White-Collar Crime Flashcards
According to Diane Vaughan, linking employees’ needs and goals to the company’s success can encourage unlawful conduct by individuals on the organization’s behalf. T/F
True
Diane Vaughan, the author of Controlling Unlawful Organizational Behavior: Social Structure and Corporate Misconduct, believes that organizations can be criminogenic because they encourage loyalty. This, in turn, causes company personnel to sometimes perceive that the organization might be worth committing crime for to maintain and further its goals. The use of formal and informal rewards and punishments, plus social activities and pressures to participate, link an employee’s needs and goals to the company’s success. When a company achieves its goals, its employees prosper. In short, the interests of an organization and its employees coincide, and that situation might set the stage for unlawful conduct by individuals on the organization’s behalf.
According to the 2014 Report to the Nations, more occupational frauds are committed by men than by women. T/F
True
Sixty-seven percent of fraud cases in the 2014 Report to the Nations were perpetrated by males, while females were the primary perpetrators in 33 percent of cases. Men are also associated with a median loss more than twice as great as that caused by women. This trend has been consistently observed during our previous studies as well.
Management from several IT consulting firms conspires to take turns submitting the lowest bids for all contracts in their area; this is considered an organizational crime. T/F
True
Organizational crime is that which is committed by businesses, particularly corporations, and the government. In contrast, occupational crime involves legal offenses committed by individuals in the course of their occupation. An antitrust offense, such as bid rigging or price fixing, would be an organizational crime; accepting or offering bribes is an occupational offense.
Organizational crime occurs in the context of complex relationships and expectations among boards of directors, executives, and managers on one hand, and among parent corporations, corporate divisions, and subsidiaries on the other.
According to the 2014 Report to the Nations, the majority of occupational frauds are committed by ____________; median losses are highest in frauds committed by ___________.
A. Employees; owners/executives
B. Employees; employees
C. Owners/executives; employees
D. Owners/executives; managers
A. Employees; owners/executives
We examined the fraudsters in our study based on their positions within the victim organization and found that the majority of occupational frauds are committed by employees and mid-level managers. Owners and executives are involved less often (18.6 percent of all cases), but the median loss caused by these individuals was approximately four times higher than the median loss caused by managers and nearly seven times that of employees.
Systems based on the compliance theory of crime control attempt to achieve conformity to the law without having to detect, process, or penalize violators. T/F
True
Enforcement strategies include two main theories: compliance and deterrence. Compliance hopes to achieve conformity to the law without having to detect, process, or penalize violators. Compliance systems provide economic incentives for voluntary compliance to the laws and use administrative efforts to control violations before they occur. In contrast, deterrence is designed to detect law violations, determine who is responsible, and penalize offenders in order to deter future violations. Deterrence systems try to control the immediate behavior of individuals, not the long-term behaviors targeted by compliance systems.
According to the Corporate Sentencing Guidelines, a corporate policy that mitigates the effect of an occurrence of fraud can reduce an organization’s fine for criminal conduct by as much as 95 percent. T/F
True
Fines imposed under the Corporate Sentencing Guidelines are based on two factors: the seriousness of the offense and the level of culpability by the organization. The seriousness of the offense determines the base fine to be imposed. This figure can be quite high. The organization’s culpability is a measure of the actions taken by the organization that either mitigated or aggravated the situation. Depending on the culpability of the organization, the base fine can be increased by as much as 400 percent or reduced by as much as 95 percent.
Which of the following is FALSE regarding the Corporate Sentencing Guidelines?
A. The Guidelines require that, whenever possible, the organization must pay full restitution to the victims of the crime.
B. The Guidelines allow for a reduction in fines for organizations found guilty of criminal conduct if they have effective compliance programs in place.
C. Judges in both state and federal courts are required to follow the Guidelines.
D. The Guidelines were established to provide incentives for organizations to maintain internal mechanisms for preventing, detecting, and reporting criminal conduct.
C. Judges in both state and federal courts are required to follow the Guidelines.
Cressey found that embezzlers’ offenses are motivated by situations that either threaten their current status or threaten to prevent them from achieving a higher status.
T/F
True
Through his research, Cressey found that the non-shareable problems encountered by the people he interviewed arose from situations that could be divided into six basic categories: violation of ascribed obligations, problems resulting from personal failure, business reversals, physical isolation, status gaining, and employer-employee relations. All of these situations in some way dealt with status-seeking or status-maintaining activities by the subjects. In other words, the non-shareable problems threatened the status of the subjects, or threatened to prevent them from achieving a higher status than the one they occupied at the time of their violation.
