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When the FBI pays its confidential informants and cooperating witnesses for information, it usually pays them in cash. Sometimes they’re paid hundreds of dollars. Sometimes hundreds of thousands are paid through the agency, which does not buy testimony with cash. Cash recipients, a vast majority of whom are witnesses and informants, must sign a receipt for the money, which is intended to reimburse them for legitimate expenses they incur while gathering information or sojourning in the federal witness protection program. That receipt is placed in a confidential FBI file. As a parade of FBI agents and acknowledged mobsters takes the witness stand during the second week of Gold Club owner Steven E. Kaplan’s racketeering trial, the case has provided a rare public look at the internal workings of the bureau, how it handles informants and witnesses, and how it documents its cases. And that handling, at least when it comes to cash, includes very little accountability. How FBI informants spend the government’s cash is based, almost without exception, on the honor system, according to an FBI agent who testified last week. The bureau’s confidential informants and cooperating witnesses are not required to document how they spend the money. They receive no W-2 forms and no 1099s, although once a year, the FBI requires their agents to “remind a confidential informant that he is liable for any taxes on the money he gets,” FBI Supervisory Special Agent John Steubing testified. “How do you know, once they get the cash, that they use it for what they’re supposed to use it for?” defense attorney Steven H. Sadow asked Steubing. A long pause. “If he’s given money for rent and he’s thrown out of his apartment, we know he didn’t use it the way it was intended,” Steubing replied. Steubing was the first federal witness to testify against Kaplan, his alleged Mafia handler Michael “Mikey Scars” DiLeonardo, four of Kaplan’s club employees and an Atlanta police officer. His testimony, intended as a primer for the jury on the inner workings of the New York Mafia, also became one on the FBI. Cooperating federal witnesses not only provide information, but also agree to testify in court. Confidential informants usually remain “in place” inside an allegedly corrupt organization. The FBI routinely reimburses them for their expenses in exchange for information, Steubing said. They are not required to return receipts to their agent handlers, but undocumented expenses “have to be reasonable,” he said. Lacking receipts, what is reasonable remains a subjective judgment. A $2,000 dinner bill, even in New York, probably would not receive approval from a case agent’s supervisors without a receipt, he said. Steubing described the cash paid to the bureau’s confidential informants as “nominal,” saying, “You can’t make a living as a CI,” he said. But later he acknowledged that if someone is considered a full-time cooperating witness, “their living expenses would be paid by the FBI,” including housing. A full-time witness, he explained, is someone who is “available to the FBI 24 hours a day.” If a cooperating witness is already in prison, the FBI might “provide a nominal amount for commissary expenses,” Steubing said. One of those cooperating witnesses is former Mafia hitman Dino Brasciano, whom lead prosecutor Arthur W. Leach called to testify against Kaplan last week. Brasciano — an acknowledged killer who also has committed acts of arson and hijackings, and engaged in drug trafficking and gun running — testified that Kaplan was a money-maker for the Gambino family. Facing life in connection with the drug-dealing charges alone, Brasciano spent less than six years in prison before his release earlier this year. After Brasciano became a government witness and began testifying against his cohorts, his family received $188,000 in cash from the FBI, he acknowledged under oath. The government relocated his wife and two children “three or four times for their protection,” he said, and gave them a stipend to live on while he remained in prison. How the FBI preserves information from people such as Brasciano also differs dramatically from the techniques adopted by most state and local law enforcement agencies. According to Steubing, the FBI rarely tape-records an interview, even though the agency has routinely captured thousands of hours of wiretaps on tape during ongoing investigations. Steubing says that agents rarely tape-record during formal interviews because “it’s just not policy.” Instead, agents reduce those interviews to a report known as a 302. Bureau policy “under certain circumstances allows the recording of certain interviews but it’s not normally done,” he said. “I don’t think there’s a prohibition against recording interviews. It’s just not something that is ordinarily done.” In fact, Steubing, who has spent 15 years as an FBI agent in New York, acknowledged, “I have not recorded anybody’s interview ever, whether a victim or a witness.” Nor do agents routinely take detailed notes during those interviews, he said. In fact, he acknowledged, “Some agents remember everything and just don’t take written notes.” As a result, the 302 reports are summaries that rely primarily on an agent’s memory and usually include only what’s relevant to a particular investigation. “It’s not a verbatim transcript,” Steubing explained. “It’s based on the substance of the interview. Ordinarily, it would be good practice to include everything that’s relevant to the investigation.” Do agents permit witnesses to review an FBI agent’s summary reports for accuracy? Says Steubing: “I never did.”

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