Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, January 9, 1995 TAG: 9501100042
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: MICHAEL STOWE STAFF WRITER
DATELINE: LENGTH: Long
It was nearing 5 p.m. on a Friday, just two weeks before Christmas, and Assistant U.S. Attorney Tom Eckert sat on a bench outside Roanoke's main federal courtroom nervously reading the newspaper.
He waited as a jury, which had spent three days hearing testimony and reviewing more than 50 exhibits, deliberated the fate of Walter ``Gene'' Hoffman - a former Salem businessman charged with falsifying loan statements to assist in a ``straw man'' loan scheme that had defrauded several Roanoke-area banks.
Eckert, who specializes in prosecuting white-collar criminals, was confident of his case. He knew from experience, however, that a jury is more likely to convict a drug dealer or a gun runner than a former chief executive officer charged with signing false bank statements.
``Everyone knows that if you are caught holding a kilo of cocaine, then that's wrong,'' Eckert said after the trial. ``But not everyone understands that falsifying a loan application is also wrong ... It's difficult to have a jury understand that what happened here is actually criminal.''
Though he watched dozens of federal workers hop off the elevator and leave the Poff Federal Building, Eckert was in no hurry to start his weekend.
``I hope the jury's out for a long time,'' he said, explaining that in complicated white-collar cases, the jury often needs a lot of time to study the evidence.
After about 90 minutes, Eckert was summoned back to the courtroom. The jury had reached its verdict.
``This is not good. This is not good,'' Eckert said as he walked in, fearing that the quick verdict meant an acquittal for Hoffman.
Eckert's heart sank when he heard the court clerk say: ``We, the jury, find Walter Eugene Hoffman not guilty to count one of the indictment, not guilty to count two of the indictment, not guilty to count three of the indictment, not guilty to count four of the indictment.''
But Eckert's spirits rose seconds later when the clerk said the jury had convicted Hoffman on five other counts.
``I'm happy; justice was done,'' Eckert said afterward. ``Any conviction in a white-collar case is a victory.''
U.S Attorney Bob Crouch says that this year he'll be more aggressive in pursuing white-collar criminals.
``This office has always addressed white-collar crime, but in the past we have been reactive,'' he said. ``We are changing from being reactive to proactive.''
The office has formed a fraud team that will be headed by Assistant U.S. Attorney Karen Peters and will include Assistant U.S. Attorneys Eckert, Jennie Waering and Rich Lloret.
Crouch said the emphasis will be placed on medical fraud, an area in which Peters will specialize. She has attended conferences around the region to familiarize herself with the federal agencies involved in health care.
About 121 of the approximately 800 cases handled by the U.S. attorney's office in 1994 involved white-collar crime. Of those, 48 involved some form of bank fraud, and only two involved health-care fraud.
Though the fraud team is still in the planning stages, Peters said she thinks most of the health-care cases will focus on doctors, hospitals and other health-care providers who are defrauding federal programs, including Medicare and Medicaid.
Peters said the U.S attorney's office has been limited in those efforts in the past, because the U.S. Department of Health and Human Services, which oversees those programs, has only two investigators in Virginia.
The new focus on health-care fraud is an initiative of U.S. Attorney General Janet Reno, and it isn't exclusive to the Western District of Virginia. The Southern District of West Virginia and the U.S. attorney's office in Atlanta also are beefing up efforts to find medical fraud cases.
``Health-care cases are like fruit falling off the vine,'' Kent Alexander, the U.S. attorney in Atlanta, told a Georgia newspaper. ``We are just trying to pick up as many as we can.''
Despite the increased efforts, white-collar convictions still won't be easy.
Fraud cases, by nature, are more expensive, more time-consuming and more complicated to prosecute. They almost always involve stacks and stacks of bank records, tax records or other financial data that must first be subpoenaed and then tediously analyzed.
``They take a long, long time,'' said Eckert, who, along with the FBI, spent several years investigating Hoffman.
Barry Tatel, a Roanoke lawyer who represented Hoffman, said the evidence in a white-collar cases is more ambiguous than in other criminal cases.
``If a guy gets caught with 100 hits of LSD, then everyone knows that is wrong,'' he said. ``But in white-collar cases, the facts don't speak for themselves so much.''
