WHITE-COLLAR AND CORPORATE CRIME WHITE-COLLAR AND CORPORATE CRIME A Documentary and Reference Guide GILBERT GEIS Documentary and Reference Guides Copyright 2011 by Gilbert Geis All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, except for the inclusion of brief quotations in a review, without prior permission in writing from the publisher. Every reasonable effort has been made to trace the owners of copyright materials in this book, but in some instances this has proven impossible. The editors and publishers will be glad to receive information leading to more complete acknowledgments in subsequent printings of the book and in the meantime extend their apologies for any omissions. Library of Congress Cataloging-in-Publication Data Geis, Gilbert. White-collar and corporate crime : a documentary and reference guide / Gilbert Geis. p. cm. — (Documentary and reference guides) Includes bibliographical references and index. ISBN 978–0–313–38054–9 (hard copy : alk. paper) — ISBN 978–0–313–38055–6 (ebook) 1. White collar crimes. 2. Commercial crimes. I. Title. HV6768.G452 2011 364.1608—dc23 2011019659 ISBN: 978–0–313–38054–9 EISBN: 978–0–313–38055–6 1514131211 12345 This book is also available on the World Wide Web as an eBook. Visit www.abc-clio.com for details. Greenwood An Imprint of ABC-CLIO, LLC ABC-CLIO, LLC 130 Cremona Drive, P.O. Box 1911 Santa Barbara, California 93116-1911 This book is printed on acid-free paper Manufactured in the United States of America In loving memory of Robley Elizabeth Geis CONTENTS Acknowledgments ix Reader’s Guide to Related Documents and Sidebars xi Preface xv 1. What Is White-Collar and Corporate Crime? 1 2. The Robber Barons 35 3. The Muckrakers 63 4. Antitrust Crimes 83 5. Major Scandals and Scams: 1864–1993 109 6. Insider Trading and Related Crimes 141 7. Government White-Collar Crimes 169 8. White-Collar Crime in the Professions 183 9. Environmental and Consumer Crimes 209 10. The Enron Decade of Corporate Debacles 233 11. Outdoing Ponzi: Bernie Madoff, R. Allen Stanford, and Boss Jezda 271 12. The Great Economic Meltdown: 2007–2009 289 13. Doing Something about It 321 Selected Resources: Bibliography 337 Index 345 ACKNOWLEDGMENTS Numerous persons in direct and indirect ways have been crucial to the work that went into the present book and much of my earlier work on the subject of white- collar and corporate crime and various other subjects. Most importantly, there is my family which has made my life, personal and profes- sional, quite gratifying. I mention only those members who were close in terms of this particular book or when I was writing it, but I remain deeply indebted to all of them. I am grateful to Arnie Binder, John and Val Braithwaite, Craig Morris, Mickey Braswell, Chris and Nora Brown, Ivan and Lesley Bunn, Frank Cullen, Joe DiMento, Mary Dodge, David Friedrichs, Tina Fischer, Bill Frohlich, Ellen Geis and Andy Freeman, John Gill, Colin Goff, Trish Goforth, Peter Grabosky, Patrick Huston, Ted and Chris Huston, Paul Jesilow, Jeanette LaVie, Mike Levi, Don Managuale, Sanjoy Mazumdar, Claire McLean, Bob Meier, Shawn and Dea Movery, Jeanie Oliver and Dave Hudson, Don and Jo-Ellen Parker, Henry Pontell, Don Paolli, David Shichor, Janet Temko, Kathleen Tuttle, Joe Wells, Bobby and Renee Wolff, and Richard Wright. There are numerous others who, if not on the list, I hope real- ize that I appreciate them, and it is only space constraints and my carelessness which led to them not being mentioned by name. The Selected References and Bibliography segment was the result of diligent work by Kitty Calavita, Mary Dodge, Rodney Huff, and Laura Valcore. Samdy Towers was wonderful to work with as an editor at ABC-CLIO; thought- ful, innovative, meticulous, and intelligent: what more could a writer ask? Later two very competent persons—Sakthi Priyah and Arathi Pillai—supervised my copy editing and I am grateful for their good work. Pictures were diligently gathered up by Nina Gomez and permissions secured by Erin Ryan. I thank them both very much. READER’S GUIDE TO RELATED DOCUMENTS AND SIDEBARS Antitrust Crimes Tylenol, 227 Genesis of the offense, 86 Union Pacific case, 111, 114 Hart-Scott-Rodino Act, 91 Watergate, 170 Heavy electric equipment antitrust case, 97 Worldcom, 266 The Microsoft cases, 107 Corporate Criminal Liability Sherman Antitrust Act, 84, 86 Citizen’s United v. Federal Election Commission, 31 Corporate Crimes: Charged or Suspected New York Central & Hudson River R.R., 21 Adelphia Communications Corp., 249 In re Sutton’s Hospital,24 AIG, 305, 307 Embezzlement Arthur Andersen, 242 Bank of America, 290, 292 Donald Cressey on male embezzlers, 126 British Petroleum, 321 Dorothy Zietz on female embezzlers, 127 Countywide Financial, 301 False Advertising Enron, 234 Erie Railroad case, 43 Sutherland’s roster, 24 Exxon Valdez oil spill, 216 Insider Trading Ford Pinto case (Ford acquitted), 26 General Slocum steamship case, 23 The law