The hidden cost of going soft on white-collar crime

Martin Weinstein

In the last few weeks alone, I have come across two striking instances of white-collar crime.

The first case involves a girls’ summer camp owner who may have cheated parents, vendors and counselors by repeatedly declaring bankruptcy. The second involves a lawyer who may have used his position to dupe a young client into signing ownership of his tech company over to the lawyer himself.

Both cases deserve serious investigation by their respective U.S. Attorney’s Offices. But due to limited resources, it is unlikely they will face real consequences.

It is easy to assume that financial penalties collected by the Department of Justice’s criminal enforcement simply pad the budgets of the agencies imposing them. In reality, fines are directed to the little-known Crime Victims Fund. Consequently, narrowing white-collar enforcement results in more than just uncollected fines. It means defrauded retirees receive no restitution. Domestic violence survivors are turned away at shuttered shelters. Victims of trafficking are left without support.

The Crime Victims Fund supports an average of 4.2 million victims each year, providing critical funding to programs that work with victims of child abuse, domestic violence, identity theft and many other serious offenses. Through annual grants, the Department of Justice distributes funds to the states, which in turn use them to support local services. Importantly, the Crime Victims Fund is funded by federal fines, not tax dollars.

Over the last seven years, the amount of money in the fund has steadily declined, largely due to its design, which proved poorly suited to the Department of Justice’s growing use of deferred prosecution and non-prosecution agreements. These resolutions divert funds away from the Crime Victims Fund and into the Treasury’s general fund.

In 2021, Congress attempted to save the fund and passed the VOCA Fix to Sustain the Crime Victims Fund Act, which directed revenues from deferred prosecution and non-prosecution agreements to the fund. The VOCA Fix has proven to be a resounding success, allocating more than $2.35 billion into the fund and accounting for nearly 30 percent of total funds from the last five years. The fund’s rebound under the VOCA Fix underscores a hard truth — support for crime victims now depends on the scale and consistency of federal white-collar enforcement.

While the VOCA Fix worked as a short-term stimulus, its success depends on the very enforcement the administration keeps scaling back. Moreover, although the Biden administration championed the VOCA Fix as a solution to the fund’s depletion, it was also under the Biden administration that Congress approved a cap reduction, from $1.9 billion in fiscal 2023 to $1.35 billion in fiscal 2024. This resulted in a $550 million cut in obligations and a 40 percent reduction in victim assistance programs funding for each state.

For many programs, these substantial funding cuts proved devastating. States are now scrambling to fill the growing gap.

In Washington State, lawmakers attempted to pass a bill guaranteeing $50 million annually for victim services through 2029. When that effort failed, they resorted to increasing marriage license fees by $100. In California, $103 million was allocated in 2024 to offset shortages, but this money is unlikely to reappear in next year’s budget. Arkansas, meanwhile, saw nearly $4 million in cuts over four years, which it supplemented once but cannot do so again.

As a corporate defense lawyer, I am the first to say that many of the Justice Department’s recent theories of prosecution have been too expansive, but there is still a need for genuine apolitical white-collar enforcement. If victims must rely on robust white-collar enforcement for compensation, the Department of Justice should refocus its efforts on serious misconduct rather than walk back enforcement altogether.

While prosecuting a summer camp director and a small-time crypto lawyer would hardly move the needle on Crime Victims Fund shortages, these examples are representative of a larger pattern of white-collar crime going unchecked, and they set a dangerous precedent. This is especially troubling when the alternative to holding criminals accountable is shifting the cost to taxpayers, or even Washingtonian couples who simply want to get married.

The Department of Justice’s priorities never should have shifted from punishing criminal misconduct to policing routine business operations in the first place. Today, however, we are in danger of swinging the pendulum too far in the opposite direction.

The Victims of Crimes Act’s solvency was never meant to be a political issue. It was meant to deliver justice, support and restitution. But when white-collar enforcement slows, it fails both ends of that commitment: enabling harm and eliminating the resources to repair it.

As support programs shrink or shut down entirely, the administration’s white-collar enforcement posture must align with the Crime Victims Fund’s growing deficits. The future of the fund — and the people it was built to serve — depends on it.

Courtesy: thehill