Since President Trump’s firing of FBI Director James Comey, a national debate about the role of government leaks has taken on new life. While the most infamous government leaks in recent history-- Watergate’s Deep Throat, the Pentagon Papers, and Edward Snowden—made headlines for shining a light into dark corners of our government, leaks are not relegated to the public sphere. Indeed, during Comey’s tenure, the FBI became the source of countless highly prejudicial leaks against private individuals accused of white-collar crimes. Many of those investigations went nowhere, and few cases resulted in convictions. But the damage to these U.S. citizens' livelihoods and reputations endures.
Whatever your feelings about Wall Street bigwigs, all Americans should be concerned about this increasingly common, and little discussed, practice, which not only undermines the bureau’s reputation for integrity and justice, but also shows how the government can wield its might to crush its opponents and aggrandize itself. The new FBI Director, whoever he or she will be, has an opportunity to break with this cheap and wholly un-American practice.
Leaks against private citizens follow a pattern. They are coordinated, deliberate measures aimed at goosing witnesses and intimidating targets in order to score legal wins. Because the FBI is both privy to our nation’s secrets and responsible for collecting evidence, unauthorized disclosures of confidential information regarding private citizens are especially dangerous to our constitutional rights and liberties. FBI “white collar” leaks can and do devastate reputations before a trial date can be set. They can and do reduce fortunes to rubble by the close of afternoon trading.
All Americans should be concerned about this increasingly common practice, which not only undermines the bureau’s reputation for integrity and justice, but also shows how the government can wield its might to crush its opponents and aggrandize itself.
In recent years, the bureau has been accused in several high-profile cases of leaking damaging grand jury evidence to the media and tipping the media off to raids. The attending publicity provides an unjust assist to the prosecutors, who have the leverage of public opinion to cow their targets into plea bargains. And that’s the name of the game for both the bureau and U.S. Attorneys: a tick in the win column.
Take the insider trading case brought against legendary Las Vegas gambler William Walters, in which FBI Coordinating Supervisory Special Agent David Chaves admitted to disclosing to media “sensitive and confidential details, including trades being examined, records being analyzed, the name of an individual approached by the FBI and the supposed targets of the investigation.” The leaks were published nine months before an indictment was handed down by the grand jury, and the articles resulting from the leaks were—not coincidentally—pivotal to bringing the indictment. In January of this year, federal prosecutors warned that Chaves may be prosecuted for his leaks. Chaves’ conduct is now under investigation by the FBI’s Office of Professional Responsibility and the Justice Department’s Office of the Inspector General.
Worse still, according to Walters’ filings, Chaves and possibly other agents in the FBI’s white-collar unit seemed to have made a habit of leaking about investigations to goose witnesses and intimidate targets in other insider trading cases, including those targeting former Galleon Group head Raj Rajaratnam and David Ganek of Level Global.
So alarmed by the FBI’s leaks was the judge in the case, he took the dramatic step of ordering the Department of Justice to update him with written reports over the internal investigation of Chaves and others engaged in leaking bearing on insider trading. Clearly, the court recognized that leaks led to the intimidation, if not outright coercion, of both witnesses and defendants thereby stymying the prospects of a fair trial or even proceeding to trial at all.
Indeed, as the supervisor for securities fraud investigations in the FBI’s New York Field Office, Agent Chaves was aware of and participated in the investigation of another New York City financier, Mark Nordlicht. Court documents allege that the FBI leaked to a number of reporters that Nordlicht was running a “Ponzi-like scheme,” as toxic a charge as any on Wall Street and a dog-whistle for the media and for grand jury prejudice. That Nordlicht’s fund in no way behaved like a Ponzi scheme is beside the point. The rub is that Nordlicht’s fund remained in operation during the investigation. It should go without saying that in a case alleging overvaluation of investments, deliberate government conduct helped suppress the value of those very investments. This not only hurts investors, but it shapes the evidence before the grand jury.
The FBI has not been alone in this emerging government practice of leaking to intimidate private individuals. Federal prosecutors, particularly in New York’s high-profile Southern and Eastern Districts, have also been particularly fond of publicity. We could always count on the former Southern District’s Attorney Preet Bharara for a splashy press conference to claim his latest scalp. The media and the public ate it up, and made Bharara a minor celebrity. But make no mistake, it is not simple vanity that motivates the prosecutors, it is strategy: dragging prominent and wealthy financial industry types before the cameras has a funny way of pressing them into plea bargains. Bharara and Robert Capers, his like-minded counterpart in the Eastern district, were summarily dismissed along with every other U.S. Attorney by the Trump administration just months after the new president came into office. With few convictions and lots of damaged reputations, this too was a welcome if unintended, house-cleaning.
The extent that FBI and other government personnel have come to rely on leaks signals a failure in the chain of command, an indication of the mistrust in agency protocol or, arguably worst of all, affirms an agent’s misguided notions of his supposed authority to determine a private citizen’s legal fate. This makes a reliable fix over a sustained period difficult. Nonetheless, post-Comey, the FBI has formally tightened access to traditional media — de-facto acknowledgment of the agency’s reawakened sensitivity to the far-reaching damages of its leaks — a good first step yet one that alone will not eliminate the risk of further unauthorized blasts.
For better or worse, these leaks have become a fixture in the halls of power. But the bedrock American principles of “innocent until proven guilty” and the right to a fair and just hearing are in peril when the government leaks against citizens accused of wrongdoing. In the long run, these leaks are stark examples of the legal remedy being worse than the disease.
John Banks-Brooks served as attorney-adviser at the Securities and Exchange Commission and counsel at the New York City Council.