Enterprise Crime: White-Collar and Organized Crimes and Their Impacts - Prof. Cedric Taylo, Study notes of Criminology

Download Enterprise Crime: White-Collar and Organized Crimes and Their Impacts - Prof. Cedric Taylo and more Study notes Criminology in PDF only on Docsity! Chapter Outline I. Introduction II. Enterprise Crime A. Two categories 1. White-collar crime 2. Organized crime B. Crimes of Business Enterprise 1. White-collar and organized crime are linked and often overlap. 2. These organizational crimes taint and corrupt the free market system. 3. Enterprise crime can involve violence a. Corporate violence annually kills and injures more people than all street crimes combined. III. White-Collar Crime A. General 1. Edwin Sutherland first used the phrase “white-collar crime” to describe the criminal activities of the rich and powerful. a. “A crime committed by a person of respectability and high social status in the course of his occupation” 2. White-collar crime involved conspiracies by members of the wealthy classes to use their position in commerce and industry for personal gain without regard to law. 3. Sutherland believed the great majority of white-collar criminals did not become the subject of criminological study because their crimes were handled by civil courts and injured parties were more concerned with recouping losses rather than punishment of offenders. B. Redefining White-Collar Crime 1. Contemporary definitions of white-collar crime are typically much broader than Sutherland’s including: a. Offenses of those who are not members of the upper class b. Tax evasion, credit card and bankruptcy frauds, embezzlement, violations of trust, swindles, and corporate crime C. Extent of White-Collar Crime 1. Difficult to judge the extent of harm to victims 2. Findings of the National White-Collar Crime Center a. About half of households and more than one third of individuals experience at least one form of white-collar crime victimization each year. b. Almost two-thirds of all Americans experience at least one form of white-collar victimization within their lifetimes. c. The type of white-collar victimizations that occur most often are product pricing fraud, credit card fraud, unnecessary object repairs, and being directly affected by corporate fraud. d. Two-thirds of white-collar victims report the incident to someone. e. About 30 percent report their victimizations to law enforcement. 3. In addition to monetary losses, white-collar crime: a. Damages property and kills people b. Destroys confidence and saps the integrity of commercial life c. Has potential for devastating destruction IV. Components of White-Collar Crime A. Stings and Swindles 1. People use their institutional or business position to trick others out of their money. 2. Collapse of the Bank of Credit and Commerce International is probably the most costly swindle in history, costing depositors $10 billion. 3. Swindling the desperate a. Swindlers love to target the poor and desperate b. Religious people are common targets – fake religious organizations swindle $100 million per year. c. Preying on couples desperate to adopt children – swindlers sometimes use religious organizations to do this B. Chiseling 1. Involves regularly cheating an organization, its consumers, or both a. May be individuals who own their business or employees of large companies b. Charging for bogus auto repairs, zapping cab meters with magnet- loaded pens c. Illegal use of information about company policies that have not been disclosed to the public. 2. Professional chiseling – Pharmacists have been known to: a. Alter prescriptions b. Substitute low-cost generic drugs for more expensive name brands 3. Securities chiseling a. A great deal of chiseling takes place on the commodities and stock markets. b. California scheme that defrauded elderly and retired victims out of $1.7 million c. Churning, front running, and bucketing d. Insider training i. Originally defined as corporate employees with direct knowledge of market-sensitive information using it for their own benefit ii. Definition has since been expanded by the federal courts C. Individual Exploitation of Institutional Position 1. Exploiting one’s power or position in organizations to take advantage of other individuals who have an interest in how that power is used 2. Exploitation at the local level and state levels i. Fire inspectors, liquor license board members, food inspectors 3. Exploitation in private industry i. Purchasing agents, fraudulent contracts for work never performed, steering work to contractors in exchange for kickbacks 325 G. Corporate Crime 1. Powerful institutions or their representatives willfully violate the laws that restrain these institutions from doing social harm or require them to do social good – also referred to as organizational crime. 