A district attorney’s efforts to enlist banks in the fight against white-collar criminals has yielded results and helped to spark similar efforts in jurisdictions nationwide.
Weld County, Colorado, District Attorney Ken Buck realized how far his community would go to fight white-collar crime when he heard about a local victim independently tracking a felon who had used a false deed of trust to steal $80,000. The trail took the victim through Montana, Washington, Oregon, and finally California, where an arrest was made.
The victim as investigator was not a model Buck wanted to adopt, but “the message to me was that there is a lot of interest in the community,” says Buck. “Instead of thinking law enforcement has all the answers, the community has the answers and the willingness to help us solve these crimes.”
The real question was how to increase the resources devoted to pursuing cases. Buck took his message to the 22-bank financial services community in booming Weld County, a bedroom community of Denver. All but two have responded with both money and commitment, forming a posse-like task force and pledging to support a five-year fund. The fund is being used to hire two former federal agents who will investigate white-collar crime cases, such as check fraud, identity theft, false documentation, and embezzlement.
Buck’s strategy of enlisting private sector support to help the AG’s office fight white-collar crime is not confined to Colorado. Across the country, businesses are funding public-private efforts that can help law enforcement put an end to the growing problem of economic crime.
U.S. Census Bureau figures show Weld County is the fastest-growing metropolitan area in the nation. It houses at least seven of the 10 fastest-growing communities in Colorado, and its population has nearly trebled to more than 200,000 people since 1990.
With the growth has come more sophisticated businesses—but also smarter thieves. “We’ve seen large white-collar rings funded by the underground drug trafficking world, where they move into areas…and set up elaborate plans where they hit 20 or 30 banks in a few days and walk away with $50,000 to $100,000,” says Byron Bateman, chief executive officer, president, and chair of Cache Bank and Trust, and a cochair on the special task force.
Jenifer Saltzman, senior vice president of the Colorado Bankers Association, says that the state of Colorado loses $75 million every year from fraud, or $1,000 per every $1 million in assets. The bulk of the loss is from check fraud, which nationwide reached $677 million in 2003, according to the American Bankers Association (ABA). The banks, not the customers, shoulder the burden. The ABA noted that attempted check fraud during the same year was $5.5 billion. The association credits banking-system safeguards with thwarting the majority of attempts.
Benefits. The Weld County task force, supervised by the chief investigator in the local district attorney’s office, has already identified six cases that it will tackle. Investigators will stay on cases “until they reach conclusions,” says Buck.
Local bank executives recognize that they are all in the fight together and can all benefit when the task force helps police to stop any white-collar criminal. For example, Bank of Choice, one of the larger community banks, was hit recently for more than $100,000 in check fraud and other related financial crimes by an individual who was also victimizing other area banks. “It brings to light the reality that everybody is susceptible to having things like this happen,” says Patty Gates, the bank’s executive vice president.
Banks hope that in addition to helping to catch some fraudsters who have committed crimes in their area, the task force will also serve as a deterrent to underhanded activity. “We want our area to be less desirable [to crooks]. We want people to steer clear,” says Bateman.
Funding. Banks are funding the Weld County task force with donations relative to their size. A small bank or one new to the area is asked to contribute about $500, while larger, more established entities are encouraged to donate as much as $5,000. One bank that had been stung by a slew of white-collar capers ponied up $10,000.
Contributions are confidential. “The D.A.’s office will never know how much anyone gives, for obvious political reasons. Everyone will be treated equally, no matter the size,” says Bateman. Industry officials note that the amounts are a drop in the bucket for most financial institutions. “$10,000 is not that big of a deal. For $5,000 or $10,000, if [the task force] can accomplish anything, it’s worth it,” says John Shriner, senior vice president and director of physical security at Wells Fargo.
Activities. In addition to funding its own investigations, the Weld County task force plans on putting some of its collected contributions into other tools for foiling white-collar crime, such as Fraud-NET.com, founded in 2004 by the Utah Bankers Association.
The program uses the Internet to create a fraud-alert database where financial institutions can both post and field alerts regarding criminal activity. Coverage patterns can canvass regions of a particular state, states as a whole, or even the entire nation.
Though it is relatively new, Fraud-NET has already become known among bankers. “We’re a big user of Fraud-NET,” said Shriner. “Any way, shape, or form we can share information or pictures that lead to apprehension, or shutting these [white-collar] things down, is good for everybody,” he says.
Buoyed by Fraud-NET and the eventual results of on-the-ground investigations, Weld County officials expect their task force to gather momentum. Cochair Byron Bateman says the group is hoping to expand beyond commercial ban
To give the Weld County contributors an idea of what they are paying for, the area task force holds quarterly progress updates. The first such progress-reporting session took place on September 30.
Money should not be an issue as the program gets rolling and starts snaring criminals in its net, Bateman says. “If we are reporting on a quarterly basis on the successes of the program, and if this goes the way I think it will, I think we’ll have twice the $40,000 for the bulk of the five years we’re looking to do this,” he says. As an officer in the state banking organization, Bateman’s goal is to put together a similar program for banks across Colorado once the successes pile up.
