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Tuesday, October 2, 2012
Staying Out of Jail When Business Becomes A Crime
When the government is increasingly populated by lawmakers and bureaucrats who hate capitalism and genuinely believe that business owners are criminals somehow "taking" things away from others, your liberty depends on your strategy for staying out of jail.
Here is my latest piece, first printed on the Financial Policy Council's website earlier this afternoon. The full article appears below. Strategies For Staying Out of Jail In An Age of Criminalized Business, by Eric Dixon
two worst things our government can do to someone are to
conscript him for military service, and deprive him of his liberty.
or being threatened with loss of liberty is an ordeal increasingly
average, law-abiding Americans.
We have become a nation of "No," of the ever-present threat of criminal
prosecution -- even, perversely enough, in an era of "yes" and
permissiveness on someone else's dime. The routine trip to the doctor's
office comes with the
warning that "false statements" on the insurance form can result in
prosecution. Anything you do that involves either your receipt of
money, or ever-growing duties and responsibilities owed to customers,
lenders, clients or the general public, now comes with the risk of being
suspected, investigated and accused of a "crime." As I
detail later in this article, your "crime" may not be a substantive
violation of the law but rather just a disputed interpretation of what
you said -- or intended to
say -- where your word goes against the word of the
government agent whose credibility juries often assume to be impeccable.
This trend places our entrepreneurial, managerial, ownership and professional classes at the
greatest risk. There is a perfect storm of adverse crosswinds that
converge to create this danger. First, no one in America is more
vulnerable to these type of accusations than the business community, as
illustrated by the Department of Justice's statement that "business
fraud" (in various forms) "remains one of the highest priorities" of the
Department's Criminal Investigations Division.1 This subset of America is the most envied and targeted for "justice" --schadenfraude masquerading as "fairness."2It
is hard to imagine a greater disincentive to educational and
professional achievement -- or a greater reward for sloth and envy.
This is clearly not a social or governmental attitude that made this
nation great, or will allow it to enjoy an economic resurgence.
entrepreneurial One Percent suffers from a legally
uncertain future, where yesterday's permissible behavior may become
tomorrow's crime. This group is increasingly viewed by "the street"
with suspicion, envy and condemnation, and such emotions are fueled and
encouraged by many in the public sector. This legal uncertainty,
coupled with growing condemnation, strongly deters productive,
wealth-creating investment and
encourages (if not requires) survivalist tendencies to hoard, secrete
wealth in physical
assets (e.g., precious metals, real estate) or even flee overseas. Today, America's most productive classes must wonder what tomorrow holds, whether they will be free, or even where they will be.
On the premise that
"the government" can and should control our
behavior, legislators pass laws, bureaucrats create new
regulations, and government lawyers and judges have
expanded their interpretation. As "legal"
activity increasingly becomes "criminal," the risk of arbitrary, targeted government intimidation,
investigation, prosecution and imprisonment grows with no check in sight. Worse, emerging forces are pushing us towards prosecutions "for show" and
not "for cause." Both populist political movements,3 and journalists question why more corporate executives have not been jailed, and demand more prosecutions.4
However, these cries ignore
one critical fact: the number of financial crime prosecutions only
reflects cases in
which the charges actually brought involve the elements of financial
securities fraud, bank fraud). This number omits the cases brought when
businesspeople are targeted, and any pretextual charge is used for a
prosecution. These are
charges brought when evidence is insufficient for the target (that is, a
person considered to be a putative defendant in a yet-to-be-brought
criminal indictment) of an investigation to be charged with any
business-related crime. Justice Department statistics do not
reflect the true extent to which the business community is targeted for investigation and intimidation, because they are engaged in business, or to which its members
are charged with any non-business crime such as false
failing to file required tax forms, conspiracy or misprision (the
to report an act which one allegedly knows to be a crime) when evidence
of substantive criminality cannot be found. When the ends justify the
means, any criminal charge will suffice. The true scope of this problem
may not be measurable at all, but can be indicated somewhat through
cataloguing and examining each and every "white collar" criminal case
brought by authorities (a mammoth project in which the author is
presently engaged). Finally, these statistics also do not measure the many who are investigated but never charged.
a business owner or someone with a high public profile, your livelihood
may be affected by or depend on your
credibility and reputation. This means when the government starts
"investigating" you (i.e., looking for evidence to support , you are
the popular (and incorrect) notion that silence is evidence of guilt.
