Public Corruption Update

Periodically Whitecaps links readers to the Internal Revenue Service’s Examples of Public Corruption Crimes Investigations, a report updated quarterly. The IRS is not the only federal law enforcement agency involved in public corruption crimes investigation. The Federal Bureau of Investigation (FBI) also has a prominent role in public corruption investigations.

Some news accounts have suggested that the FBI has reassigned many special agents from public corruption investigations to counterterrorism activities. Recently in San Francisco, Attorney General Michael Mukasey sought to comfort citizens and afflict corrupt officials by renewing his pledge to pursue public corruption. His comments were reported in an Associated Press story in USA Today headlined Mukasey vows corruption crackdown.

The US Department of Justice posted a press release dated Thursday, March 27, 2008. It was titled Fact Sheet: the Department of Justice Public Corruption Efforts. This press release includes both statistical data and anecdotal case studies. It explains the DoJ’s role in public corruption investigations, both foreign and domestic. (Note: The press release refers to the FCPA but doesn't explain the acronym. It is the Foreign Corrupt Practices Act.)

It would be a mistake to conclude that the IRS and the FBI do not work cooperatively on public corruption crimes investigations. Both agencies have unique and important jurisdictions and assets that make it much more efficient to team up on these investigations.

The Spitzer Investigation, Part 2

It is 8:30 AM in Coeur d’Alene, Idaho. Eliot Spitzer is expected to resign from his position as the Governor of New York within the half hour. Unless Spitzer has cut a deal with prosecutors, his resignation should not have any bearing on his prosecution for violation of federal currency transaction laws. Because Spitzer was formerly New York’s Attorney General responsible for prosecuting complex financial crimes, readers might think he would have been smart enough to evade the law. The banking laws have been written to make that kind of informed evasion more difficult.

Anyone with a bank account, anyone who moves money, is subject to transactional surveillance by US banks. For an entertaining (or alarming, depending on your point of view) take on this, listen to a National Public Radio report titled “Bank [sic] Scrutinize Even Routine Transactions” by Adam Davidson.

To have a better understanding of federal currency transaction laws, go to the Internal Revenue Service’s “Bank Secrecy Act” webpage and click on the various links that explain specific Bank Secrecy Act requirements to assist with education and compliance with the law.

If you’re really into money laundering, read the Office of the Comptroller of the Currency’s “Bank Secrecy Act / Anti-Money Laundering - Comptroller’s Handbook”. This little gem is 92 pages long, but it is easily read and understood. It is one of the better primers on money laundering. For example, the Suspicious Conduct and Transactions list begins on the report’s page 12 (page 15 of 92 on the .pdf paginator). That list identifies behaviors that should or could trigger a Suspicious Activity Report.

One of the more interesting crimes chargeable under federal law is “structuring” (31 USC 5324). It is a crime of evasion. This has been mentioned as one of the crimes for which Spitzer is being investigated. In simple terms, “structuring” means the person accused knew of the law and intentionally broke up one or more reportable financial transactions into smaller transactions to get their dollar value below the threshold that would have triggered a report required by law. For a detailed discussion of “structuring”, read “Structuring Financial Transactions to Evade Reporting Requirements - A Trap for Unwary Defendants Yet an Opportunity for Defense Counsel“.

Some readers may feel that the banking laws are too intrusive, that they allow too much official attention to be paid to the financial transactions of honest citizens, citizens who have no desire or intent to violate banking laws. The challenge faced by legislators and law enforcement is that not all citizens are honest. There are citizens who seek out ways to intentionally evade the financial transaction laws and violate them. Typically these violators are financially and legally astute. As violators become more skilled in violation and evasion, the tools available to law enforcement must expand to detect and prosecute the violators.

The Spitzer Investigation

By now most readers know that New York Governor Eliot Spitzer has been implicated as a client of a high-end prostitution ring. Some of our local public officials in Kootenai County and Coeur d’Alene, Idaho, might want to look at how the allegations against Spitzer came together.

Some of the details were disclosed in today’s New York Times article headlined “Revelations Began in Routine Tax Inquiry”. What may have begun as a routine income tax inquiry by IRS revenue agents, probably in response to a Suspicious Activity Report, was fairly quickly handed off to IRS Criminal Investigations (CI) agents and the FBI.

Most people have a fair, consumer-level understanding of the duties and responsibilities of FBI special agents. Fewer people understand the role of IRS-CI agents and how they and FBI agents work cooperatively to fight money laundering and other financial crimes.

