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SPECIAL REPORT-From Hannibal Lecter to Bernie Madoff

Stock MarketsApr 20, 2011 09:04AM ET
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mythology that has surrounded profiling of serial killers. He wrote that a lot of the success attributed to profiling stems from books written by former profilers who in many cases have embellished the facts. He noted that much of what the FBI profilers said about Kansas' so-called BTK killer -- short for "bind, torture and kill" -- was often contradictory. In fact, Gladwell said that when police in Kansas arrested Dennis Rader in 2005 and charged him with the BTK murders, the married father of two was "nothing even close" to the descriptions offered by the profilers.

Some feel FBI profilers also came up short in helping law enforcement track Gary Ridgway, the Green River killer. "I don't really believe in profiling," said Patricia Eakes, a former Seattle-area prosecutor who worked on the Green River killer investigation and now is a partner with Yarmuth Wilsdon and Calfo and mainly defends white collar defendants.

"In Green River, they missed big time," she said. "In theory it's a great concept. But there are so many individual factors that go into why people commit crimes."

INSANE PRICES

Still, profiling has its champions -- even among some who've been convicted of white collar offenses.

Sam Antar, the former chief financial officer of discount electronics retailer Crazy Eddie, who pleaded guilty to securities fraud for his role in a long-running accounting scam, says he sees some value in profiling. He told Reuters that greed often is a secondary motivation for many white collar offenders. He believes Madoff, for example, was driven mostly by "a sense of stature" and an unwillingness to show failure as an investor.

In his case, Antar said the main reason he helped cook the books at the once ubiquitous New York retail chain Crazy Eddie was loyalty to his family. His cousin Eddie Antar, the company's namesake, ran the business. But in 1993, Sam Antar testified against his cousin and helped convict him in exchange for a lighter sentence.

Today, Sam Antar works with law enforcement and goes around the country giving lectures on how to fight white collar crime. He also runs a popular blog at his website, whitecollarfraud.com, where he comments on usual trading activity in the markets.

In a recent interview, Antar told Reuters that FBI profilers are right to be wary of putting too much stock into interviews with white collar felons because they'll often say what a questioner wants to hear. In his view, once people become a scamster it's hard for them to ever really change.

"People like to ask me if I am redeemed," said Antar. "I like to say that I am possibly retired. The only reason I stopped was because I got caught."

Of course, FBI profilers working with the BAU never have claimed to be fortune tellers. They fault movies like "The Silence of Lambs" with fostering unrealistic expectations of their craft. They say profiling is nothing more than another tool, along with DNA analysis and questioning of witnesses.

Indeed, the FBI's official involvement with profiling dates back to 1972 with the formation of the Behavior Science Unit, which is part of the FBI Academy in Quantico, Virginia. In the mid-1980s, the federal government decided to expand the BSU model and that led to the creation of the Behavioral Analysis Unit, with whom Hilts has worked with more than a decade.

In hunting down serial killers, BAU agents help local police departments better analyze the physical evidence left behind at murder scenes to decipher some motivation or character traits of the killer. But in a white collar investigation, the clues left behind often are computer records and private emails -- not blood splatter and DNA traces. Hilts says he and his crew are aware of the skepticism about developing profiles of white collar offender and they do have some reservations about limitations of the work they are doing. It's one reason, Hilts, when he talked to Reuters last months, seemed to dial back expectations a bit.

"I don't ever seeing us displacing the accountants in a white collar or securities investigation" said Hilts, who notes that his group always has had a mandate to look at white collar cases. He said BAU agents won't be doing crime scene analysis in a white collar case. But Hilts said, his group "can be relevant in helping agents prepare to make a pitch to a guy," he said.

In FBI speak, "the pitch" is all about determining which suspect in an investigation is the best one to approach to turn into a cooperator and get them to either wear a wire or tape phone calls with friends and colleagues. The success of an undercover investigation often rests on finding the right person to "pitch" or "flip."

DATA PROFILING

Meanwhile, a relatively new SEC team that specializes in insider trading is already showing there may be some merit to profiling in white collar cases. This group has developed an expertise in analyzing associations between traders suspected of wrongdoing and their friends and relatives.

Relying on computers to analyze trades made by people with common social connections, the team will also look for aberrant trades that fall outside the expected pattern of activity. They have found that these one-off trades can lead to people who may prove to be weak links and potential cooperators.

This so-called pattern-recognition analysis may not be profiling in the classic sense. The SEC isn't focusing on behavioral characteristics of suspects as the FBI agents do. But regulators are profiling data to help find patterns in trading activity that previously would have left regulators befuddled and scratching their heads.

And the SEC's new pattern-recognition analysis approach has achieved some early success. The market abuse team's analysis proved instrumental in helping federal prosecutors bust a 17-year-long insider trading ring that generated at least $37 million in illicit profits, say people close to the investigation.

But pattern recognition has it limitations as well. This kind of analysis lends itself best to smoking out insider trading rings, not to busting a corporate executive cooking the books or a person running an investment scam.

As with much of the SEC's approach to enforcement work, the trading analysis developed by the market abuse team tends to be dry, legalistic and devoid of looking at the victims of crime. Indeed, one of the most important behavioral tools that FBI profilers bring to the white collar world is a perspective of focusing on the victims to learn more about the offender.

With serial killers, much of the art of developing a profile of a suspect comes from analyzing the way victims have been selected and slain. The FBI profilers expect to gain potentially even more insight from victims of white collar crimes because they still around to tell their side of the story.

"An important part of what we do is victimology," said Susan Kossler, a longtime BAU agent, who is working closely with Hilts on the white collar profiling project. "Looking at the victims tells you a lot about the offender."

In the case of Madoff, there are certainly plenty of victims for the FBI profilers to take into account. Ira Lee Sorkin, the former federal prosecutor and former top SEC enforcement attorney, who represented Madoff, said he has found that victims of financial frauds all too often ignore obvious warning signs as they get blinded by promises of big returns. Sorkin said it makes no difference how educated or wealthy an investor is.

"Investors tend to be greedy and ignore red flags if they are making money and that is something that occurs with boiler rooms, insider trading and Ponzi schemes," said Sorkin. "The bad guys know all this and they play off it."

Indeed, if there is one thing FBI profilers can count on it is that a little more two years since his arrest and the bursting of scores of smaller Ponzi schemes, the spirit of Madoff is alive and kicking.

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SPECIAL REPORT-From Hannibal Lecter to Bernie Madoff
 

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