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Snitching Industry Absolutely Teeming With Entrepreneurial Spirit

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A fascinating article by Evan Ratliff in this week's New Yorker explores the complex relationship between FBI agents and confidential informants.

"The human-source program is the lifeblood of the FBI," Wayne Murphy, the Bureau's Assistant Director for Intelligence, told a House subcommittee in 2007.

And Ratliff points out that "In almost every successful case against a large-scale criminal enterprise -- from the one against John Gotti's Mob operation to those involving terrorists plotting against New York synagogues and subways -- an informant has played a central role."

He also notes that "useful C.I.s are often paid thousands of dollars, and sometimes hundreds of thousands, in retainers. For certain crimes, such as those related to drug trafficking and money laundering, informants can make as much as twenty five per cent of confiscated proceeds."

This is, obviously, very attractive to enterprising crooks -- and fraught with trouble -- according to Alexandra Natapoff, a law professor quoted in the piece.

"The entrepreneurial nature of informants makes them dangerous," she says. "We see time and time again that informants not only are capable of ginning up business for themselves and the government but have deep motivations to do so."

Last year, the local Fox affiliate in Memphis aired a segment called "Snitches Get Riches" which claimed informants have been known to "shop their information around to the highest bidder."

Brian Lieberman, Supervisor of Special Investigations with the Winter Haven (Florida) Police Department, was blunt in his assessment of informants' motives in a 2009 article in Police Chief magazine:

"Only rarely are confidential informants upstanding citizens who desire to assist law enforcement for the good of society," he wrote.

Of course they don't. Entrepreneurs may create jobs and generate tax revenues, but in a capitalist society, they also want to make money. Former Missouri state senator Jeff Smith spent "most of 2010" as an inmate at FCI Manchester, a federal correctional institution in Manchester, Kentucky, which was "teeming with ambitious, street-smart men, many who appear to have been very successful drug dealers on the outside, and some of whom possess business instincts as sharp as those of the CEOs who wined and dined me six months before."

"There were a myriad of 'hustles' inmates created to help themselves live more comfortably, and every hustle fell somewhere different on the spectrum of acceptability to the administration," Smith writes. "Some hustles were perfectly legal and could be done in front of the COs (guards), such as washing and ironing another inmate's jumpsuit before a family visit, or the jailhouse lawyers who wrote legal briefs and cop-outs for other inmates. Others, such as the in-cell stores reselling food items from the commissary or one-man barbershops that operated most evenings, were technically illegal, but the COs looked the other way. The next level on the continuum were the tattoo artists, poker dealers, and bookies, whose businesses were frowned upon and often busted up by COs. The most risky businesses—which were also, of course, the most profitable, as even prison walls can't destroy the rules of risk-reward or the entrepreneurial spirit—were the smugglers of contraband: cigarettes, steroids, pornographic movies, cell phones, etc. With cigarettes going for about $3 apiece and some of the other goods running into the hundreds of dollars, the guys who ran these businesses could become quite wealthy by prison standards. In the parlance of FCI Manchester, they were dubbed 'entrepre-niggaz.'"

In fact, Smith's observations seem to be backed up by academic research. A 2002 study by economist Robert Fairlie called "Drug Dealing and Legitimate Self-Employment" found that "drug dealers are 11%-21% more likely to choose self-employment than non-drug-dealers, all else equal."

However, Fairlie doesn't say whether or not a "career" as a confidential informant qualifies as being self-employed. IRS guidelines aren't much help in getting to the bottom of this issue, although the Attorney General's Guidelines Regarding the Use of Confidential Informants do make one thing crystal-clear:

"The CI is liable for any taxes that may be owed."
POSITION:  No positions in stocks mentioned.

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