The New York Times has – in addition to its coverage 1 – made available a copy of the complaint against Jenny Hou, the campaign treasurer for John Liu, currently the elected comptroller of the City of New York. This case – while fascinating on its own terms, reinforces some basic lessons about fraud, evidence and ethics:
There’s no law preventing candidates from exceeding ethical requirements. If Mr. Liu is competent to be comptroller, he should have and could have put internal safeguards in the fund-raising process. Since the campaign raised more than $2 million, they could have hired an outside law firm, auditor or investigative firm charged with policing internal money-handling processes. Of course, without the illegal straw donors, it’s possible the campaign wouldn’t have raised as much money – or would have had to spend more time and energy to raise the same amount. Political campaigns – or any organizations – serious about ethics – can keep things on the up-and-up if they are so inclined. It’s not as though the tools to keep things clean have to be invented, or that there’s any shortage of people with that expertise.
If good investigators focus on a fraudulent scheme, they’re likely to find evidence. Typically, even a clever fraudulent scheme tends to leave a lot of evidence behind. As a society – alas, ours seeems to be one – loses its ethical consensus – more people commit fraud, and it’s a fair bet that a lot of fraud and unethical conduct goes undetected. But – over and over, we see fraudsters who are initially undetected, and who continue or expand their schemes over time. As they continue without apparent detection, the perceived risk of detection seems to drop. NB: this is my speculation, an educated guess based on cases I’ve worked on or observed.
Instant Messages last longer than they take to compose or send. In fact, a lot longer.
The FBI found the following IM (instant message):
Yet another example of the durability of electronic communications.
Labor-intensive fraud tends to require more participants, or generate more witnesses. In the Liu case, the defendant is accused of asking other people for help in filling out campaign finance forms for “straw donors,” including forging signatures. Each one of those people is a potential prosecution witness; the more these people understood what was going on and had guilty knowledge (like the IM recipient), the greater motive and less explanation will be needed for the government to secure their cooperation and testimony. Anyone who’s been deceived into performing any of these tasks is likely to feel betrayed, angry and scared. And – in cases where people were deceived or coerced into assisting in fabricating documents – and the government views them in that way – potential witnesses may testify without cooperation agreements, free from incentives to falsely testify, and immune to cross-examination about government incentives.
Forgery: don’t try this at home. Forgery is not an easily acquired skill. Assuming facts similar to those alleged here, people without any experience assume they can imitate or trace signatures without detection. It’s only true if experts don’t look. Forgery – depending on the medium (modern documents, currency, antiques, fine art) – is not usually a level playing field: experts often have a lot of training, share expertise or learn from people with specific expertise (inks, paper-making, printing) and, when push comes to shove, have the ability to bring in specialist colleagues and modern scientific and laboratory equipment, from microscopes to carbon-dating. We can only explain such cases by assuming that unskilled forgers suffer from hubris, or assume that no one cares about integrity or will ever investigate. Or perhaps they’re not very bright.
One of the earliest forgeries in American history is Benjamin Franklin’s forgery of a purported letter from Frederick II of Hesse Kassel (Germany) to King George III,
urging the British to make more aggressive use of German mercenaries in battling the American insurgents …. The prince reminded King George that in addition to the fee he was being paid for the use of his troops, he was also due a comforting bonus for each soldier killed. As of the moment, the prince complained, too few of his troops were being killed to make the venture as profitable as he had been led to expect. He also suggested that it might be more humane to allow the German wounded to die rather than keep them alive to live wretchedly as cripples.
The forgery added a wallop to the various open offers of amnesty and free farmland available to Hessian deserters. It was a well-targeted, inexpensive, self-contained covert action. Of the 30,000 German mercenaries employed by the British, more than 5000 are known to have deserted.2
The differences between fraudsters and Ben Franklin? In the first instance, he was engaged in what – in the United States, at any rate – is widely regarded as a just war. And at risk of hanging had the Revolution failed. Second, there’s no apparent financial motive. But – third and fourth,, back to our earlier points:
(1) he was one of the most successful printers in the country;
(2) the investigative r esources to detect and prove forgery might then have been outmatched by printing technology.
The lessons here are twofold:
I. if you’re involved with, or represent, any organization that cares at all about its reputation – police yourself.
II. In a contest between deception and truth – when there’s a communications record (paper, electronic evidence) – the smart money, assuming good investigators, is on the truth.
- Liu’s Campaign Treasurer Arrested on Fraud Charges by David Chen and Benjamin Weiser, dated February 28th, 2012 [↩]
- Richard Helms, A Look Over My Shoulder: A Life in the Central Intelligence Agency, ISBN 0-8129-7108-6, 1st paperback edition, 2004, at 110. [↩]