If you have issues viewing or accessing this file contact us at NCJRS.gov. - ce-or-.-. - --- -~ _ _ _~ _ _ _ _ _..!_____i:..._ ... .-~ __ . _ _ _- - - .... ~. _ _ _ _ _ _ _,.~;_ " .. __ .~ _ _':_ ._'-~ ____ .-'_~ __ ~_,. I .... _- .J 11;::'-/ U.S. DepartmeDt 01 Justice Law Enforcement Assis!:ance Administration National Criminal Justice Reference Service nCJrs JUNE 1980 WH!TE COLLAR CRIME This microfiche was produced from doc.uments received for inclusion in the NCJRS data base. Since NCJRS cannot exercise control over the physical condition of the documents submitted, the individual frame quality will vary. The resolution chart on this frame may be used to evaluate the document quality. 1.0 :; 1~2.8 W ~ ~ I~ w ~ ... l.::. 1J.L:~ FOR PROGRAMS TO COMBAT WHITE COLLAR CRIME 25 . ~ ~'. .~ L:: 111:hb 11111 MODEL CURRICULUM AND TEACHER'S GUIDE a u. \ I 111111.25 111111.4 111111.6 ,'. MICROCOPY RESOLUTION TEST CHART o NATiONAL BUREAU Of STANDARDS-1963-A , 11 Microfl~g ~ . . ." . . ' ...... proc~d;se 1:0 c~eat thi~ fiche ~omply the standards set forth in 41CFR 101-11.504; . ; ,. ,. -. . '.0 i"~·: witrt·" Points of view or opinions stated in this document are those of the author(s) and do not represent the official position or policies of the U. S. Department of Justice. -rN;'iion;'i i;;-stiiui; t-:.~, ~i;'stjce-J United States Department of Ju~tice Washington, D. C. 20531 ,Co_., ~.-," '0' 1 I -:~"=1 rt)ATE -FI LMED I. .! '12/01/ 81 f: I ..., ..... ~- . . . . . . -".,I;~': .... ~"> ,\ _+____ - _ .. ----.-.__ __ ._____ - - -_ _ ~ I _ _ _J , ':i~ ". I j I ,', , (;:: /J THE NATIONAL CENTER ON WHITE-COLLAR CRIME ,': Battelle Law and Justice Study Center 4000 N.E. 41st Street Seattle, Washington 98105 (206) 525-3130 . "1- ";,," ~, .. ; .. , Herbert-Edelhertz, Project Director Clifford Karchmer, Director of Training and Operations MODEL CURrLM.AND·T1E~S GUIDE FOR PROGRAMS TO COMBAT WHITE-COLLAR CRfME by Clifford L. Karchmer Proj ect l-1oni tors: James o. Golden, Director Criminal Conspiracies Division Office of Criminal Justice Programs, Jay Marshall Conspiracies Division Office of Criminal Justice Programs Cri~nal ~J U.S. Department of Justice National Institute of Justice This document has been reproduced exactly as received from the person or organization originating it. Points of view or opinions stated in this document are those of the authors and do not necessarily represent the official position or policies of the National Institute of Justice. Permission to reproduce this 1!Bpj I isllt!ld material has been granted by Public Domain LEAA, U.S. pept. of Justice to the National Criminal Justice Reference Service (NCJRS). Further reproduction outside of the NCJRS system requires permission of the ~ owner. This project was supported by Grant Numbers 77-TA-99-0008 and 78-TA-AX-OOSO awarded to the Battelle Memorial Institute Law and Justice Study Center by the Law Enforcement Assistance Administration, U.S. Department of Justice, under the Omnibus Crime Control and Safe Streets Act of 1968, as amended. Points of view or opinions stated in this document are those of the authors and do not necessarily represent the offir.ial position or policies of the U.S. Department of Justice. .\ , ----- _ ................ ~ _ _ .-"~, r r '·: ...- - - . . . ,.' .,. '~,;_ '~" ~'h" .-~ .' - . . - -_ _ _ _ _ _ _ _ -~., -~ " ,- . ' - -.......... 0 _ _........ I .. , ~ , ,I TABLE'0F'C0NTENTS I. How Trainers Can Use and Modify the Model Curriculum • • •••• A. B. C. 1 Recruiting and Orienting Instructors • 3 ~ .......... E. Obtaining Instructional Materials ·.. Comprehensive Curriculum on White-Collar Crime Enforcement Training • • • • • • · . . . . . D. II. ..·.. Introduction . . . . . . . . · . . . . . . . . Adapting the Model Curriculum to Meet Specific Needs • • • • • • • • • • · . . · . . Selecting Participants • Orientation to the Problem, I: Introduction--What Is White-Collar Crime? Orientation to the Problem, II: Relationship of White-Collar Crime to Other Crime Problems ...· . 5 7 9 ··· 10 ··· ··· 12 I 16 Detection: Intell igence Colle.ction and Analysis • • • • • • 18 Detection: Handling of Complaints • 20 Detection: Conducting Searches 'for ·......... I 22 Detection and Investigation: Employing Financial Investigation Tools 24 iii .... ,., 14 Detection and Investigation: Locating Sources of Documentary Information ; Preceding page blank ~_o 2 ..· Violations . . . . . . . Investigative Planning ~-, 1 ,: , ----------------------------~ , {) FOREWORD AND ACKNOWLEDGMENTS Investigation: Interviewing Victims and Witnesses • • • • • • • 26 Investigation: Interviewing Suspects 28 ............. Investigation: Computer-Related Fraud Investigation: Using the Computer as an ............ Investigative Aid . . . 30 32 Post-Investigation: Presentation of a Completed Investigation to the Prosecutor • • • • • • • • • • • 34 Post-Investigation: Use of Civil and Administrative Remedies • 36 This model curriculum is one of a series of publications by Battelle's National Center on White-Collar Crime as part· of its program of support services to agencies engaged in the prevention, detection, investigation, and prosecution of white-collar crime and related abuses. These publications are intended for use in actual law enforcement operations, as well as training, on the theory that the best training materials are those which most respond to the day-to-day needs of users who regularly practice"their skills. This model curriculum is based on a comprehensive view of the relationships between the elements of white-collar crime and the operational needs of the law enforcement community. It is, we hope, a roadmap which will assist law enforcement agencies to initiate effective programs for on-thejob training as well as formal training operations. It has been structured to encourage its users to adapt its contents to respond to specific agency needs. Special mention should be made of the support· and encouragement of James O. Golden, Director of the Criminal Conspiracies Division of the Office of Criminal Justice Programs, Law Enforcement Assistance Administration, and of Mr. Jay Marshall who is oUA L.E.A.A. Project Monitor. Last, we gr.atefully acknowledge the invaluable support of members of the Battelle Law and Justice Study Center staff,.and particularly that of Cheryl Osborn and Charleen Duitsman who typed our manuscripts, kept our files, and did all those things without which this series could not have been created. Herbert Edelhertz Project Director National Center on White-Collar Crime i' t 1- iv v _ -------------------~' ... _ - - .... , - ~-., I. HOW'TRAINERS'CAN'USE'AND'MODIFY THE'MODEL CRRICULUM A. About the Author _ _ r. Clifford Karchmer is a Battelle Research Scientist at the Law and austice study Center, Battelle Human Affairs Research Centers, Seattle. Currently he serves as Director of Training and Operations of the National Center on White-Collar Crime, located at Battelle, Seattle. Prior to joining