Anyone who reads the newspapers or listens to our public officials knows two things about white-collar crime: First, white-collar criminals are just like street criminals. They may wear nicer suits and commit their crimes in boardrooms instead of alleyways, but their motivation is the same: greed. And second, white-collar offenders are highly rational. The way to deter their conduct is to ensure that the risks and consequences of being caught outweigh the rewards. As former U.S. Attorney Preet Bharara said in 2012, white-collar criminals “are highly skilled at cost-benefit analysis” and “weigh the risk of getting caught against the potential reward, and they decide it's worth the risk.” Stewart, James. “In a New Era of Insider Trading, It's Risk vs. Reward Squared.” New York Times, Dec. 7, 2012.

Our criminal justice system continues to evolve around those received truths. In response to every financial crisis—from the S&L scandal of the late 1980s, to Enron and accounting fraud cases of the early 2000s, to the financial crisis of 2008-09—Congress has enacted ever stricter laws to combat and punish white-collar criminals, and federal and state law enforcement agencies have poured ever more resources into investigating and prosecuting white-collar crime. And investigative techniques once reserved for organized crime and drug cartels, such as wiretaps, undercover agents, and informants, have in recent years been used to great effect against white-collar criminals.

The message to the public is unmistakable: No fraudster will be treated differently just because of his or her education or corporate standing. And to potential future defendants the statement is equally clear: As you weigh the pros and cons of criminal conduct, know that the government's resources to come after you are immense and the punishment if you're caught will be crushing. And thus our society attempts to deter and punish white-collar crime.

But what if everything we think we know about the motivation and decision-making of white-collar criminals is wrong?

The Psychology of White-Collar Crime

In his ground-breaking book, Why They Do It: Inside the Mind of the White-Collar Criminal (New York: Public Affairs, 2016), Prof. Eugene Soltes debunks conventional wisdom and shows through meticulous case studies what those of us who practice in the field of white-collar criminal defense have long understood: The psychology of white-collar crime is different from street crime; and white-collar defendants typically do not weigh risk and reward before engaging in criminal conduct.

In today's political climate, to make these points is to invite controversy. Any opinion that suggests that white-collar criminals, especially bankers, should be understood differently from other criminals runs against the deeply held views of large portions of our country and is taken by many to imply that white-collar criminals are therefore less culpable for their crimes. So it's important to note that to discuss the unique psychology of white-collar crime is not to take sides in the debate over whether white-collar crime is more or less harmful to society than street crime or to make a normative statement about the appropriate punishment of financial crime. Rather, it serves to urge that in thinking about white-collar crime—how to deter it and how to prosecute and defend it—we recognize important distinctions and avoid false parallels.

The distinctions are real, at the most basic of human levels. As Professor Soltes notes, a combination of evolution and socialization ingrains deep in the human psyche an aversion to causing suffering in others. The physical intimacy characteristic of street crime typically requires the perpetrator to consciously override that instinct. A mugger sees the fear in his victim's eyes. A burglar forcing his way into a locked home knows, even if not by name, whose property he is looting and whose sense of security he is violating. The psychological cues that tell the actor that he is breaking society's most established norms are unmistakable and must be consciously suppressed.

Physically distant from their victims, the perpetrators of white-collar crime often miss those visceral cues. An investor trading on inside information or a salesman bribing a public official to win a contract may believe that no one is being harmed. For other crimes like price-fixing or accounting fraud, the victims may be impossible to identify and their individual economic injury so slight as to be imperceptible. As a result, the would-be white-collar criminal, if he stops to consider the question at all, may conclude that with no harm, there can be no foul—this is just the way the business works. The human instinct that warns against causing the suffering of others never kicks in.

This explains why, as Professor Soltes documents, so many white-collar criminals looking back cannot recall having made a conscious decision to engage in crime. Few of them recount having engaged in a careful risk-reward calculus. In many cases, the modest monetary benefits they earn from their crimes could never rationally outweigh the catastrophic consequences to careers and families. Instead of a single dramatic leap, the criminal path of the typical white-collar criminal consists of small, incremental steps—each one perhaps even justifiable on its own—until he finds himself so far over the line that there is no turning back.

