Fighting Fraud with Utah's White-Collar Crime Registry

Val Sedgwick used his ties to the Church of Jesus Christ of Latter-day Saints to assure real estate investors of his trustworthiness to use their funds to develop land, when in fact he was using their money to pay for his personal expenses and past debts. Nicholas Garza swindled his employer and its clients with an invoice edited to include fraudulent charges used only for his benefit. James Douglas Oliver convinced small businesses to pay for a spot on the “clown map” he was creating. His business, Clowns and Maps Are Us, never got around to making that map.

By: Jennifer Liebman, Research Editor, ACFE  

Val Sedgwick used his ties to the Church of Jesus Christ of Latter-day Saints to assure real estate investors of his trustworthiness to use their funds to develop land, when in fact he was using their money to pay for his personal expenses and past debts. Nicholas Garza swindled his employer and its clients with an invoice edited to include fraudulent charges used only for his benefit. James Douglas Oliver convinced small businesses to pay for a spot on the “clown map” he was creating. His business, Clowns and Maps Are Us, never got around to making that map.

The details of their frauds are different, but they all “earned” their place in the only white-collar crime registry in the United States. The registry, which the Utah legislature passed into law in 2015, has been online since February 2016. It’s a requirement for anyone convicted of second-degree felonies for securities fraud, theft by deception, unlawful dealing of property by fiduciary, insurance fraud, mortgage fraud, money laundering and pattern of unlawful activity in a Utah state district court since 2005. First-time fraudsters stay in the registry for ten years and those convicted of a second offense remain listed for another ten years. A third fraud conviction keeps the registrant on the list for life.

As of June 2016, 171 people convicted of fraud in Utah district courts are listed on the registry website. According to the Salt Lake Tribune , approximately one hundred people are convicted of financial crimes in Utah annually. Proponents of Utah's white-collar registry hope that it will curb affinity fraud crimes in the state and, perhaps, spur fraudsters to make good on restitution to their victims. Those who pay the court-ordered restitution in full may get their names removed from the site.

Utah and Affinity Fraud

Just as sex-offender registries were created to provide people with accessible information they can use to protect themselves from criminals in a given jurisdiction (as well as some old-fashioned public shaming for convicts), the white-collar registry's proponents contend that it's a user-friendly tool for investors who live in a state with a large religious population often vulnerable to affinity fraud schemes. In an affinity scheme, perpetrators target close-knit religious or ethnic communities by leveraging their trust as a member of that group. Affinity schemes can be doubly devastating for victims because the frauds not only deplete their funds, but they can also shatter trust in people with whom they thought they shared a common bond. A quick read-through of the online database reveals several convicted fraudsters who used their connections to the Mormon Church as a way to take advantage of investors. The registry also lists a number of people who defrauded their friends and family. Utah Attorney General Sean Reyes, who spearheaded development of the registry, told The Atlantic that affinity frauds in Utah add up to millions in losses each year.

Enforcing and Recovering Judgments

As mentioned earlier, one way that convicted fraudsters can get off the registry is by making their court-ordered restitution payments in full. Recovering restitution for victims of fraud can be a difficult task. As the ACFE's 2016 Report to the Nations shows, 58.1 percent of victim organizations that took part in the survey had yet to recover any of their losses. The process to recover losses can take years and even still a victim might never fully get back what they lost. Indeed, a fraud examiner's best chance to enforce a judgment is to start the recovery process as early as possible. Being proactive in tracing and locating hidden assets, as well as identifying a collection method early on, is crucial to recovering the proceeds of fraud in the long-run. Reyes told The Atlantic, “If we could raise restitution from less than one percent to even ten percent, it would represent millions of dollars back to citizens and the economy.”

But while finding ways to encourage the payment of restitution to make fraud victims whole is a worthy cause, some critics of Utah's white-collar crime registry argue that it might favor already wealthy fraudsters who can afford to keep their names off the registry. Thus, the registry might miss the mark on meeting one of its central goals. People are not required to register if they have complied with court orders at the time of sentencing and have paid restitution in full. The registry does not include those convicted of federal crimes, and the registry is certainly not filled with big-time hedge-fund scammers or Bernie Madoff-like pyramid schemers who might have the funds to easily pay restitution. As a March 2016 Wall Street Journal story demonstrates, the typical Utah white-collar fraudster is probably more like Kenneth Ray Wagner, a construction worker convicted of defrauding his insurance company. Wagner fell behind in paying the restitution he owed to the insurance company and had all but $336 left to pay off when the WSJ published the article. Convicted fraudsters may also petition the Utah attorney general’s office to have their names removed from the registry if their offenses have been expunged or lowered to a third-degree felony or misdemeanor.

Using the Registry

The registry itself contains all the public information that any fraud examiner could easily find on their own with a Google search or a trip to the court house; however, it’s set up to be a one-stop site for all the basic information someone might need for a background check on a prospective employee or business partner. The registry, which is operated by Utah’s attorney general, is located at www.utwhitecollarcrimeregistry.com. Before viewing the registry, you must acknowledge a disclaimer which notes that the attorney general does not guarantee the accuracy of the information.

Once in the registry, you have several options for navigating the database. You can scroll through the registry, which lists offenders alphabetically, or you can search for specific names or select the letter that corresponds with a particular last name. Each registrant is required to submit a current picture (which they’re required to submit) with their entry. Entries contain a description of the crime, when the fraudster was convicted and in which court, any aliases they might use, and identifying physical characteristics such as eye color, hair color, height and weight.

An examination of the registry shows that the most common convictions are for communications fraud, insurance fraud and securities fraud. Common targets of the fraudsters’ crimes were employers, investors, fellow church members, friends and family, and homeowners, just to name a few.