special report
REUTERS/Photo illustration from hannibal lecter to bernie madoff FBI profilers famous for tracking serial killers are turning their attention to white collar felons
By Matthew Goldstein branded as "monsters" in the tabloids. the Federal Bureau of Investigation's NEW YORK, April 20 But a team of FBI agents, the same ones Behavioral Analysis Unit have been who specialize in helping local police track consulting with their colleagues in New York ernard Madoff - the architect of history's down serial killers like Ridgway, are using who specialize in securities fraud detective biggest Ponzi scheme - and Gary their expertise in behavioral profiling to work. The BAU agents are going over the Ridgway,B the Green River killer, would seem target white collar criminals like Madoff. case files put together by the FBI for Madoff to have little in common aside from being For about two years now, agents with and other convicted scammers like Bayou
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Group's Samuel Israel, whose $400 million hedge fund turned out to be Ponzi scheme, and former Democratic fundraiser Hassan Nemazee, who stole nearly $300 million FBI reading list from Citigroup and two other big banks. Some of the research papers that can be found on the bedside tables of the The hope is the BAU agents, whose work in agents working with the FBI’s Behavioral Analysis Unit. profiling serial killers has been popularized 1. “Why do they do it? The motives, mores and character of white in books, movies and on TV, can get into the collar criminals” minds' of fraudsters and see what makes — Bucy, Raspanti and Rooney (St. John’s Law Review) them tick. 2. “Criminal thinking and identity in male white collar offenders” In cinematic terms, substitute Gordon — Walters and Geyer (Criminal Justice and Behavior) Gekko, the insider trader in "Wall Street," for 3. “Economic crime: Does personality matter?” Hannibal Lecter, the cannibalistic serial killer — Alalehto (International Journal of Offender Therapy and Comparative Criminology) in The Silence of the Lambs, and you get an 4. “Corporate psychopathy: Talking the walk” idea of what the FBI is trying to do. — Babiak, Neumann and Hare (Behavioral Sciences & Law) "This originally started out as an attempt to find a way to prevent and detect Ponzi 5. “Can general strain theory explain white-collar crime” — Langton and Piquero (Journal of Criminal Justice) schemes," said Peter Grupe, the FBI's assistant special agent in New York in charge of white collar investigations. "But it developed into something broader." The FBI's profiling strategies are part of an aggressive new approach to financial crimes. Facing widespread criticism over the lack of criminal cases stemming from the financial crisis, the FBI and federal prosecutors are "pervasive and pernicious." that many white collar defendants have no keen on showing that they are not soft on Indeed, some of the FBI agents in New prior criminal records and outwardly often fit white collar offenses. York assigned to investigating securities the profile of a successful corporate executive To that end, the FBI for the first time has fraud openly describe some of their targets or Wall Street trader: greedy, hard-charging, an "embedded" agent working closely with as operating like "professional criminals" charismatic, ambitious, smart and Type-A the Securities and Exchange Commission's - the kind of language you might expect control freaks. main office in Washington, D.C. The agents to use when discussing the Yet the agents with the FBI's behavioral agent began working a year Mob or other organized crime group, some of whom also are active in ago with the SEC's new syndicates. developing profiles of terrorists and criminals market intelligence unit, Still, the ability of FBI who prey on children, believe they can develop vetting early tips the profilers to make a profiling strategies that will help undercover regulatory agency difference is less clear agents ferret out corrupt corporate titans, gets about potential to some experts. shady hedge fund traders and other Wall scams and frauds There's a good Street con artists. At a minimum, the from the public. deal of skepticism profilers want to determine if major white An FBI official says about whether the collar criminals share enough personality there's talk of doing techniques used to traits and behavioral patterns that agents in something similar target killers who interrogations and investigations could use with the SEC's all commit some of the the information they glean. important New York most heinous and violent If the FBI profilers can do that, it will