2. Interest in corporate crime first emerged in the early 1900s. a. Monopolistic business practices of John D. Rockefeller targeted b. Ross’s “criminaloid” business leader c. Sutherland’s focus of theoretical attention on corporate crime 3. Corporate crimes are socially injurious acts committed by people who control companies to further their business interests. a. Actual authority – a corporation knowingly gives authority to an employee b. Apparent authority – a third party reasonably believes the agent has the authority to perform some act 4. Illegal restraint of trade and price fixing a. Involves a contract or conspiracy designed to stifle competition, create a monopoly, artificially maintain prices, or otherwise interfere with free market competition b. Sherman Antitrust Act has defined as illegal: i. Division of markets ii. Tying arrangement iii. Group boycott iv. Price fixing 5. Deceptive pricing a. Occurs when contractors provide the government or a corporation with incomplete or misleading information on how much it will actually cost to fulfill a contract on which they are bidding or use mischarges once the contracts are signed b. Lockheed C-5 cargo plane example - $150 million in overcharges 6. False claims advertising a. Illegal to knowingly and purposely advertise a product as possessing qualities that the manufacturer realizes it does not have b. 2003 Supreme Court case of Illinois Ex Rel. Madigan v. Telemarketing Associates, helped define the line separating illegal claims from those that are artistic hyperbole. c. Supreme Court has held that states may charge fraud when fundraisers make false or misleading representations designed to deceive donors about how their donations will be used. 7. Worker safety/environmental crimes a. Many different types of environmental crimes b. Estimated that 20 million workers exposed to hazardous materials while on the job c. Occupational Safety and Health Administration (OSHA) oversees worker safety. d. Environmental Protection Agency (EPA) enforces environmental crimes. i. Granted full law enforcement authority in 1988 328 ii. Criminal Investigation Division (EPA CID) investigates criminal allegations of criminal wrongdoings prohibited by various environmental statues, including: a. Illegal disposal of hazardous wastes b. Illegal discharge of pollutants into a water of the U.S. c. Illegal importation of restricted or regulated chemicals d. Tampering with a drinking water supply e. Mail and wire fraud f. Conspiracy and money laundering relating to environmental criminal activities V. Causes of White-Collar Crime A. Rational Choice: Greed 1. Greedy people rationally choose to take shortcuts to acquire wealth believing that the potential profits far outweigh future punishments. 2 Believe they will not get caught 3. Examples: Ivan Boesky and Michael Miliken B. Rational Choice: Need 1. Some people turn to crime to fulfill an overwhelming financial or psychological need. a. Executives may tamper with company books because they feel a need to keep or improve their jobs b. Blue-collar workers may pilfer because they need to keep pace with inflation. c. Women convicted of white-collar crime typically work in lower- echelon positions and their acts seem more motivated by economic survival than greed. d. For some, such as Boesky, scars from an earlier needy period in life can only be healed via accumulating ever-greater amounts of money. e. According to Donald Cressey, embezzlement is caused by a “nonshareable financial problem.” VI. Theories of White-Collar Crime A. Rationalization/Neutralization View 1. People develop rationalizations for white-collar crime. 2. Offenders use rationalizations to resolve the conflict they experience over engaging in illegal behavior. 3. Medicare/Medicaid fraud study found offenders used three techniques of neutralization. a. Everyone else does it. b. It’s not my fault or responsibility. c. No one is hurt except wealthy insurance companies. B. Cultural View 1. Some business organizations promote white-collar criminality in the same way that lower-class culture encourages the development of juvenile gangs and street crime. 329 2. Some business organizations cause crime by placing excessive demands on employees while at the same time maintaining a business climate tolerant of employee deviance. 3. Can be used to explain the collapse of Enron C. Self-Control View 1. Hirschi and Gottfredson maintain the motives that produce white-collar crimes – quick benefits with minimal effort – are the same as those that produce any other criminal behaviors. 