The government will exploit this notion to pressure you to talk. In an
age of government "leaks" and totally irresponsible social media and the
destruction of basic privacy, reputational threats pose an immediate
risk of lasting financial harm to
targets in the public eye.
the case of former New Jersey state Assemblyman and Consumer Affairs
Director Joseph Doria. FBI agents raided his home one morning in July
2009 as part of the legendary Bid Rig corruption investigation. In full
view of reporters and photographers, who undoubtedly received prior and
improper notice of the raid, agents carried out cardboard boxes from
Doria's home. The implication of guilt was clear, the press fueled
immediate corruption rumors and Doria swiftly resigned (under
pressure from then-New Jersey Governor Jon Corzine) his state cabinet
position. Only yearslater was it revealed that the boxes
contained -- nothing but air. They were empty. The boxes were part of an
apparent ruse, with no logical purpose other than to make Doria seem
guilty.5The reputational harm was done.
Once the government has made you its "mark," you must choose: Remain silent,
and be thought a crook? Or speak, and remove
the obstacle to investigators and prosecutors who have preordained your guilt and want to find
(or create) evidence to support their conclusion? If you talk, their
trap can be sprung at any time. Once that happens, your freedom and
future may depend more on the integrity of the agents investigating you
instead of anything you actually say. Business leaders like Martha Stewart
have served jail time for nothing more than a false statement charge when evidence did not include any video or
audio recording but only the notes of FBI agents interviewing her and
recorded in a "302 report."6You see, if
and when you talk, the "evidence" against you will be the official record of what
you say, and this means the FBI's 302 report. So If
government agents come knocking, think twice about saying anything.
Even if your lawyer is present (and certainly if he or she is not). And
particularly when you are innocent. No one wants to lose
his innocence and become presumptively guilty after talking (and
totally vulnerable to being charged or pressured), no matter what you
really say or what you have done. Any
conversation you have with any federal employee creates some risk of
criminal prosecution which is greater than if you stay silent. After all, remaining silent is the best defense against being charged with a false statement crime.7
might think there's no problem with answering a few seemingly innocuous questions. You
may think you can talk your way out of any suspicion. Don't do it! That could
end up being the mistake of your lifetime. But also know this: The authorities
rarely have real questions. They are talking to you to size you up,
measure your mental strength and whether they can intimidate or break you.
These trap interviews, with accusations in the form of
questions, are designed to create discrepancies between your answers and
other evidence they have, sometimes for the very purpose of creating
proof for a false statements charge. You may assume there can't be misunderstandings because there's a tape and you're willing to be taped. Police
departments routinely record interrogations and even traffic stops
(although this is done much more to protect the police from misconduct
allegations and potentially ruinous civil rights litigation). But the
Federal Bureau of Investigation has a
policy against recording interviews of targets and subjects (that is, potential witnesses and defendants) of investigations.8 Why? Because without a tape-recording of what
you actually said, it's much
easier to be charged with a false statement. It's your word against the aforementioned FBI 302
report. Now, how do you plead?
FBI's rationale for this policy reveals motives that should terrify
achievers in our nation. The FBI justifies its no-recording policy by
presence of recording equipment may interfere with and undermine the
successful rapport-building interview technique which the FBI practices"
and "perfectly lawful and acceptable interviewing techniques do not
always come across in recorded fashion to lay persons as proper means of
obtaining information from defendants."9The FBI does acknowledge
"there are many situations in which recording a subject's interview
would be prudent," but suggests recordings be made in so-called positive
instances such as "where and when it will further the investigation and the subsequent prosecution."10
(Emphasis added.) Despite the ability to use recorded interviews to
exonerate people and thereby reallocate scarce resources to pursue other
wrongdoers, the FBI believes recorded interviews
are useful only to prove guilt. The federal government thereby shows a
depraved indifference towards those whom it has wrongfully convicted,
wrongfully prosecuted or wrongfully harassed people. It even supports
an inference that the
government is willing to investigate, prosecute and jail
people whom it knows are innocent. In an age where
business owners, managers and investors are increasingly envied,
despised and targeted for ruin by those with dark political or personal
antipathies, such government powers can be fearsome indeed.
