Author Archive for Kate Langmore

LegalMatch Update on White Collar Crime in America

white-collar-crimeDuring economic recessions, many people keep better tabs on their money, and even try to recoup their investments.  This phenomenon has a way of bringing fraudulent schemes to the surface, as demonstrated by the Bernie Madoff scandal, which was unveiled after Madoff’s clients started asking to withdraw their long-gone investments.  Of course, fraud is not usually perpetrated on such a grand scale.

According to LegalMatch.com intake reports collected over the past five years, the most common “white collar” crime charge people sought legal help for was credit card fraud.  Ironically, it may have been Madoff’s greed that prevented him from experimenting with credit card crime.  Many criminals make fairly modest credit card transactions in order to avoid the harshest penalties:  according to one source, the Secret Service doesn’t prosecute cases involving less than $150,000, and the Federal Trade Commission doesn’t investigate fraud cases unless they involve at least $2,000.  Madoff, whose giant Ponzi scheme involved about $65 billion, may have considered credit card scams not worth his trouble. 

The second most common charges facing LegalMatch clients involved insurance and unemployment fraud.  It’s obvious why Madoff, who was wealthy before embarking on his scheme, couldn’t pull off unemployment fraud, but it’s less clear why he avoided insurance fraud.  

The third most common charge facing LegalMatch’s white collar crime clients involved check fraud.  This crime is usually committed on a smaller-than-Madoff scale, which most victims losing an average of $5,000.

Madoff’s case differs from the average LegalMatch client’s case in other ways too.  While Madoff did not have any prior arrests or convictions, 34% of LegalMatch.com white collar crime respondents had prior arrests, 26% had prior felony convictions, 24% had prior misdemeanor convictions, and 16% had prior juvenile convictions.  Madoff’s clean record could have helped him avoid detection by authorities:  Madoff planted the seeds of his scheme in the early 1990s, and although concerns were raised as early as 1999, serious inquiries were not made until December 2008, and formal charges were not brought until 2009 after Madoff’s sons reported him to federal authorities. 

Finally, while Madoff is 70, most LegalMatch.com white collar fraud cases involved persons in their 40s and 50s, and no LegalMatch cases involved defendants in their 70s.  Perhaps Madoff’s age worked to his advantage: he probably acquired significant financial and social skills over the years, and investors may have perceived him as more “trustworthy” because he was older.  Of course it also helped that he had inside connections which allowed him access to numerous investors, wealthy and middle class alike.

Drug Abuse: Just What The Economy Ordered?

drugsAccording to a new report issued by the World Health Organization, drug use is more common in the United States than in any other country in the world, including those with comparatively lax drug enforcement laws such as the Netherlands.  Americans are the most frequent users of cocaine and marijuana; for instance, 16% of Americans reported using cocaine as opposed to the next closest contender, New Zealand (4%).  Americans are also the most likely to use marijuana (42%). 

Which drugs are Americans using?  Not surprisingly, the most common illegal drug today is marijuana, followed by cocaine, and methamphetamine.  According the U.S. Drug Enforcement Agency, 42% of total drug arrests involve marijuana.  This figure takes on new significance considering that marijuana is more potent than it’s been in over 30 years

These findings comport with LegalMatch.com figures I gathered from 2005 through the end of 2008.  39% of people looking for a drug-related criminal defense attorney were arrested for a crime involving marijuana; while 20% of arrests involved methamphetamine, 15% involved cocaine, 11% involved crack, 10% involved other drugs such as prescription medications, 3% involved heroin, 2% involved ecstasy, and 0.2% involved steroids.

While it’s discouraging to know that despite spending almost $12 billion per year on drug prevention efforts, so many Americans continue to use, the White House has some positive news.   According to a recent press release, illegal drug use in America is on the decline. A report based on data compiled from workplace drug tests, a study conducted by the University of Michigan, and the U.S. Drug Enforcement Agency shows that America’s tough drug policies are reducing illegal drug availability and demand.  Specifically, there was a 25% decline in overall illegal drug use by youths from 2001 to 2008.  Cocaine on American streets dropped in purity by 32% and increased in price by 89%, indicating a lack of supply.  Further, nationwide workplace drug tests showed a 38% drop in positive results from June 2006 to June 2008.

While illegal drug use may be on the decline as the economy tanks, some reports indicate that people are increasingly turning to prescription “escape” drugs, such as painkillers and mood enhancers to dull the pain of a foreclosure or job loss.  Drug industry sales figures show that many Americans are forgoing expensive doctor visits and high-priced medications, and instead choosing to mask their pain with prescription painkillers and psychiatric drugs.  Additionally, DEA officials recently reported that prescription drug abuse is rising sharply, at about an 80% increase from 2002. 

Is one problem merely being replaced by another?  Maybe not if the new administration recognizes that drug problems come in many different forms.

LegalMatch Data Shows Chapter 7 Bankruptcies Decreased

bankruptcyBy filing for bankruptcy, a consumer is stating in legal terms that he cannot pay his creditors.  While creditors have the option of filing a bankruptcy petition against a consumer debtor, most bankruptcies are filed by the debtor.  According to the National Bankruptcy Research Center, 1,064,927 consumers filed for personal bankruptcy in 2008, a 33% increase from 2007.  Filings are expected to rise again in 2009 because the primary reasons for this trend – the sagging economy, housing crisis, and credit crunch – are not likely to be resolved in the near future. 