Battelle, the author served as Director of the Massachusetts Organized Crime Control Council, as Police Program Specialist for the Massachusetts Committee on Criminal Justice, and as a special agent and research coordinator for the Pennsylvania Crime Commission. Other law enforcement publications, which he co-authored, include The Report on Organized Crime (Pennsylvania Crime Commission, 1970), and Compendium of Planning and Operational Guides to White~Colar Crime Enforcement (Washington, D.C.: Government Printing Office, 1979). Presently, he is completing an enforcement manual on arson-for-profit under a 1979 LEAA technical assistance grant to Battelle. Introduction Over the past-decade, we have seen nationwide interest in white-collar crime grow at a tremendous pace. Whether this concern has been generated by scandals or by the abuses uncovered by crusading public officials, the term "white-collar crime" has become a catchall expression. Often this term is used without clearly defining the abuse(s) it is intended to describe. In order to avoid a lengthy discussion of what should or should not be included in the term, the model curriculum uses this definition of white-collar crime: . • • an illegal act or series of illegal acts committed by nonphysical means and by concealment or guile, to obtain money or property, to avoid the payment or loss of money or pro~ety, or to obtain business or personal advantage. A number of major crime problems which are often treated as separate issues can fall within this definition. These include organized crime (especially where illicit profits are secretly plowed into legitimate businesses) and official corruption. Other problems could also be included within the definition, depending upon whether criteria such as concealment or criminal intent are applied. In the last analysis, the value of any' training program developed from the following model depends upon whether enforcement resources are committed primarily to invoke remedies for white-collar crime. lHerbert Edelhertz, The Nature, Impact, and Prosecution of White-Collar Crime (Washington, D.C.: U.S. Government Printing Office, 1970), p. 3. , , " vi -"",""",'_T - -~ - -- - , 2 3 Adapting the Model Curriculum to Meet Specific Needs 2 This model curriculum is addressed to the training needs of personnel working in general white-collar crime assignments (often known as "fraud" or "economic crime" units) which aJ:'e located in state or local police or prosecutors' offices. This curriculum is designed intentionally to orient personnel to the requirements of building a case as it moves along the enforcement process. This focus is substantially different from that of other approaches, which stress methods to attack specific types of fraud or to utilize particular laws or administrative remedies. Because this curriculum has been geared to requirements of the enforcement process as a whole rather than to its specific parts, it follows that the model curriculum will be most beneficial for those who want to conduct a process-oriented training program. Clearly, personnel in highly specialized enforcement units or in regulatory agencies will find some topics in this curriculum more helpful than others, depending upon their units' legal jurisdiction, policies, and priorities. In order to adapt the curriculum for personnel with specific needs (e.g., beginning, advanced, or specialized personnel), the user is provided with one or more references at the end of each topic discussion. These references can be reviewed in order to gauge the need to raise, lower, or otherwise modify the sophistication level by which each topic is addressed. One way to modify the curriculum for a particular group is to select course instructors directly suited to the needs of that group. For example, the treatment of financial investigation could be split into more than one lecture B. . 2~or segment, with a special instructor teaching advanced stUdents who are already familiar with the basics of accounting and financial investigation. Another method of adapting the curriculum is to select technical and specialized background readings for the students and to gear these readings to the students' experience levels or specialized disciplines. One publication designed to identify such material is the Compendium'of'Training'and Operational Guides to White-Collar Crime'Enforcement which contains over 60 references to technical materials. Limited copies are available from either the National Center on White-Collar Crime, located at Battelle, Seattle, or from the Criminal Conspiracies Division, Office of Criminal Justice Programs, Law Enforcement Assistance Administration, Washington, D.C. 20531. C. Recruiting and Orienting Instructors Recruiting qualified white-collar crime instructors is not difficult if trainers know what qualities to look for. One of the best ways to match instructors with training needs is to select several candidates for each course topic, each of whom might do a satisfactory job with that topic. Then, jointly with someone else either working on the development of the course or engaged directly in white-collar crime enforcement, discuss the strengths and weaknesses of each candidate. There is ample justification for selecting instructors on the basis of rigid criteria. First, it is important to examine the records of instructors as communicators of knowledge, as well as their records as investigators, prosecutors, or supervisors. Instructors may develop reputations as "terrific speakers" only because they are tellers of crilorful "war stories", not necessarily because they are good communicators of practical enforcement knowledge. Whether instructors will be paid or will volunteer their services, it is important to set forth for them a clear" concise statement that covers exactly what they are to speak ba~kgrund reading on refining educational and .see Ro~ert F. Mager, Preparing Inst~uc10alObJev, 2a ed. (Belmont, Calif.: Fearon Pub~lhers, 1975) .. The development of white-collar crime tra1nlng programs 1S also covered in Appendix A of the manual by.Herbert ~delhrtz, et al., The Investigation of White-Collar Cr1me (Washlngton, D.C.: U.S. Government Printing Office, 1977). tra1ng.obJecl~s, I I' o , Ii 4 about. This statement should also explain where and how each topic fits into the overall course theme. Conscientious instructors usually appreciate these efforts to help them structure their presentations. However busy they may be, they usually find time to prepare adequately for the course if they know'what is expected of them. If instructors work under a contractual (e.g., consultant) arrangement, it should be possible to include contract provisions covering both the required preparation and prior mutual agreement on subject matter. If the training budget can support these provisions f it will be a worthwhile investment of time--and money. In orienting instructors, it helps to obtain from them an outline