enable regional office as well. crimes is at all applicable agents working undercover to better spot to analyzing the motivations the bad guys and determine which suspects PROFESSIONAL CROOKS of Wall Street felons. are the best ones to try to flip and turn into The expanded efforts to sniff out "As an academic exercise it may be snitches against their corrupt colleagues. white collar crime arise from a deep-seeded interesting to put Madoff, Michael Milken, "The goal here isn't so much to prevent a belief shared by many in law enforcement Allen Stanford and Jeff Skilling all in the financial crime from occurring but to make - that fraud is rife in some corners of Wall same room and let the shrinks analyze investigations more productive," says Mark Street and corporate America. Manhattan them," said Marc Mukasey, the head of Hilts, head of the FBI's BAU-2, the eight- U.S. Attorney Preet Baharara says his office, white collar defense practice at Bracewell & member group that is overseeing the white which is prosecuting the big insider trading Giuliani and a former federal prosecutor. "It collar offender project. "There is no one case against Galleon Group co-founder would be interesting to do, but I'm not sure template for what constitutes a serial killer Raj Rajaratnam, has found that trading by of the utility." and the same applies to the white collar hedge funds on confidential information is After all, Mukasey and others point out world. What we try to do is look at things
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WHITE PAPERS: Susan Kossler , FBI Supervisory Special Agent (SSA) of the Behavioral Analysis Unit (BAU) 2 - Crimes Against Adults, points to a report on white collar criminal behavior in her office in Quantico, VirginiaA pril 1, 2011. REUTERS/Kevin Lamarque
through the lens of the offender. " prosecutors, criminologists and investigators criminology at Florida State University, who Hilts said his team likely will interview Reuters interviewed for this story were wrote several academic papers that Hilts' significant white collar cons like Madoff skeptical that the profiling strategies can BAU team is reviewing, said her research on -- just as FBI profilers did in the past with work in the white collar arena. white collar offenders has found that many serial killers Ted Bundy and so-called Son "It sounds a bit like voodoo law are extremely controlling in the workplace, of Sam murder David enforcement to me," said Berkowitz. But any one-on- "the goal here Jeffrey Bornstein, a former one interviews with Madoff longtime federal prosecutor and his white collar ilk are isn't so much and now an attorney in the probably months, maybe San Francisco law firm of even years, away. to prevent K&L Gates. Despite what goes on in a finanical Bornstein, who the movies, FBI profilers represents Richard Choo- don't like to interview crime from Beng Lee, a former hedge criminals until they've done occurring fund manager who pleaded extensive "archival and guilty in 2009 to insider paper research" so they but to make trading and became a key can then sort out fact from investigations cooperating witness in the fantasy, Hilts said. Nor can Galleon insider trading he rule out that Madoff, who more investigation, said few many have described as productive.” white collar offenders set cold, calculating and largely out to be criminals. In most lacking in remorse, may be cases, they end up breaking something of an "outlier" in his peer group. the law because they keep stretching the limits of permissible activity. "VOODOO" COPS "You could give these people lie detector PONZI KING: Accused swindler Bernard Madoff enters the Manhattan federal court house Clearly, Hilts and his team have their tests and they might pass," said Bornstein. in New York, March 12, 2009. REUTERS/Shannon work cut out for them. A dozen former Nicole Piquero, an associate professor of Stapleton
3 white colar PROFILING april 2011 almost obsessively so. But she said the their craft. They say profiling is nothing more problem profilers may encounter is that than another tool, along with DNA analysis the characteristics that make a successful and questioning of witnesses. businessman, especially on Wall Street, are Indeed, the FBI's official involvement with often ones shared by white collar offenders. profiling dates back to 1972 with the formation Other lawyers and experts were simply of the Behavior Science Unit, which is part of skeptical of profiling in general. They say that the FBI Academy in Quantico, Virginia. In the movies like The Silence of the Lambs and the mid-1980s, the federal government decided CBS television show "Criminal Minds" have to expand the BSU model and that led to glamorized the work of FBI profilers, making the creation of the Behavioral Analysis Unit, them seem like real life versions of Sherlock with whom Hilts has worked with more than Holmes who always get their man. a decade. In a 2007 New Yorker magazine article, In hunting down serial killers, BAU agents writer Malcolm Gladwell tore into the help local police departments better analyze mythology that has surrounded profiling of the physical evidence left behind at murder serial killers. He wrote that a lot of the success scenes to decipher some motivation or attributed to profiling stems from books character traits of the killer. But in a white written by former profilers who in many cases collar investigation, the clues left behind have embellished the facts. He noted that often are computer records and private much of what the FBI profilers said about emails -- not blood splatter and DNA traces. Kansas' so-called BTK killer -- short for "bind, Hilts says he and his crew are aware of the torture and kill" -- was often contradictory. In skepticism about developing profiles of fact, Gladwell said that when police in Kansas white collar offender and they do have some arrested Dennis Rader in 2005 and charged reservations about limitations of the work him with the BTK murders, the married they are doing. It's one reason, Hilts, when he father of two was "nothing even close" to the talked to Reuters last months, seemed to dial descriptions offered by the profilers. back expectations a bit. Some feel FBI profilers also came up "I don't ever seeing us displacing the short in helping law enforcement track Gary CRAZY CON: Sam Antar, the former convicted CFO accountants in a white collar or securities Ridgway, the Green River killer. "I don't really of Crazy Eddie electronics store, stands for a portrait investigation" said Hilts, who notes that his believe in profiling," said Patricia Eakes, a in New York, April 12, 2011. REUTERS/Shannon group always has had a mandate to look at former Seattle-area prosecutor who worked Stapleton white collar cases. He said BAU agents won't on the Green River killer investigation and be doing crime scene analysis in a white now is a partner with Yarmuth Wilsdon company's namesake, ran the business. collar case. But Hilts said, his group "can be and Calfo and mainly defends white collar But in 1993, Sam Antar testified against his relevant in helping agents prepare to make a defendants. cousin and helped convict him in exchange pitch to a guy," he said. "In Green River, they missed big time," she for a lighter sentence. In FBI speak, "the pitch" is all about said. "In theory it's a great concept. But there Today, Sam Antar works with law determining which suspect in an investigation are so many individual factors that go into enforcement and goes around the country is the best one to approach to turn into a why people commit crimes." giving lectures on how to fight white collar cooperator and get them to either wear a crime. He also runs a popular blog at his wire or tape phone calls with friends and INSANE PRICES website, whitecollarfraud.com, where he colleagues. The success of an undercover Still, profiling has its champions -- comments on usual trading activity in the investigation often rests on finding the right even among some who've been convicted of markets. person to "pitch" or "flip." white collar offenses. In a recent interview, Antar told Reuters Sam Antar, the former chief financial officer that FBI profilers are right to be wary of DATA PROFILING of discount electronics retailer Crazy Eddie, putting too much stock into interviews with Meanwhile, a relatively new SEC who pleaded guilty to securities fraud for white collar felons because they'll often say team that specializes in insider trading is his role in a long-running accounting scam, what a questioner wants to hear. In his view, already showing there may be some merit says he sees some value in profiling. He once people become a scamster it's hard for to profiling in white collar cases. This group told Reuters that greed often is a secondary them to ever really change. has developed an expertise in analyzing motivation for many white collar offenders. "People like to ask me if I am redeemed," associations between traders suspected of He believes Madoff, for example, was said Antar. "I like to say that I am possibly wrongdoing and their friends and relatives. driven mostly by "a sense of stature" and an retired. The only reason I stopped was Relying on computers to analyze trades unwillingness to show failure as an investor. because I got caught." made by people with common social In his case, Antar said the main reason he Of course, FBI profilers working with the connections, the team will also look for helped cook the books at the once ubiquitous BAU never have claimed to be fortune tellers. aberrant trades that fall outside the expected New York retail chain Crazy Eddie was loyalty They fault movies like "The Silence of Lambs" pattern of activity. They have found that to his family. His cousin Eddie Antar, the with fostering unrealistic expectations of these one-off trades can lead to people who
