DOJ Promises More Wiretaps In White Collar Cases

Hilary Russ


November 4, 2010

The head of the U.S. Department of Justice’s Criminal Division said Thursday that the department’s use of wiretaps would “continue to go up dramatically” in all kinds of cases, including in the department’s all-out assault on white collar crime in the wake of the financial crisis.

“We have begun increasingly to rely, in white collar cases, on undercover investigative techniques that have perhaps been more commonly associated with the investigation of organized and violent crime,” said Lanny Breuer, assistant attorney general of the DOJ’s Criminal Division, at the Practising Law Institute in New York on Thursday.

Last year, prosecutors and regulators from the U.S. Securities and Exchange Commission said they would use more of the blue collar investigative techniques to combat white collar crimes.

The DOJ’s Criminal Division has beefed up its Office of Enforcement Operations, which reviews and approves all applications for federal wiretaps across the U.S., Breuer said.

The OEO has a new director, Paul O’Brien, and has “substantially increased” the number of attorneys who review applications for wiretaps, Breuer said.

The shift toward increased use of undercover tactics became glaringly apparent in the largest hedge fund insider trading case ever, against Galleon Group founder Raj Rajaratnam and several others, after Rajaratnam was charged in October 2009.

The alleged scheme was busted with the use of wiretaps, which Rajaratnam has attacked in both the DOJ and SEC cases against him.

In January, prosecutors also brought a high-profile foreign bribery case using undercover techniques when they arrested 22 executives and employees of companies that make military products in an organized crime-style sting operation, a coup the agency called the largest single investigation and prosecution since it started enforcing the Foreign Corrupt Practices Act.

That case was also the DOJ’s “most extensive use ever of undercover law enforcement techniques in an FCPA investigation,” Breuer said Thursday.

Breuer also gave some hard numbers that prove what the defense bar already knows: FCPA investigations have boomed in the past several years and are still on the rise, Breuer said.

In 2004, the DOJ collected about $11 million in fines and penalties from companies in FCPA cases and charged two individuals.

The next year, those numbers increased to about $16.5 million and five individuals, Breuer said.

But already in 2010, the department has collected more than $1 billion in FCPA fines and penalties. In 2009 and 2010 so far combined, the department has charged more than 50 individuals, he said.

Last year the department also successfully tried three FCPA cases to verdict, and 35 more people are currently awaiting trial on FCPA charges, Breuer said.

“Our message to companies and individuals who would bribe foreign officials is clear: foreign bribery is not an acceptable way of doing business, and we won’t tolerate it,” Breuer said.

The top Justice Department official also briefly addressed public corruption prosecutions in the wake of the Supreme Court’s ruling that eliminated prosecutors’ ability to use the honest services fraud statute to go after undisclosed self-dealing unless bribery or kickbacks are also involved.

Public corruption cases are still a “critical part of our revitalized enforcement efforts,” Breuer said. The Criminal Division’s public integrity section has hired nine new attorneys and is in the process of hiring more. He could not say exactly how many additional attorneys would be coming on board.

The department has come up against criticism from all sides as it pushes forward. Prosecutors have taken heat for not doing enough to prosecute the people and companies responsible for the financial crisis, while some in the defense bar question whether aggressive new techniques and enhanced cooperation between government agencies goes too far.

Robert Bennett, a partner at Hogan Lovells in New York and a panelist at the conference, said that when he’s in talks with the SEC regarding a client, the DOJ is now almost always present at the meeting as well. That never used to be the case, he said.

Breuer said there is an efficiency to having the meetings together and “that’s just going to happen more and more” because the agencies need to work together for more robust enforcement.

Breuer – along with Denis McInerney, chief of the fraud section of the DOJ’s Criminal Division, who spoke at a later panel – repeatedly reassured attorneys that their clients would get credit for self-reporting misdoings to the government.

Companies that report criminal violations when they become aware of them will be treated “significantly and materially differently” than if they don’t disclose, Breuer said.

He also called it “stunningly bad business” to put in place a mere shell of a compliance program instead of a real and rigorous one, and he said companies would get more credit for having good programs in place.