of the points they will make in their presentations. If possible, encourage them to express each point in their outline as a simple, declarative sentence. These outlines can then serve several purposes. First, the outlines can be distributed to students so that they can follow each lecture, point by point. Second, they can be used by training Course administrators to spot needless overlap or to help detect gaps in coverage of important points so the problems can be remedied well before the Course. Third, outlines can be distributed to other instructors to give each one an idea of what the others will be covering and how each can develop or embellish a point made by another instructor. The National Center on White-Collar Crime is identifying expri~cd instructors in this field. Inquiries are welcome from those planning to conduct white-collar crime and related training courses. Other organizations which have sponsored training courses on or related to white-collar crime should also be contacted for advice and possible assistance: • • Economic and Financial Crimes Training Unit FBI Academy Quantico, Virgin{a 22135 Federal Law Enforcement Training Center Glynco, Georgia 31520 5 r I: l' ~> • National Training Center Internal Revenue Service 2221 Jefferson Davis Highway Arlington, Virginia 22202 • Cornell Institute on Organized Crime Cornell University Law School Myron Taylor Hall Ithaca, New York 14853 • Dade County Institute on Organized Crime Biscayne Community Col~eg 16400 N.W. 32nd Avenue Miami, Florida 33054 • National College of District Attorneys Bates College of Law University of Houston Houston, Texas 77004 , L I, J, In many locations, industry and professional associations have sponsored programs on white-collar crime issues. The most popular courses seem to be in the fields of insurance fraud, computer fraud, financial investigation, and business security. Local offices or chapters of national agencies and organizations can often provide information on available instructors and may be able to help rate their suitability for law enforcement audiences. D. Selecting' Participants Whether or not an organization has a selective admission policy depends upon local conditions of manpower availability, funding, and time. Assuming that it will be possible to select students from a list of applicants, the following criteria should be considered: Criterion Length of involvement in white-collar crime enforcement Reason"for'Concern Novice personnel may be too new to criminal investigation or prosecution to be able to ~istnguh the special requirements of whitecollar crime enforcement .... I ----- ---~'-. ... ----_.----.------•. (' -'~ l-I 7 6 Prior relevant training Students may have attended other courses as basic (or advanced) as that planned, and therefore may derive little or no benefit Degree of specialization Some specialists in white~'colar crime enforcement may have little, if anything, in common with the other studentsJ or they may have such Jimited involvement in the enforcement process that the bulk of the course may be inapplicable (and uninteresting) to them. In many cases, students who are more advanced than the majority of the other attendees may be helpful course participants for several reasons. First, they may serve as good evaluators of the course for·the·course·sponsor. Because of these students' experience, they are often good judges of the value of each instructional segment for the less-experienced students. Second, they can make use of their p~er status with other students to assist the less-experienced students in absorbing the course material--both formally in ~las and informally at meals and during free time. There are many viewpoints on ways to divide course attendees into workshop or discussion groups. Some believe that it is more helpful to "track" the students by placing into each workshop students with similar terms of service or specialized duties. In this way, novices, intermediates, and more experienced students will discuss problems at their respective levels of competence and in terms of mutual concerns. Others believe that it is best to mix students and avoid tracking. As a compromise, one might consider having some.workshops and discussion groups consist of a mix of all types of students, and others made up of students who are either tracked or assigned according to their specialities (e.g., police/prosecutors, or managers/operational personnel). Whatever method is chosen, it is important to be guided by one's own assessment of the background and needs of the student body. Clearly, concerns about workshop assignments in a "I "~. _ _.,__ ~." _ _ _ C" _ _ ' - _ . . . . t~ .~_, __ , .... ~.", •• ~- •• ~., --..---- seminar for chiefs of securities enforcement units are very different from those involved in training 50 investigators and 50 prosecutors from general fraud units. As a rule of thumb, it helps to develop a profile of course stude.nts which covers their backgrounds, specialities, and experience levels. One option to consider is to aim each course at the majority of students who form the "middle ground." Then, t"ime can be set aside to address the needs of special groups (e.g., novices, advanced, and/or highly specialized participants). E. Obtaining Instructional Materials With some searching, it is possible to locate a good deal of useful and relatively low-cost instructional material. First, consult the Compendium of Planning and Operational Guides to White-Collar Crime Enforcement, copies of which are available (in limited supply) from the National Center on White-Collar Crime. Second, canvass industry and professional organizations concerned with white-collar crime. The larger the jurisdiction, the more likely it is that a regional office or local chapter of such an organization is located within the area ser·ved. Many such organi zations maintain training staffs--nationally and sometimes locally--that have conducted programs for law enforcement agencies, as well as for their own personnel. If local staff members cannot help immediately, they can often place the requestor in touch with the national office's training or research staff. Frequently, training materials developed for "in-house" use ~an be made available to outside agencies if the requestor knows what to ask for and can assure the issuing organization that such materials will be kept within his or her distribution and security restrictions. Material published in government reports, including the products of LEAA-sponsored projects, can usually be obtained inexpensively or reproduced without copyright approval. There is a wealth of other material that is protected by copyright; f , 8 however, permission can often be obtained from the copyright holder.s to reproduce these materials.3 An initial search for instructional material should include those federal agencies that conduct training programs and develop their own material, such as the FBI, IRS, SEC, and LEAA.4 Private organizations that ~onduct educational programs on white-collar crime include the Insurance Crime Prevention Institute, Westport, Connecticut; The American Society for Industrial Security, Washington, D.C., the Institute of Internal Auditors, Altamonte Spr.ings, Florida; the Bank Administration Institute, Park Ridge, Illinois; and the Computer Security Institute, Northboro, Massachusetts. II. COMPREHENSlVE-CURRICULUM-ON-WHITE-COLLAR CRIME-ENFORCEMENT-TRAINING 3In view of recently enacted federal copyright legislation, this is a particularly important issue to be considered in preparing materials for training programs. 