Defending Against Intent in White-Collar Prosecutions

What does this mean for a white-collar defense lawyer? With rare exceptions, intent is a bedrock principal of criminal law. No mistake or error in judgment, no matter how inexcusable or how great the consequences, should be punished criminally unless the actor intended to cause the negative outcome—or at least to violate the law. (A host of civil sanctions, including highly punitive monetary penalties and industry debarment, are of course available in cases where wrongdoers acted recklessly or negligently.)

And, as I've written before (Bourtin, Nicolas. “Combatting Hindsight Bias in White-Collar Criminal Investigations,” New York Law Journal, April 3, 2017), in financial crime more than in most areas of criminal law, guilt or innocence usually turns not on what the defendant did, but on the defendant's intent in doing it. What was the defendant's state of mind when she approved an accounting treatment, drafted a securities disclosure, or made a representation to a counterparty that now appears incorrect? A defendant's mental state can only be inferred, and the documentary record is often ambiguous.

But if, as Professor Soltes argues, intent is a particularly amorphous concept when it comes to white-collar crime—and if white-collar crime is an area of criminal law where the proof of intent often matters the most—the challenge to our justice system of distinguishing true criminal conduct from innocent errors in judgment becomes extraordinarily difficult. It perhaps explains why prosecutors and the public prefer to adopt the comfortable paradigm of the calculating white-collar criminal.

In the face of that, how does a defense lawyer convincingly make the case that although her client acted consciously and deliberately—and, in hindsight, improperly—he never intended to act criminally? The standard playbook—argue that there is insufficient direct evidence that the client intended to commit an unlawful act—may not be enough. Unless defense counsel can answer the question “How could he not have known?,” prosecutors and juries may conclude that the only possible inferences are guilty ones. That's what makes the unique psychology of white-collar crime so important. If defense counsel can explain, in a common-sense, non-academic way, what makes white-collar crime different on the question of intent, she stands a far greater chance of convincing her audience that what may appear fraudulent in hindsight looked very different at the time to a client who never saw and never thought about the people who could be harmed.

In some cases, of course, that hurdle may prove too high. There will be too many emails, false certifications, or other incriminating evidence to avoid the conclusion that the client at some point must have realized that he was committing fraud, even if he didn't set out to. And in many cases, that may indeed be true, and the best legal advice may be to counsel a client to understand that criminal intent can sometimes consist of a series of questionable incremental judgments, even without a moment of conscious decision-making to break the law.

How to distinguish between those two cases is what keeps white-collar defense attorneys awake at night.

Preventing White-Collar Crime

Other important questions follow from Professor Soltes' insights. If tilting the risk-reward calculus in favor of ever greater deterrence will not effectively deter most white-collar crime, and if few white-collar criminals experience that moment of decisional clarity—Do I break the law or don't I?—how can a company create a compliance program that deters unlawful behavior?

There are no easy answers, but at least part of the solution involves training and culture. Compliance training should include efforts to sensitize employees on how to identify potential harm to others, even when that harm is diffuse and the victims faceless and difficult to identify. Employees should internalize the mental exercise of imagining who might be harmed by a particular financial product or business practice.

Companies should also work to develop a culture where respectful disagreement is possible—where “nagging doubts” can be voiced without fear of criticism or reprisal. Employees should be incentivized to raise questions and concerns thoughtfully and respectfully. And leaders adept at encouraging and facilitating the productive, non-confrontational resolution of such concerns should be rewarded and promoted. In this way, no employee will have to operate in an “ethical silo” walled off from the benefit of the collective ethical insights of her colleagues.

Conclusion

Anyone who spends time with white-collar defendants soon realizes that the popular conceptions are almost never accurate. The societal harm white-collar criminals cause can be devastating, but few begin their careers determined to enrich themselves by breaking the law. How and why a white-collar professional came to be a criminal defendant is almost invariably a fascinating and complex question, and the answer is always important—to the defendant himself, to the company where he worked, to the attorney assigned to defend him, and to society at large.

Nicolas Bourtin is a litigation partner and the managing partner of Sullivan & Cromwell's criminal defense and investigations group.