Examining the FBI: How Investigations Get Started

© 2015 The Texas Lawbook.

By Frederick M. Bennett, CPA, and John W. McSwain, CPA

Most people have seen the FBI only on television or in the movies where special agents of the FBI are comically displayed either as bumbling fools or as superheroes. Neither portrait is accurate. In reality, FBI agents are a cadre of hardworking, highly-educated men and women who take seriously their responsibility and oath of office.

Being the subject of an ongoing FBI investigation certainly is not a comfortable position. The potential liabilities (be they criminal or civil) are cause for sleepless nights, and the distraction of a federal investigation can be disruptive to a person’s personal and business life. This article delves into how FBI investigations get started, examines what to expect during the investigative process and offers insight into the prosecution or conclusion of the matter after an indictment is handed down.

Coming Under Investigation

Every step of an investigation – from opening a case through prosecution – is closely monitored by attorney general guidelines, the federal prosecutors that special agents work with and the direct supervisors of the special agents. In fact, the working relationship between a special agent and a federal prosecutor drives investigations. A passionate special agent paired with an aggressive federal prosecutor and solid evidence make for a formidable team.

Individuals and companies can learn that they are the subject of or a witness in a federal investigation in several ways. An FBI special agent might knock at the door to ask a few questions, an office might be served with a federal grand jury subpoena for records or a co-worker or associate might notify an individual that the FBI has asked some questions about that individual or his or her company. Becoming aware that a federal investigation is ongoing likely does not mean that the investigation is new. Many investigations are ongoing for months or even years before they become public or become known to the individuals under investigation. It is what happens behind the scenes in those prior months that determines the next steps for those under investigation.

How Investigations Get Initiated

The opening of an FBI investigation is somewhat subjective and requires collaboration and input from both the local U.S. attorney’s office and the local FBI office. Information used in investigations often comes from the victims themselves. If the victim is a financial institution, it would file a suspicious activity report. If the victim is a civilian, he or she would file a complaint.

Since the events of Sept. 11, 2001, the FBI has been deeply involved in developing its cases by recruiting reliable sources or informants. Source development, whether it is for counterterrorism or white-collar-crime matters, is crucial to all special agents working on investigations.

In general, there are five main ways cases become known to the FBI:

1. Victim reports
2. FBI source or informant information
3. Investigative journalism (especially for investigations involving elected officials)
4. Data mining by FBI intelligence analysts
5. Intelligence developed during prior investigations

Certain matters automatically get assigned to a control file (or “zero file” as special agents call it), which serves as a repository for those allegations that are not opened and assigned for investigation. Cases where minimum prosecutorial guidelines are not met or where the matter is not a priority for the FBI often end up in a zero file. When prosecutorial guidelines involve a minimum loss amount, the matter can be declined by federal prosecutors and likely will be referred to the local district attorney’s office. When a matter is declined, the subjects likely will never even know it was considered. But just because a case is not opened and assigned does not mean the FBI discards the information. All information that finds its way into an FBI office regardless of the source is indexed and saved for future retrieval. The addition of new information at a later date might create the necessary foundation for an FBI investigation.

Consider, for example, a complaint that is received in which the victim alleges a loss amount below prosecutorial guidelines and the information is indexed to a zero file. If, a few months later, additional information comes in from a different victim that brings the loss amount to a level within prosecutorial guidelines when coupled with the prior complaint, the case might come under federal scrutiny after all.

A complaint that initially is indexed to a zero file also can come back to life if additional information is developed on the subjects themselves. For example, elected officials who are named as subjects of fraud complaints might come under increased scrutiny because of their position or title regardless of the loss amount. Public corruption matters always have been a top priority, and when a public official is the subject of a complaint, loss amounts alone are not the determining factor for whether a matter is opened. Similarly, in some cases, the subject of a complaint could be a person in whom the FBI has an interest, and a separate criminal fraud complaint provides the basis to open an investigation.

Proactive Investigations

One of the FBI’s main goals is to be proactive regarding investigations. To demonstrate how intelligence is used to help drive investigative matters, including white-collar-crime matters, the FBI started the financial intelligence center (FIC) in 2009. The FIC is staffed with intelligence analysts assigned the task of using advanced data analytic techniques and evolving technology to generate targeting packages for white-collar-crime fraud matters. The analysts develop a package of information that they forward to the appropriate FBI field office for further investigation.

Establishing the FIC to gather investigative intelligence is a direct result of today’s environment. The availability of massive amounts of electronically stored information and the ability to analyze this data using advanced techniques can help connect the dots on financial crime investigations. White-collar-crime investigations relating to health care fraud and insider trading are prime opportunities to use data analytics to identify fraud. Data analytics now plays a significant role in uncovering fraud – especially in governmental fraud matters where the federal government holds much of the relevant electronically stored information.

Data analytics drive many new investigations, including health care fraud investigations. The Centers for Medicare & Medicaid Services (CMS) has been using predictive analytics since 2011. CMS’ fraud prevention system is a state-of-the-art predictive analytics platform. The information it generates is shared with investigative agencies, including the FBI, to bring criminal prosecutions to providers who have defrauded the system. For instance, data mining Medicare claims for providers who bill patients whose zip code is outside their service area for services or whose billing time per day exceeds 10 to 12 hours is one of the analytic scripts that can identify fraud.

Data analytic tools also are used to monitor stock trading to identify criminal prosecution patterns of fraudulent or insider trading activity. Data analytics will continue to play an increasingly important role in generating cases.

Looking Ahead

Today’s special agents have an abundance of tools and sources available to them when investigating cases. Though the cases might take different routes to land on their desks, they each undergo increased scrutiny as a result of data analytics and better-developed informants or sources.

Fred Bennett served 23 years with the FBI and is a retired assistant special agent in charge. Fred worked in the San Antonio, Dallas, and Chicago field offices assigned to white-collar crime, organized crime, drug, and violent crime investigations. Fred also was assigned to FBI headquarters in the violent crime and organized crime sections of the criminal division. Fred now is a director with Crowe Horwath LLP in the Dallas office. He can be reached at 214.777.5252 or fred.bennett@crowehorwath.com.

John McSwain served 22 years with the FBI and is a retired supervisory special agent. John worked in the Dallas field office assigned to white-collar crime and counterterrorism investigations and at FBI headquarters in the laboratory division. John now is a director with Crowe in the Dallas office. He can be reached at 469.801.4313 or john.mcswain@crowehorwath.com.

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