12 White-Collar and Organized Crime

A Brief History of White-Collar Crime Financial scandals have a long history in the U.S. Teapot Dome 1929 Ivan Boesky – insider trading 1980s Michael Milken – 1980s securities fraud S&L disaster 1980s Sham banking operations 1990s continued on next slide

A Brief History of White-Collar Crime 21st century crimes Enron WorldCom Inc. Adelphia Communications ImClone Martha Stewart Various securities firms

Understanding White-Collar Crime Edwin H. Sutherland’s definition: violations of the criminal law committed by a person of respectability and high social status in the course of one’s occupation Emphasized need to study the criminality of the upper-class continued on next slide

Understanding White-Collar Crime Said white-collar criminals are less likely to be investigated, arrested, or prosecuted than other types of offenders

Definitional Evolution of White-Collar Crime White-collar crime (Edelhertz) committed by nonphysical means and by concealment or guile… Upperworld crime (Geis) crimes by persons not considered the ‘usual’ kind of offenders continued on next slide

Definitional Evolution of White-Collar Crime Blue-collar crime crimes by members of less prestigious occupational groups Occupational crime crimes through opportunity created during legal occupation

Green’s Typology of Occupational Crime Organizational occupational crime State authority occupational crime Professional occupational crime Individual occupational crime

White-Collar Crime Today Early definitions focused on the violator, rather than the offense when deciding whether to classify a crime as “white collar” Today, the focus has shifted to the nature of the crime, rather than the persons or occupations involved

Corporate Crime Corporate crime violation of a criminal statute by a corporate entity or by its executives, employees, or agents acting on behalf of and for the benefit of the corporation Culpability greatest when company officials are shown to have had advance knowledge Corporate liability unique to U.S.

Financial Crime Corporate fraud accounting schemes, self-dealing by corporate executives, obstruction of justice, insider trading, kickbacks, misuse of corporate property for personal gain continued on next slide

Financial Crime Securities and commodities fraud stock market manipulation, high-yield investment fraud, advance-fee fraud, hedge-fund fraud, commodities fraud, foreign exchange fraud, broker embezzlement continued on next slide

Financial Crime Health-care fraud Mortgage fraud Particularly target Medicare and Medicate but all health-care programs are subject to fraud Mortgage fraud Corporate fraud involving subprime mortgage lending companies continued on next slide

Financial Crime Insurance fraud Insurance industry size makes it a prime target for criminal activity continued on next slide

Financial Crime Mass-marketing fraud Money laundering fraud connected with communications media (telemarketing, mass mailings, Internet, etc.) Money laundering the process by which illegal gains are disguised as legal income

Environmental Crimes and Green Criminology Violations of the criminal law that damage some protected or otherwise significant aspect of the natural environment Green criminology the study of environmental harm, law, regulation, victimization, and justice

Terrorism and White-Collar Crime Terrorist activity frequently involves white-collar crime Terrorists need money Lower profile than street crimes One way to curtail terrorist activities is through legislation criminalizing the financing of terrorism

Causes of White-Collar Crime Sutherland – differential association theory White-collar criminality is learned Hirschi and Gottfredson – general theory White-collar criminals are motivated by the same forces that drive other criminals continued on next slide

Causes of White-Collar Crime Braithwaite – integrated theory White-collar criminals motivated by disparity between corporate goals and limited conventional opportunities

Curtailing White-Collar and Corporate Crime White-collar crimes are difficult to investigate, prosecute, convict Not always clear what happened Offenders better educated – better able to conceal their activities Evidence often understandable only to financial or legal experts Offenders can hire excellent defense attorneys continued on next slide

Curtailing White-Collar and Corporate Crime President G.W. Bush Corporate Fraud Task Force Sarbanes-Oxley Act President B. Obama Financial Fraud Enforcement Task Force Fraud Enforcement and Recovery Act New initiatives targeting financial crimes and unfair trading practices continued on next slide

Curtailing White-Collar and Corporate Crime Sarbanes-Oxley Act (2002) Sherman Act (1890) Clayton Act (1914) Securities Act (1933) Securities Exchange Act (1934)

Organized Crime Organized crime Unlawful activities of a highly organized group engaged in supplying illegal goods/services Italian criminal organizations came to the U.S. in late 19th/early 20th centuries Became a quasi-police organization in Italian ghettos of American cities continued on next slide

Organized Crime Ethnic succession The continuing process whereby one immigrant or ethnic group succeeds another through assumption of a particular position in society continued on next slide

Organized Crime Jewish and Italian criminal groups flourished in New York City in the late 19th/early 20th centuries In mid-20th century, organized crime in the US became the domain of Italian Americans

Prohibition and Official Corruption Prohibition was a godsend for the Mafia Existing infrastructure allowed efficient entry into running/sale of contraband liquor Huge profits led to wholesale bribery of government officials, quick corruption of many law enforcement officers

Activities of Organized Crime Racketeering Vice operations Theft/fence rings Gangs Terrorism

Other Organized Criminal Groups Criminal enterprise Group of individuals with an identifiable hierarchy, and extensive supporting networks, engaged in significant criminal activity continued on next slide

Other Organized Criminal Groups Key elements of true criminal organization Function independently of any members (including leader) Have continuity over time as personnel change continued on next slide

Other Organized Criminal Groups State laws defining criminal enterprise more inclusive than federal statutes Stereotype is Italian and Sicilian Mafioso Face of organized crime in US changed Threat broader, more complex Groups of different nationalities operate in US or target US citizens from afar

Figure 12-4 International Organized Criminal Groups Whose Activities Impact the United States Source: Schmalleger, Frank J., Criminology. Printed and Electronically reproduced by permission of Pearson Education, Inc., Upper Saddle River, New Jersey.

Transnational Organized Crime Unlawful activity undertaken and supported by organized criminal groups operating across national boundaries Major 21st century challenge continued on next slide

Transnational Organized Crime Globalization of crime requires coordination of law enforcement efforts around the world U.S. law enforcement activities have to expand beyond national borders

Organized Crime and the Law Hobbs Act the first federal legislation aimed specifically at curtailing the activities of organized crime RICO Racketeer Influenced and Corrupt Organizations statute Asset forfeiture

Policy Issues: The Control of Organized Crime Increase the resources available to law enforcement agencies Increase law enforcement authority Make legitimate opportunities more readily available Decriminalization or legalization to decrease opportunity