Seeds of Synergy
The Weld County effort has precedents to lean on. Fifteen years ago in Portland, Oregon, a group of developers was eager to sink a few hundred million dollars into the downtown Lloyd’s shopping center district under the umbrella of the business improvement development program. The plans included rehabilitating buildings and building a hotel and the Rose Garden Coliseum for the Portland Trail Blazers basketball team.
“We were trying to create an area where we would lure people. But it was also the highest area of incidence for street muggings, prostitution, car prowls,” and other crimes, says Multnomah County District Attorney Michael Schrunk, whose office covers Portland. Schrunk’s team was too strapped financially to provide the developers a full-time prosecutor, so the businessmen decided to take on the burden themselves. They pulled together voluntary contributions of more than $100,000 to recruit a district attorney devoted to their neighborhood. They also donated an office and a secretary.
“Now they have a regular budget and fund a deputy district attorney out there, and they tax themselves,” says Schrunk. “It has been very successful. They cleaned up the area, and they like it.”
Portland’s experiment was part of the genesis of the National Center for Community Prosecution (NCCP), a nationwide neighborhood district-attorney program designed to help cleanse commercial and residential areas. Mike Kuykendall, who was part of the original Portland effort, later moved to Washington, D.C., to run the NCCP for five years up to early 2005. He helped spread the program to 150 cities.
Kuykendall says the NCCP uses its attorneys in a way that is not typical. Instead of spending all day in court as per the norm, they are out in the neighborhoods “working on problem people and problem places,” he explains.
“Traditionally D.A.s were reactive. We’d wait until there was a crime, the police would bring us a report, we’d review it, we’d launch the charges, we’d try the cases or plea them out. This [NCCP] way of prosecution is really new over the last 15 years,” says Kuykendall.
The NCCP is the sort of public-private sector collaboration that is now being used successfully in financial-sector crime-fighting campaigns like that of Weld County.
Weld County’s grassroots movement to nab criminals has sparked interest far from home, Buck says. He has received out-of-state queries about the task force from officials who are considering the implementation of a like-minded crime-busting organization.
Other efforts have sprung up independently. For example, Josh Marquis, district attorney for Clatsop County, Oregon, and a vice president of the National District Attorneys Association, says, “There are consortiums that have been created around the country, usually by banks and insurance companies, to encourage prosecutors and police to work on cases.”
The private sector has to be proactive because white-collar cases often require extensive examination of documents, accounting records, and e-mails, along with time-consuming surveillance, and this resource-heavy work is being pushed aside out of necessity.
“There is a lot of triage going on in prosecutors’ offices across the country, where decisions are being made not to prosecute certain categories of offenses because the resources just aren’t there,” says Marquis. These public-private collaborative efforts pick up the slack for a law enforcement system that is hamstrung by inadequate budgets and stretched too thin to handle many lower-level crimes, he says.
“The public wants violent crime taken care of—the ax murderer, the rapist, the armed robber,” agrees Schrunk. “That’s where most of the resources are. White-collar crime is one that public agencies very often don’t have the time or the resources to handle.” “The trend will be more cooperation between communities and law enforcement. To me this is an extension of the community policing idea,” says Buck.
Public-private collaboration definitely works, but it is not a perfect solution. For example, Shriner notes that Wells Fargo has 23 regions nationwide where it could potentially assign a special task force to combat white-collar crime. Another problem is that the law enforcement officials often do not have what Shriner calls “management information reports”—that is, reports substantiating their level of effectiveness.
Another concern is whether banks are being asked to pay too much. Banks are already paying state and federal governments for protection. “Management says, what do we pay taxes for? Don’t we pay enough?” says Shriner.
And while the Weld County program has not had a high price tag, some of these efforts can be costly. In the past, law enforcement officials have solicited Shriner for up to $350,000 to fund their special task forces. In comparison, Weld County is getting a deal: the former agents they have hired—both of whom are expert witnesses who testify around the country for an hourly rate of $125—are coming on board for $25 per hour.
Schrunk said retired experts collecting a pension can afford such a cut-rate deal while offering in return a combination of experience and relative youth. “There’s a lot of law enforcement retirees who get out when they are just hitting their stride at 55 or so, and they have a lot of mileage left,” he says.
But in some cases, private funds can be used to get an effort going that will later be funded with public tax dollars. That was the case for the Minnesota Financial Crimes Task Force, a public-private partnership that started back in 1997 when local retailers complained to District Attorney Bob Johnson that they were losing millions of dollars through fraud and other crimes.
Johnson, the D.A. for Anoka County, a bedroom community of Minneapolis and St. Paul, worked with retailers and bankers to start the task force. The city of Minneapolis chipped in part-time personnel to round out an initial working budget of roughly $100,000 per year.
The state legislature officially recognized the task force in 2001 and agreed to match private sector funding with its own. For the two years covering 2005 and 2006, the task force has a $1.5 million bankroll and a statewide reach.
Among the six investigators are federal law enforcement personnel, local police, and a representative of the postal system, which is concerned about stolen mail leading to identity theft. Johnson says the task force has a proven track record of successfully cracking cases, including several involving up to $2 million in theft and fraud.
“This is a significant evolution of law enforcement,” says Johnson. And it shows what can happen when the private and public sectors work together.
Robert Elliott is assistant editor at Security Management.