Snitching

Criminal Informant Law, Policy, and Research

White Collar

President Trump gets snitching backwards

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President Trump has attacked “flipping” and cooperation, saying that “it should almost be illegal,” according to the New York Times.  Reacting to his lawyer Michael Cohen’s plea deal, Trump says “I know all about flipping. For 30, 40 years I have been watching flippers. . . . I have seen it many times. I have had many friends involved in this stuff.”

The irony is that Trump is attacking snitching for its greatest strength:  it enables law enforcement to investigate and prosecute the wealthy, the powerful, and the politically insulated.  Think of the Enron prosecution, or the dismantling of the mafia, neither of which could have happened without cooperation deals.  Also ironically, Trump is criticizing informant use in its least problematic incarnation. When Trump’s “many friends” become defendants and informants, they will be well represented and informed about their rights and options, while their cooperation deals will be recorded, vetted, and publicly scrutinized.  Most informants, and most defendants faced with snitch testimony, will get none of these protections.  It is precisely here in the white collar and high profile political context that cooperation is best regulated, most accountable and transparent, and thus least problematic.

To be sure, there are many reasons to agree that snitching “should almost be illegal.”  It leads to wrongful convictions; it tolerates the crimes committed by informants; it coerces the most vulnerable and rewards the most culpable.  It promotes government secrecy, rule breaking, and sometimes corruption.  But its potential to hold powerful people accountable is its best feature.

Intercept publishes FBI informant manual

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The Intercept has published the FBI’s 2015 Confidential Human Source Policy Guide. It includes policies on recruitment, payments, and international informants: The FBI Gives Itself A Lot of Rope to Pull In Informants.  From the article:

“The classified guidelines reveal:
  • Before approaching a potential informant, agents are encouraged to build a file on that person, using information obtained during an FBI assessment, including derogatory information and information gleaned from other informants. The FBI claims that it seeks derogatory information in order not to be blindsided by its informants’ vulnerabilities, but such material may also be useful in coercing cooperation from otherwise unwilling recruits.
  • FBI agents may use undercover identities to recruit informants, including online. These approaches are not limited by a rule stipulating that agents and informants are allowed no more than five meetings with a target before their activity is subject to supervisory approval as an undercover operation.
  • With permission from supervisors, FBI agents may recruit minors as informants. They may also, with permission from the U.S. Department of Justice, recruit clergy, lawyers, and journalists.
  • Informants may operate in other countries for the FBI, and the FBI guidelines do not require notification to be given to the host countries.”

The Economist on the power of informants

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Today The Economist published The kings of the courtroom, exploring how the use of informants helps make “American prosecutors more power than ever before.”  The article covers examples ranging from Cameron Todd Willingham, who was wrongfully executed for arson based in part on a jailhouse snitch, to the Enron prosecutions which involved over 100 potentially cooperating unindicted co-conspirators.  From the piece:

     “The same threats and incentives that push the innocent to plead guilty also drive many suspects to testify against others. Deals with “co-operating witnesses”, once rare, have grown common. In federal cases an estimated 25-30% of defendants offer some form of co-operation, and around half of those receive some credit for it. The proportion is double that in drug cases. Most federal cases are resolved using the actual or anticipated testimony of co-operating defendants. 

     Co-operator testimony often sways juries because snitches are seen as having first-hand knowledge of the pattern of criminal activity. But snitches hoping to avoid draconian jail terms may sometimes be tempted to compose rather than merely to sing.”

Law review article on informant bounties

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As the informant model spreads from traditional criminal law to administrative enforcement agencies like the IRS and the SEC, some have questioned its efficacy: do bounties work? are they a good idea in the white collar context? See for example this article from Forbes on the use of cash bounties, and this post: IRS expands use of informants.
This article–Bounties for Bad Behavior: Rewarding Culpable Whistleblowers under Dodd-Frank and the Internal Revenue Code–explores the use of the criminal snitch model in the white collar context. Here’s the abstract:

In 2012, Bradley Birkenfeld received a $104 million reward or “bounty” from the Internal Revenue Service (“IRS”) for blowing the whistle on his employer, UBS, which facilitated a major offshore tax fraud scheme by assisting thousands of U.S. taxpayers to hide their assets in Switzerland. Birkenfeld does not fit the mold of the public’s common perception of a whistleblower. He was himself complicit in this crime and even served time in prison for his involvement. Despite his conviction, Birkenfeld was still eligible for a sizable whistleblower bounty under the IRS Whistleblower Program, which allows rewards for whistleblowers who are convicted conspirators, excluding only those convicted of “planning and initiating” the underlying action. In contrast, the whistleblower program of the Securities and Exchange Commission (“SEC”) under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), which was modeled after the IRS program, precludes rewards for any whistleblower convicted of a criminal violation that is “related to” a securities enforcement proceeding. Therefore, because of his conviction, Birkenfeld would not have been granted a bounty under Dodd-Frank had he blown the whistle on a violation of the federal securities laws, rather than tax evasion. This Article will explore an area that has been void of much scholarly attention — the rationale behind providing bounties to whistleblowers who have unclean hands and the differences between federal whistleblower programs in this regard. After analyzing the history and structure of the IRS and SEC programs and the public policy concerns associated with rewarding culpable whistleblowers, this Article will conclude with various observations justifying and supporting the SEC model. This Article will critique the IRS’s practice of including the criminally convicted among those who are eligible for bounty awards by suggesting that the existence of alternative whistleblower incentive structures, such as leniency and immunity, are more appropriate for a potential whistleblower facing a criminal conviction. In addition, the IRS model diverges from the legal structure upon which it is based, the False Claims Act, which does not allow convicted whistleblowers to receive a bounty. In response to potential counterarguments that tax fraud reporting may not be analogous to securities fraud reporting, this Article will also explore the SEC’s recent trend of acting increasingly as a “punisher” akin to a criminal, rather than a civil, enforcement entity like the IRS. In conclusion, this Article will suggest that the SEC’s approach represents a reasonable middle ground that reconciles the conflict between allowing wrongdoers to benefit from their own misconduct and incentivizing culpable insiders to come forward, as such persons often possess the most crucial information in bringing violations of the law to light.

The way it’s supposed to work: organizational informants

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The strongest arguments for informant use are connected to the nature of criminal organizations: informants permit the government to get information about, infiltrate, and destabilize group criminal activity. The most famously effective such deployment was the FBI’s use of informants to go after the mafia, a success story that is often invoked in support of informant use more generally. Of course even that success story had its costs: see this post on the dangers of mafia informants.

These tactics are now on display in several recent cases regarding insider trading and computer hacking, in which the use of informants has not only permitted prosecution of individual wrongdoers but may be weakening the culture of collective wrongdoing itself. According to this Reuters report, “[t]he FBI says it has enough informants lined up to keep its investigations of suspected illegal insider trading at hedge funds going for at least five more years.” The New York Times opines that the conversion of a leading hacker into an informant “will sow even more distrust and dissension in the ranks of [the international hacker movement].” In both communities, the knowledge that colleagues and peers may be informants could well chill criminal activity. At the same time, the government should be careful not to send the message that becoming an informant is a get-out-of-jail-free card, a double-message that could undermine deterrence. See this post.