White Collar Crime
White collar crime may appear deceptively innocent to the average corporate employee or executive. It might continue unnoticed for years, and even if it is discovered by the company, identifying all of the individuals involved is an educated guess at best. Disproving their intent to stealfrom or defraud their employer is even more challenging because in some cases ,intent may be established through inference or evidence of a person's knowledgeof a plan to embezzle or defraud the employer.
Elements of White Collar Fraud and Embezzlement
In general, the term “whitecollar crime” refers to unlawful acts, the most common of which are fraud andembezzlement, committed by corporate executives and other professional workers.1
White collar fraud isdivided into three primary categories: mail,bank, and wire. Such cases are typicallyheld in federal court because they affect interstate commerce. Ingeneral, the burden is on the governmentto prove beyond a reasonable doubt that the accused knowingly or intentionallyparticipated in a scheme to defraud another of money or property.2
Embezzlement cases may be held in state or federal court. Under Florida law, embezzlement is considered theft, which involves “knowingly obtain[ing] or us[ing]... the property of another with intent to... deprive the other person of a right to the property...”3 Federal law, in turn, provides in part, Whoever embezzles, steals, purloins, or knowingly converts [property of the United States]... or... receives, conceals, or retains the same with intent to convert it to his use or gain... [s]hall be fined under this title or imprisoned not more than ten years, or both...”4
Mens Rea: The Critical Component
The crux of a white collar case is the issue of intent or mens rea. In order to avoid a fraud or embezzlement conviction, the criminal defense lawyer must convince the jury that the defendant did not intend to divert funds or other property improperly. Often, this is a difficult hurdle to overcome, particularly where in some cases, intent may be inferred by circumstantial evidence or by evidence of the defendant's knowledge that the acts were unlawful.5 As such, a forensic accountant is extremely beneficial to the defense in casting reasonable doubt on intent.
Role of the Forensic Accounting Expert
Over the past few years, particularly in the wake of the Enron case, the use of forensic accountants in white collar cases has increased significantly. Today's accounting experts are challenging traditional methods of proving or disproving intent in white collar cases. Given that lawyers are rarely financial gurus, these “the detectives of the accounting field are important allies. 6
John Magliano, who has served as a forensic accounting expert in state and federal cases for the past ten years, describes forensic accountants as “CPAs with a nose for investigation and defines his job as simply “finding the truth.7 Although financial records alone cannot reveal what was in someone's mind, the accountant's inquiry extends far beyond a mere review of financial spreadsheets. For example, a good accounting expert uses digital forensics to scrutinize all office and mobile phone records as well as relevant computer files, including e-mail, instant messages, websites visited, and electronic documents. Even if such files have been deleted, a savvy expert will have the tools to recover them as well as search through meta-tags and backup files.
An experienced and skilled forensic accountant is particularly valuable to the defense in casting reasonable doubt on the issue of intent. This can be accomplished by showing, for example, that the defendant was financially viable and therefore would have no reason to steal or defraud the employer, or that the funds were diverted by mistake or oversight.8 Even if a defendant is found guilty of a white collar crime, a forensic accountant may still be useful in helping uncover other perpetrators, giving the defense attorney the opportunity to negotiate a reduced sentence in exchange for the defendant's information about co-conspirators.
To offer a real-life example, we had a case recently where our client had filed a civil complaint in another jurisdiction to recover damages in excess of $200,000. While that case was pending, the money was transferred from the defendant in the civil case to our client's bank account, and the bank was unable to determine who had initiated the transfer. Fortunately, the government did not use a forensic accountant to try to prove that our client had embezzled the money, and the case was dismissed. If they had used an expert, we would have retained our own forensic accountant to undermine the allegation that our client was involved in the transfer.
Establishing reasonable doubt on the issue of intent is no small feat in white collar fraud or embezzlement cases, especially where the government can prove intent through inference or circumstantial evidence. As a result, a criminal defense lawyer in a white collar action is well-served by a comprehensive defense strategy that incorporates the technical expertise of a forensic accountant, who can cast doubt on the defendant's intent to steal from or defraud his or her employer.
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