of insider trading, 142 HealthSouth, 258 The law as seen by its enforcers, 142 Love Canal, 211, 214 Ingredients of insider trading behavior, 145 Massey Energy, 321 Martha Stewart case, 161 McKesson & Robbins, 128 Stepped up enforcement against insider trading, 159 Merrill Lynch, 290 Muckrakers Savings & Loan cases, 136 Tyco, 262, 265 McClure’s Magazine, 64 Reader’s Guide to Related Documents and Sidebars The Jungle, 77 Mark Twain on Cornelius Vanderbilt, 4 The muckraking surge, 63 Micah, Introduction, 1 The Octopus, 75 Ralph Nader, 224 Source of the term “muckraking,” 66 Samuel McClure, 65 Standard Oil Company crimes, 68, 90 Shakespeare on bribery, 201 Sherron Watkins, 238 White-Collar Crime Analysis: Academic Solon, Introduction, 1 E. A. Ross, 42 Theodore Roosevelt, 80 Edwin H. Sutherland, 3 Upton Sinclair, 77 “The law is like a spider web,” 54 New York Times on Sutherland address, 9 White-Collar Criminals: Charged or Suspected Sutherland on robber barons, 38 ABSCAM, 175 William Black, 313 Attorneys as criminals, 192 Angelo Mozilo, 300 White-Collar Crime: Definitions Bernard Cornfield, 135 Corruption by nation, 202 Bernard Madoff, 272 Dark figure of white-collar crime statistics, 106 Boss Jezda, 285 Entrapment, 178 Charles Crocker, 41 General definitions, 1 Charles Keating, 139 Herbert Edelhertz’s perspective, 13 Charles Ponzi, 116 Introduction of the concept of white-collar crime, 3 Collis Huntington, 35, 44 Sarbanes-Oxley, 253 CIA and extraordinary rendition, 180 Yale Law School approach, 18 Cornelius Vanderbilt, 48 Cre´dit Mobilier case, 110 White-Collar Crime Crusaders: Popular Daniel Drew, 52 Art Buchwald, 322, 324 Dennis Levine, 157 Bob Woodward, 173 Ivan Boesky, 147 Carl Bernstein, 173 Ivar Kreuger, 122 Dante, Intro., xvi J. Pierpont Morgan, 56, 60 Frank Norris, 74 Jay Gould, 43 Harry Markopolos, 277 Jeffrey Skilling, 234 Ida Tarbell, 67, 69 John Mulheren, 151 J. Cullen Ganey, 98 John Rigas, 249 Jacob Riis, 80 John D. Rockefeller, 93 Jed Radoff, 282 Kenneth Lay, 234, 238 Joe Wells, 329 Leland Stanford, 35, 40 Lincoln Steffens, 70 Mark Hopkins, 40 xii Reader’s Guide to Related Documents and Sidebars Martha Stewart, 161, 165 Richard Nixon, 171 Medical white-collar crime, 184 Robert Scrushy, 261 Michael Milken, 153 Robber barons, 37 Philip Musica, 130 Robert Vesco, 132 Politicians and white-collar crime, 198 Thomas Durant, 114 Richard Whitney, 124 xiii PREFACE Crimes, misdeeds, and self-serving actions by business executives and the corporate enterprises that employ them underlay the severe meltdown of the global economic marketplace that got under way in the last third of the first decade of the current century. Families were forced from their homes in the United States because they had been talked into so-called subprime loans by slick salesmen who were well aware that their customers would not be able to make the payments on the homes they had yearned for if the real estate bubble burst, as it most assuredly sooner or later would. Loan applications were faked—bus drivers were reported to be earning $200,000 a year. Down payments were no longer required, and low or nonexistent interest rates were offered without the offsetting information that in two or five or some other number of years down the road, the interest rate would zoom up to a level well beyond the ability of the purchaser to handle it. The crisis metastasized. Unemployment rose steeply, further undercutting the possibility that recipients of subprime loans could meet their mortgage payments. Investment banks whose portfolios were stuffed with millions, sometimes trillions, of dollars’ worth of risky subprime mortgages found themselves unable to raise enough capital to meet increasing customer demands to cash in on their stock hold- ings as they came to realize that the institutions were in serious financial trouble. The American crisis, the worst economic catastrophe since the Great Depression of 1929, quickly engulfed markets throughout the world. In many countries these foreign institutions had purchased huge amounts of the American housing debts, lured by incorrect assessments of the risk factors involved and the allure of high returns. The economic catastrophe brought to the foreground a theme that has resonated throughout the whole of recorded history: that persons and business entities with power will at times take advantage of lax or nonexistent regulatory regimens to play fast and loose with ethical standards and with the demands of the criminal law. In ancient Greece, seven centuries before the beginning of the current calendar, Solon, a leading statesman and lawgiver, issued edicts that condemned middlemen, who Preface were seen as siphoning off profits that should go entirely to the person who produced the product. Solon’s philosophy on morality and the marketplace is reflected in a poem that he wrote: Often the wicked prosper, while the righteous starve; Yet I would never exchange my fate for theirs.