Introduction to Corporate and White-Collar Crime

Frank J. DiMarino, Cliff Roberson

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781482215700
• Edition: 1
• Topic: Jura
• Subtopic: Strafrecht

White-collar crime costs the United States more than $300 billion each year. It is surprisingly common, with one in every three Americans eventually becoming a victim. The criminals often dismiss these crimes as victimless, but those unfortunate enough to fall prey would disagree. An Introduction to Corporate and White-Collar Crime provides readers

1

Introduction to the Study of White-Collar Crime

Chapter Objectives

After studying this chapter, the reader should be able to or understand the following:

• The meaning of the phrase “white-collar crime.”
• The extent of white-collar crime in the United States.
• Public perception of white-collar crime.
• How the white-collar crime concept developed.
• How white-collar crime differs from street crime.
• The fact that white-collar crime existed prior to Sutherland’s coining of the phrase.
• The victimization that is attached to white-collar crime.
• Who is a white-collar criminal?
• How does the white-collar criminal differ from the street criminal?
• Some of the problems involved in prosecuting white-collar criminals.
• The existence of the National White Collar Crime Center (NW3C).
• The U.S. Attorney General’s policy on prosecuting white-collar criminals.

Introduction

The introduction of the concept of white-collar crime into the study of criminal behavior revolutionized the thinking of the field by making it no longer possible to employ class-specific explanations to interpret such behavior. [Gilbert Geis and Colin Goff.^*]

The surge in incarceration since 1980 has been fueled in part by the mistaken belief that the population can be divided neatly into “good guys” and “bad guys.” In fact, crime rates are not determined by the number of at-large criminals, any more than farm production is determined by the number of farmers. Crime is a choice, a choice that is influenced by available opportunities as much as by character. This perspective, drawn from economic theory, supports a multifaceted approach to crime control.^†

^* Gilbert Geis and Colin Goff. (1983). “Introduction.” In: Edwin H. Sutherland. White Collar Crime: The Uncut Version. New Haven, CT: Yale University Press. Page xxx1.

^† Philip J. Cook. (December 10, 2011.) “Economical crime control: Perspectives from both sides of the ledger.” NIJ Seminar. Washington, DC: Duke University.

Fraud Cases Rarely Penalize Executives Who Caused the Fraud

According to a statement issued by U.S. Senator Jack Reed of Rhode Island, people on the street wonder how a company can commit serious violations of federal law and yet “no individuals seem to be involved.”^* Senator Reed noted that in the first eight months of the calendar year 2012, pharmaceutical companies, banks, military contractors, and other corporations were on track to pay over $8 billion dollars to resolve charges of defrauding the U.S. Government. The amount exceeds the total assessed for any prior complete year. The billions were for civil charges of fraud against the Government. Reed questioned why company executives who are involved in the fraud against the U.S. Government are not also prosecuted.

One reason for this lack of attack on the individual executives may because of the difficulties of prosecuting them. In July 2012, for example, a federal jury in New York City acquitted a bank manager who had been involved in selling an exotic financial security consisting of residential mortgages. The manager had been charged with falsely describing the company’s role in selecting the assets and failing to disclose that the bank group was betting against the investment.^†

According to the Securities and Exchange Commission’s (SEC) complaints, filed in the U.S. District Court for the Southern District of New York (SDNY), in October 2006, personnel from a bank group’s collateralized debt obligation (CDO) trading and structuring desks had discussions about possibly having the trading desk establish a short position in a specific group of assets by using credit default swaps (CDS) to buy protection on those assets from a CDO that the bank group would structure and market. Following the institution of discussions with Credit Suisse Asset Alternative Capital, LLC (CSAC) about having CSAC act as the collateral manager for a proposed CDO transaction, Stoker sent an e-mail to his supervisor in which he stated that he hoped that the transaction would go forward and described the transaction as the bank group’s trading desk head’s “prop trade (don’t tell CSAC). CSAC agreed to terms even though they don’t get to pick the assets.” The New York federal jury found the defendant not guilty in July 2012.

Many attorneys contend that the federal government is more likely to go after the companies than the executives because of the companies’ deep pockets. One SEC attorney noted that for every $1 the government spends on a civil fraud case, the government gets a return of $15, whereas the government almost never makes money when prosecuting an executive in a criminal action. In addition, it is noted that it is often difficult and expensive to build a criminal case against a corporate executive because senior executives are often insulated from day to day decisions of the business.^* Note: The above referenced trial proceedings that resulted in a not guilty finding started in 2006 and ended with a jury verdict in 2012.

