Cressey Award Winner Reflects on Career and Lessons Learned

“It is unusual for those of us in the inspector general community to have people, when you are introduced, to actually stay in the room to listen and talk to you. Usually, people run for the doors,” joked Michael Horowitz, the inspector general for the U.S. Department of Justice (DOJ), as he addressed another packed session at 34th Annual ACFE Global Fraud Conference in Seattle on Tuesday.

Horowitz was in Seattle to receive this year’s recipient of the Cressey Award, which the ACFE bestows annually for a lifetime of achievement in the detection and deterrence of fraud. Coincidently, one of his most recent cases involved a DOJ lawyer who helped facilitate a friend’s dealings with Jho Low, the businessman who allegedly stole billions of dollars from Malaysia's sovereign wealth fund 1MDB. And it was that corruption case that was exposed by Xavier Justo, who was also in Seattle to receive the ACFE’s Sentinel Award this year.

“It gives you a sense of how enormous the tentacles are of that fraud and just the enormity of the work of Xavier has done to uncover it,” said Horowitz.

Horowitz’s experience in fighting fraud spans decades from his time as a junior prosecutor at the New York Southern District investigating police corruption in the 1990s to his most recent appointment as head of the Pandemic Response Accountability Committee (PRAC).

Looking back over his career, Horowitz recalled what he learned from being involved in New York City’s biggest ever police corruption case, dubbed the “Dirty 30.” Out of the 90 or so police officers in Manhattan’s 30th Precinct, 30 or so were found to be corrupt. “It was evident in that case what you see over and over again about the corrosive effect of fraud and corruption, and they often go hand in hand,” he said.

Because drug dealers were paying off the cops, the Harlem neighborhood in upper Manhattan lacked the policing it so desperately needed at the height of the crack epidemic during the early 1990s.

In an early use of data analytics, investigators working with the Drug Enforcement Administration (DEA) approached Horowitz about how unusually low the street price of cocaine was in the 30th compared to neighboring precincts and other parts of the city. They concluded that there was a lack of policing and that was likely because of corruption. The data ultimately proved correct as law enforcement discovered that police were kicking in doors without warrants in search of drugs and money.

Horowitz quickly learned how naïve he was as a young prosecutor when they arrested the owner of the corner grocery shop where the drug money was being exchanged between the dealers and the police. “We asked him why didn’t he do something about this, and his answer was ‘What did you want me to do? Call the cops?’”

The experience also helped Horowitz understand the dynamics of the Fraud Triangle developed by Donald Cressey, his award’s namesake. The three legs of the triangle that explain why fraudsters do what they do – namely opportunity, pressure/motivation and rationalization – applied nicely to the corrupt cops. “None of those officers came to the NYPD because they were corrupt and looking to engage in corruption,” he said. “They were corruptible.”

The cops were largely young, with no college education, and were starting their first jobs at low pay. “We talked to upward of 20 of these officers and we heard in some of the stories what Dr. Cressy had laid out,” he said.

Those police officers rationalized their actions saying that they spent more time doing paperwork than the drug dealers stayed in prison. They were also under financial pressure and saw an opportunity to make more money. And as they saw that others were getting away with corrupt acts – no thanks to poor oversight – they could rationalize it further by thinking, “Everyone is doing it.” And hence the corruption spread among other police officers.

“The internal affairs organization at the NYPD at the time was completely ineffective,” said Horowitz. “In fact, as a result of this and other cases, it was essentially disbanded and reorganized into a much more effective organization. It was clear to me at that stage of my career the importance of the work we all do to prevent, detect and deter wrongdoing because of the terrible impact it has on community.”

Mary Jo White, 2002’s Cressey Award winner and the U.S. attorney of the South District of New York who worked on the case at the time, also reminded Horowitz that he should look at the bigger picture. After all, while the investigation was taking place, the corrupt police officers remained on the streets. “Even though we strongly believed they were corrupt, we didn’t think we had enough evidence to arrest them. So, we had to think about how we manage that,” said Horowitz.

By carefully gathering all the evidence and facts, Horowitz and his team surprised many after they got several officers to confess and provide vital information in the investigation. “We were told that cops don’t flip on cops,” said Horowitz. “That was another important lesson I learned. It’s true that that cops might be hard to flip, but if you do your job well and you aren’t bluffing but presenting them with hard evidence and information, and making sure they understand that their choice is jail or trying to work off their sentence, they will not only seriously consider turning state’s evidence, but they will.”