How Federal Conspiracy Law Widens White Collar Cases.

Yes, a federal conspiracy charge requires an agreement between two or more people with the specific intent of committing a crime. To convict you of conspiracy, prosecutors are not required to prove that you completed the planned crime. Indeed, federal conspiracy defendants can and are convicted even in cases in which their conduct falls short of completing a substantive violation of federal law.

So, if no crime was completed, what exactly do prosecutors need to prove in a federal conspiracy case? The crucial components of a conspiracy prosecution are:

• (i) a knowingly made agreement to commit an unlawful act;
• (ii) criminal intent to commit that unlawful act; and,
• (iii) an overt act in furtherance of the agreement.

With respect to these last two requirements, one of the most common misconceptions about federal conspiracy charges is that federal prosecutors must prove the defendant completed a “substantial step” toward committing the crime. “Substantial steps” are, in fact, a feature of “attempt” liability under 18 U.S.C. 2. With respect to liability for conspiracy under 18 U.S.C. 371, federal law requires proof of an “overt act.” This can be a relatively minor act as long as it advances the conspiracy, such as renting a company office or incorporating a new company, and, in cases where financial transactions are involved, the intent underlying this action must be one that promotes the ultimate object of the conspiracy. The U.S.And, in federal white-collar cases that involve financial matters, federal prosecutors’ cases center on the defendant’s intent.

If a crime was completed, prosecutors may also include charges for “object” offenses, in addition to any conspiracy counts, in the indictment.

Which federal conspiracy statute applies in a white-collar case?

If you are being investigated for a white-collar offense, there are four federal conspiracy statutes that could potentially apply to your case. However, prosecutors must rely on the statute that most closely aligns with the circumstances in their particular case and prove every element of the relevant statute. The four federal conspiracy statutes (which are categorized by their substantive provisions) are:

• 18 U.S.C. Section 371 (conspiracies to commit various federal crimes),
• 18 U.S.C. Section 1349 (conspiracies to commit wire and mail fraud, banks, deposits, and computer fraud),
• 18 U.S.C. Section 1956(h) (conspiracies to commit money laundering), and,
• 18 U.S.C. Section 1962(d) (conspiracies to commit violations of the RICO Act).

The Federal Conspiracy Statute in Most Federal White Collar Cases

The federal conspiracy statute in the majority of federal white-collar cases is 18 U.S.C. Section 371. This provision applies in cases that involve conspirators who intend to commit any “offense against the United States” or “conspire to defraud the United States or any agency thereof.” Under Section 371, federal prosecutors are required to prove:

• (i) the existence of an agreement between two or more people to commit an unlawful act;
• (ii) the defendant’s knowing and voluntary agreement to join the conspiracy;
• (iii) the defendant’s specific intent to complete the planned crime; and,
• (iv) that at least one conspirator committed an “overt act” in furtherance of the crime.

Conspiracy Charges Relating to Fraud, Money Laundering, and Financial Crimes

When white-collar defendants stand accused of conspiring to commit fraud, money laundering, or other related financial crimes, the statutes involved tend to be more specific than Section 371. The four federal conspiracy statutes mentioned above (18 U.S.C. Sections 371, 1349, 1956, and 1962(d)) are the main ones that govern these types of cases, and they all have some overlap with one another. However, prosecutors must still rely on the one that best fits their case. The statute that will apply depends on the specific facts and circumstances at issue.

Additionally, in cases involving 18 U.S.C. Section 1349 (conspiracy to commit wire or mail fraud, bank fraud, health care fraud, or securities fraud), the government is not required to prove that at least one conspirator committed an overt act. This requirement is also absent in cases involving conspiracy to commit money laundering, in which the government relies on the substantive provision of 18 U.S.C. Section 1956(h).

How can prosecutors prove I knowingly joined the agreement?

In conspiracy cases, proof of a knowing agreement can often be circumstantial, and it often must be circumstantial, as defendants rarely sign a formal contract or execute a written agreement to commit a crime. But a mere association with other suspected wrongdoers is not sufficient to establish guilt for conspiracy. And, similarly, just knowing that others are engaging in illegal acts is not sufficient proof of knowingly joining a conspiracy.

