November 2009 Archives

November 5, 2009

Federal Government Contractors - Watch Out For Fraud Prosecutions

For many federal contractors, TARP and the American Recovery and Reinvestment Act are a godsend. The economy isn't great overall, but the federal government is still spending. This is good for the economy around Washington, D.C., and it's good for those who sell services and products to the federal government.

The government, though, has a concern about fraud in government contracting. Some of this is generic. Every agent with an Office of Inspector General can tell you that his or her job is to combat waste, fraud, and abuse. Even in normal times, Inspector General offices spend a lot of time investigating whether federal contractors have engaged in fraud. As a result, even in normal times, government contractors need to take reasonable steps to prepare themselves in case an OIG agent comes calling.

But these are not normal times. The federal government is spending an astounding amount of money, and it's worried that this spending is ripe for fraud. The Department of Justice's Criminal Division is gearing up to investigate and prosecute those who receive government funds and who they suspect of fraud. The White House has unveiled a web page where anyone can track the spending from the Recovery Act and it's express purpose is to prevent fraud.

Perhaps this will mean only that those who engage in shady activity have a higher likelihood of being prosecuted. What I worry will happen, though, is that the government will prosecute where it could better regulate, and that good, but perhaps sloppy, federal contractors, and their employees, will be caught up in politically created prosecutions and investigations.

Of course, time will tell.

If you have questions about how federal criminal charges are different than state criminal charges, please visit this page on Maryland federal criminal charges or Washington DC federal criminal charges.

November 4, 2009

Why Does White Collar Crime Happen?

Like most people who practice criminal law, I go back and forth between thinking that the explanations for some kinds of behavior are basically unknowable, and a healthy dose of armchair psychology to figure out why people do things that they know are not in their self-interest. When I'm writing a sentencing memo, I tend to try to answer for the court why my client is before the judge. I find that studies about the causes of crime almost never fail to get my attention.

Which is why I was very excited to see this article, Researchers Expose a Pattern for White Collar Crime. The article reports on a study that found a pattern for what allows white collar crime to happen at a company or other institution. Basically, like the stages of grief, the researchers believe that every big white collar case works through the following 12 steps:

  1. Perpetrator is hired into a position of power
  2. Perpetrator develops a sense of superiority and engages in illegal activity
  3. Co-workers recognize perpetrator's misconduct and become passive participants
  4. Passive participants recognize opportunity
  5. Passive participants reluctantly follow the perpetrator
  6. Perpetrator distrusts followers and feels the need for control
  7. Perpetrator senses his power over followers and is emboldened
  8. Perpetrator bullies followers and relishes his hold on them
  9. Perpetrator intensifies white-collar crimes as followers feel increasingly trapped
  10. Followers struggle with the conflict between their values and actions
  11. Perpetrator loses control as a whistle-blower steps forward
  12. Perpetrator denies or admits to wrongdoing and shows lack of remorse

I'm not sure what I think of this. On one hand, it looks like it may be a relatively useful way of explaining how people at institutions respond to the one bad actor at the top. I could see this being used as a meaningful argument for mitigation of a lower-level employee.

On the other hand, this study kind of looks like it might be junk (as a guy whose only read an article about it, not the actual study). Who counts as a perpetrator? Take Enron for example, is Ken Lay the perpetrator? Skilling? Fastow? It seems like the model would be slightly different (or squishy enough to be vacuous) depending on which of these players you choose as the "perpetrator."

Moreover, look at step two. Isn't that kind of quick? Perpetrator develops a sense of superiority and engages in illegal activity? That's it? That's the explanation for why there's crime? No look into what else was going on in the lives of the "perpetrators?" No look at whether the "perpetrator" even thought his conduct was criminal to begin with, particularly in this age of regulation of business through the Bureau of Prisons.

White collar crime happens because of a sense of superiority. Huh. I guess that's good to know.

If you have questions about how federal criminal charges are different than state criminal charges, please visit this page on Maryland federal criminal charges or Washington DC federal criminal charges.