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REUTERS INSIDER
Click to see Sam Antar interview: Find more Reuters special reports at http://bit.ly/eh0z6B our blog The Deep End here: http://link.reuters.com/heq72q may prove to be weak links and potential cooperators. This so-called pattern-recognition analysis may not be profiling in the classic sense. The SEC isn't focusing on behavioral characteristics of suspects as the FBI agents do. But regulators are profiling data to help find patterns in trading activity that previously would have left regulators befuddled and scratching their heads. And the SEC's new pattern-recognition analysis approach has achieved some early success. The market abuse team's analysis proved instrumental in helping federal last year into a purported high-yielding prosecutors bust a 17-year-long insider "An important investment strategy involving U.S. Treasuries trading ring that generated at least $37 that was pitched by New York financier million in illicit profits, say people close to the part of what Vassilis Morfopoulous. Parlin says the money investigation. we do is wound up in bank accounts controlled by But pattern recognition has it limitations TL Gilliams LLC, a commodities trading as well. This kind of analysis lends itself best victimology." shop run Tyrone Gilliams Jr., who broadcasts to smoking out insider trading rings, not to too often ignore obvious warning signs as services on the Internet. busting a corporate executive cooking the they get blinded by promises of big returns. Parlin claims in court papers he knew books or a person running an investment Sorkin said it makes no difference how nothing about Gilliams' involvement in the scam. educated or wealthy an investor is. investment deal and has no idea how his As with much of the SEC's approach to "Investors tend to be greedy and ignore fund's money ended up with TL Gilliams, enforcement work, the trading analysis red flags if they are making money and that which says it has office in more than two- developed by the market abuse team tends is something that occurs with boiler rooms, dozen locations around the globe, according to be dry, legalistic and devoid of looking at insider trading and Ponzi schemes," said to the firm's website. Parlin is seeking to get the victims of crime. Indeed, one of the most Sorkin. "The bad guys know all this and they his money back and claims and Gilliams important behavioral tools that FBI profilers play off it." has spent some of it on hotels, real estate bring to the white collar world is a perspective Indeed, if there is one thing FBI profilers ventures and night clubs. of focusing on the victims to learn more about can count on it is that a little more two years How this litigation will be resolved is the offender. since his arrest and the bursting of scores of unclear. Parlin claims he was defrauded by With serial killers, much of the art of smaller Ponzi schemes, the spirit of Madoff is Morfopolulous and contends in court papers developing a profile of a suspect comes from alive and kicking. that Gilliams is running a Ponzi scheme. analyzing the way victims have been selected Lawyers for Morfopolous and Gilliams and slain. The FBI profilers expect to gain HIP-HOP TRADER dispute Parlin's contentions. John Lang, potentially even more insight from victims of A case in point is a bizarre investment the attorney for Gilliams, says: "If any Ponzi white collar crimes because they still around deal involving a wealthy Cincinnati, Ohio, scheme existed, T.L. Gilliams is its biggest to tell their side of the story. businessman, a New York financier and a victim." Meanwhile, a lawyer for Parlin says "An important part of what we do is Philadelphia-based online minister who his client has contacted the FBI in Cincinnati victimology," said Susan Kossler, a longtime claims to be a commodities trader and a about the matter. BAU agent, who is working closely with friend of hip-hop musician Sean Combs. The Maybe someday this mess will wind up on Hilts on the white collar profiling project. wreckage from the deal is now playing