4As of this writing, training programs were being developed by the Enforcement and Compliance Division, Comptroller of the Currency, U.S. Treasury Department, Washington, D.C. 20219; and the Federal Law Enforcement Training Center, U.S. Treasury Department, Glynco, Georgia 31520. I ~·: , , 9 ! ~.- -~ ---- , - 11 10 Enforcement Issue: 4. Orientation to the Problem; I: Introduction - What Is White-Collar Crime? To communicate the responsibility that personnel have to educate the public in general, and busines.ses and professional associations in particular, about the need to combat white-collar crime, to deter such violations, to make it Instructional Goal: To educate enforcement personnel about (1) white-collar crime, and (2) the nature of the harm done to individuals and to more likely that violations will be reported, and to increase community cooperation with enforcement personnel. society by white-collar crime offenders. Resource ,Materials: Rationale: Investigators must develop a thorough working knowledge of what is meant by "white-collar crime," the relevance of this enforcement area to the broad range of indv~ual agency objectives, and the kinds of responses they may be capable of effecting. Unless investigative personnel are exposed to a well-developed and comprehensive session of "consciousness raising" at the beginning of their training, the various skills Ede1hertz, Herbert. White-Collar Crime. Office, 1970. The'Nature; Impact, and Prosecution of Washington, D.C.: Government Printing Ede1hertz, et al., The Investigation of White-Collar Cr ime, Chapters I-III. Washington, D.C.: Government Printing Office, 1977. A'Handbook on White-Collar Crime. Chamber of Commerce, 1974. Washington, D.C.: and techniques taught later may not seem relevant to the needs of the trainees and their agencies. White-collar crime refers to an enormous variety of individual crimes. Therefore, it is critical that the students develop an understanding of how white-collar crime offenders operate, and a perception that with their individual and collective energies they can combat them effectively, as well as advance their personal and agency objectives at the same time. Training Objectives: 1. To communicate a specific, operational definition of white-collar crime--one which includes the various offenses to which the term applies. 2. To clarify the nature and extent of white-collar crime in the nation and the different harmful effects that it has on individuals and economic and political institutions. 3. To understand the roles and relationships among criminal justice personnel who investigate, prosecute, and i otherwise combat white-collar crime. :' , Qo1""""'-. 12 Enforcement· Issue: Orientation to the Problem, II: Relationship of White-collar Crime to Other Crime Problems Instructional'Goal: To establish that white-collar crime is not an isolated problem, that it causes and grows out of other crime problems, including organized crime and corruption, in both the private and the public sectors. Rationale: White-collar criminal activities are closely related to other criminal activities. For those who intend to steal, white-collar crime is an alternative approach to theft, whether it is theft from the government or from private parties. Often those who are engaged in highly organized forms of crime (organized crime) commit white-collar crimes in order to realize and hold on to their illicit profits, or to find new (and perhaps otherwise legal) ways of investing their illicit earnings. It is essential that white-collar crime enforcement personnel develop a thorough understanding of all relationships between and among white-collar and related crimes, primarily to develop working relationships with units and 'agencies specializing in combatting these particular criminal activities. 13 3. To understand when, why, and how criminals active in organized crime engage in white-collar crime activities, or develop working relationships with criminals involved in fraud schemes. 4. To know the characteristics and indicators of corruption in public agencies, and how corruption develops in them. 5. To develop and maintain both liaison and operating relationships with agencies responsible for preserving integrity in governmental programs, as well as with agencies that investigate organized crime, corruption, and other types of well-planned and ongoing criminal activity. Related'Skills: 1. Interagency liaison 2. Intelligence analysis Resource'Materials: DeFranco, Edward. Anatomy of a Scam. Government Printing Office, 1973. To develop an awareness of characteristic white-collar criminal activities that naturally develop out of common street crimes and organized crime. 2. To develop a knowledge of criminal organizations in which planning, division of labor, secrecy, and inSUlation of leadership are the major characteristics that present detection and investigation problems. t al The Investigation of White-Collar'Crime, ewashington, D.C.: Government Printing Office, ~:t 1977. Gardiner, John A. Politics of Corruption. Russell Sage, 1970. Training'Objectives: 1. Washington, D.C.: Prevention, Detection; and. Local Government. Wash1ngton, D.C.: Government Printing Office, 1978. c~retion·fuP L man New York: Theodore, et ale ( \ f - ----- ~- - -~ .......-._. , (' _>'- _ _ _ _ _~ _ _~ _ _ , .• _ _ _ _ ~ _ _ _ _ _ _ _ _ _ ' "_ _ _ _ _ _ _ _ ~ _ _ _ _ _ _ _ _ _, _ _ _ • _ _r.,- -~ 15 14 Enforcement Issue: Inv.estigative Planning Instructional Goal: To familiarize the investigator with the value of early and continuing information analysis in order to plan for the various events that might arise during the investigation; and where necessary, to alter the direction of the investigation according to the findings of continuing information analysis. Rationale: Fraud often involves complex crimes in which the full dimension of the scheme is evident only after a prolonged investigation. In order to manage a fraud investigation successfully, it is important at the outset of the inquiry to determine: (1) that there is a strong prospect that the inquiry will be as productive as was initially expected; and (2) the different offenses that might have been committed. By proceeding in this manner, investigators will be able to build a case involving the maximum number of defendants involved. In addition, the investigator may select the most appropriate and effective charges to bring against the defendants, based upon a thorough review of alternative charging options. Training-Objectives: 1. To enable the investigator to analyze intelligence data, agency referrals, complaints, and other pertinent information to determine whether an investigation, in its early stages, has enough potential to proceed. 