2. White-collar offenders have low self-control and are inclined to follow momentary impulses without considering the long-term costs of such behavior. 3. White-collar crime is relatively rare because business executives tend to hire people with self-control. 4. Data indicate that the demographic distribution of white-collar crime is similar to other crimes. VII.White-collar law enforcement systems A. General 1. On the federal level, detection of white-collar crime is primarily in the hands of administrative departments and agencies. 2. The number of state-funded technical assistance offices to help local prosecutors has increased significantly. 3. Local prosecutors pursue white-collar criminals more vigorously if they are a part of a team effort involving a network of law enforcement agencies. a. Relatively few prosecutors participate in interagency task forces. B. Controlling White-Collar Crime 1. In the past, it was rare for a corporate or white-collar criminal to receive a serious criminal penalty. a. White-collar criminals are often considered non-dangerous offenders because they are respected older citizens who have families to support. b. Perception of white-collar crime is clouded by moral ambiguity c. Prevailing myth: many white collar criminal avoid prosecution and those that are prosecuted receive lenient punishments. 2. Compliance strategies a. Aim for law conformity without the necessity of detecting, processing, or penalizing individual violators b. Ask for cooperation and self-policing among the business community c. Attempt to create conformity by giving companies economic incentives to obey the law d. Depend on the threat of economic sanctions or civil penalties to control corporate violators e. Administrative agencies to oversee business activity i. Securities and Exchange Commission ii. Food and Drug Administration f. Forcing corporate boards to police themselves and to take more oversight responsibility 330 6. Since 1970, Russian and other Eastern European organized crime groups have been operating on U.S. soil. a. Some groups formed by immigrants from former satellites of the Soveit Union. b. FBI established the Yugoslavian/Albanian/Croatian/Serbian Crime Group initiative as a response to the increasing threat of criminal activity by people from these areas. c. Estimated that thousands of Russian immigrants are involved in criminal activity in Russian enclaves in New York City. i. Have cooperated with Mafia families in narcotics trafficking, fencing stolen goods, money laundering, and other organized crime schemes G. Controlling Organized Crime 1. George Vold argued that the development of organized crime parallels early capitalist enterprises. 2. Organized crime employs ruthless monopolistic tactics to maximize profits. 3. Difficult to control organized crime 4. Foreign Travel or Transportation in Aid of Racketeering Enterprises Act (Travel Act). 5. Racketeer Influenced and Corrupt Organization Act (RICO) prohibits acts intended to: a. Derive income from racketeering or the unlawful collection of debts and use or investment of such income b. Acquire, through racketeering, an interest in or control over any enterprise engaged in interstate or foreign commerce c. Conduct business through a pattern of racketeering d. Conspire to use racketeering as a means of making income, collecting loans, or conducting business 6. Enterprise theory of investigation (ETI) a. ETI model focus is on criminal enterprise and investigation attacks on the structure of the criminal enterprise rather than on criminal acts viewed as isolated incidents. b. ETI focuses on subsystems of the criminal enterprise that are considered the most vulnerable. H. The Future of Organized Crime 1. Indications are that the traditional organized crime syndicates are in decline. a. Joseph Massino, “the Last Don” – violated the rule of omerta b. Reigning family heads are quite old. c. The younger generation of mob leaders seems to lack the skill and leadership of the older bosses. d. Government policies have halved what the estimated mob membership was twenty-five years ago. e. A number of the highest-ranking leaders have been imprisoned. f. Pressure from newly emerging ethnic gangs g. Changing values in U.S. society h. Code of silence now regularly broken by younger mob members 333 i. Younger members are better educated and capable of seeking fortunes through legitimate means. 2. If traditional organized crime syndicates are in decline that does not mean the end of organized crime. a. Russian, Caribbean, and Asian gangs thriving b. Internet gambling a tempting target for organized crime c. Continuing demand for illegal goods and services 334