What's an innocent person to do? You need to recognize that although Government is Authority, your
misplaced trust, your childish hope that Authority is both Fair and
Benevolent, will be as rational -- and as risky -- as a blind roll of
the dice. As a successful, mature, rational adult, an achiever -- a Grown-up, for heavens' sake -- you
must reject the easy way out of Obedience to The (Nanny) State As Mommy. You must beat the impulse to surrender
to your fears of confronting injustice in an imperfect world in which you must fight for your very freedom, the right to be left alone. If you don't, you allow others to
make the most critical decision for your future, and in every real sense, to control you. Freedom requires you to fight. This is part of the price for our freedom.
an era of increased visibility of financial crimes, a broadening of
what business practices are termed criminal, and growing public demands
for "accountability" of the business community, there is a surprisingly
easy and cheap policy solution. Federal legislation mandating that
investigators and prosecutors tape-record all interrogations will be an
inexpensive, cost-effective means of guarding against miscarriages of
justice and entirely mistaken criminal indictments of innocent people.
Allowing hard-to-refute tapings of interrogations will remove the
parade of false statements prosecutions and allow the authorities -- who
always complain about scarce resources for investigations, compliance
and monitoring -- the ability to recoup and redeploy resources towards
criminal investigations involving violence and public safety: terrorism,
weapons and narcotics offenses.
This sentiment was demonstrated by the comment made by President Barack
Obama to the chief executive officers of the nation's thirteen largest
banks that, "My administration is the only thing standing between you
and the pitchforks," ABC News report, April 3, 2009, available athttp://abcnews.go.com/blogs/politics/2009/04/obama-to-banker/.
The call for more criminal prosecutions of "Wall Street" is one of the
most common demands voiced by the leftist and somewhat anarchist protest
movement calling itself "Occupy Wall Street." See Bob Cesca, "Occupy Wall Street Isn't Anti-Corporation, It's Anti-Corporate Crime," Huffington Post, Oct. 27, 2011, available athttp://www.huffingtonpost.com/bob-cesca/occupy-wall-street-isnt-a_b_1034418.html.
5. Ted Sherman and Josh Margolin, "The Jersey Sting," (St. Martin's Press, 2011), at 287-290.
See Indictment, U.S. v. Martha Stewart, Peter Bacanovic,
S1-03-Cr-717 (MGC), Southern District of New York, June 4, 2003 (four
count indictment of Stewart). The 302 report is the Federal Bureau of
Investigation's Form for
Reporting Information That May Become Testimony (FD-302), memorializing
the statements by a witness, subject or target of an investigation being
questioned by federal agents. See House of Representatives
Report 112-546, Resolution Recommending That the House of
Representatives Find Eric H. Holder, Jr., Attorney General, U.S.
Department of Justice, In Contempt of Congress for Refusal to Comply
With A Subpoena Duly Issued By The Committee on Oversight And Government
Reform, at 16("Pursuant to the Committee's
investigation, the Justice Department produced FBI reports of witness
interviews, commonly referred to as `302s.'"), available athttp://www.gpo.gov/fdsys/pkg/CRPT-112hrpt546/pdf/CRPT-112hrpt546.pdf.
7. The statute at issue, Section 1001(a) of the United States Code, Title 18 (18 USC 1001), provides as follows:
Except as otherwise provided in this section, whoever, in any matter
within the jurisdiction of the executive, legislative, or judicial
branch of the Government of the United States, knowingly and willfully—
(1) falsifies, conceals, or covers up by any trick, scheme, or device a material fact;
(2) makes any materially false, fictitious, or fraudulent statement or representation; or
makes or uses any false writing or document knowing the same to contain
any materially false, fictitious, or fraudulent statement or entry;
be fined under this title, imprisoned not more than 5 years or, if the
offense involves international or domestic terrorism (as defined in
imprisoned not more than 8 years, or both. If the matter relates to an
offense under chapter 109A, 109B, 110, or 117, or section 1591, then the term of imprisonment imposed under this section shall be not more than 8 years.