2. To gather all available information about a fraud scheme or a variety of schemes in order to chart all probable events and relationships that could account for the way in which the fraud developed. 3. To examine all possible patterns of facts and circumstances that explain a scheme or pattern of activity, in order to select, given the range of all possible options, the most effective criminal, civil, and/or administrative action. 4. To determine whether there are legitimate business explanations for the conduct under examination so that tmjustified enforcement action may be avoided; but, if the actions are determined to have no legitimate explanation, to increase the impact of the completed investigation. 5. To make use of a system for the management of materials, documentary and otherwise, gathered in the course of an investigation, and an indexing system to assure prompt, accurate access and retrieval of the material. Relevant Skills: 1. Intelligence collection and analysis 2. Document review and analysis Resource-Materials: O'Neill, Robert. InvestigaPl~. D.C.: Government Printing Office, 1979. Washington, Visual Investigative Analysis. Sacramento: California Department of Justice, Advanced Training Center, 1975. '.-, , -,~. , ...-~ ....... -~,. Q ~-. , ., "~'1 ~ <• • ~ Detection: Conducting Searches for Violations Instructional-Goal: To identify methods that investigators can use to uncover incidents and patterns of fraud in the .absence of complaints. Rationale: It is important that investigators know where and how to search for probable white-collar crime violations. Different types of fraud victimize different segments of the population. Investigators should be able to satisfactorily answer the following questions: how much fraud is there in my jurisdiction that may concern my agency? who are the citizens and what are the institutions victimized? and who are the probable offenders? Training Objectives: 1. To develop a special sensitivity to the indicators of fraud in one's jurisdiction, and to the existence of vulnerable situations in which such crimes are likely to occur. 2. To know the sources of public document and news media information that can enable thp- investigator to extract leads on probable fraud violations. 3. To obtain information on probable violations by developing cooperation with business and professional organizations. 4. To develop a liaison with other public agencies (e.g., licensing, regulatory, and revenue) in order to encourage the reporting of violations. 5. To use knowledge obtained from investigations in other types of cases (e.g., theft or organized crime) to help develop white-collar crime investigations of the same or other subjects. -'", '. "., ,'" :_'"~;-= . :~'" -:'2~.," .","" .-~ _.. _~,";:-'A1i. "'-:. ~ 17 16 Enforcement Issue: :.=~ • - - . : : . : . : . :....:.•• ..: . : . :... 6. To develop a familiarity with information on possible fraud violations contained in computer copy, and to be able to identify patterns of illegal activity from such information. Relevant Skills: 1. Document review and analysis 2. Intelligence aaalysis 3. Interviewing 4. Interagency liaison Resource Materials: A Handbook on White-Collar Crime. Chamber of Commerce, 1974. Washington, D.C.: U.S. Ede1hertz, et a1. The Investigation of White-Collar Crime, Chapter IV, pp. 179-199. Washington, D.C.: Government Printing Office, 1977. Godfrey, E. Drexel, et a1. Basic Elements of Intelligence (revised edition). Washington, D.C.: Government Printing Office, 1976. Villano, Clair E. Complaint and Referral Handling. Seattle: National Center on White-Collar Crime; forthcoming, 1980. , , r , ~- ........... '-. , - r 19 18 Enforcement Issue: Detection: Intelligence Collection and Analysis Instructional Goal: To enable the investigator to gauge the extent of fraud patterns in his or her jurisdiction and to identify probable fraud offenders. Rationale: The time and personnel of white-collar crime units are valuable. Time and personnel should be allocated according to priorities which in turn are based upon an accurate determination of the jurisdiction's fraud problems. In order to accomplish this, it is necessary for fraud unit personnel to develop skills in collecting intelligence (in the normal course of detection and investigation), in analyzing int.elligence to determine its reliability and importance, and in storing and retrieving such information. Training-Objectives: 1. To know what kinds of information to collect on the variety of fraud schemes and offenders operating in the investigator's jurisdiction, and how to collect them. 2. To elicit intelligence on a routine basis from other investigators in the same agency, in other agencies, and in private agencies, and to remain aware of interagency protocols, and security and privacy restrictions. 3. To analyze information on the various types of fraud schemes and offenders, demonstrating familiarity with such techniques as link, event, cash flow, and visual investigative analysis. 4. To identify and draw upon sources of public record information and confidential informant intelligence in the j ur isdiction. 5. To employ collection and analytical skills satisfactorily to the point that indicators of fraud schemes in their early stages of growth can be identified and such activities combatted through investigation ,and prosecution. 6. To be able to collect both strategic intelligence (at the detection stage) and tactical intelligence (during investigation) • 7. To use the intelligence gathered for planning the conduct of fraud investigations. 8. To use information contained in files of closed or terminated cases as intelligence on possible offenders. Relevant Skills: 1. Report writing 2. Document review and analysis 3. Interviewing Resource Materials: Edelhertz, et ale The Investigation of White-Collar Crime, Chapter III. Washington, D.C.: Government Printing Office, 1977. Godfrey, E. Drexel, et ale Basic Elements of-Intelligence (Revised edition), Chapter IV and Appendix F. Washington, D.C.: Government Printing Office, 1976. Hagen, Roger. The Intelligence Process and White-Collar Crime. Washington, D.C.: Government Printing Office, 1979. Handbook of Self-Evaluation Guidelines for Intelli ence Units. Sacramento: Cali ornia Department of Justice, Organized Crime and Criminal Intelligence Branch, 1976. \ ' i , ~~- -----------------~.,- ~- 20 Enforcement Issue: -~ ~- -- 21 Detection: 6. Handling of Complaints To use complaints as a means of determining whether Or not to initiate investigations and to allocate necessary resources. 