Defending a Fraud Case in Federal Court

There are many kinds of fraud charges that the government may bring in Federal court. The most common charges are wire fraud and conspiracy to commit wire fraud. Health care fraud charges are also quite common and for information about defending a health care fraud case in Federal court go here.

Most people learn they are the target of a Federal fraud case because a Federal agent seeks to interview them and makes clear in the interview that they are suspected of wrongdoing. Sometimes people receive a formal letter from an Assistant United States Attorney informing them that they are the target investigation. In some cases, a person does not learn of the investigation prior to their arrest.

If you receive a target letter or were interviewed by Federal agents in relation to a fraud investigation, it is imperative to immediately retain a criminal defense lawyer who is experienced in handling Federal criminal cases. Even if the agents assure you that you are not a suspect but merely a witness, it is not uncommon for a mere witness to say something that makes them a suspect in the eyes of the Federal investigator. In the pre-indictment investigation stage, Federal law enforcement will almost always be cooperative with your attorney and provide your attorney with enough information about the investigation so that your attorney can advise you whether your cooperation with the Federal agents might tend to incriminate you. The attorney may advise you that cooperation is not in your best interest and decline to have you meet with Federal agents. Once you have engaged an attorney, the Federal agents are prohibited from continuing to attempt to contact you directly.

Often it is important for a suspect’s attorney to conduct their own investigation during these early stages. It is important to interview witnesses before their view of the relevant business or transactions are influenced by the fact that the Federal government has deemed them criminal in nature. Moreover, many witnesses will eventually be intimidated by threat of prosecution themselves, so that they are willing to characterize matters in a manner to curry favor with the prosecution. Interviewing people early in an investigation, therefore, makes it far more likely one will get their honest perspective.

In the Federal system the defense has no access to the grand jury.¹ The prosecutor decides what witness to have testify before the grand jury and has no obligation to present any evidence favorable to the defense. Federal grand jurors largely act as a prosecutorial “rubber stamp” and rarely decline to return an indictment which the prosecution has presented to them. The common adage is that a Federal grand jury “would indict a ham sandwich” if the prosecutor requested it to do so.

1 There are unusual cases in which the Federal prosecutor will subpoena the target of the investigation to the grand jury. In those cases, the defense will almost always inform the prosecutor that the defendant will decline to provide any sworn testimony by invoking their Fifth Amendment privilege and appearance before the grand jury occurs. Sometimes a person is subpoenaed to testify before a Federal grand jury as a witness and the person is concerned that their sworn testimony may lead to their becoming a target in the investigation. In that situation the witness needs to hire a Federal criminal defense attorney to advise the witness concerning their Fifth Amendment rights.

As a result, it is not uncommon for defense lawyers to attempt to persuade the Federal prosecutor not to indict their client. Sometimes, to bolster their attempt to persuade the prosecutor not to indict, the defense lawyer will make his client available for an “interview” with the investigating agents and Federal prosecutor. Because it is probably more difficult to persuade a Federal prosecutor not to indict than it is to persuade a police officer not to write them a speeding after having been pulled over while racing a Porsche, more often than not, these efforts fail. Sometimes the cost of the effort is apprising the prosecution of favorable facts, and if the defendant made themselves available for an interview, they may have talked themselves into corner during the interview.

If an indictment is returned by the Federal grand jury, the defendant must make an initial appearance in Federal court. If the Federal prosecutor is concerned that the defendant may attempt to flee the jurisdiction, the agents may arrest the defendant at home or the defendant’s place of business. If there is no such concern, and the defendant is represented by an attorney, the defendant usually will be told to come to the Federal court at a specified time.

Even in those cases in which the defendant will simply be released by agreement with the government, the defendant will have to meet with pretrial services and be processed by the US Marshal’s Office. Pretrial Services supervises mostly everybody who has been indicted and is released pending their trial. Often the supervision consists of little more than limitations on international travel and making a monthly call to their pretrial services officer. The US Marshal’s office processes everyone who is indicted by taking their photograph and fingerprints. If a person has already been indicted at the time of their initial court appearance, the defendant will be provided a copy of their indictment and told to enter a plea of not guilty before the court.

After the case is indicted and the defendant has made their initial appearance in court, the prosecutor begins the process of providing the defense with “discovery.” Discovery primarily consists of all the physical and electronic evidence the prosecution has gathered in the course of its investigation. It often contains paper documents, photographs, emails, bank records, video and audio recordings, etc….  Often times it does not contain sworn statements of witnesses nor memoranda of interviews of witnesses. Federal investigators rarely collect sworn statements from witnesses but merely record what the witness told them in a memorandum of interview. The defense is not generally entitled to these memoranda until the time of trial, but many prosecutors choose to make them available to the defense earlier in the process.

Although fraud cases in Federal court go to trial far more than most Federal criminal cases, the Federal prosecutor on the case will almost always attempt to induce a defendant to enter a plea agreement. The plea bargain process in Federal court cannot be understood without some understanding of the Federal sentencing guidelines.

