Fraud. There are a host of federal criminal laws concerning identity theft and identity fraud. The offenses include knowingly transferring or using a means of identification of another person in connection with the commission of a federal crime or any felony under state law; credit card fraud; computer fraud; mail fraud; wire fraud; and bank fraud. Some of these carry maximum penalties as high as 30 years in prison, plus substantial fines.
Embezzlement. Embezzlement may be prosecuted under state or federal law, depending upon the circumstances. It is a form of theft in which the money or other property comes into the hands of the alleged wrongdoer legally, but which is then converted by that person for a purpose not permitted by the terms under which he acquired possession. Most federal embezzlement charges involve, in one way or another, theft by conversion that involves funds generated through or earmarked for federal institutions and/or federal programs.
Counterfeiting. The crime of counterfeiting can, but does have to, involve currency. Under federal law forging or altering currency or any United States security is punishable by imprisonment of up to 20 years. 18 U.S.C. § 471. Possession of tools (including software or other digital technology) used in counterfeiting is also illegal, as is counterfeiting foreign securities if done within this country. But the crime extends beyond bills and coins. It includes certain documents used by lending institutions; any contract (and other documents) used to defraud the federal government; postage stamps; and federal seals and court documents, among others. In addition, under the Trademark Counterfeiting Act of 1984 (18 U.S.C. 2320), it is a federal crime to traffic, or attempt to traffic, in goods that bear a counterfeit trademark.
Antitrust Violations. It is clear that the prosecution of criminal antitrust claims on the federal level is on the rise. In fact, the Antitrust Division of the United States Department of Justice filed more criminal antitrust cases last year than in any year since at least 1990. To give you an idea of the scope of enforcement, the DOJ collected over $1 billion dollars in 2011 from enforcement actions, of which over half a billion dollars came from criminal fines assessed as part of federal criminal antitrust convictions. Federal antitrust allegations cover a wide area, but the essence of the crimes included within this topic is competition that is anti-competitive. The majority of alleged antitrust violations involve price fixing (an agreement to raise, fix or otherwise maintain the price of goods or services); bid rigging (agreements to refrain from bidding, to submit complementary bids, bid rotation, and offering subcontracts in exchange for withholding bids); and geographic market allocation. Antitrust violations may also include other devices that are considered in restraint of trade. A significant feature of most of these offenses is collusion in the marketplace. The original antitrust law in the United States is the Sherman Antitrust Act, 15 U.S.C. § 1, which provides:
“Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.”
While other antitrust laws have been passed over the years which expand the scope of antitrust violations (for example, the Clayton Antitrust Act, which was amended by the Robinson-Patman Act), the Sherman Act remains the primary source for criminal prosecutions. Criminal prosecutions are generally limited to “per se” violations, that is, violations that do not depend upon market conditions or market effect. Bid rigging, for example, is an offense independent of whether the alleged scheme was successful. Whatever the particular violation, the potential penalties, in terms of both fines and prison time, are significant.
Extortion and Blackmail. The primary federal law covering extortion and blackmail is 18 U.S.C. § 871 and the sections that follow. Offenses under that statute include:
- Extortion by an officer or employee of the United States.
- Threatening to inform (or not to inform) on the violation of a federal law coupled with a demand for money or anything of value (blackmail).
- Taking kickbacks on a public project.
- Interstate communication of a kidnapping threat or demand.
- Using the mails to extort money or anything of value.
Obstruction of Justice. Obstruction of justice can take many forms, but the essence of these offenses is the hindering of governmental activities. There are a number of federal laws that may be involved, including:
- Jury tampering. 18 U.S.C. § 1503.
- Obstruction of or interference with Congressional or administrative proceedings. 18 U.S.C. § 1505.
- Witness tampering. 18 U.S.C. § 1512.
- Witness retaliation. 18 U.S.C. § 1513.
- Conspiracy to commit and offense against the United States. 18 U.S.C. § 371.
Section 1503 also includes what is known as the “omnibus clause.” It is essentially a catch-all provision, and states that:
“Whoever corruptly, or by threats or force, or by any threatening letter or communication . . . influences, obstructs, or impedes, or endeavors to influence, obstruct, or impede, the due administration of justice, shall be punished . . ..”
This provision has been the subject of numerous differences of opinion among the federal circuits concerning whether it should be narrowly or broadly interpreted. Even a narrow interpretation, however, could substantially expand the potential charges associated with obstruction of justice beyond actual jury tampering and similar specific acts.
Bribery. The primary federal statute covering bribery as it relates to official acts is 18 U.S.C. § 201. It applies to public officials, as defined in the statute, and applies to anyone who “directly or indirectly, corruptly gives, offers or promises anything of value to any public official or person who has been selected to be a public official, or offers or promises any public official or any person who has been selected to be a public official to give anything of value to any other person or entity, with intent” to influence an official act. It likewise criminalizes the action of a public official who accepts or agrees to accept the bribe.
