WHITE-COLLAR CRIME WHITE-COLLAR CRIME THE CLASSIC STATEMENT • White-collar crime: crime committed by those within legitimate occupations or organizations. • The concept of white-collar crime was first introduced in the social sciences by Edwin Sutherland in 1939. • He described white-collar crime as “a crime committed by a person of respectability and high social status in the course of his occupation”. • Sutherland’s investigation using records of regulatory agencies, courts, and commissions found that of the 70 largest industrial and mercantile corporations studied over a 40-year period, every one violated at least one law and had an adverse decision made against it for false advertising, patent abuse, wartime trade violations, price fixing, fraud, or the intended sale of faulty goods. WHITE-COLLAR CRIME THE CLASSIC STATEMENT • According to Sutherland (1949), while “crime in the streets” attracts headlines and police attention, the extensive and far more costly “crime in the suites” proceeds relatively unnoticed. • White-collar crimes cost several times more than other crimes put together but in most cases, they are not treated under the criminal law. • White-collar crime differs from lower-class criminality only in the implementation of criminal law that segregates white-collar criminals administratively from other criminals (Sutherland, 1949). • The status of the offender rather than the legal uniqueness of the crime is most important. WHITE-COLLAR CRIME RELATED CONCEPTS • In 1907, Ross coined the term “criminaloids” to refer to those who prospered by shameful practices which may not yet come under the ban of public opinion. • Ross viewed offenders as morally insensible and concerned with success but not with the proper means of achieving it. • In 1952, C. Wright Mills used the term “the higher immorality” to illustrate the moral insensibility of the power elite (wealthy). • Mills argued that “the higher immortality” of the power elite allowed for a continuing, institutionalized component of modern U.S society, involving corrupt, unethical, and illegal practices committed by the wealth and powerful. WHITE-COLLAR CRIME RELATED CONCEPTS • Occupational Crime: refers to personal violations that take place for self-benefit during the course of a legitimate occupation. • Corporate Crime: refers to crimes by business or officials, committed on behalf of the employing organizations. • Organizational Crime: refers to crime on behalf of the organization and it becomes corporate crime when it is done for the benefit of a private business. • Considered organizational crime when it is committed by bureaucrats within and for the benefit of the state. MEASUREMENT AND COST OF OCCUPATIONAL AND CORPORATE CRIME • The gathering of accurate data on most occupational and corporate crimes is difficult to collect because of the following: • The higher professions are self-regulating, and very often codes of silence and protectionism rather than sanctions greet wrongdoers. • Many employers simply ask for resignations from errant workers in order to avoid scandal and recrimination. • Occupational crime statistics are not kept on a systematic basis by criminal justice agencies or by professional associations. • Probes of occupational wrongdoing by outsiders are usually greeted by secrecy or a professional version of “honor among thieves”. MEASUREMENT AND COST OF OCCUPATIONAL AND CORPORATE CRIME • The cost of white-collar crimes far exceeds the cost of traditional crimes as recorded in official police statistics. • The Senate Subcommittee on Investigations estimated that cost at roughly $36 billion in 1976 and upward of$50 billion in the 1980’s. • Today, the estimated cost is north of $500 billion (especially in savings and loan companies). CONS AND SCAMS • Scam is a criminal slang term used to refer to various criminal techniques, “hustles”, or operations. • A scam is an illegal game to swindle people out of their money. • Confidence (con) games: games that win the confidence of victims in order to take advantage of them. • Many victims are so humiliated that they do not even report their victimization to the police. • Short cons usually prey not on the affluent but on middle-aged, retired, and widowed working-class types, particularly females. CONS AND SCAMS • Badger game: a scam that preys on naive elderly victims. • For example: An alert teller at a savings and loan association alerted police when an obviously distressed 81 year old man withdrew his life savings of $10,622—in cash. He had been visited on a number of occasions by a 19 year old girl who had indicated that she represented a Bible Institute. During the last visit, a man pretending to be the girl’s father bursted into the apartment and accused the old man of having illicit relations with his daughter. The father informed the old man that he would forgive him if he paid him. CONS AND SCAMS • The Bank Examiner’s Scam: swindlers pretend to be bank examiners (government investigators) and ask to borrow “buy money” to catch a dishonest teller. • The victim (mark) is asked to withdraw money and turn it over to investigators, who