The Federal sentencing guidelines are primarily intended to reduce sentencing disparities in Federal court. They are a complex system for evaluating the severity of a given crime by means of a point system. The more severe the crime the more points and final “offense level” determination. Once the offense level of a given crime is determined, a guideline sentencing range is derived by cross-referencing the offense level with the defendant’s criminal history category (which itself is derived by an analysis of the defendant’s criminal convictions and sentences and how recent they are). Although a Federal judge is not required to impose a sentence within the guideline sentencing range, they are required by law to calculate the guideline range and give “consideration” to them when imposing sentence. As a practical matter, the vast majority of Federal judges impose sentences within the guideline range, and if they elect to “depart” or “vary” from the guideline range, they do so by reducing or increasing the offense level or criminal history for some reason not taken into account in the initial offense level or criminal history determination.

The Federal sentencing guidelines reward defendants who plead guilty for “accepting responsibility” and reducing their offense level. Pursuant to plea agreements the Federal prosecutors can stipulate to the offense level or factors used in determining the offense level. The Federal prosecutors are also permitted to award defendants who “cooperate” and incriminate other people with substantial reductions in their sentences. Although there are many ways in which a Federal prosecutor with a plea agreement can attempt to provide a defendant with incentives to plead guilty, they rarely enter into a plea agreement that stipulates what the defendant’s sentence is going to be. In many federal courts, plea agreements that stipulate a specific sentence are looked upon by judges with some degree of disfavor. In any event, Federal judges always retain the authority to reject plea agreements.

If the defendant ultimately declines to enter a guilty plea (whether with or without a plea agreement), eventually the case will go to trial. In Federal court it is common for multiple defendants to be charged in the same indictment and for the amount of evidence to be examined and gathered by all the parties to cause substantial delays before the trial to actually commence. Delays of a year or more from indictment to trial are commonplace in complex cases.

Because Federal fraud trials often involve multiple defendants, numerous witnesses, and countless exhibits, they usually take at least a week to try, and, often times, several weeks or months. Due to the length and complexity of these trials it is not uncommon for a defendant to employ two lawyers to defend the case at trial. At Broden & Mickelsen, LLP, often times, both Clint Broden & Mick Micklesen will both appear at trial to represent the client. Unlike many “boutique” criminal defense practices, Broden & Mickelsen, LLP is a true partnership and do never farm work out to associates or other lawyers.

Although most Federal fraud cases involve more than one defendant and a conspiracy charge, the court will instruct the jury that it must consider the guilt of each defendant separately. Thus, in many Federal fraud trials there are complex dynamics in play at trial. One defendant may attempt to shift blame to another defendant, and another defendant may employ a strategy of being relatively “invisible,” letting the focus of the trial fall on a co-defendant. Because multi-defendant trial in Texas state courts are almost non-existent, it is important to hire a criminal defense lawyer with experience trying cases in Federal court given these complexities.

Another way in which Federal trials are different than in state courts is that most Federal judges only permit the lawyers to have minimal interaction with the prospective jurors during the jury selection process. Because the lawyers are not permitted to ask probing questions and interact with jury pool as they are in Texas courts, most lawyers who practice almost exclusively in state court feel disempowered during the Federal jury selection process and consider the Federal process somewhat of a “crapshoot.”

Most Federal fraud trials boil down to the question of whether the defendant intended to cheat someone. Almost always the “victim” of the alleged fraud, whether that be a government entity, business or individual, lost money in the transactions or business dealings are at issue. Likewise, there is almost always some clear impropriety, such as a violated regulation, misrepresentation of fact, etc., that gave rise to the Federal investigation in the first place. But a mere violation of a regulation for example, does not constitute a crime. In order for a crime to exist the defendant must have specifically intended to engage in some kind of fraud. This means the prosecution always has the burden of showing the defendant did not simply make a mistake or an error in judgment. The prosecution always has to prove the defendant had corrupt intent.

As a result, it is usually important in a Federal fraud case that the defendant testify in their own defense, if at all possible. Many lawyers who primarily practice in Texas state courts rarely call their client to testify in their own defense and are unpracticed in this skill. Preparing a client thoroughly, to testify well, (not to be confused with “coaching” or suggesting the client commit perjury), in a complex case one of the most important skills that a Federal criminal defense lawyer must have.

If the jury finds the defendant not guilty on every charge, the case is immediately over. On the other hand, if there is guilty verdict on any charge, the jury is excused, and sentencing will be set for several months later. Usually, the defendant remains on release pending sentencing.

With a few weeks after having been found guilty or having had entered a guilty plea, the defendant and his attorney will meet with a Federal probation officer. This officer is assigned the task of writing a comprehensive presentence report. This report will describe the offense conduct, calculate the guidelines, and provide the court with the defendant’s personal history, a description of their mental and physical status, and their financial status. A draft report is provided to the defense a month or two later, and the defense may formally object to the guideline calculation or factual inaccuracies in the report. These objections, if not accepted by the probation officer will be resolved by the court at the sentencing hearing.

At the sentencing hearing both sides can call witnesses relevant to the guideline calculations and usually at least three character witnesses. Moreover, the defense may submit any number of character letters to the court in advance of the hearing. Finally, the defendant and their lawyer always have the right to address the court before sentence is imposed.

In Federal court, probation is rarely imposed as a sentence, especially after a trial. Usually the guidelines provide that the crime should result in the incarceration of the defendant. Nevertheless, in Federal fraud cases the court often lets the defendant report to their designated Federal prison a month or two after their sentencing hearing.

Even though approximately 90%-95% of defendants who go to trial in federal court are convicted, only approximately 35% of Clint Broden’s federal trials have resulted in final convictions for the client.