Lecture 1: The Discovery of White Collar Crime

WHITE COLLAR CRIME

White Collar Crime Versus “Conventional” Crime

•

White Collar Crime

Usually involves deceit and concealment (rather than direct violence).

• Typically for the purpose of financial gain.

•

“Conventional” Crime

Usually involves force or violence.

• Varying reasons for the commission of offenses.

• Occurs in a business setting.

• Less chance of being caught and punished.

• Can be characterized as involving a violation of trust.

• More leniency from the justice system (“status shield” protects from harsh penalties of “common” criminal offenders.

• Able to secure the best legal counsel.

• Usually occurs in non-business settings.

• More focused justice system response.

• Some crimes can involve violations of trust, but most lack a relationship between the victim and perpetrator.

• Generally receive less leniency (victims engender more sympathy than those harmed by white collar criminal activity).

• Generally not able to secure expensive legal counsel.

Identify The White Collar Criminals

Kenneth Lay Martha Stewart Michael Jackson Richard Nixon Scott Peterson Lindsay Lohan

Name Kenneth Lay Martha Stewart Michael Jackson Richard Nixon Scott Peterson Lindsay Lohan

Answer

Crime

Enron Lying about stock sale

Result

WCC WCC Child Molestation Abuse of Political power Murder DWI Not WCC WCC Not WCC Not WCC

Defining White Collar Crime

Early Definition: • Term first coined by criminologist Edwin Sutherland • “Crimes committed by a person of respectability and high social status in the course of his occupation”

Alternative Approaches To Definng White Collar Crime

• Definition by type of offender (i.e., high socioeconomic status and/or position of trust) • Definition by type of offense • Definition in terms of organizational structure

Reasons For Lack Of Consensus Regarding Definition

• Dispute regarding whether “white collar crime” should only refer to acts defined by criminal law and adjudicated in criminal proceedings.

• Dispute regarding whether “white collar crime” should only refer to acts committed by higher-status individuals or institutions.

• Dispute regarding whether “white collar crime” should refer to acts committed in association with legitimate employment, regardless of socioeconomic status.

Difficulties Associated With Identiy Of White Collar Crime

• Victims of white collar crime typically do not know that a crime has even occurred • WCC is less visible than the other crimes and witnesses often do not believe that a crime has occurred • City police forces are not organized to respond to white collar crimes

• Victims that are aware that a white collar crime has been committed may not report it due to embarrassment/shame • Many alleged white collar crime cases fail to reach the proper authorities * *Statistics obtained from the National Fraud Center approximate that 1 in 3 households is the victim of white collar crime. Of these, only 41% report the incident. Of the number of reported incidents, only 21% are handled by a law enforcement or consumer protection agency. This means that less than 8% of white-collar crimes reach the proper authorities.

Informers

• Typically

involved

some degree.

in the illegal activity to • Usually receive “consideration” in return for revealing knowledge about white collar criminal activity.

Whistleblowers

• Have an inside perspective on the illegal activity, but

not

criminally implicated.

• Can be current employees, former employees, competitors, subcontractors, and just about anyone else with whom a company does business.

• Rarely receive a positive response.

• Laws prohibit employer retaliation, but many still punished by termination, suspension, demotion, wage garnishment, and/or mistreatment by other employees.

Other Sources Of Exposure

• Investigative journalists • Public interest groups • Congressional investigative committees • Social scientists • Academic scholars • Prosecutors

Direct Costs

• Economic • Actual loss suffered by victim

• Higher taxes

Indirect Costs

• Increased cost of goods and services • Higher insurance rates • Cost of maintaining justice and regulatory systems to address WCC

Physical Costs

• Death • Illness from pollution • Unsafe working conditions • Unsafe Products

Justice Served?

“CONVENTIONAL” CRIMINAL OFFENSES (average in months)

Robbery: 110.6

Drug Trafficking: 75.3

Drug Possession: 18.5

Manslaughter: 26.1

Larceny: 15.6

WHITE COLLAR CRIMINAL OFFENSES (average in months)

Fraud: 18.0

Embezzlement: 9.9

Bribery: 16.2

Tax Offenses: 16.6

Money Laundering: 46.3

Environmental: 14.5

Antitrust: 12.7

Food & Drug: 23.1

*Obtained from Paul Rosenzweig’s March 26, 2003 testimony before the Commission on Sentencing of Corporate Fraud and White Collar Crime