Whitecaps’ post of January 25, 2007, was titled “IRS Criminal Investigations” . It introduced readers to the duties, responsibilities, and investigation methods used by IRS-CI agents. The links in that post are still active today.

Spitzer is in a lot of trouble. He was formerly the New York Attorney General. He had to know that his money was being used to support a criminal enterprise. He apparently took great care to avoid moving the money with wire transfers, and he also apparently took pains to conceal how he used the US mail to move it. Soliciting a prostitute is the least of the charges he may have to face. If he hasn’t already, Spitzer will lawyer up today.

Don't Push That Button!

I hope there’s more to this March 6, 2008, Spokesman-Review story headlined “Phone evidence accidentally erased”. In case the story link won’t connect (I’m not a subscriber to the S-R), here are the basic facts.

A man on trial for vehicular homicide was allegedly using his cellular telephone when the car he was driving collided with another vehicle. Five occupants in the other vehicle were killed. The cellular telephone, more accurately the information stored electronically in the telephone’s circuits, was likely to be evidence at the man’s trial.

But approximately a month ago prosecutors, accident investigators and attorneys for the defendant met at the Washington State Patrol’s Spokane office to examine evidence for defendant’s upcoming trial. During the course of that examination, defense counsel was allowed to handle the cell phone. The cell phone was then plugged in to a power supply, and defense counsel was further allowed to turn on the phone’s power. While defense counsel was handling the phone, the data created during the phone call in progress when the accident occurred was altered, by some counts erased. This was reportedly because the defense counsel had hit the phone’s ”send” button. The trial judge has determined that defense counsel did not intentionally destroy the evidentiary value of the data stored in the cell phone.

The newspaper story strongly suggests that while the cell phone had been properly booked into evidence, it had not been examined and analyzed by qualified evidence technicians trained and skilled in the recognition, retrieval, storage, and documentation of electronically stored evidence.

Why had the electronically stored evidence in that phone not been properly processed before the phone was handled in a manner that changed and maybe destroyed its evidentiary value? Procedures for properly preserving cell phone evidence were established in the mid-1980’s. I was personally involved in developing the techniques used by the US Secret Service, but other federal agencies including the FBI and Air Force Office of Special Investigations were doing it, too.

I suspect the prosecutor and the judge will have some serious questions about why the Washington State Patrol had apparently failed to process the electronically stored evidence before allowing the cell phone to be handled by anyone other than qualified technicians. Those would be the right questions to ask.

Addendum on 03-07-2008: The headline mentioned in the first paragraph of this post was the one used when the article was first posted on Thursday, 03-06-2008. The headline was changed this morning although the URL remained the same.

Arson On the Street of Dreams

Our local and regional public safety and government officials should closely follow the progress of the "Street of Dreams" fire investigations. Read carefully the Seattle Post-Intelligencer article headlined "Fire Destroys 'Street of Dreams' Homes." Readers will note there has been some social controversy in the Maltby-Woodinville area where these fires occurred. The controversy involves developments being built over an aquifer, cluster housing, and disagreements over local governments' efforts to manage growth.

Initial news reports focused on a banner found at one of the crime scenes. The banner suggested the fires might have been set by the Earth Liberation Front (ELF), a group whose methods have been characterized by the FBI as special interest extremism. However, the same P-I article reported, "FBI Assistant Special Agent in Charge Dave Gomez said the arsons fit the profile of an ELF attack, but cautioned that anyone could have set the fires and claimed it as an ELF action."

The P-I's story was accompanied by a series of photos of some of the fire scenes. One photo caption included this statement, "Eco-terrorists are suspected of using explosive devises [sic] to destroy or damage several Street of Dreams show homes, which burned in Woodinville on Monday."

Arson can be a very complex crime to investigate. Though motive is not an element of the crime (motive need not be proven to get convictions), it is of interest to investigators. It is often useful to use motivation as the ribbon on the package of physical evidence at trial. Motivation sometimes answers the "why?" question jurors often want to have answered. The Insurance Information Institute's "Topic - Arson" webpage gives a statistical breakdown of the most common motives for arson.

Readers who want to learn more about this complex crime and what motivates people to commit it may want to look at the interFIRE.org website. That site bills itself as, "...the complete resource for fire services, fire insurers, law enforcement and others whose duties involve arson investigation, fire investigation safety and fire scene training."