will mark it in order to apprehend the dishonest employee. • Too-good-to-be-true opportunities for easy money and get-rich-quick schemes lure victims. • Paying advance fees for estates that have been left to you by unknown people, chain letters, work-at-home schemes, and sales of far-off lands. • Home Repair Scams BIG CONS • Wealthy marks such as business executives, entertainment personalities, and wealthy professionals who are searching for tax shelters are ideal targets. • Traditional Steps Associated with Big Confidence Games: • Putting up the mark (investigating and locating likely victims) • Playing the con (gaining the confidence of the victim) • Roping the mark (steering the victim to meet the inside man/woman) • Telling the tale (showing the victim who he or she can make big money dishonestly) • Giving the convincer (permitting the victim to make a profit) • Having the victim invest further • Sending the victim after more money • Playing the victim against the “big store” and fleecing him/her • Getting the victim out of the way • Cooling out the mark (having the victim realize that he/she cannot turn to the law) • Putting in the fix (bribing) BIG CONS PONZI SCHEMES • Ponzi Scheme: a con game that involves paying early investors high investment returns with money from later investors in a nonexistent enterprise. • In 1919, Charles Ponzi discovered that post return coupons could be purchased overseas and redeemed in the U.S at anywhere from 100 to 300 percent profit. • He offered investors 40% profit in 90 days…paid his investors sooner and with larger dividends. • Investors were thrilled and told others. People invested and did not withdraw money (convinced to reinvest). • Profits/dividends were covered by the $$ acquired from new investors. • When people demanded their $$, there was no money to actually give. • Ponzi schemes prey on greedy victims who want something for nothing. BIG CONS PONZI SCHEMES • The explosion of financial services, deregulation, and the bewildering number of new investments available to the public contributed to the resurgence of Ponzi schemes in the 1990’s. • During the initial stages, the scheme may focus on a specific group of possible investors and then rely on initial victims to enthusiastically recruit new customers. BIG CONS PONZI SCHEMES • Bernie Madoff led the biggest Ponzi scheme in history…$65 billion in losses to his investors (actually stole $20 billion). • No one actually knows when Berne Madoff actually started his Ponzi scheme..some say 1987, others say 1992. • Reported to authorities by his sons. • Sentenced to 150 years in prison. BIG CONS PYRAMID SCHEMES • A financial scheme relying on the continual recruitment of investors in a nonexistent product. BIG CONS RELIGIOUS CONS • A source of big money in professional crime is the rapid growth of religious cults. • Although most are probably sincere operations, a number appear to be interested in capturing the mind, bodies, and assets of their members. • For example: In the 1970’s, an IRS audit of the Church of Scientology found that the founder L. Ron Hubbard had skimmed millions of dollars from the church, laundering money through dummy corporations in Panama and then hiding it in Swiss banks. • Televangelist W.V. Grant raised $350,000 per month for an orphanage in Haiti but actually gave the orphanage between $2,000 and $4,000. LEGAL REGULATION OCCUPATIONS AND THE LAW • In Western societies, the legal regulation of occupations is often self- regulation. • Although laws and codes of ethics exist to protect the public from harmful occupational activity, much self-governance has been used instead to protect the interests of members of the occupation. • The more developed professions attempt to convince legislatures that they posses highly sophisticated, useful, specialized knowledge; that they are committed to serving societal needs through a formal code ethics; and that they therefore should be granted autonomy because they and only they are in a position to evaluate the quality of their service • The legal codes that control occupational practice tend to be formulated by members of the occupations themselves. LEGAL REGULATION OCCUPATIONS AND THE LAW • Occupational crime can be controlled by professional associations, by traditional criminal law, by civil law, and by administrative law. • Actions by professional ethics boards can include suspensions, censure, temporary or permanent removal of license and membership, and the like. • Traditional criminal prosecution such as larceny, burglary, and criminal fraud; civil actions by the government may include damage and license-suspension suits. OCCUPATIONAL CRIME CRIMES BY EMPLOYEES AGAINST INDIVIDUALS (THE PUBLIC) • Political corruption by public servants or office holders, or commercial corruption by employees in the private sector. • Public Corruption: • The list of occupation-related crime on the part of political employees or office holders may include furnishing favors to private businesses such as illegal commissions on public contracts, fraudulent licenses, tax exemptions, and lower tax evaluations.