In addition to bribery involving public officials, federal law prohibits commercial bribery under the Travel Act (18 U.S.C. § 1952). Other laws involving specific instances of bribery include the Foreign Corrupt Practices Act (15 U.S.C. § 78dd-1), as well as those involving bribery of bank examiners, bribery related to certain loan and other bank transactions, and bribery in connection with the distribution or sale of alcoholic beverages.
Under Federal law, therefore, the crime of bribery includes more than actions relating to public acts and public officials. In fact, other laws have widened the scope of federal bribery charges. Under the Travel Act, for example, interstate or foreign travel or use of any facility in interstate or foreign commerce, with intent to commit any unlawful activity may be prosecuted as a federal crime. Since unlawful activity includes bribery, many “state” bribery crimes can also be prosecuted under the laws of the United States.
Tax Evasion. The essence of tax evasion is the use of illegal means to avoid payment of taxes. The means by which this may be accomplished often involves misrepresentation of income to the Internal Revenue Service. The misrepresentation can include underreporting of income, overstating expenses and deductions, or other actions such as money laundering and hiding income by depositing funds in offshore accounts.
The elements of a tax evasion charge are that (1) there exists some unpaid tax liability, (2) the defendant performed some unlawful affirmative act to avoid payment of that tax liability, and (3) the defendant had the specific intent to knowingly avoid payment.
The penalties for federal tax evasion can be severe. Section 7201 of the Internal Revenue Code (26 U.S.C. § 7201) provides as follows:
“Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.”
RICO. The Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. Chapter 96, was enacted as part of the Organized Crime Control Act of 1970. It provides penalties for any member of a criminal enterprise who has committed violations of two or more of over 35 different crimes (both state and federal offenses) within a 10-year period. It authorizes a prison sentence of up to 20 years for each racketeering count in the event the defendant is found guilty. It also allows for civil actions against the alleged wrongdoer, and is often used to attempt to convict so-called leaders of criminal groups.
The RICO statute has been used by the federal government to prosecute a wide variety of cases over the years. Examples include prosecution of the Latin Kings street gang in Tampa, Florida; the Gambino crime family; and Michael Milken. It has been said that what the RICO law really does is target the crime of being a criminal.
Sentences under the federal white collar criminal laws are relatively severe. And their severity increased after the government addressed the corporate and accounting abuses, insider trading, financial manipulation and similar conduct of the 1990’s. In 2002, Congress passed the Sarbanes-Oxley Act. But Sarbanes-Oxley went far beyond dealing with corporate financial abuses. As part of the law, Congress added what is known as the White Collar Crime Penalty Enhancement Act of 2002. What that law did was to increase penalties for a wide range of existing offenses, including mail fraud; wire fraud; violations of the Employee Retirement Income Security Act of 1974 (ERISA); and attempts and conspiracies to commit federal crimes. As an example, the prison sentence for mail fraud and wire fraud was previously up to five years; the new law increased the penalty to a maximum of 20 years.
The 2002 law also contains a direction to the United States Sentencing Commission, which direct the commission, in publishing sentencing guidelines and policy statements, to insure that those guidelines
“reflect the serious nature of the offenses and the penalties set forth in this Act, the growing incidence of serious fraud offenses which are identified above, and the need to modify the sentencing guidelines and policy statements to deter, prevent, and punish such offenses.”
Federal offenses continue to carry extremely harsh sentences, and white collar crimes are no exception to this rule.
When Do I Need a Lawyer in a Federal White Collar Case?
The time to contact a Phoenix white collar criminal defense attorney is as soon as you know that you are involved in a criminal investigation. Even if you are not certain that you are a target of the investigation, it is always a good idea to seek legal help as soon as possible. Your first awareness of a potential problem may be simply a communication from the FBI, the Postal Service, Immigration, or another federal agency. In some cases, you may be served with papers, and in others you may not. It may be unclear at the outset whether you are being investigated, or whether you are merely a witness in a case. No matter what the communication consists of, it is never too early to retain legal counsel. The earlier this occurs, the better your chances of dealing with and heading off or reducing the consequences of whatever situation you will eventually face.
If you have been charged with or are under investigation for, a federal white collar crime, choose an experienced federal criminal attorney for your defense. Remember that the federal court system is unique. It includes its own rules of evidence and its own rules of criminal procedure. That means that in federal criminal cases, there are significant differences from being charged in state court. Those differences affect the specifics of the crimes charged; grand jury proceedings and indictments; arraignments; pleas; pretrial motions and other proceedings; pretrial discovery; subpoenas; the introduction of evidence at trial; sentencing; and post-conviction procedures.
At The Feldman Law Firm, we are experienced criminal defense attorneys who know the federal justice system inside and out. We have extensive familiarity with the federal criminal laws and procedures, as well as substantial trial experience. If you have been charged with a federal white collar crime, or if you have been contacted in connection by a federal agency in connection with a federal investigation, contact us for a free consultation.