Informants & whistleblowers

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Criminals are sometimes the best people to use to catch other criminals. However, CFEs should follow the important rules when using and managing informants, whistleblowers and cooperating defendants to avoid sabotaging their cases.

This article is excerpted and adapted from “Faces of Fraud: Cases and Lessons from a Life Fighting Fraudsters,” by Martin T. Biegelman, published by John Wiley & Sons Inc. © 2013 used with permission.

No one knows the faces of fraud better than those people intimately involved in misconduct, whether as willing participants or eyewitnesses to wrongdoing. Experience teaches us that fraud is often uncovered and reported by people with inside knowledge, including employees, vendors and customers. The longtime administrative assistant or bookkeeper who has been with the company for ages may know where all the “bodies are buried,” and if given the opportunity will provide valuable information to an all-too-willing-to-listen federal agent, prosecutor or news reporter.

I truly value informants and the information they can provide. Informants have provided me with evidence I would never have been able to find on my own. Many of these informants were defendants I had arrested for various fraud schemes and flipped into cooperating defendants. They provided me with valuable evidence against their co-conspirators as well as reporting other frauds they became aware of. I used informants in undercover capacities and placed them in fraudulent operations to obtain evidence for prosecutions. I used them as witnesses at trials. Informants who fully cooperated and provided truthful information made me very successful as a criminal investigator, and I continue to use informants in my work in the corporate sector and now as a consultant.

Informants, whistleblowers and cooperating defendants helped expose and prosecute corporate fraudsters in some of the biggest business scandals ever seen. WorldCom’s Cynthia Cooper discovered the cooking of the books by the corporate leadership of her company. (See “Extraordinary Circumstances: An Interview with Cynthia Cooper,” by Dick Carozza, CFE, in the March/April 2008 Fraud Magazine.) In the process, she became a respected whistleblower and was recognized by Time magazine as a 2002 Person of the Year. Later, former WorldCom CFO Scott Sullivan became a cooperating defendant, testifying against former WorldCom CEO Bernard Ebbers. Sullivan was the government’s star witness against Ebbers with firsthand accounts of how he, Ebbers and others falsified the company’s financial results and misled investors. Ebbers was convicted and sentenced to 25 years in prison.

Yet, it’s not always so simple to just use an informant, whistleblower or cooperating defendant and expect good results. It’s been said that if someone wants information on crimes, it’s more likely to come from criminals than honest citizens. Every defense attorney will attack the credibility of a cooperating defendant, especially one who was originally part of the conspiracy. Although one would prefer witnesses without “baggage” for the defense to attack, the fact is that prosecutors have to play the cards they’re dealt, and that includes using criminals to testify against other criminals.

The problem is that informants, whistleblowers and cooperating defendants often have their own agendas and have been known to lie and obstruct justice while claiming to be helping investigate and prosecute fraud and corruption. Rather than help the case, they can sabotage and destroy prosecutions.

MANAGING CONFIDENTIAL INFORMANTS

Remember the opening to Charles Dickens’ “A Tale of Two Cities”: “It was the best of times; it was the worst of times”? That can also be applied to the use of confidential informants (CIs) in investigations. They can be the best things that ever happened to an investigator because they can provide information and details only known to criminal insiders. They can advance a fraud investigation, lead to a successful conclusion of the case and make any investigator look like a superstar. They can also lie and deceive, ruin a fraud examination and destroy one’s reputation, or worse.

The FBI’s success against organized crime is directly attributable to its ability to turn high-level mobsters into informants. In one of the most significant mob trials on record, when Sammy “the Bull” Gravano made a deal with the government to testify against crime boss John Gotti, the “Teflon Don’s” fate was sealed.

Law enforcement authorities aren’t the only ones to use CIs. Often private investigators without law enforcement resources use CIs to obtain needed information. While there are some distinctions between a CI used by law enforcement and one used by a private investigator, the basic rules remain the same. Understanding an informant’s motives for providing information is fundamental when using CIs.

WHAT IS A CONFIDENTIAL INFORMANT?

A confidential informant is an individual who supplies information with the understanding that his or her identity won’t normally be revealed. It needs to be understood by all parties that there is always the possibility the informant’s testimony will be needed at some point in a court of law, thus compromising his or her confidentiality.

The assistance of an insider in a fraud to detail the scheme and the role of other fraudsters can help resolve the case quickly. CIs also can warn of a planned crime, assist in the recovery of stolen property and enable asset forfeiture. They can also be used to lower criminal morale and create distrust among the criminals.

Using a CI is sometimes considered a shortcut approach, but that thought can be misleading. Much work goes into developing, documenting and managing CIs. Their use involves a highly personal relationship between an investigator and the CI.

TYPES OF INFORMANTS

Sources of information may be anonymous callers, police officers, citizen informants and others. Citizen informants generally provide information as a result of their belief in good citizenship, or because they’re either witnesses to or victims of crime. Criminals provide information for a variety of reasons as detailed below, and the veracity of any information provided must always be scrutinized.

Tested informants have provided information that has proven reliable in the past. Untested informants haven’t provided information before, thus corroboration is a key factor before any information can be used. The easiest way for an investigator to damage his case is to rely on uncorroborated information from a CI.

In 1883, at the murder trial of Frank James, the brother of outlaw Jesse James, prosecutor William H. Wallace explained to the jury why he was using a former member of the James gang to provide testimony against Frank James. Mr. Wallace stated:

When men are about to commit a crime, they do not sound a trumpet before them. They do their work in secret and in darkness. Neither when they are forming bands for plunder or death, do they select conscientious, honest citizens. A man contemplating murder would not say, ‘come along and join me in my fiendish task.’ Their work is done when honest, law-abiding men are asleep and beasts creep forth. For this reason, when the state must break up a band of criminals, it must depend upon the assistance of one of their peers in crime to do it. Hence, it is a custom, as old as the law, to pick out from a desperate band one of their own number, and use him as a guide to hunt the others down. (See “Speeches and Writings of Wm. H. Wallace; With Autobiography” by William H. Wallace, Kansas City, MO: Western Baptist Publishing Company, 1914, p. 137.)

What was true in 1883 regarding informants is still true now.

WHY DO PEOPLE INFORM?

It’s important to determine why a person is willing to act as an informant. People become informants for the following reasons: