The problem with white collar crime

White-collar crime: this kind of crime spans a wide range of frauds committed by business and government professionals. These crimes are characterized by deceit, concealment, or violation of trust and are not dependent on the application or threat of physical force or violence; Wikipedia: refers to financially motivated, nonviolent or non directly violent crime committed by individuals, businesses and government professionals 

The New York Times and other outlets report that two key New York state prosecutors have resigned from a case that is gathering evidence to potentially prosecute the ex-president for his past business practices in New York. In my limited experience, white collar crime is hard to prosecute and get convictions for. My guess is that about 0.05% of all white collar crime is prosecuted. Lack of sufficient evidence to convict is the main reason. Most of the few cases that are brought to trial lead to a conviction because sufficient evidence to convince a jury was found. Plausible deniability is a powerful shield that protects white collar crooks who know how to use it as a defensive weapon against law enforcement.

The main problem is insufficient evidence to convince a jury of a crime beyond a reasonable doubt. There are ways to create reasonable doubt in at least 1 juror on a jury. Systemic factors also inherently create room for reasonable doubt, e.g., no one takes any responsibility for anything they can weasel out of. That is just standard business practice. 

So, ‘reasonable doubt’ is all that it takes in the mind of one juror to get a crook off the hook. There may also be a limited resource problem because prosecuting white collar crime take a lot of time to gather evidence. 

With the resignation of the two key prosecutors after their boss expressed doubts about the case, it looks like the ex-president will get off of white collar crimes he committed in New York state. The NYT writes:

The two prosecutors leading the Manhattan district attorney’s investigation into former President Donald J. Trump and his business practices abruptly resigned on Wednesday amid a monthlong pause in their presentation of evidence to a grand jury, according to people with knowledge of the matter.

The prosecutors, Carey R. Dunne and Mark F. Pomerantz, submitted their resignations because the new Manhattan district attorney, Alvin Bragg, indicated to them that he had doubts about moving forward with a case against Mr. Trump, the people said.

Early this month, (Trump’s accountants] Mazars notified the Trump Organization that it would no longer serve as its accountant and that it could no longer stand behind a decade of Mr. Trump’s financial statements.

Mazars said it had not, “as a whole,” found material discrepancies between the information the Trump Organization provided and the true value of Mr. Trump’s assets.

Even with the retraction from Mazars, a criminal case would likely be difficult to prove. The documents, known as statements of financial condition, contain a number of disclaimers, including acknowledgments that Mr. Trump’s accountants had neither audited nor authenticated his claims.

And the prosecutors would have to show that Mr. Trump’s penchant for hyperbole crossed the line into criminality, a tall order when it comes to something as subjective as property values. A case like this might hinge on the testimony of a Trump insider, but the prosecutors have not persuaded Mr. Weisselberg to cooperate with the investigation, depriving them of the type of insider witness whose testimony can be crucial to complicated white-collar criminal trials.

Another challenge is that Mr. Trump’s lenders might not appear to a jury to be sympathetic victims.[1] The lenders, which made millions of dollars in interest from Mr. Trump, conducted their own assessments of his assets.

The advantages a white collar criminal has are huge and obvious. Mazars hides behind disclaimers. Juries will not be sympathetic to big lenders who made lots of money helping the ex-president commits his crimes. Witnesses refuse to cooperate. Maybe it is a miracle that any white collar criminals are ever convicted.

Adding to the deep insult of his probably unpunishable criminality, the ex-president publicly blasts the District Attorney as a politically motivated black racist, even though his predecessor DA was a White guy who started the investigation into Trump’s corrupt business dealings. 

When I complain about the rule of law being under attack and weak, a major part of what I am complaining about is immunity from prosecution for white collar crimes.[1] Street thugs are not white collar criminals. Rich and powerful people are. They have the opportunity, a protective system and an intense motive, more wealth and/or power, that drives them. Why not be a white collar crook? The reward is usually quite high and, when a good opportunity presents itself, the risk of accountability is quite low.

Footnote: 

1. A lawsuit I was very familiar with involved an unsympathetic jury (not a white collar crime). An attorney committed malpractice and that cost his clients about $800,000 in avoidable loss. The jury convicted the attorney for malpractice but awarded his former clients $1 in damage. Why just $1? Two reasons. First, the clients were paying the attorney “only” $187/hour when the going rate was closer to maybe about $250/hour. The attorney, not the clients, suggested that rate because that was his rate for similar work and they accepted it.

Second, was the defense attorney’s closing argument based on a story that he claimed was personal. His story was this: Me and my wife went out to dinner. I was looking forward to a nice steak. But when we ordered, she made me get the chicken. End of story.

I was completely baffled by that story and its relevance to the lawsuit. My confusion aside, apparently the chicken dinner story left a big impression on the jury. Apparently, they thought the attorney’s wife was a cheap skate and he deserved his steak, not the chicken. The jury transposed that reasoning into the lawsuit and decided the two clients were cheap skates and all they deserved was $1 for their cheapness. 

So, the clients paid ~$300,000 to their attorneys and got $1 in return for their loss. They would have been ~$300,000 better off just letting their loss go. 

Lessons: Juries are humans and can be deeply flawed. Humans are often (usually?) not rational beings. The legal system is not close to perfect. To protect the innocent, the law is heavily tilted in favor of the accused, especially accused white collar criminals. That tilt also protects the guilty, especially smart white collar criminals who know how to build and maintain plausible deniability.

Plausible deniability in action