Earlier this year five major banks pled guilty to criminal charges and agreed to shell out more than $5.5 billion to settles charges that their “traders” manipulated the international “foreign-exchange market” for their own profit. The fines are the largest anti-trust penalties collected by U.S. authorities.
Big crimes generally begin with little crimes. This past January, David Welsh, University of Washington, Lisa Ordonez, University of Arizona, Deirdre Snyder, Providence College, and Michael Christian, University of North Carolina, collectively published a study titled “The Slippery Slope: How Small Ethical Transgressions Pave the Way For Larger Future Transgressions” in the Journal of Applied Psychology.
The study found that individuals who engage in the unethical office behavior of taking an office pen or padding a few extra hours to their payroll often creates a “slippery slope” that makes it easier for them to engage in more blatant criminal behavior. Little evils are routinely used to justify bigger evils.
“People rationalize their behaviors to justify it,” Ordonez, one of the study’s authors, said in a press release. “They might think ‘No one got hurt.’ The next thing, they feel fine doing something a little bit worse the next time and then commit more severe unethical actions.”
The argument suggest that minor unethical actions can lead to more serious criminal actions, like the manipulation the foreign-exchange market for profit. “Well, you know what happens is, it starts out with you taking a little bit, maybe a few hundred, a few thousand,” Wall Street fraudster Bernie Madoff’s secretary told Vanity Fair. “You get comfortable with that, and before you know it, it snowballs into something big.”
The “Slippery Slope” researchers tested this theory through various experiments. One study found that individuals who took 25 cents for doing something wrong were more likely to do a greater wrong for $2.50. The research concluded that people are more likely to engage in sweeping unethical conduct when they have already engaged in relatively minor unethical conduct.
Apparently the U.S. Justice Department is now working on the same theory. On September 9, 2015, the DOJ issued a policy memorandum titled “Individual Accountability for Corporate Wrongdoing.” The new policy initiated by Attorney General Loretta Lynch put the corporate world on notice that “fighting corporate fraud and other misconduct is a top priority of the Department of Justice” and this fight will include the “effective enforcement of the civil and criminal laws that protect our financial system and, by extension, all our citizens.”
Speaking at New York University Law School the day after the new policy was announced, Deputy Attorney General Sally Yates said: “Effective immediately, we have revised our policy guidance to require that if a company wants any credit for cooperation, any credit at all, it must identify all individuals involved in the wrongdoing, regardless of their position, status or seniority in the company, and provide all relevant facts about their misconduct.”
However, within 24 hours of the issuance of the policy, some legal scholars told USA Today not to expect any corporate arrests in the near future. For example, Anthony Sabino, attorney and law professor at St. John’s University, told the newspaper: “The government still has a heavy burden to prove, which is that this individual acted in a criminal fashion. You have to prove criminal intent, and that’s a difficult proposition … You had so many people involved [in a conspiracy]. Who was simply following orders and who had criminal intent?”
If history is a fair barometer, you can take it to the bank that the Justice Department will probably target the individuals who were “simply following orders” and link them to criminal intent through the testimony of wrongdoers higher up in the food chain. That is the way most federal fraud conspiracies are prosecuted by the federal government.
A Common Fraud Investigation Tactic
Businesses of all sizes, and the people they employ, can be the targets of a fraud investigation at any time. The smaller and medium signed businesses will more likely be targeted because they do not have fraud prevention systems or aggressive and responsive legal teams.
Various studies have shown that whistleblowers rather than fraud examiners are responsible for exposing fraud among businesses and corporations. A significant portion of these whistleblowers are motivated by personal agendas, not the desire to expose and stop wrongdoing. This can lead to innocent individuals getting caught up in a massive corporate fraud investigation conducted by the FBI.
According to the Association of Certified Fraud Examiners, “all organizations are subject to fraud risks. Large frauds have led to the downfall of entire organizations, massive investment losses, significant legal costs, incarceration of key individuals, and erosion of confidence in capital markets. Publicized fraudulent behavior by a key executive has negatively impacted the reputations, brands, and images of many organizations around the globe.”
In 2013, the Federal Trade Commission reported there were more than 2 million fraud cases in the U.S. The John T. Floyd Law Firm has extensive experience in white collar crime investigations and jury trials. We represent both individuals and businesses charged with federal or state fraud-related charges. Both governmental entities have criminalized a litany of different kinds of fraud. Conviction for any of these frauds can lead to significant criminal penalties: incarceration, probation, fines, forfeitures and restitution.
Given the new Justice Department’s emphasis on aggressively going after both corporate and individual fraud, we stand ready and prepared to commit our legal defense resources to represent you in during federal and state criminal investigations, grand jury proceedings, related administrative enforcement proceedings and will aggressively fight your complex corporate case at trial, if necessary, to protect your good name and the good reputation of your company.