However, there were still fewer filings in 2008 than in 2005 and earlier, prior to the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA).   The BAPCPA overhauled important parts of the Bankruptcy Code, and made it more difficult for consumers to file for Chapter 7 bankruptcy.  For instance, the BAPCPA requires debtors filing for Chapter 7 to wait eight years between filings, and the BAPCPA raised the asset and income requirements needed to qualify for Chapter 7.  Consumers bringing home incomes that exceed their state’s median income level, and who can pay at least $6,000 over five years must instead file for Chapter 13.  The new law pushed Chapter 13 filings up from 24% in 2005 to 41% in 2008.

What’s the difference between Chapter 7 and Chapter 13?  By filing for Chapter 7, an individual agrees to have his assets liquidated in order to pay creditors; in return, the debtor is able to discharge some of his debts.  Under Chapter 13, the debtor keeps ownership and possession of his assets, but agrees to pay some of his future income to creditors under a debt repayment schedule.

I looked at LegalMatch.com data from 2005 to 2008 to investigate these trends for myself.  In 2005, 74% of consumer clients wished to discharge all of their debts, while only 7% wished to repay them over time.  In 2006, 66% sought to discharge their debts completely, while 12% sought to make payments.  In 2007, 65% sought to discharge all debt, while 13% sought to repay.  And in 2008, 66% sought to discharge, while 11% opted to repay.  

In sum, it appears that the BAPCPA has been successful in prompted consumers to increasingly seek repayment (Chapter 13) over total discharge (Chapter 7).  However, the law’s goal of reducing overall findings is being somewhat thwarted by the tumultuous economic climate.

Where There’s a Will (or No Will), There’s a Legal Way

willAs the baby boomers approach their golden years, many are planning to leave legacies and to provide for their families’ well being by drafting estate plans.  However, as I looked over the thousands of cases posted on LegalMatch, it seems that a sizeable number of wills are challenged in court. 

According to LegalMatch case data from the past 5 years, 61% of people claiming an interest in the estate of the decedent (the person who dies) involve a written will.  Most commonly, children brought these lawsuits (43%); parents (16%), grandkids (9%) and spouses (5%) were less likely to take legal action. 

So, why are these wills being challenged?  People seek to prevent or stop a will from being probated for a number of reasons.  Commonly, plaintiffs claim that:  1) the will reflects a mistake of the testator, 2) the testator wrote his will under undue influence, fraud, or duress, or 3) the testator lacked testamentary intent or the capacity to write his will in the first place.

While a minority (23%) of the LegalMatch will contests that I evaluated involved decedents who died intestate (without a written will), according to a 2007 Harris poll, 55% of U.S. adults don’t have a will or estate plan.  This trend is even more prevalent among minorities: only 32% of African Americans and 25% of Hispanic Americans have wills, compared with 52% of White Americans. 

According to the same Harris poll, however, more Americans are making living wills (also known as health care directives), perhaps in response to widely publicized disputes such as the Terry Schiavo case.  Respondents’ number one reason for not making a will?  They thought they didn’t have enough assets to worry about.  Other popular responses were:  1) I don’t want to think about dying or being incapacitated, 2) I don’t know who to ask about drafting a will, and 3) procrastination. 

While crafting your will to withstand legal challenge may seem complicated, a good lawyer should be able to do this competently.  However, there is one simple thing that all laypersons can do: make your will accessible!  I found that 17% of LegalMatch will contests indicated that the parties did not even know if a will existed!  Remember, even the most carefully drafted will won’t do a bit of good if it can’t be found. 

Maybe the knowledge that their children will most likely be the ones to hash things out in court will motivate parents to start drafting their wills with care.  Also, while it’s troubling to know that so many people leave their estates unsettled, it’s also comforting to know that legal action can be taken even if the decedent fails to leave a will or alert his loved ones that a will exists at all.

Congress Product Regulations Make U.S. Safer, or China Stronger?

unsafe-toyCongress recently passed new product safety regulations which require United States manufacturers and importers to test toys and nursery products for levels of lead and phthalates, and to comply with a number of strict regulations.  The Consumer Product Safety Improvement Act also expands the size and budget of the U.S. Consumer Product Safety Commission, shields whistle-blowers who expose defective products, and permits state attorney generals to remove hazardous products from stores.  Further, the law raises the maximum safety violation fine to a whopping $15 million.  The law also creates a public database, from which consumers can learn about children’s product safety hazards and manufacturers can respond to complaints and clarify false information.

While efforts to make our products safer are obviously commendable, some of the law’s measures are already undergoing fierce criticism.  First, the law allows states to impose their own, stricter standards.  This means manufacturers will be forced to comply with up to 50 different standards – a truly daunting task. 

Second, some worry that the costs of compliance will simply be too great for all but the U.S.  largest manufacturers.  Larger companies with in-house labs can likely conduct their own tests; however, smaller companies that need to send their products out for testing may not be able to bear this financial cost.  Moreover, the law mandates each different style of toy be individually tested; and most small companies don’t sell sufficient stock of a single product style to offset this cost.  Additionally, small U.S. companies may have trouble keeping up with marking provisions, which require products be permanently marked with information specifying where, when, and by whom the product was manufactured. 

If smaller U.S. children’s product manufacturers go under, will we be left with only the mass-produced products from China, which, ironically, have been the source of so much trouble in the past?