So, when is circumstantial evidence enough to meet the government’s burden of proof in a federal conspiracy case? Generally, the federal government can meet its burden by showing coordinated conduct, use of codes and slang, sharing the fruits of the conspiracy, and other factors that together indicate a coordinated effort to commit a crime. For example, coordinated conduct can be used to establish both the existence of a conspiratorial agreement and your knowing agreement to enter into a conspiracy. If you helped your boss commit wire fraud by preparing false statements, communicating with customers about the fraud, and keeping a share of the ill-gotten proceeds, then these are all examples of coordinated conduct. If all of these steps were intentionally executed as part of a scheme, then the coordinated nature of the conduct can be used as circumstantial proof that you entered into a conspiratorial agreement to commit wire fraud.

Coded communications, including the use of codes, slang, and metaphors to avoid detection by authorities, can also be used to establish both the existence of an unlawful agreement and a defendant’s knowing agreement to join it. Similarly, the sharing of the fruits of a conspiracy can be a powerful way for prosecutors to establish a defendant’s knowing participation in a criminal enterprise.

Ordinary and professional services and minimal involvement can also lead to exposure to federal conspiracy charges. However, evidence of providing ordinary and professional services by itself will generally not be enough to establish liability. And, while minimal involvement can leave you exposed to liability, you may still be able to avoid the possibility of conspiracy charges if you can establish that you had a relatively insignificant or peripheral role. Examples of minimal involvement that are nevertheless sufficient to trigger a federal conspiracy charge include:

• (i) Opening offshore bank accounts;
• (ii) Executing fake contracts;
• (iii) Negotiating with overseas sources;
• (iv) Sending and receiving encrypted emails; and,
• (v) Taking other actions that have the potential to implicate a defendant in a federal white-collar conspiracy.

Can I be liable for what other conspirators did?

If you are found guilty of conspiracy, how much liability are you facing for the acts of other conspirators? If your co-conspirators are convicted of substantive offenses, you can face liability for their criminal conduct as well. In a federal criminal trial, the government will rely on this evidence by arguing that:

• (i) your co-conspirators’ statements are admissible under Federal Rule of Evidence 801(d)(2)(E); and,
• (ii) you are vicariously liable for your co-conspirators’ criminal conduct under the “Pinkerton” doctrine.

Statements of Co-Conspirators

Under Federal Rule of Evidence 801(d)(2)(E), statements of a party’s co-conspirator (or an agent to whom that party has delegated authority to act) are treated as nonhearsay if they were “made during the course and in furtherance of the conspiracy.” With respect to a defendant who has been convicted of conspiracy, the prosecution will often use the statements of the defendant’s co-conspirator to establish both the existence of the conspiracy and the defendant’s knowing participation.

Co-Conspirator Crimes (the Pinkerton Doctrine)

The Pinkerton doctrine is a federal rule of criminal liability that extends a defendant’s liability to a co-conspirator’s crimes that were “reasonably foreseeable” and committed in “furtherance of the conspiracy.”

In a conspiracy conviction, sentencing can be influenced by the conduct of co-conspirators. In a federal sentencing hearing, a conspiracy conviction can expose a defendant to sentencing for a substantive offense (if convicted) or for a co-conspirator’s substantive offenses that were in furtherance of the conspiracy.

Venue in a Federal Conspiracy Case

In a federal conspiracy case, the government can establish venue in any federal district where a co-conspirator committed an act that was in furtherance of the conspiracy. This makes it much easier for the government to bring charges in a forum of its choosing.

If you are facing this situation, Spodek Law Group handles federal criminal defense matters nationwide, from offices in New York and Los Angeles.

Can I withdraw from a conspiracy and end my exposure?

If you are facing conspiracy charges, there are two ways in which you may be able to end your exposure to liability. One way is by defeating the government’s attempt to maintain its action before the applicable statute of limitations has run. The other way is by establishing that you withdrew from the conspiracy.

