If you have issues viewing or accessing this file contact us at NCJRS.gov. I , f>" : The Nature, Impact and Prosecution of White-Collar' Crime ICR 70-1 MAY, 1970 HERBERT EDELHERTZ National Institute of Law Enforcement and Criminal Justice U.S. DEPARTMENT OF JUSTICE LAW ENFORCEMENT ASSISTANCE ADMINISTRATION FOREfVORD In addressing the problem of research priorities, the National Institute of Law Enforcement and Criminal Justice has developed an intensive concern that so-called "white-collar crime" receives scant attention from the law enforcement and research communities. Indeed, only recently has the public displayed an increased awareness of the vast economic and social harm caused by those who obtain money and plOperty through illegal schemes and deceptive business practices. Though the weapons of this criminal activity are mere words and pieces of paper, the devastation reaped thereby affects all of us-and most seriously affects the ghetto dweller who seeks a stake in our society and the retired man or woman who constantly battles to conserve scarce personal resources. The entire field of white-collar crime represents a national priority for' action and research-to define the problem, to examine its many faces, t6 measure its impact, to look for ways in which its victims can be helped, and to determine how such crime can be prevented, deterred, and effectively prosecuted. As one step toward stimulating such research, this paper was prepared by Herbert Edelhertz, formerly Chief of the Fraurl Section, Criminal Division, U.S. Department of Justice. NIl'. Edelhertz supervised nationwide prosecution under a broad group of Federal statutes in this area and is now a member of the staff of the National Institute of Law Enforce­ ment aud Criminal Justice. The National Institute is the research arm of the Law Enforcement Assistance Administration, U.S. Department of Justice. It was established under the Omnibus Crime Control and Safe Streets Act of 1968 in response to a widely recognized need for research and development in crime control and prevention. This document is one of a planned series to be issued by the Institute, to reflect research by members of its staff and by researchers working under Institute grants and contracts. Publication, however, cloes not necessarily indicate the conccurrence of the Institute in the statements or conclusions contained herein. Information about the Institute, and its research plan and programs, may be obtained from the Institute on request. HENRY S. RUTH, JR. Director, National Institute of Law Enforcement and Criminal Justice. May 1, 1970 iii TABLE OF CONTENTS Introduction ............................... , . 1 Definition of white-collar crime. • . 3 The impact of white-collar crime.... 5 Common elements of white-collar crime. .. 12 (a) Intent to commit a wrongful act. .... .. 12 (b) Disguise of purpose or intent. 14 (c) Reliance by perpetrator on ignorance or carelessness of victim. 15 Cd) Acquiescence by victim. 16 (e) Concealment of crime. 17 Classifying white-collar crimes ......... " . , .. .. ... ........... 19 Responsibility for investigation. 21 Detection. 23 (a) Complaints by victims. 23 (b) Informants .................................... ···.····· 25 (c) Affirmative searches. • . 25 Investigations. 27 (a) Jurisdiction ................................. ·.········· 27 (b) Facilitating private aid to investigation. 29 (c) Conflicting interests of victims and private parties. 30 (d) Cooperation of victims and witnesses. 32 (e) Benefits of investigations. 33 (j) Investigative techniques. 35 (g) Joint investigations.. 36 Prosecutive evaluations. 38 (c-:) Investigatr.:rs ..................................... ·.···· 40 (b) Prosecu t(lrs. • • . • . • . • • • . • • • • • . • . 42 Prosecutions. 45 Pleas and plea bargaining. 54 Sentencing. 58 Legislation. 63 Consideration of specific areas of concern. 65 A. Implications of the cashless society. 65 B. Oivil rights and white-collar crimes... 67 C. Election laws and corrupt practices. 67 D. Environmental problems ........... , ............. , .. .. 67 E. Consumer protection. 68 F. Diversion of cases to noncriminal channels. 69 Objectives of research. 71 Appendix A........... ........ ............................ 