out in the desk of the FBI profilers in Virgina. But "Looking at the victims tells you a lot about the federal and state courts in New York with one thing is certain: if the FBI is serious about the offender." the various parties either suing each other or profiling white collar criminals it won't go In the case of Madoff, there are certainly denying responsibility. wanting for work. plenty of victims for the FBI profilers to take Many of the facts are in dispute but the into account. Ira Lee Sorkin, the former federal warring parties appear to agree that a prosecutor and former top SEC enforcement charitable fund set-up by Cincinnati's David (Reporting by Matthew Goldstein; editing by attorney, who represented Madoff, said he Parlin is owed some $4 million it sunk Jim Impoco and Frank McGurty) has found that victims of financial frauds all
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PROFILERS: FBI Supervisory Special Agent (SSA) Mark Hilts, Chief of the Behavioral Analysis Unit (BAU) 2 - Crimes Against Adults and SSA Susan Kossler of BAU 2 at their office in Quantico, Virginia April 1, 2011. REUTERS/Kevin Lamarque Are you a white collar criminal? behavioral analysis group with scandals. white collar case is how a person relates to the U.S. Federal Bureau of Investigation With those caveats, here are some of his co-workers." isA trying to bring the same skills it uses to the most common character traits FBI Here then, is a scenario that three work up profiles of serial killers to the world profilers, prosecutors, lawyers, academics criminologists asked a group of business of white collar felons. It's an ambitious and criminologists say are markers for white school students to analyze and respond to: project and one that many in the legal collar criminals: "Tom is an upper-level manager at the community believe the FBI will have a XYZ accounting firm. During the end of the difficult time achieving. 1) a controlling personality fiscal year board meeting, Tom is told that One of the big challenges facing the 2) hard-charging and overly aggressive his division needs to "take care" of particular criminal profilers with the FBI's Behavioral 3) charismatic and charming documents relating to the Smith account. Analysis Unit is that successful Wall Street 4) lack of transparency in dealing with When Tom returns to his office, he calls a traders and corporate executives often clients staff meeting and instructs his employees to share many of the same characteristics with 5) revenge destroy all documents relevant to the Smith the most notorious white collar criminals. 6) greed account. Each of the employees begins to In other words, there's a fine line between 7) hunger for power shred the documents." what makes someone the chief financial 8) feeling of intellectual superiority The business school students were told officer of the year and a convicted felon they could answer anonymously and were doing hard-time for cooking the company The FBI profiling group also is planning to instructed to answer truthfully to help books. investigate the impact a company's culture the researchers, Nicole Piquero, Andrea It's worth remembering that Enron's has on individuals and whether that is what Schoepfer and Lynn Langton, conduct their Andrew Fastow, one of the architects of the causes some to break the law. study. company's off-balance sheet shenanigans, Susan Kossler, an agent with the FBI's Do you think Tom did the right thing? was named CFO of the year in 1999 by the Behavioral Analysis Unit/2, which is trade publication CFO Magazine. Three overseeing the white collar crime project, years later, he was charged with securities said, "Corporate culture is very important." (Reported by Matthew Goldstein; fraud in one of the biggest U.S. corporate She adds, "One of the important things in a Editing by Frank McGurty)
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PERPS: (Top Left) Convicted Ponzi king Bernard Madoff, pictured here in a booking mug shot released to Reuters on March 17, 2009 by U.S. Marshals Service. (Top Right) Homemaking maven and media personality Martha Stewart, pictured here in Sept. 30, 2006, was convicted in 2004 of lying to investigators about a stock sale. REUTERS/ CHIP EAST (Bottom Right) Former Democratic fundraiser Hassan Nemazee, pictured here on March 18, 2010, pleaded guilty last year to a nearly $300 million fraud. REUTERS/BRENDAN MCDERMID (Bottom Left) Former WorldCom founder and chief executive officer Bernard Ebbers, pictured here on July 8, 2002, was convicted in 2005 of securities fraud. REUTERS/HYUNGWON KANG/FILE
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