7. To use the analysis of complaints as an indication of Instructional Goal: To teach the investigator the importance of encouraging and the unit's effectiveness. properly handling victim complaints, and procedures for 8. processing, retrieving, and tracking such information. To develop the capability of generating referrals to other agencies with jurisdiction over fraud problems, and to encourage referrals from other agencies to the investigator's Rationale: own. In general, enforcement agencies lack standard procedures for encouraging members of the public victimized by fraud to report such activity. Relevant Skills: By establishing both formal procedures 1. Interviewing and sensitive methods of handling personal interactions, fraud 2. Report writing unit personnel should be able to encourage citizens to report 3. Resource allocation white-collar crime offenses. Resource Materials: Training"Objectives: 1. Edelhertz, et ala The" Investigation" of White-Collar Crime, Chapter II, pp. 53-64 and 72-78. Washington, D.C.: Government Printing Office, 1977. To understand the crucial importance of complaints to the functions of detection, investigation, and prosecution. 2. To familiarize the investigator with methods to Villano, Clair E. Complaint" and Referral Handling. Seattle: National Center on White-Collar Crime; forthcoming, 1980. initiate and maintain contacts with citizens organizations and business owners in order to create an incentive for reporting i I fraud victimization. 3. To develop the capability to effectively assemble and II " analyze complaint information from different sources and/or agencies, including complaint information that is related but does not initially appear to be related. 4. To determine which complaints should be retained by the unit for verification and/or further investigation, and which , J 5. To enable the investigator to monitor at any time the I [ '\ I should be referred to other departmental units or outside agencies. i ! ! oj 1i \ status and progress of all complaints received. l ! r ! i I ~ , 1 i I l i i t, t I i .... , -~ rI " ..... ~-.' If 22 Enforcement· Issue: 23 Detection and Investigation: Locating Sources of Documentary Information 4. To know when and how to obtain information through the use of search warrants and subpoenas, and any special applications that warrants and subpoenas may have in white-collar crime cases. Instructional Goal: To enable the investigator to identify all sources of public record information about a subject, business entity, and/or fraud scheme from public and private agencies. 5. To understand the requirements of state and federal privacy and security legislation for access to, and usage of, records. Relevant Skills: Rationale: Investigators may embark on criminal investigations without obtaining and analyzing all available background information. Substantial information about offenders and their businesses ana fraud schemes is often readily available from a wide range of public licensing agencies, regulatory agencies, and other agencies, and even from professional associations. It is also important to obtain such information in order to determine whether regulations and laws regarding disclosure, registration, filings, and false statements may have been violated. 1. 2. 3. Resource Materils~ Edelhertz, et ale The Investigation of White-Collar' Crime, Appendix B, pp. 267-275. Washington, D.C.: Government Printing Office, 1977. Glick,. Rush, et ale Police, pp. 271-288. 1974. Training Objectives: 1. To familiarize investigators with the existence of repositories of information on prior investigation, litigation, licenses, property transfers, permits, registrations, filings, and other data on individuals, businesses, and fraud schemesJ Document review and analysis Report writing Interviewing Fraud Investigation: Fundamentals-for Springfield, IL: Charles C. Thomas, Real Estate and Title Research. Miami: Dade County Department of Public Safety, 1975. • ' . .1 ! and how to best obtain, store, retriever and utilize such information. 2. To locate those kinds of documents in each jurisdiction where the submission of false or incomplete information may be cause for administrative, civil, or criminal action. 3. To assemble a' file of all such available information in order to augment intelligence information about individuals and fraud schemes. , ; ; I \I \ I \ , .1 ; ~. l , ~ ! !I , I t f c ~ ~ , -------------"--25 24 Enforcement Issue: 4. Detection and Investigation: Employing Financial Investigation Tools accounting terms. 5. To guide auditors, accountants, and other financial examiners in uncovering the elements of fraudulent activity in Instructional Goal: To enable personnel to make productive use of financial documents _and, examinations to detect possible fraud and to use such information to guide investigations. Rationale: A frequent reason given for the reluctance to combat white-collar cr'ime is that investigators need to have extensive accounting backgrounds. Although such knowledge is helpful, it is not essential to the investigation of most types of fraud. It is important that investigators develop a general working knowledge of financial statements and balance sheets in order to make some preliminary determinations about: (1) what the statements alone tell about possible frauds; and (2) what leads the investigator can extract from the statements in order to ask the auditors or accountants specific questions. It is also essential that an investigator realize that the detection of fraud is largely assisted by a working knowledge of business practices and the financial conditions reflected in financial statements. Training' Objectives: 1. To identify likely sources of financial information, e.g., statements, books, checks, business records, mortgage documents, and sales and purchase documents. 2. To develop the capability to ask specific and relevant questions of auditors, accountants, bank examiners, and other preparers of financial examinations regarding possible fraudulent activity. 3. To be able to develop specific questions and assignments for financial examiners in order to obtain follow-up information. To develop a working knowledge of business and the course of investigations. 6. To use information generated by computers to detect and investigate fraud relating to financial transactions. 7. To be able to trace the movement and control of assets from the actual owner to straws and other parties. \ Relevant'Skills: 1. Document review and analysis \ 2. 