73 Appendix B. 77 v INTRODUCTION Public attention is currently focused on crimes physical in execution and immediate in impact, the so-called common crimes. Massive and costly efforts are being mounted to meet the challenge of street crimes, burglaries, the narcotics trade, and all of the tentacled manifestations of organized criminal activity. Our justified concern with common crimes and organized crime should not be allowed to obscure our view of the socially destmctive and costly, but less dramatic criminal activities, which are popularly called white-collar crime. White-collar crime is covert, and not immediate in impact. It is therefore difficult to move to the forefront of issues calling for public attention and a place in the priorities for allocation of law enforcement resources. Common crimes always appear more pressing, and no white-collar victim constituency clamors for attention. Yet white-collar crimes are serious, and must be investigated and prosecuted promptly. To ignore white-collar crime is to undercut the integrity of our society, just as we ignore the safety of society when we fail to cope with common crime. To delay or postpone action is an abdication of law enforcement responsibility and not an ordering of priorities. Law enforcement is not merely an instrument for social contro1. It is also a discipline aimed at maintaining or creating standards of conduct which will fuithel' the economic and social development of the community. To the extent street crimes are prevented, our people are free to heighten the levels of social and economic interaction which contribute to the growth of our economy and to the quality of our life. In exactly the same way the curbing of white-collar criminal activities, by contributing to the integrity of our economic and social transactions, may free large resour;es for socially and economically productive purposes. If the poor are not cheated, their few dollars may be chal111eled into meeting their real needs and hope­ fully lessen the burdens and degradations of welfare support. If the con­ S'.lmer can be helped to know what he is really buying and what he is paying for credit, he can make the budget decisions which will enable him to most effectively pursue his image of what the quality of life should be \for him. To tlle e..xtent that tax evaders are deterred, we either can redIrect tax savings into personally or economically more desirable channels I or have 1 more resources available to cope with the problems of our national community. There can be and should be priorities in law enforcement, as in every area of private and community endeavor. But both the substance and the image of law enforcement will be lost if criminal and antisocial activity is not recognized, prevented, and prosecuted, when committed in the com­ fortably furnished office as well as in the street. The purpose of this paper is to focus attention on the nature and impact of white-collar crime, and on problems of law enforcement in this area. It seeks to define white-collar crime, to determine the common elements of its operative structure, and to examine how it is detected, investigated, and prosecuted. Most of all, its aim is to open doors which may lead to measures which will both deter such crimes and provide an extra measure of relief for victims. 2 Definition of White-Collar Crime The teon "white-collar crime" is not subject to anyone clear definition. Everyone believes he knows what the tenn means, but when definitions are compared there are usually sharp divergences as to whether one crime or another comes within the definition. It may well be that, as Humpty Dumpty said to Alice/- "it means just what I choose it to mean-neither more nor less." For the purpose of this paper, the tenn will be defined as an illegal act or series of illegal acts committed by nonphysical means and by concealment or guile, to obtain money or property, to avoid the payment or loss of money or property, or to obtain business or personal advantage. The definition, in that it hinges on the modifying words "an illegal act or series of illegal acts," does not go to the question whether particular activities should be the subject of criminal proscriptions. It is a definition which differs markedly from that advanced by Edwin H. Sutherland, who said that ".)', ·x· .r, white-collar crime may be defined approxi­ mately as a crime committed by a person of respectability and high social status in the course of his occupation." Sutherland 2 introduced this defini­ tion with the comment that these white-collar crimes are violations of law by persons in the "upper socio-economic class." Sutherland's defintion is far too restrictive. His view provided a rational basis for the economic deterrl1inism which was the underlying theme of his analysis, but did not comprehend the many crimes committed outside one's occupation. Ready examples of crimes falling outside one's occupation would be personal and nonbusiness false income tax returns, fraudulent claims for social security benefits, concealing assets in a personal bankruptcy, and use of large-scale buying on credit with no intention or capability to ever pay for purchases. His definition does not take into account crime as a business, such as a planned bankruptcy, 01' an old fashioned "con