Misbehavior is less likely to be detected and punished in a complex organizational structure than in a simple organizational structure. T/F
True
Complex companies provide a structure that can foster misbehavior. They provide many settings where misconduct is possible. They isolate those settings in departments and in locations around a city, a country, or the world. This isolation, in turn, means that information about what one part of a company is doing might be unknown in another part. All this reduces the risk that misbehavior will be detected and punished. The larger a company grows, the more specialized its sub-units tend to become, and this specialization thereby breeds a higher risk of fraud. An internally diversified company might have few employees who fully understand the detailed workings.
Additionally, specialization tends to hide illegal activities, especially where a firm’s tasks are kept separate and unrelated. Employees cannot garner knowledge about all the particulars of how a firm works. This protects a company from the effects of personnel turnover and leaks of information because no one can offer much more than a piece of the jigsaw puzzle that paints the overall company picture. The same secrecy, however, raises the chances for misconduct.
The criminologist responsible for the well-known hypothesis of the “fraud triangle” is:
A. Immanuel Kant
B. Marshall B. Clinard
C. Donald R. Cressey
D. None of the above
While working on his Ph.D. in the 1940s, Donald R. Cressey focused his research on embezzlers. His findings resulted in a theory which, over the years, has become known as the fraud triangle. One leg of the triangle represents a perceived non-shareable financial need. The second leg is for perceived opportunity, and the final is for rationalization. The role of the non-shareable problem is important. Cressey said, “When the trust violators were asked to explain why they refrained from violation of other positions of trust they might have held at previous times, or why they had not violated the subject position at an earlier time, those who had an opinion expressed the equivalent of one or more of the following quotations: (a) ‘There was no need for it like there was this time.’ (b) ‘The idea never entered my head.’ (c) ‘I thought it was dishonest then, but this time it did not seem dishonest at first.’”
According to the 2014 Report to the Nations, which of the three major categories of occupational fraud is the most common?
A. Corruption
B. Asset misappropriations
C. Financial statement fraud
D. Identity theft
B. Asset misappropriations
All occupational frauds fall into one of three major categories: asset misappropriation, corruption, or financial statement fraud. In the 2014 Report to the Nations, asset misappropriation schemes were both the most commonly reported—occurring in more than 85 percent of cases—and the least costly of the three major categories of occupational fraud. Financial statement fraud, on the other hand, was the least commonly reported type of occupational fraud, occurring in just 9 percent of cases reported, but these schemes caused considerably more damage than frauds in the other two categories. Corruption schemes fell in the middle of the spectrum in terms of frequency and cost.
Research shows that a criminal’s social status or class is the determinant aspect of white-collar crime. T/F
False Of all factors, organizational opportunity remains the determinant aspect of white-collar crime. Research shows that a criminal’s position in an organization and his ability to organize the scheme have far more bearing on the crime than social status or class alone.
The term white-collar crime was first coined by which of the following scholars?
A. Donald R. Cressey
B. Sigmund Freud
C. Edwin H. Sutherland
D. Immanuel Kant
The term white-collar crime was coined by Edwin H. Sutherland in December 1939 during his presidential address in Philadelphia to the American Sociological Society. Since the term first was used, there have been constant disputes regarding what is (or should be) its formal definition.
The two primary strategies to control corporate criminal behavior are:
A. Compliance and deterrence
B. Deterrence and enforcement
C. Enforcement and compliance
D. None of the above
A. Compliance and deterrence
Enforcement strategies include two main theories: compliance and deterrence. Compliance hopes to achieve conformity to the law without having to detect, process, or penalize violators. Compliance systems provide economic incentives for voluntary compliance to the laws and use administrative efforts to control violations before they occur. In contrast, deterrence is designed to detect law violations, determine who is responsible, and penalize offenders in order to deter future violations. Deterrence systems try to control the immediate behavior of individuals, not the long-term behaviors targeted by compliance systems.
White-collar defendants are less likely to insist on a trial than other offenders. T/F
False
White-collar defendants are more likely to insist on a trial than other offenders. In at least 90 percent of federal cases, defendants will plead guilty, avoiding the expense and effort of a trial. But in one notable study, over 18 percent of white-collar defendants (as opposed to the usual 10 percent) pleaded “not guilty.” In cases like bank embezzlement, usually “simple cases with clear evidence,” plea bargains are easily negotiated and “prosecutors may actively seek guilty pleas.”