3. Report writing Interagency liaison i \ i \ Resource 'Materials: Briloff, Abraham. More'Debits'Than'Credits:The'Burnt Investigators Guide to Financial Statements. New York: Harper and Row, 1976. Edelhertz, et ala The'Invstigao9fW~-Clr Cr~me, Appendix D, "The SRventh Basic Invest1gat1ve Techn1que. Washington, D.C.: Government Printing Office, 1977. Introduction to Books and Records. Academy, 1975. Quantico, VA: FBI '. Nossen, Richard. The'Determination of Undisclosed Financial Interest. Washington, D.C.: Government Printing Office, 1979. ;; t , ~'-. o ~'-"1: , , '. ii -1 i$~ 26 Enforcement Issue: Investigation: Interviewing Victims and Witnesses Instructional-Goal: To enable personnel to interact with fraud victims and witnesses in order to encourage cooperation and elicit the maximum amount of information. Rationale: Because fraud investigation usually involves determination as to whether a crime was committed rather than the identity of the offender, the investigation of white-collar crimes requires frequent contacts with possible victims and witnesses of the fraudulent activities. In order to interact with citizens sensitively, investigators must conduct themselves in such a manner as to persuade victims and witnesses not only to report offenses, but also to cooperate fully throughout the ensuing investigations. Training Objectives: 1. To conduct the interview in a manner to secure complete, detailed, and explicit information about fraud schemes and offenders. 2. To obtain all documentation relevant to the incident or scheme communicated by the victim or witness. 3. To reinforce the cooperation of the witness or vic~m by remaining sympathetic to, and cognizant of, his or her motives, so that continued cooperation will be forthcoming. 4. To remain aware at all times of the legal requirements in electronically recording and otherwise documenting interviews. 1 .' '/l ,. : , f,' :} V 27 Relevant Skills: 1. Note taking and report writing 2. Analysis of victim/witness motivations Resource Materials: Ede1hertz, et ale The'Investigation of White-~01ar'Cm, pp. 261-262 and Chapter IV, pp. 153-166. Government Printing Office, 1977. Washlngton, D.C. "Financial Interviewing," in Financial Investigative Technigues: Student'Coursebook. Arlin~t, VA: U.S. Internal Revenue Service, National Tralnlng Center, 1978. Condon, Richard. Interviewing'and Interoga~ in White-Collar Crime'Enforcement. Seattle: Natlona1 Center on White-Collar Crime; forthcoming, 1980. \ \ \ ,, ~.- r ;..> II " 29 28 Enforcement Issue: 5. To distinguish between the enforcement implications of interviews held at the request of a suspect and those held at the request of the investigator, and to distinguish between the Investigation: Interviewing Suspects different considerations that would detrmin~ Instructional Goal: To enable personnel to determine when, how, and under what conditions during the course of the investigation they should arrange to question those centrally involved or victimized. Rationale: Depending upon the nature of the case and progress of the investigation, it may be helpful at some point to interview suspects. The investigator's purpose may be to incriminate the suspect, or to persuade the suspect that the strength of the evidence against him or her warrants a plea of guilty. Since white-collar crime offenders can be better educated and more articulate than other criminals, investigators need to take special precautions and make extraordinary preparations when undertaking an interview. Interviews which are prem'ature, either in terms of scheduling or in preparation, may result in the failure of an investigation. Training Objectives: 1. To know at which point(s) in the course of a fraud investigation it is most beneficial to interview a suspect. 2. To understand the relative costs and benefits of conducting interviews at various stages of the investigation. 3. To remain cognizant at all times of constitutional and other legal requirements which can affect subsequent enforcement use of the products of the investigation. 4. To maintain a working relationship with a prosecuting attorney for the purpose of determining whether the suspect should be given a formal grant of immunity or other special consideration in return for his or her cooperation, and to avoid mistakes that, in effect, confer de facto immunity upon the suspect. the investigator's procedure in each case. 6. To plan thoroughly for questioning and to postpone it, if necessary, until able to pose the desired questions. 7. To conduct an interview successfully in the presence of the suspect's attorney, but in the absence of a prosecutor. i" Relevant'Skills: 1. Note taking and report writing 2. Interviewing Resource'Materials: \ Edelhertz, et ale The'InvestigationofWhite-Collar-Crime, Chapter IV, pp. 167-172 .• Washington, D.C.: Government Printing Office, 1977. i I .j, ; ·1 ; .. ,\ ------11-4"""'.' - . ; --- _-- •....._-, ...--_....-..---...-..------.. ..._. __......--_._-_.--_ ........ .. b -.~, .. ----.---------------.. ~ ~.c-:= ....,"'.,....... . ,. ...".,'-"-"' . .. ~ 5. To understand requirements involving evidence gathering and preservation, including special issues in search and seizure, in computer-related fraud investigations. Investigation: Computer-Related Fraud Instructional Goal: To enable the investigator to identify, obtain, and preserve evidence of the range of fraud schemes and offenses growing out of the use of computers. Rationale: Computers can be used to produce false billings, account entries, and other instrumentalities to commit white-collar crime. This requires that investigators be familiar with the computer as a data-processing mechanism, with the various illegal methods for manipulating computer operations, and with special approaches that computer technology requires in the course of a fraud investigation. Investigators often avoid this type of investigation because of an unwarranted belief that expertise in--rather than familiarity with--computer operations is required. Therefore, it is important that investigators become familiar with basic computer operations and terminology, but they should also learn where to locate experts in this field who can furnish specialized assistance. Training'Objectives: 1. To develop a basic understanding of computer operations and terminology. 2. To understand how computers are used as a data-processing tool in governmental and business operations. 3. To use computer operation audits as sources of investigative leads that may reveal the vulnerability of a system to fraud. 4. To determine when, in the course of a computer fraud investigation, it may be necessary to enlist the services of a computer expert, and what questions to ask. . ~-:·'=" 31 30 Enforcement Issue: " Relevant Skills: 1. Document review and analysis 2. Knowledge of financial examinations Resource Materials: Becker, Jay. The' Investigation of Computer ,Crime. Seattle: National Center on White-~olar ~r1meJ and Washington, D.C.: Government Printlng Offlce, 1980. Edelhertz, et ale The Investigation of White-Collar Crime, Chapter V, pp. 199-210. Washington, D.C.: Government Printing Office, 1977. \ 1\ Leibholz, Stephen, and Louis Wilson. User's Guide' to Computer'Crime, ChapterB 1-4, 11, and 12. Radnor, PA: Chilton Books, 1974. I I i ·· ... ; ·, ! .