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Criminal Intent and the So-Called 'Red Flag' Theory
We live in times where there is an extreme amount of anger and distrust regarding our country's financial institutions. Such circumstances traditionally impel prosecutors to exercise their discretion to indict in an aggressive way expressive of the political environment. This is all the more reason why there is a need to encourage prosecutors to seek indictments based only on reliable and solid evidence, and not on evidence that may shift with mere perspective. The “red flag” theory, which we discuss here, carries the danger of fostering undeserved prosecutions, for so much of it involves the feelings or the opinions of the prosecutor ' and conceivably of a jury.
Proof of “willful blindness” or “conscious avoidance” now appears to be a generally accepted (if not overused) substitute for proof of actual knowledge in criminal cases, i.e., criminal scienter, the sine qua non of a criminal proceeding. The doctrine has been criticized, and courts have cautioned that certain formulations of the elements of “willful blindness” could lead a jury to convict based on negligent or reckless conduct. This danger is squarely presented by the U.S. Court of Appeals for the Second Circuit's recent decision in United States v. Ferguson, — F.3d — (2d Cir. Aug. 1, 2011), which held that “[r]ed flags about the legitimacy of a transaction can be used to show both actual knowledge and conscious avoidance.” While not entirely unprecedented, the growing invocation of the red flag theory is new and dangerous, investing far too much discretion in the prosecution to charge without a solid basis of proof of intentionality. This extension of the willful blindness doctrine is problematic, and inconsistent with the Supreme Court's recent discussion of this doctrine in Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060, 179 L. Ed. 2d 1167 (2011).
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