Statute of Limitations for Conspiracy Charges

With respect to conspiracy charges that require proof of an overt act, federal statutes of limitations can begin to run from the time of the last overt act. As a result, any alleged concealment efforts by co-conspirators can be used by prosecutors to defeat statute-of-limitations arguments. However, concealment efforts do not affect the statute of limitations unless they were part of the charged conspiracy.

Withdrawing from a Conspiracy

To withdraw from a conspiracy, the defendant must affirmatively distance himself from the agreement and communicate his intent to withdraw to his co-conspirators (or communicate the information to law enforcement). Withdrawal requires affirmative action, and it must be inconsistent with the conspiracy’s goals. With respect to a conspiracy to commit a financial crime, this may involve disclosing the scheme to law enforcement, notifying victims, or refusing and disgorging the proceeds.

Proof of Withdrawal from a Conspiracy

The defendant bears the burden of proof when asserting withdrawal. In order to prove withdrawal from a conspiracy, the defendant must prove withdrawal by a preponderance of the evidence.

Effects of Withdrawal from a Conspiracy

Withdrawal does not typically erase criminal liability for any conspiratorial acts that have been committed prior to withdrawal. However, withdrawal can be used to cut off “Pinkerton” liability for any future crimes committed by your co-conspirators that were foreseeable and committed in furtherance of the conspiracy.

Concealment Efforts in a Conspiracy Case

Prosecutors can use evidence of concealment efforts against a white-collar defendant. The government may rely on evidence of concealment efforts in several different ways:

• (i) use evidence of concealment to establish evidence of a conspiracy;
• (ii) use evidence of concealment as evidence of a defendant’s withdrawal from the conspiracy;
• (iii) use evidence of concealment to overcome statute-of-limitations defenses; and,
• (iv) use evidence of concealment to increase a white-collar defendant’s sentencing exposure.

What defenses challenge agreement and criminal intent?

When defending against criminal conspiracy allegations, a key aspect of the defense will be to attack the government’s arguments regarding the existence of a knowing agreement and criminal intent. In federal fraud cases and cases involving other white-collar offenses, there are five defenses that can specifically rebut the government’s efforts to prove these elements of the conspiracy offense.

Good Faith Reliance

In federal fraud cases, a good-faith belief (i.e., the defendant acted in good faith based on advice he believed was truthful) can be a successful defense against specific intent. While this is not the only defense available for white-collar conspiracy offenses, it can be a strong defense when used in combination with a federal fraud conspiracy charge, particularly in cases that involve government contractors and federal aid applicants.

Reliance on Counsel or Accountants

Relying on counsel can be a strong defense in criminal cases that involve complicated white-collar offenses, such as federal conspiracy to commit securities fraud. Similarly, when relying on accounts, a defendant can rebut a finding of willfulness, which is an element in criminal tax prosecutions. To establish a defense of advice-of-counsel or advice-of-accountants, the defendant must prove:

• (i) full disclosure of all relevant information;
• (ii) reliance in good faith; and,
• (iii) reliance that is reasonable under the circumstances.

Mistake

A mistake of fact can negate specific intent in fraud cases. Establishing a mistake defenses is particularly critical in cases involving fraud conspiracy allegations, as this is one of the few cases where the jury will weigh the defendant’s knowledge.

Challenging the Scope of the Conspiracy

In some cases, it may be more beneficial to challenge the scope of the conspiracy than to challenge the intent underlying it. Establishing the scope of the conspiracy can affect the court’s decision regarding Pinkerton liability and whether the statements of co-conspirators can be admissible in court.

Challenging a Single, Comprehensive Conspiracy

If a defendant is charged with conspiracy, they can raise the issue of multiple conspiracies. If evidence indicates that defendants may have been involved in separate schemes instead of a single conspiracy, this can weaken the government’s case and the strength of any alleged conspiracy.

