8.24.2007
Ungar, Calo Interviewed about White-Collar Crime and Internal Investigations in Portland Business Journal
Steven Ungar and Robert Calo were interviewed for an August 24, 2007, Portland Business Journal article titled “White-collar crime grabs attention of regulators.” The article noted that federal and state governments have stepped up enforcement actions in recent years, including increased involvement by the Securities Exchange Commission and the Department of Justice. “Five years ago they would have picked out a few bad apples and investigated only those companies. Now they’re casting a much wider net,” Calo said. Ungar added, “It goes back to Michael Milken and Ivan Boesky. What has changed since Enron is that there used to be a much brighter line between what was a civil and what was a criminal case.” He related a story in which a SEC official recently said, “Don’t hold me to the exact numbers, but just 15 years ago about one in 10 cases was referred to the Department of Justice for criminal prosecution. Now it’s closer to nine out of 10.”
Ungar said, “The criminal net is being cast over an ever-widening swath of conduct that in years past would have been resolved in the civil or regulation realm,” noting that companies should conduct internal investigations of potential fraud and misconduct. “There is a duty to investigate,” he said. While there is temptation by some companies to avoid the considerable cost and hope wrongdoing isn’t investigated by outside authorities, “betting wrong can be disastrous, especially if, in retrospect, the decision-makers are accused of not investigating either to save money [or to] protect employees, officers or directors.”
Calo said an internal investigation has three steps: uncovering the problem, disclosing it to the government, and then making whatever changes are necessary to make sure it doesn’t happen again. “The best situation is where the company finds out first,” he said. “The worst-case scenario is where the company receives a ‘target letter’ stating that it’s the subject of an investigation.” Calo said white collar criminals often do things, such as pushing income that properly should have been reported in the second quarter into the first quarter, to make themselves or their companies look good. “I’ve never seen one case of fraud that wasn’t somehow different than every other case. It’s the No. 1 entrepreneurial industry in the country,” he said.