White-collar Crime Flashcards
Marxists on white-collar crime…
Marxist sociologists argue that more attention needs to be paid to crimes committed by the middle-classes, and particularly the very wealthy and powerful, i.e. the ruling capitalist class.
Most criminologists agree that the financial costs to society of crimes committed by this social group far outstrip the cost/value of crimes such as burglary, theft and street robbery committed by poorer members of society. However, few people are aware of this fact.
White-collar crime…
Sutherland defines white collar crime as ‘crime committed by a person of respectability and high social status’ in the course of their job, i.e. managers, professionals such as solicitors, accountants and doctors, directors of companies etc.
Croall notes that such crime is normally carried out whilst employed in a particular role and often involves the abuse of authority, position and trust in order to carry out and conceal the crime.
She lists fraud, accounting offences, tax evasion, insider dealing and computer crime as typical white collar crimes.
Corporate crime…
Croall notes that companies also commit crimes. In other words, a board of directors or a team of managers actively choose to break the law in order to financially benefit the company, i.e. by increasing their profits or the value of shares in the company.
There are many types of corporate crime:
1) Crimes against consumers
2) Crimes against employees
3) Environmental or green offences
4) Financial fraud
Crimes against consumers…
These include the manufacturing or selling of food which is unfit for human consumption, manufacturing or selling dangerous goods, and falsely describing the contents of goods, for example, in 2013, horse meat was passed off as beef by companies who sold meat to supermarkets and schools.
Other examples of this type of crime involve Ford marketing the Ford Pinto in the 1970s knowing full well that the car suffered from mechanical defects. Approximately 900 people were killed because of these in the USA.
The drug company Bayer improperly tested the fertility drug thalidomide and this resulted in the births of thousands of deformed babies.
Stephen Box points out when a company kills or harms consumers or customers, the law often does not define the action as a criminal offence. Rather it is defined as a lesser civil offence.
For example, when the cross-channel ferry ‘Herald of Free Enterprise’ sank outside Zeebrugge in 1987 with the loss of 192 lives, the official enquiry blamed the ferry company P & O for operating unsafely for the sake of making profit. However, attempts to sue the company for corporate manslaughter failed. No director of the company has ever been taken into criminal account for these deaths.
Crimes against employees…
These include failing to meet health and safety regulations which can lead to the injury and death of employees. Approximately 500 employees die at work every year.
Between 1965 and 1995 in the UK, 25,000 people were killed at work. 70% of these deaths were due to employer’s negligent violation of health and safety laws. However, it is rare that employers are subject to criminal prosecution because the Health and Safety Executive, a civil agency, lacks the power to impose the criminal sanctions that might be imposed on an individual killer.
Generally employers whose negligence leads to the death of a worker are fined about £20,000 on average.
The Piper Alpha oil platform disaster in the North Sea in 1988 killed 167 workers and was blamed on management neglect of safety standards and regulations by the official enquiry.
However, the company that owned the rig – Occidental – and its owners escaped prosecution for any criminal offence.
Environmental or green offences…
These include polluting the environment with toxic waste and radiation. For example, ICI was fined £300,000 in 1999 by the Environment Agency for polluting groundwater in Cheshire.
The average company fine for these types of offences is about £4500.
Financial fraud…
These include false accounting, insurance frauds and the making of false claims about the benefits of pension schemes and saving plans. Such fraud can involve vast sums of money.
For example, executives of WorldCom – the second biggest phone company in the USA – admitted in 2002 that they had fraudulently claimed to have $4 billion more in the bank than it actually had to keep share prices artificially high. When the truth came out, WorldCom’s share price dropped from $64 to 20 cents and investors in the company lost a fortune.
In 2001 Enron was the world’s largest energy trading company. It specialised in contracts to deliver natural gas and electricity to customers at a future date.
However, in 2001 it filed for bankruptcy and was found to be billions of dollars in debt. 19,000 employees lost their jobs and their savings which they had invested in the company’s pension plan. Investigations revealed fraud on a large scale.
Top executives lined their pockets while concealing massive debts from shareholders and employees. False accounting practices boosted reported income and lowered reported debt.
As a result, share prices remained high, bearing no relationship to the true value of the company. Shortly before redundancy, the company president, Kenneth Lay borrowed $74 million and repaid it with company shares. Senior executives were given payments totalling $55 million.
Why is white-collar crime not reported or recorded…
Croall argues that despite the high economic and personal costs of white collar and corporate crime, it is not regarded as a serious problem by the general public for a number of reasons.
Invisible…
These offences are often invisible and hidden from the public gaze– as Croall notes, they leave ‘no blood on the streets’ in the way that street crime does.
People do not fear white collar or corporate crime in the same way as they do robbery or violence.
Indirect…
Victimisation tends to be indirect – offenders and victims rarely come face to face, and many people often do not realise they have been victims of these types of crime.
Victims may also be spread out or diffused. For example, environmental pollution can affect thousands of people and create cancer clusters.
Complex…
Many of these crimes are very complex because they involve the abuse of technical, financial or scientific knowledge that is often beyond the understanding of the ‘person in the street’.
For example, most people do not understand how insider trading works or why it is illegal. Often the crime will involve different companies, various bank accounts, a multitude of transactions and a variety of individuals who are more, or less, aware of what’s going on.
Consequently, teams of experts spend years attempting to get to the bottom of large-scale frauds.
Diffused responsibility…
Responsibility is often delegated or diffused in companies, so it is often difficult to decide where blame lies.
For example, take the Herald of Free Enterprise disaster, a variety of people and organisations were blamed – crew members, their commanding officers, the company and the state authorities that were supposed to regulate the company, i.e. to check whether they were abiding by health and safety rules.
Ambiguous laws…
Laws which aim to prevent these types of crime are often ambiguous – Croall notes that there is often a very fine line between what are acceptable and unacceptable business practices.
Some white collar crime also involves moral ambiguity, e.g. many people regard tax evasion as morally acceptable and are happy to tolerate it.
Difficult to prove…
Many offences are difficult to prove in court – often they are too complex for juries – and the cost of such trials which can go on for months can be extremely high.
Difficult to prosecute…
Law enforcers find offences committed by elite individuals and companies difficult to detect and prosecute because much of the enforcement is in the hands of civil agencies such as Trading Standards, the Health and Safety Executive etc – these organisations lack the financial resources and personnel to pursue complex and expensive cases which may take years to investigate.
The police too suffer from a lack of resources and personnel – the Serious Fraud Office lacks the personnel to cope with the volume of the white collar and corporate crime that is thought to exist in the UK.
Many of the regulatory bodies which monitor these types of crimes are mainly concerned with securing compliance with regulations rather than prosecuting offenders.
They advise and warn offenders rather than punish. The Inland Revenue and Customs and Excise tend to deal with offences administratively. This means that if they uncover an offence, they aim to recover the money rather than prosecute – they will invite the offender to repay the money with a financial penalty on top. The offender is rarely taken to court and consequently does not receive a criminal record.
Contrast this with the government’s insistence that benefit fraudsters should always be prosecuted. For every tax offender prosecuted, about 700 people are prosecuted for welfare offences despite official estimates that suggest financial losses from benefit abuses are dwarfed by losses from tax evasion. For example, the cost of welfare fraud is about £500 million a year (and 14,000 people are prosecuted) whereas the cost of tax fraud is £5000 million a year (and 20 people are prosecuted). As one tax accountant put it ‘you have to be very unlucky, very stupid and very crooked to be done by the Revenue’.