Financial Records

Motions to Suppress

Confrontation Clause Arguments

What should I do before federal conspiracy charges are filed?

If you are worried about facing potential liability in a federal conspiracy case, there are several ways to protect yourself. Depending on the circumstances of your case, it may be more effective to adopt one of these strategies over others, or, as discussed in the next section, it may be more beneficial to rely on a combination of them in order to properly protect yourself.

Do Not Destroy Records in Your Possession

If you are facing a federal conspiracy investigation, you must avoid destroying records in your possession. This is because, even if you have a legitimate business reason to do so, doing so during an investigation can create exposure to obstruction of justice charges.

Pre-Indictment Advocacy

Pre-indictment advocacy involves interacting with prosecutors before they formally file charges. In some cases, pre-indictment advocacy is a strong defense strategy because it allows for the communication of exculpatory evidence, which can convince federal prosecutors to not bring charges.

Grand Jury Subpoena Responses

If you have received a grand jury subpoena, make sure to preserve documents in anticipation of production, but do so without inadvertently destroying any evidence. After preserving all documents in your possession, work with your lawyer to analyze these documents and select those you must produce in response to the grand jury subpoena. As part of this analysis, you will also need to conduct a privilege review. This allows you to avoid the disclosure of attorney-client communications or other privileged documents.

Proffer Agreements

In some cases, the government may offer a proffer agreement, in which they provide an opportunity to speak with a federal prosecutor under an agreement that limits their use of the statements. While this is not the same thing as offering immunity, it can be a helpful first step when negotiating a plea deal with the government.

The SEC’s Investigation into Securities Violations

If you are facing an investigation in which you are suspected of trading securities based on material nonpublic information, then the SEC will be one of the government’s main enforcement agencies. SEC investigations are similar to DOJ investigations, and they are highly investigative in nature. As a result, the decision of whether to communicate with the SEC in order to secure its cooperation can be a high-risk decision that may result in unnecessary exposure to liability.

What penalties can a federal conspiracy conviction bring?

A federal conspiracy conviction under 18 U.S.C. Section 371 carries a maximum of five years of federal imprisonment. While this maximum sentence can be reduced in some cases, judges rely on the U.S. Sentencing Guidelines and take a variety of factors into account when determining a defendant’s sentence. When sentencing white-collar defendants, judges consider factors such as the amount of loss, the number of victims, the defendant’s role in the conspiracy, and the defendant’s prior criminal history.

In addition to federal imprisonment, there are also several other potential penalties in federal white-collar conspiracy cases. A conviction under Section 371 or any other federal conspiracy statute can also carry restitution, asset forfeiture, and fines.

In cases involving fraud charges, federal prosecutors and defense attorneys will often litigate intended loss. Establishing intended loss is especially important in federal fraud sentencing because it can be used to argue for a higher sentence in the absence of a prior criminal conviction.

The specific federal conspiracy statute being used also plays a role. For example, a conviction under Section 1349 can carry the same maximum penalty as the underlying substantive offense. In the case of Section 371, if the conspiracy’s intended object is a misdemeanor, then a defendant’s sentence is capped at the maximum penalty that could be imposed if the offense had been successfully completed.

One other risk of a federal conspiracy investigation is the potential for additional felony charges in the event that a defendant makes a false statement to a federal agent. This is particularly common during pre-indictment investigations, as investigators look to identify any individuals who may have been involved in the alleged conspiracy. If a defendant makes a material false statement to an FBI or IRS agent, this can trigger prosecution under 18 U.S.C. Section 1001.

In conjunction with the potential for a federal conspiracy prosecution, you may also need to worry about facing civil penalties in a parallel enforcement action. The U.S. Securities and Exchange Commission (SEC) is one of the primary enforcement agencies in cases involving allegations of trading on material nonpublic information.

Get Advice on Your Situation

If you want someone to look at the specifics of your case, Spodek Law Group handles federal criminal defense nationwide from New York and Los Angeles. The firm has been practicing since 1976 and its motto is simple: we owe loyalty to only you. Call 212-300-5196.