Many Americans are aware that U.S. Sen. Bob Menendez (D-NJ) was indicted this past September for conspiracy to commit bribery, conspiracy to commit honest services fraud, and extortion—all white-collar crimes. The New Jersey lawmaker has a long history, dating back to 2006, of either being investigated or indicted for white-collar criminal activity.
Many less well-known people are charged and convicted of white-collar crimes nationwide. For example, recently, investigations and charges have been filed against individuals for conspiracies to commit wire fraud in connection with the submission of fraudulent CARES Act loan applications. The Coronavirus Aid, Relief, ND Economic Security (“CARES”) Act was a federal law enacted in March 2020 to provide financial assistance to those financially impacted by the COVID-19 pandemic.
The FBI reports that white-collar crime, a term coined in 1939 by criminologist Edwin Sutherland in a speech entitled The White Collar Criminal, costs the U.S. roughly $300 billion each year. This explains why the U.S. Justice Department takes white-collar criminal activity so seriously.
Deputy U.S. Attorney General Lisa Monaco in a March 2, 2023 speech at the American Bar Association National Institute on White Collar Crime said that white collar crime, particularly corporate criminal wrongdoing, “jeopardizes jobs, savings, our economic security, and increasingly, our national security.”
But what is white-collar crime?
As its name suggests, it is a crime associated with getting money or services one is not entitled to receive and is generally non-violent. While the term conjures images of three-piece suits and sneaky boardroom plots, typical white-collar defendants span the economic spectrum.
The U.S. Attorney’s Office often describes them as just “Harris County man and woman,” nothing particularly distinguishing about them—they weren’t CEOs of Fortune 500 companies, they weren’t household names guaranteed to lead the news at night with the announcement of their plea hearing. They are often just middle-class people who sought PPP Loans during the Pandemic but did not qualify for the program and submitted falsified documents to receive federal dollars. Instead of using the funds to support payroll and keep workers employed, they often use the funds to buy motorcycles, accumulate luxury goods, take vacations, and get plastic surgery.
These misrepresentations and misappropriations are the hallmarks of white-collar crimes. Generally, white-collar criminal activity is committed by individuals, corporations, and organizations that have positions of individual, financial, and community trust but violate that trust in some way. It can generally be understood as improperly receiving money or depriving another person of money. Fraud-related criminal activity makes up 63 percent of all white-collar crimes, but the category can include:
- Tax evasion
- Embezzlement
- Money-laundering
- Antitrust
- Bribery
- Racketeering/extortion
- Larceny/theft
- Ponzi schemes
- Insider trading
- Identity theft
- Personal use of corporate or government funds
- Dealing in counterfeit goods
- Copyright infringement
- Theft of mail
- Import and Export violations
- Computer Fraud and Abuses
White-collar criminal activity can be found in all segments of the population. When these prosecutions were much more in the public eye, there used to be a saying that there were those who were subjects of a federal white-collar investigation and those who would be. This is because the elements of a white-collar criminal case are often shockingly basic and involve fairly common activity.
For example, if Bob wants to buy a house, and the bank asks what his income is, Bob might be tempted to tell the bank that he makes $350,000 a year because he thinks he’ll be able to get a bigger loan for a bigger house. In reality, though, Bob only makes $80,000 a year and has exposed himself to criminal prosecution for bank fraud.
Or, as another example, Steve has a business idea and asks people to invest in his company. He tells potential investors that if they invest $25,000, they will get $100,000 back in five years. Steve, however, knows this isn’t true—expected returns on investment are only 10%, and what’s more, he got so excited about all the investment flowing in that he didn’t invest money in the business; instead, he bought a fancy car and other trappings of success. Steve just exposed himself to criminal prosecution for wire fraud.
Often, we see the government prosecuting individuals for receiving government money they are not entitled to. For example, a doctor or someone in the healthcare industry might submit payment requests to Medicare for treatment that was never performed; that can lead to a federal investigation and prosecution for healthcare fraud. Or, as seen above, in the prosecution of PPP fraud, getting money they weren’t entitled to or spending it in disapproved ways. After Hurricane Harvey, many individuals in the Houston area were investigated and prosecuted for getting money from FEMA for property that was not damaged by the storm.
White-collar crimes involve all categories of life in the United States:
- Taxes
- Insurance
- Bankruptcy
- Financial institutions
- Consumers
- Healthcare
- Federal programs
- Corporate
- Welfare
- Commodities and securities trading
According to the most recent data provided by the United States Sentencing Commission, white-collar crime is broadly the third-largest category of crimes prosecuted by the United States federal government. Immigration and Drugs comprise approximately 30% of all prosecutions each, while financial crimes and firearm violations account for roughly 13% of all prosecutions each. (“Other” accounts for about 10%, while sex crimes, including child pornography, account for about 5%.)
Statutorily, the penalties for white-collar crimes are among the most severe penalties imposed by the federal government. Most have a punishment range of 0 to 20 years imprisonment, while some, such as bank fraud (making false statements to a bank to get funds), carry a maximum punishment of 30 years. By contrast, improperly disclosing classified information carries a maximum penalty of only ten years imprisonment. White-collar crimes are serious crimes.
Statistically, the average sentence in white-collar crime cases is 27 months, but it is common to see much higher sentences imposed. A person embezzling millions of dollars from a bank can easily face a sentence of ten years or more.
While Martha Stewart famously received a five-month sentence for her insider trading conviction, Bravo reality TV “star” Jenn Shah received a sentence of 78 months for her role in a telemarketing scheme targeting senior citizens. It is also not uncommon for someone billing Medicare for hundreds of thousands of dollars of unprovided services to face a sentence of 60 months or more. The average may be 27 months, but that is because there is an extensive range of sentencing possibilities in the federal criminal justice system; many sentences are lower than 27 months, but many are much higher.
Sentencing in white-collar cases, as in all federal criminal cases, depends on the application of the relevant United States Sentencing Guidelines. Federal judges must consult the sentencing guidelines before imposing a sentence in virtually every federal criminal case. Federal sentencing, however, is a topic of discussion that is far too convoluted for this post, and we’ll save that for another time.
In recent years, there has been a perception that white-collar prosecutions have decreased. That’s probably not true—in 2006, white-collar prosecutions comprised about 15% of all federal cases; in 2012, white-collar prosecutions accounted for 15% of all federal cases; and, as noted, today, they make up about 15%. Nonetheless, there is a public perception that white-collar prosecutions should become more common and that not enough is being done to punish people getting money illegally.
The public statements by Ms. Monaco seem to suggest that there may be an increase in white-collar prosecutions. If so, this would be a significant policy change. White-collar investigations are expensive to conduct. They involve many federal agents and thousands of pages of financial records, all of which must be scrutinized by investigators and defense attorneys.
Because the criminal and civil penalties faced by an individual in a white-collar criminal investigation are wide-ranging and often severe, it is best that the defendant has the services of an experienced white-collar criminal defense attorney to withstand a potential federal investigation and prosecution.
As in all criminal investigations, it is sage advice to refuse to answer any questions from federal investigators without counsel.