NATIONAL PRIORITIES FOR THE INVESTIGATION

AND PROSECUTION OF WHITE COLLAR CRIME

This report describes the work of the United States Department of Justice during the period October 1979 through June 1980 in connection with the formulation of national priorities for the investigation and prosecution of white collar crime. The first part of this report briefly reviews the background for this project and then discusses the information-gathering effort that took place in order to provide a comprehensive view of current white collar crime problems. The second part of the report describes the analytical framework used by the Department in reviewing the information gathered and in formulating national law enforcement priorities. National priorities are identified and discussed in the third part. The final section of the report discusses the purposes to be served by national and district priorities and procedures for implementing those priorities and periodically evaluating their impact.

The focus of this report is national white collar crime priorities. The next phase of this project, which is already underway, involves the formulation of district white collar crime priorities in a number of federal districts. In this report, district priorities are discussed only to the extent they affect the implementation of national priorities. This report does not address all of the interesting aspects of white collar crime law enforcement. It is limited to those issues that appear to have the greatest impact on the problems at hand-defining, implementing and measuring the impact of national white collar crime law enforcement priorities.

The idea of having law enforcement priorities in the white collar crime area has been a matter of interest and some discussion within the Department for years. Focusing one's limited resources on those activities perceived to have the greatest potential for social benefits is a fundamental operating principle for any governmental entity. Interest in effectively targeting resources heightens as those resources become more scarce relative to the demands placed upon them.

Increased interest in white collar crime both within and outside the Department has produced the following:

1. An appreciation of the immensity of the problem and the practically limitless nature of the demands it could place on law enforcement resources;

2. Increased expectations and competing demands within and among Congress, the general public and the law enforcement community with respect to the use of law enforcement resources against various types of white collar crime; and

3. Increased demands for accountability concerning the use of law enforcement resources against white collar crime-how resources are being deployed, why, and with what results.

All of the above make white collar crime law enforcement priorities a matter of great urgency and importance.

In creating the Economic Crime Enforcement Units, Attorney General Griffin B. Bell recognized the importance of white collar crime law enforcement priorities. His order states, in pertinent part:

"The national, regional and district priorities in the broad areas of fraud and corruption shall be approved and set by the Deputy Attorney General. The Assistant Attorney General in charge of the Criminal Division . . . shall develop proposals for national and regional priorities. Each United States Attorney shall select specific priorities within the national policy that are particular to their federal districts with the concurrence of the Assistant Attorney General in charge of the Criminal Division." (Paragraph 6a., A.G. Order No. 817-79)

In furtherance of this Order, the Criminal Division, in particular the Office of Policy and Management Analysis, the Office of Economic Crime Enforcement, and the Fraud, Public Integrity, and General Litigation and Legal Advice Sections, respectively, designed an Information Request for gathering information concerning white collar crime activity on a nationwide basis from all relevant sources. This information would allow national white collar crime enforcement priorities to be defined in a reasonable, workable and informed manner. The first step involved deciding what kind of information from what sources was needed and then creating a vehicle for the collection of that information.

B. Information-Gathering Process

During November and December of 1979, an Information Request was prepared and distributed to the major federal investigative agencies and departments involved in the investigation and prosecution of white collar crime. The same Information Request was distributed to Department of Justice personnel directly involved in white collar crime matters, including the existing Economic Crime Unit Specialists in the field, Special Fraud or Corruption Units in United States Attorneys' offices, and other parts of the Department involved in or affected by white collar crime. The Federal Bureau of Investigation provided information from a recently conducted survey concerning white collar crime activity in lieu of sending the Department's Information Request to each FBI field office.

The agencies and offices providing information to the Division with respect to white collar crime problem areas are listed on the following page. The Information Requests were distributed in late December 1979. Responses were received during January and February 1980.

With the assistance of personnel in the Systems Design and Development Staff of the Justice Management Division, the data contained in the Information Requests were coded and entered into computer storage so that they could be sorted and retrieved in usable form. Existing computer programs were adapted to meet the white collar crime priorities project's needs. The data storage and retrieval system used for this project is the same as that used for litigation support, including grand jury and other sensitive material, and is subject to the same security protections and access limitations.

C. Nature of the Information

The Information Request was divided into three parts. The first part asked each respondent to identify the types of white collar crime activity occurring within his or her geographic and substantive areas of responsibility and to indicate the frequency of occurrence. The second part asked each respondent to consider the white collar crime occurring in his or her area and, taking

into account a number of specified factors," to list in order of importance the top five to ten illegal activities deserving investigative or prosecutive emphasis. For each illegal activity so identified, the respondents were asked to provide the following information:

1. The nature of the illegal scheme;

2. Where the scheme operates;

3. Primary participants in the scheme;

4. Types of businesses or professions involved as perpetrators;

5. Government or political officials involved as perpetrators or knowing accomplices, if any;

"The factors specified were the following: 1. The total amount of direct dollar or property losses; 2. The number of victims involved; 3. Any special impact on individual victims; 4. Impact on the respect for and trust of public institutions and officials; 5. The ability of potential victims to protect themselves; 6. Impact, if any, beyond the direct victims involved; and 7. The history and circumstances of the suspected offender, including connection with other criminal activity.

