Twitter

Thursday, March 24, 2016

Financial Crime: a New Twist on the Sex-Offender Registry By Jean Eaglesham



Financial Crime: a New Twist on the Sex-Offender Registry, March 24, 2016
Utah is most aggressive jurisdiction in publicly shaming financial criminals
By Jean Eaglesham

States have taken the idea of the sex-offender registry and applied it to everything from kidnapping to animal abuse. Utah is expanding it into new territory: financial crime. 

An early version of the White Collar Crime Offender Registry, which has been online since February, includes more than 100 people convicted of tax, credit-card or insurance fraud; thefts from employers or friends; and bilking investors. 

They include 41-year-old Kenneth Ray Wagner. “Eye Color: Blue. Hair Color: Blonde … Targets: Insurance company.”  

The registry displays Mr. Wagner’s mugshot and explains that he was convicted in 2008 of fraud for dismantling his motorcycle, hiding the parts in a storage locker and claiming to his insurance company that it had been stolen.  

The list makes Utah the most aggressive jurisdiction in the country when it comes to publicly shaming financial criminals. No other state operates such a list. The Securities and Exchange Commission often shields the identities of offenders.  

The agency last month refused a public-records request by The Wall Street Journal for information on sanctions paid by specific individuals, saying that providing such information would be “a clearly unwarranted invasion of personal privacy.” 

The Financial Industry Regulatory Authority does require disclosure of events like some criminal convictions, regulatory actions and customer complaints. But it only applies to securities professionals, and the disclosures are intermingled in a database that includes more routine facts like work history.  

Utah lawmakers say their list, which is being administered by the state’s attorney general, will help protect investors by offering easy access to information about con artists. 

It could also create leverage to get felons to make their victims whole. Convicts who comply with court orders on time and pay restitution in full won’t appear on the list. 

“That’s the carrot,” Utah Attorney General Sean Reyes said. 

The new policy plunges the state into a broader debate about using name-and-shame tactics to punish convicts who have already served their time. 

Registries have proliferated rapidly in the U.S., experts say. While some lists restrict access to law-enforcement agencies or fire officials, others can be viewed online by anyone, according to the National Conference of State Legislatures. In addition to the 50 states that publicly track sex offenders, five states including California require registration for arson. Minnesota, Illinois and six others maintain lists of methamphetamine producers. In Indiana, a public website lets visitors use Google Maps to find the location of homes that have been used as meth laboratories. Tennessee requires registration for animal abuse— something nine other state legislatures are debating. Florida law requires registration by anyone convicted of a felony of any kind for up to five years after completing the sentence. 

Utah itself maintains a sex-offender and kidnap-offender list, as well as its new financial-crimes registry.

In all, the number of Americans on such lists will soon approach a million, if it isn’t already there, said J.J. Prescott, a law professor at the University of Michigan. He warned of possible unintended consequences from applying a public alert designed for sex offenses to other crimes, such as the risk of drug-offender registries being used by addicts to find suppliers. 

"Do we want to be a nation of registries?” asked Douglas Berman, a law professor at Ohio State University.
 

Utah’s white-collar registry will include anyone convicted of second-degree frauds or other financial felonies since January 2006. A total of about 230 people are expected to be on the registry when it is formally launched in a few months, officials said. 

The state will generally keep people registered for 10 years after a first offense. A second offense adds another decade, and people with three convictions never get off. 

Mr. Wagner’s lawyer, Tara Haynes, said he already has paid a considerable price for his crime. He appeared on the list after serving 90 days in county jail and being ordered to pay more than $16,000 in restitution. 

“He is not a white-collar criminal,” Ms. Haynes said. "He’s a blue-collar construction worker.” 

Utah lawmakers voted last year to create the registry to stem what they called a growing tide of white-collar crime in the state, particularly by con artists preying on its close-knit religious communities. 

Convicts need to fill out a form to register, arrange to have a photo taken and update their address and phone number if they change. 

All but one entry in the early version of the registry includes a photo, typically a mugshot, while some also list aliases such as “ Missy Moniker” or “Connie.” 

The site has some glitches. It included one man who died of cancer last year—he was removed after The Wall Street Journal sent officials a link to his obituary—and another where the wrong offense was initially shown. 

Mr. Reyes said the state is still vetting the registry, including by asking offenders to check the accuracy of their entries. “We want to be fair,” he said.

Some legal experts say Utah’s approach could be an improvement on federal efforts to encourage restitution. 

"I don’t know if it will work, but whatever else we’re trying isn’t working so well,” said Mr. Berman, the Ohio State law professor. “Given how low the recovery rate is for court-imposed restitution, we don’t seem truly committed to having that form of punishment go beyond symbolism in some cases.” 

The SEC has yet to collect $9.4 billion of $17.7 billion of sanctions it has imposed in the last five fiscal years, according to data on its website. 

Defense lawyers argue the restitution provision could favor wealthy criminals while punishing those who struggle to make amends. 

Mr. Wagner, for example, fell behind in paying the $16,493.38 restitution that he owed American Family Insurance, the company that he defrauded. He eventually paid the insurer but still owes a $336 fine, court records show. Because he has paid the restitution, he can appeal to come off the registry five years after he is finished serving his probation. 

The question of whether Utah’s registry violates defendants’ rights could end up in court. 

Clair Rulon Hawkins, a former employee of a Utah real-estate firm, was convicted in 2013 of defrauding an investor who lost $852,000 deposited on two lots of land that Mr. Hawkins helped sell. Mr. Hawkins served four months in Salt Lake County jail and a halfway house. He remains subject to a restitution order for more than $1.4 million. 

The 50-year-old is appealing his conviction. He also plans a legal challenge to his inclusion on the Utah registry, arguing it violates his constitutional rights to due process, privacy and economic liberty, his lawyer said. 

A spokesman for the attorney general declined to comment on Mr. Hawkins’s case. 

State lawmakers and other officials hope their idea will catch on nationally. Mr. Reyes, the attorney general, said his office has been contacted by legislators in several states as well as by federal prosecutors interested in replicating the experiment. 

“I know we’re the first in the nation for doing it,” said Michael McKell, a Republican who sponsored the bill in the Utah House to create the white-collar registry. “I certainly don’t think we will be the last.”