\ : ~ i , I " 1 i Ii ---------- " 33 32 Enforcement Issue: Relevant Skills: 1. Interagency liaison 2. Document review and analysis Investigation: Using the Computer as an Investigative Aid Instructional Goal: ~To familiarize personnel with methods of organizing. investigative information for orderly retrieval and analysis through computers. Resource Materials: Edelhertz, et ale The'InvstigaofW:C~lrm, pp. 210-213. Washington, D.C.: Government Prlntlng Offlce, 1977. National District Attorneys ASS?ciation .. Eviden~ Tracking: A Manual for·Psecutl~An. National District Attorneys AssoClatlon, 197~ Rationale: Investigators store large amounts of information inefficiently in their heads, on scraps of paper, in narrative reports, as well as in well-organized and indexed manual filing systems. Computers can assist with the organization and retrieval of information in individual investigations, and may also search through voluminous data in order to identify possible violations Ot patterns of such violations. Training Objectives: 1. To monitor by computer the receipt, flow, and outcome of complaints received by the unit; and according to such criteria as type of victim, kind of fraud schemes, and method of operation. 2. To use computerized printouts of information such as billings in order to obtain possible leads for further fraud investigation. 3. To pose specific investigative needs so that a computer specialist can provide the necessary information needed by the investigator in areas such as procurement bidding and billing of Medicaid services. 4. To be able to input, retrieve, and use information about fraud perpetrators, their schemes, methods of operation, and other data as an aid to an ongoing investigation. . Chlcago. H 1, -r i , J ,~ \.'\ :t ~ \ .- J .. ' ", , "' .... ' ,.,.,.. _....~"-<.' -~' ..""'""'.,.....,~ .. , -R,""","' ~- ,r r; 35 34 Enforcement Issue: Post-Investigation: Presentation of a Completed Investigation to the Prosecutor Instructional Goal: To enable the investigator to present all of the products of a completed investigation to the prosecutor in a format that met~ the prosecutor's basic requirements, and thereby enhances the likelihood of a favorable evaluation by the prosecutor. Rationale: Investigators normally submit their findings to prosecutors in the form of case summaries and collected investigative reports, supported by evidence displayed or described in an orderly manner which tracks the elements of the most likely criminal violations. This is frequently accompanied by some form of oral presentation. The loose format in which this material is presented may obscure the full value and impact of the investigator's findings. Often, what. is needed is more than a technical summary of the evidence s;_~\ \. . orting the case. It is crucial that the presentation show: (1) that there is a prosecutable case~ (2) how it should be presented in order to motivate the jury to return a verdict of guilty; (3) why the case is worthy of prosecution in the competition for court and prosecutor time; and (4) any community or public safety purposes that may be served by the prosecution. Where investigators have developed solid cases with sufficient evidence, frequently all that remains is that they organize the facts of the case into a tight, well-ordered, and coherent "package" for the prosecutor. This approach allows the prosecutor to make an accurate assessment of the merits of the case and to ask the investigator crucial questions based on the information presented. f f 1 ,I \I Training Objectives: 1. To enable the investigator to gather and present the findings of the criminal investigation in a complete and concisely written factual summary covering the nature of the offense and all pertinent evidence. 2. To enable the investigator to make a complete and concise oral summary of the case. 3. To organize all case information in the form of investigative reports, statements, do~umentary and other evidence in a manner that facilitates thorough review and easy reference. Relevant'Ski11s: 1. Report writing 2. Interagency liaison Resource 'Materials: Edelhertz, et a1. The Investigation'ofWhite-Collar Cri~, pp. 195-198. Washington, D.C.: Government Printing Office, 1977. Keutzer, Stephen H., and Clark E. Mears. Investigative ReP9 rt 'Writing. Salem: Oregon Department of Justice, Special Investigation Pivision, 1975. Internal Revenue Service. Financial Investigation Techniques. National Training Center, 2221 Jefferson Davis Highto1nV, Ar 1ington, VA 22202. ;, • t , ............ ' ... ~ - 36 Enforcement Issue: 37 Post-Investigation: 4. Use of Civil and Administrative Remedies To develop complete knowledge of all regulatory and licensing bodies in one's jurisdiction, and the range of information available to them in applications, filings, and Instructional Goal: repo~ts, To make the investigator and prosecutor aware of the including their powers to obtain documentary evidence existence and value of noncriminal sanctions that can be and other evidence of possible fraud. invoked to meet objectives of prosecution, deterrence, and restitution. Relevant Skills: Rationale: Investigators and prosecutors frequently fail to make full use of information gathered in the course of an investigation, A number of civil and administrative criminal actions. These remedies obtain relief for the fraud scheme victims through restitution, and by effecting Training Objectives: 1. To assess the relative benefits of exploring civil or administrative alternatives early in the course of a fraud investigation, so that if there is a later fallback to a civil remedy, or if this option is selected initially, the investigation can most effectively proceed. 2. 2. Interagency liaison 3. Report writing Blakey, et ale "Enjoining Illegality," Apendi~ to Rackets Bureaus: Investigation and Pros~cuin of,Organlzed Crime. Washington, D.C.: Government Prlntlng Offlce, 1978. remedies may be invoked, either in place of or in addition to punishment, may also serve the objective of deterrence. Document review and analysis Resource Materials: or the evidence which does not fall within their focus on making a criminal case. 1. 1 \ f I i i { The Use of Civil Remedies in Organized Crime Control. Raleigh, NC: National Association of Attorneys General, 1977. The Use of State Re~ulatory Action Against Criminal Infiltration of Legltimate Business. ,Sal:m: O:e?o~ Department of Justice, Special Investlgatlon Dlvlslon, 1974. "Federal False Claims Act: A 'Remedial' Alterna~iv ~or2 Protecting the Government from Fraudulent Practlces, Southern-California Law Review 159 (1978). 5 f To develop interagency liaisons with licensing, revenue, and regulatory bodies early in an investigation in order to explore the complete range of available remedies. 3. To use such remedies as the Racketeer Influenced and Corrupt Organizations (RICO) law's civil provision, * and the Federal False Claims Statute; and to develop evidence according to the requirements of state and federal antitrust laws. * 18 U.S.C. sec. 1964(c). I