6. Type of public corruption involved, if any;

7. Number and type of victims and losses;

8. Profits or benefits to perpetrators;

9. Prior enforcement experience with respect to the illegal activity;

10. Level of state and local enforcement activity targeted against the illegal activity;

11. Susceptibility to various kinds of investigative and detection techniques; and

12. Effect of increased investigation and prosecution on likelihood of conviction, deterrence, and other kinds of illegal activity.

Over 200 different types of white collar crime activity were identified as priority or problem areas by respondents. Over 1,600 descriptions of the priority areas identified, providing some or all of the information listed above, were received.

The third part of the Information Request asked each respondent to list three things: 1) the industries exerting substantial influence over the economy in the respondent's region of the country, indicating those involved in or affected by illegal activity; 2) the five major industries supplying goods or services to governmental entities in the respondent's region; and 3) any areas of white collar crime deserving less investigative and prosecutive emphasis.

Each respondent was asked to describe not merely ongoing areas of investigation, but also other problem areas or areas of potential investigation and prosecution deserving attention. The Information Request thus required that each respondent use his or her professional judgment regarding the relative magnitude and importance of white collar crime problems.

The FBI agreed to supplement the information contained in its earlier white collar crime survey by asking each of its field offices to identify the most significant white collar crime problems in their respective areas as of February 1980. The results of that supplemental survey are summarized in Appendix C and discussed in various parts of this report.

Several comments regarding the information collected during this project are in order. First, it should be noted that the Inspector General Office of the Community Services Administration chose not to participate in the information-collection process. The Internal Revenue Service was not asked to provide information, in light of existing sensitivity regarding the tax information collected by that agency. Information from public reports by these agencies and from other sources has been collected to minimize gaps in the information base.

Secondly, to the extent that agency responses only mirror the current case loads of those agencies, there is the potential danger that new, developing white collar crime problems were overlooked or underemphasized. Enforcement strategies based on such information would thus be more reactive and less forward-looking than desirable. It is difficult to gauge the character of the collected information in this regard, but to minimize the danger of being purely reactive, the information has been and will continue to be supplemented with the judgment of Criminal Division, FBI and other Department personnel regarding trends and new developments in white collar crime. Information identifying potential problem areas has been gathered from other sources as well, including the National District Attorneys Association and the news media.

In sum, the information collected during this project is by no means perfect or totally comprehensive. However, it is by far the most comprehensive information the Department has ever collected concerning white collar crime. It offers new insights into the magnitude, modus operandi and interrelationships of various types of white collar crime. While the information gathered can be improved upon in the future, it is more than sufficient to make reasonable and informed judgments concerning white collar crime law enforcement priorities.

II.

AN ANALYTICAL FRAMEWORK FOR DEFINING PRIORITIES

The choice of national white collar crime law enforcement priorities involves conceptual, strategic and, most importantly, policy judgments. In the following discussion we attempt to make as explicit as possible the steps taken in analyzing the data at our disposal and the alternatives considered in defining national priorities. We define the criteria we think should be applied in defining white collar crime priorities. Different conclusions can be reached by using other sets of criteria or by weighting the same criteria differently. We recognize, and indeed emphasize, that priority choices are not the inevitable, objective result of pure reason and logic. They are rather the result of informed, subjective judgments based on a systematic analysis of known facts and best estimates.

A. Definitional Considerations

One threshold question that may be asked is how we define "white collar crime" for purposes of determining national priorities. While that question is obviously relevant, and has important ramifications for this and other white collar crime initiatives, it need not be the subject of controversy or extended discussion in the context of this project. For purposes of gathering and analyzing information concerning white collar crime activity, the Criminal Division implicitly accepted the working definition of white collar crime endorsed by the Attorney General's White-Collar Crime Committee in early 1977:

"White-Collar offenses shall constitute those classes of non-violent illegal activities which principally involve traditional notions of deceit, deception, concealment, manipulation, breach of trust, subterfuge or illegal circumvention.'

The scope of this project is also consistent with the FBI's working definition of white collar crime.

The more important question to be considered is how white collar crime law enforcement priorities should be defined. White collar crime offenses are defined in the law enforcement community and elsewhere in a number of ways: 1) by the victim (e.g., fraud against business, fraud against the government); 2) by the alleged offender (e.g., corruption of state elected officials, fraud by federal program beneficiaries); 3) by the criminal statute involved (e.g., wire fraud, Hobbs Act violations); 4) by the type of activity or transaction involved (e.g., advance fee schemes, bankruptcy fraud); or 5) by some combination of the above (e.g., fraud against the government by local program administrators involving CETA funds).

The white collar crime offenses described by respondents to the Department's Information Request were defined in different ways. The offenses involving government programs or procurement were generally described by citing the program or government agency involved (e.g., misuse of SBA loans or Department of Defense procurement fraud), but not always (e.g., overbilling of U.S. government by construction contractors). The offenses involving corruption were generally defined according to the position of the alleged offender and the type of corruption (e.g., bribery of state alcoholic beverage control officials), but not always (e.g., Hobbs Act corruption activity). Offenses victimizing investors were generally described by the nature of the scheme (e.g., Ponzi

8 "Those illegal acts characterized by deceit, concealment, violation of trust, and not dependent upon the application or threat of physical force or violence. They are committed to obtain money, property, or services; or to avoid the payment or loss of money, property, or services; or to secure personal or business advantage." (See GAO Report, Resources Devoted by the Department of Justice to Combat White-Collar Crime and Public Corruption, March 19, 1979, App. I, p.1.)