Snitching

Criminal Informant Law, Policy, and Research

Incentives & Payments

Reuters criticizes leniency for insider trading informant

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David Slaine, a participant in the Galleon hedge fund insider trading scandal, was sentenced to probation and community service on Friday in exchange for his cooperation with prosecutors. He was facing up to 25 years in prison. This column from Thomson Reuters argues that Slaine got too good of a deal:

NEW YORK, Jan 23 (Reuters Breakingviews) – A financial snitch has gotten off too lightly. David Slaine, a former Galleon Group employee, pleaded guilty to insider trading and conspiracy but became an informant to help nab others, including the hedge fund and trading scandal kingpin, Raj Rajaratnam. At the urging of prosecutors, a federal judge has rewarded Slaine with probation and community service instead of up to 25 years in prison. Such leniency risks overreliance on criminals. . . .The justice system probably can’t crack big cases without the cooperation of unsavory characters, and giving Slaine favorable treatment is justified up to a point. But even for the best information, letting confessed felons like him essentially off the hook is too high a price to pay.

In a similar vein, this New York Times piece points out that, under recently proposed amendments to the U.S. Sentencing Guidelines, heavier sentences for insider trading will make cooperation–and the vastly lower sentences that accompany it–an increasingly prominent feature of white collar prosecutions.

The potential for higher sentences means the incentive to cooperate with the government in an investigation will be that much greater. There is already a significant disparity between the sentences of a cooperating defendant and one who goes to trial, and the best way to avoid the recommended sentence under the guidelines is to help prosecutors convict others…. 

The benefits of cooperation are likely to be on display in the near future when crucial cooperating witnesses in the prosecution of Mr. Rajaratnam are sentenced. Anil Kumar and Rajiv Goel testified at his trial, and prosecutors are likely to recommend substantially lower sentences than those received by other defendants who pleaded guilty but did not cooperate, like the 30-month sentence given to Danielle Chiesi.

Omaha murder trial sheds light on FBI criminal informants

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One informant, Jorge Palacios, was a gang member suspected in a Los Angeles murder, and accused, although never charged, in the rape of a 13-year-old girl. The FBI paid him more than $300,000 over five years to help with drug investigations. The other informant, Cesar Sanchez, was caught dealing drugs. In exchange for allowing his auto shop to be used as the site of drug deals for the FBI to monitor, he earned between $50,000 and $100,000 and avoided deportation. This glimpse of the kinds of deals that the government strikes with criminal informants was on display in Omaha last week in the murder trial of Robert Nave, accused of killing Sanchez. The story, FBI tells of informant shooting, also reveals how law enforcement can be reluctant to probe the criminal behavior of their informants:

FBI agent Greg Beninato, who was Palacios’ handler in Omaha, testified that the FBI knew that Palacios was the suspected driver and accomplice in the 2004 drive-by shooting of a rival gang member in Los Angeles, a charge for which he was recently arrested. Beninato also acknowledged that agents had heard accusations that Palacios may have been involved in the sexual assault of a 13-year-old girl, though no charges were brought. At one point, Riley [the defense attorney] asked Beninato whether he questioned Palacios about the two cases in order to decide whether to continue using him as an informant. “No,” Beninato said.

“Why not?” Riley asked.

“It’s a fine line between getting involved in someone else’s investigation,” Beninato said. “I wasn’t going to question him without the (investigating agencies’) permission or their request to do so.”

St. Petersburg police to review informant policies after officer scandal

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Police have nearly unfettered discretion when creating and handling informants. That authority is coming under scrutiny in St. Petersburg, Florida, after the FBI arrested Detective Anthony Foster for extorting thousands of dollars in cash and goods from his informant. Story here: St. Petersburg police to re-evaluate policy on confidential informants:

The FBI’s criminal complaint against Foster depicts a detective with near unlimited discretion in his dealings with an informant. Foster texted and called the informer to demand payments in cash or gifts, such as a widescreen TV, Nike shoes and groceries. The FBI alleges Foster made clear in recorded conversations that, in exchange, he would get a reduced sentence for the informant, who had been arrested on a grand theft charge in Hernando County. . . .

The criminal complaint against Foster suggests that there are either few regulations in place or that they aren’t always followed. For example, in Foster’s effort to convince the assistant state attorney that the informant had helped him solve some cases, Foster had his sergeant call to corroborate his informant’s value. The supervisor, according to the complaint, told the assistant state attorney that the informer helped in major homicide cases and was “more of a benefit out of jail rather than in jail.” Later, the sergeant faxed a list of four major investigations — including a March 23 murder — in which the informer assisted. When the FBI showed the informer the list, however, the informer denied assisting in any of those cases.

New Yorker article on out-of-control FBI informant

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Great article in this week’s New Yorker by Evan Ratcliff, entitled The Mark: The FBI needs informants, but what happens when they go too far? It’s about a longtime FBI/DEA informant named Josef Meyers who worked under the name Josef Franz Prach von Habsburg-Lothringen, claiming to be descended from Austrian royalty, who early in life was diagnosed with a violent “unspecified psychosis” and “latent schizophrenia.”

The story focuses on one particular ‘mark,’ a former district attorney named Albert Santoro, who eventually pled guilty to “operating an unlicenced money-transmitting business,” and who maintains that he was entrapped by von Habsburg into appearing as if he was engaged in money laundering. The piece includes jaw-dropping details about von Habsburg’s operations, such as thousand dollar dinners at fancy restaurants designed to lure investors, and how he and his wife lived lives of staggering luxury and excess. The story also details the FBI’s efforts over the years to protect its informant, including tens of thousands of dollars in payments, helping him avoid punishment for his own drug dealing and fraud, and even arresting a defense team’s investigator when he got too close. Von Habsburg is currently in prison for failure to pay child support. A classic tale of a criminal informant who took the system for a wild ride, much like this one.

First official boss of a NY crime family cooperates with FBI

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Joseph Massino, longtime boss of the NY Bonanno crime family, testified on Tuesday against his predecessor Vincent Basciano in a murder trial in which Basciano is accused of ordering the killing of Randolph Pizzolo. Massino himself has previously been convicted of eight murders and is facing two consecutive life sentences — he has been cooperating with the government since his convictions in 2004. He told the jury that while he has not expressly been promised a sentence reduction in exchange for his testimony, he’s “hoping to see a light at the end of the tunnel.” The defendant Basciano has also been previously convicted of murder and racketeering and is already facing a life sentence for those offenses. NYT story here: A Mafia Boss Breaks a Code in Telling All.

Over the years, the FBI’s handling of its high level mafia informants has been a major force shaping the law and culture of informant use. The Boston FBI’s mishandling of its murderous informants Stephen Flemmi and Whitey Bulger led the U.S. Department of Justice to impose strict new guidelines (see link to Attorney General Guidelines at left), while the need to protect mob informants led to the creation of the federal witness protection program WITSEC in the 1960s. See Peter Earley & Gerald Shur, WITSEC: Inside the Federal Witness Protection Program (Bantam Books, 2002).