^* Statement of Senator Jack Reed on the floor of the U.S. Senate as reported by Houston Chronicle on August 8, 2012. Page E-1.

^† Securities and Exchange Commission v. Brian H. Stoker, 11-Civ.-7388 (S.D.N.Y. filed October 19, 2011).

^* Securities and Exchange Commission v. Citigroup Global Markets Inc., 11-Civ.-7387 (Rakoff, J.) (S.D.N.Y. filed October 19, 2011).

One of the first problems in any discussion of white-collar crime is defining the concept of white-collar crime. As will be noted later in this chapter, the definition is not simple. As pointed out by Peter Henning, most crimes in the United States fall into the category of street crimes, which range from property offenses to episodic violence that involves a single or limited number of victims at a specific point in time. The content of the phrase “white- collar crime” is difficult to pin down. Generally, when we refer to white-collar crime, we are referring to offenses where there is a family resemblance to some type of concept of untruthfulness such as perjury, fraud, false statements, obstruction of justice, bribery, extortion and blackmail, insider trading, tax evasion, and certain regulatory offenses. According to Henning, what sets white-collar crime apart from traditional crime is that white-collar crimes are the product in many ways of an advanced economy with high-speed communications, a large administrative apparatus, and a pervasive legal system that makes enforcement of the law a priority. He also noted that while many crimes have their roots in common law, such as larceny by trick or perjury, white-collar crime generally encompasses the right of honest services that permits prosecution of public officials and corporate employees for breaching their judiciary duties.^*

^* Peter J. Hennings. (Spring 2008). “The DNA of a white-collar crime.” New Criminal Law Review. Vol. 11. Pages 323–338.

According to the Federal Bureau of Investigation (FBI), white-collar crime costs the United States more than $300 billion each year. Approximately one-third of Americans are victims of white-collar crime. Following the loss of much of his life savings in a 2011 investor scheme, one victim, a retired person, described his feeling of a “deep depression” with “no desire to live, no prospect of earning a living, and no way to pay the bills.”^* In Europe, 42.5% of the larger companies have been victimized by white-collar criminals, with embezzlement and breach of trust being the prevalent modes involved.^†

White-collar crimes are prosecuted under either federal or state law, depending upon the type of crime or the offender. Some of the white- collar crimes that are listed by the FBI include securities fraud, racketeering-influenced and choral organization violations, embezzlement, insider trading, identity theft, computer crimes, public corruption, pension fund crimes, perjury, counterfeiting, bribery, extortion, environmental violations, and obstruction of justice.^‡ Sociologist Edwin H. Sutherland argued that white-collar criminals inflict more harm on the U.S. society than burglars or robbers, but the criminal justice system treats white-collar offenders with more leniency and less consistency than street criminals.^§

Definition of White-Collar Crime

For most people, the term “white-collar crime” brings up images of corporate executives contriving in their way to fortune, but this is not really an accurate picture of the concept.^¶ White-collar crime is generally committed by individuals at all economic levels. The term was originally intended as a classification of offenders, but has since expanded to include a broad range of nonviolent offenses where cheating and dishonesty in normally legal business transactions are the central element.

The Department of Justice defines white-collar crime as offenses classified as nonviolent illegal activities that principally involve traditional notions of deceit, deception, concealment, manipulation, breach of trust, subterfuge, or illegal circumvention.^** Does this mean that the young teenager who shares copyrighted material by burning a music CD and giving it to a friend, a federal crime, is a white-collar criminal? Or what about the senior citizens, living near the Mexican or Canadian borders, who travel to Mexico or Canada to get cheaper...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication Page
• Table of Contents
• Preface
• Acknowledgments
• Author
• 1 Introduction to the Study of White-Collar Crime
• 2 Traditional Explanations of White-Collar Crime
• 3 Opportunity Structure of White-Collar Crime
• 4 Laws That Govern the Securities Industry
• 5 Banking and Currency Related Crimes
• 6 Racketeer and Organized Crime
• 7 Crimes Involving Public Officials
• 8 Obstruction of Justice
• 9 Sanctions for White-Collar Criminals
• 10 Control and Prevention of White-Collar Crimes
• Appendix A: Reprint of Sutherland’s Article on White- Collar Crime
• Index