Tatel said the volume of documents gives defendants more ammunition to create doubt in the minds of jurors. ``There is definitely more there to stir,'' he said.
Frank Rogers, a lawyer who has represented white-collar defendants, agreed that the complicated nature of white-collar cases often helps the defense.
``If you can muddle things up just enough, then maybe you can create a reasonable doubt,'' he said.
Eckert said many fraud defendants try to convince a jury that they aren't criminals but simply have made a mistake.
``We have to convince a jury that this man crossed the line from being negligent to actually intending to defraud and deceive,'' the prosecutor said.
Even if there is a conviction, the public isn't always happy. The general perception is that white-collar criminals aren't sentenced harshly enough.
Some folks in the Henry County area were upset that former Martinsville banker Susan Stone was sentenced to only four years in prison for stealing nearly $5 million from the accounts of an elderly heiress.
A study funded by the Justice Department and completed by the University of California, Irvine, late last year reported that burglars are sentenced to longer prison terms than loan fraud artists.
The average sentence in 1988 for major thrift crimes was 36.4 months, compared with 55.6 months for burglars and 38 months for car thieves. Those figures wouldn't be the same in recent years, because bank fraud sentencing guidelines were toughened around 1989 as a result of numerous savings and loan scams.
Even so, Peters said the new guidelines haven't gone far enough. ``There has been a real effort to toughen sentences, but you still have to steal an awful lot of money before you are going to jail for any length of time.''
Waering, the assistant U.S. attorney who prosecuted Stone, doesn't dispute that white-collar criminals get a better deal than other criminals, but she says jail isn't the only punishment the defendants suffer.
``A conviction brands them as a criminal'' and essentially prevents them from getting another job with responsibility, she said.
``If Susan Stone does ever steal again, then I don't think she will be in the position to take as much as she did,'' Waering said.
Vinton resident Peggy Gibbs said victims of white-collar crimes always suffer more than the criminals. Gibbs and her husband lost about $150,000 in the late 1980s in a shopping center fraud scheme masterminded by Vinton accountant Elmer Craft and former Roanoke real-estate agent Steve Lucion.
Lucion and Craft were convicted in 1990 of running a fraud scheme from 1982 to 1986 in which they set up investment partnerships to buy six shopping centers in Virginia, North Carolina and Tennessee. They cheated the partners by agreeing to buy the centers at one price and telling the partners the prices were much higher. More than 80 investors estimated that they lost a total of $13 million.
Lucion was sentenced to 10 years in prison and fined $1 million, and Craft was sentenced to eight years in prison. Both already have been released on parole.
Many white-collar criminals take advantage of people who trust their judgment. Gibbs said Craft, now 47, was not only the family's accountant, but also a neighbor and a good friend.
``I don't trust anybody, now,'' she said.
While Gibbs doesn't think the prison terms were long enough, she got satisfaction out of seeing the two men sent away.
``We did interrupt their lives for a short while,'' she said.
Lucion and Craft were ordered to pay restitution to their victims, but Gibbs has received nothing.
Lucion has paid $1,964 in restitution, according to U.S. District Court records; Craft hasn't made any payments. A federal court clerk said the money won't be distributed to the victims until the court has collected as much as it thinks Lucion and Craft can pay.
Craft lives in Vinton and has returned to his accounting business there. In conjunction with Jim Walter Homes, he has built a house in a Bedford County subdivision near Smith Mountain Lake.
Gibbs wonders if any profits from Craft's business ventures will be used to pay back investors.
``It seems like Elmer's back and doing OK,'' she said.
Craft's wife said her husband had no interest in being interviewed for this story.
Defense attorney Tatel says the sentencing guidelines for white-collar criminals are too tough.
``I think they are outrageous,'' he said. ``I think they have gone way overboard.''
Tatel said many white-collar fraud cases - especially false loan application cases - don't have any real victims. ``There is a lot of time being given for crimes that hurt no one,'' he said.
Besides, he said, any jail time is a long time for a white-collar defendant with no criminal history.
``Would you want to pull four years?'' Tatel asked, referring to Stone's sentence. ``I sure wouldn't.''
by CNB