Soc 225 – Lecture 13 – Flashcards
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White Collar Crime
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A crime committed by a person of respectability and high social status in the course of his or her occupation. -Edwin Sutherland
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Occupational Crime
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White-collar crime committed by a an individual or group of individuals exclusively for personal gain
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Organizational or Corporate Crime
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White-collar crimes committed with SUPPORT and ENCOURAGEMENT of a FORMAL organization intended to advance the organization's goals
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Occupational and Organizational Crime Notes
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BUT: 1. Not all occupational crimes are committed by ppl with white-collars (eg: your garage mechanic may defraud you by charging for work that has not been done) 2. It may be difficult to separate the organizational and occupational components of many white-collar crimes
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Costs of White-Collar Crime
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-financial costs far exceed 'street' crime. Formal organization allows crime of great magnitude compared to person acting alone -also causes many deaths -most offenses however are not dealt with under criminal law, and penalties may be very light
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Street Crime Vs Corporate Crime
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-Robberies accounted for estimated 409 in losses in 2011 -Worldcom scandal involved atleast 175 Billion -Average of 16,000 Americans are victims of homicides every year while 56,000 die annually on the job or from occupational diseases -Many others fall victim of pollution, contaminated foods, hazardous consumer products, etc.
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Street Crime Vs. Corporate Crime in Canada
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-An average of more than two deaths a day occur as a result of work place injuries -Manufacturing, construction, transportation and storage and mining are responsible for 63% of fatalities -Not all fatalities are considered "crime" -A study published in 2014 examines five categories of violent crime: assault, criminal harassment, homicide, robbery, sexual assault and other sexual offences -Study finds that sexual assault and other sexual offences cost 4.8B (over 90% of the victims were females) -Victims bore most of the costs for all give types of crime: 10.6B -Criminal justice system and third-party costs far behind -Overall, give types of street crimes costs 12.7B
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Cost of Criminal Justice in Canada
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-In 2011-12, federal, provincial, and territorial govts spent 20.3B (1.1% of GDP) on criminal justice -total annual expenditures on criminal justice is comparable to the budget of national defence (20.5B in 2012) -Expenditures split 27/73 between the federal govt and the provinces (5.5B and 14.8B) -Provincial security 7.9B -Provincial court expenditure 2.6B -Federal corrections expenditure 2.2B -Provincial corrections expenditure 1.6B However the 2009 bankruptcy of Canada's Nortel led to a loss of 300B
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What sociological factors enable white collar crime? (1)
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-Major white collar crimes are highly complex and secretive schemes that require expertise. Such crimes are difficult to detect unless an insider provides intelligence -Existing criminal law focuses on street crime rather than white collar crimes -The effects of white collar crime are often indirect -The public and political leaders are often preoccupied with violent crimes
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What sociological factors enable white collar crime? (2)
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-Drug offences ("war on drugs") also receive significant law enforcement attention thus diverting valuable resources -Suspects are well-resourced and highly placed; therefore prosecution is often lengthy, expensive and difficult -Middle and upper class bias in the criminal justice system -Widespread public perception of white collar offences as moral failures rather than criminality
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Examples of Corporate Crimes
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-Hyundai and Kia: Fined 100M for false advertising regarding fuel economy of their vehicles -HSBC: Accused of graud, money laundering, criminal association an illegal exercise of the profession of financial intermediary -BP: Fined 1.256B for environmental and related offenses -GlaxoSmithKline, Fined 956M for marketing offenses -Pfizer: Fined 2.3B for illegally promoting its Bextra painkiller and other drugs
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Why Do Higher Status People Commit These Crimes?
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Three Cultural components of middle-class life may contribute: 1. Competitive Spirit 2. Arrogance 3. Sense of Entitlement
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TYPES OF CORPORATE AND WHITE_COLLAR CRIME
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NEED to UPDATE FROM SLIDE
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Organization and White-Collar Crime
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-Positions of ownership and authority in modern corporations carry with them a freedom from control -The ensuing 'Executive Disengagement' may be criminogenic. "The custom by which lower level employees assume that executives are best left uninformed of certain decisions and actions of employees, or the assumption that executives cannot be legally expected to have complete control over their individual staff." -The corporate structure also diffuses responsibility, so white-collar criminals are often not held accountable
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Executive Disengagement
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The custom by which lower-level employees assume that executives are best left uninformed of certain decisions and actions of employees, or assumption that executives cannot be legally expected to have complete control of their individual staff
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Criminogenic Market Structure
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Some industries have criminogenic market structure: -refers to the pressure on people in the organization to produce a level of profit that cannot be achieved by acting legally and ethically -industries with a high rate of violation include oil, auto, and pharmaceutical
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America's Accounting Scandals - ENRON
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-Enron 7th Largest U.S. company - primarily involved in trading gas and electricity - Investors lost $63 billion -Used illegal accounting methods to make it appear profits were increasing -Culture of greed within Enron. Executives took large payouts as company was failing -Arthur Anderson accounting firm ignored violations because it wanted Enron consulting contracts -Several Canadian banks among others financed Enron: CIBC paid 2.4B in 2005 for allegedly helping Enron to hide losses
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America's Accounting Scandals - WORLDCOM
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-Large US Long distance phone company, investors lost 175B -Inflated profits by delaying the writing of expenses -Arthur Anderson again the investors, went out of business after the scandals -Worldcom founder Bennie Ebbers now service 25-yr jail term
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Bernard Madoff
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Founded the Bernard L. Madoff Investment Securities in 1960. -turned his wealth management business into a "massive Ponzi scheme' -65B lost (18B investor money) -Now serving 150 years
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Ponzi scheme
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A fraud in which old investors are paid with the funds invested by new investors. When the scheme runs out of new investors, the scheme collapses.
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Canada's Nortel
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-In 2000, Nortel was most valuable company in Canada -F/S overstated revenues so it looked like it was profitable -Shares dropped from $124 to $1. -Executives highly paid, civil charges laid against some -Investors lost 300B
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Consumer Safety Issues
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-Over the past 40 years, products have become safer because of consumer movement and government action. -In 2007, several incidents of unsafe chinese products: a) contaminated pet food b) Counterfeit colgate toothpaste c) unsafe children's toys - Elmo, Big Bird, Thomas the Train -Manufacturing has moved offshore, but North American companies and gov't still have to ensure safety and quality *In the cases above, both gov't and industry failed*
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1992 Westray Mine Explosion
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-26 killed in Nova Scotia mine explosion -Inquiry conclusion:not an accident but the result of managerial incompetence and negligence -Company violated safety rules and gov't inspectors did not enforce them -Under existing law, nobody liable -New law in 2003 to hold directors and managers accountable for safety
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Legal Sanctions (1)
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Corporations have limited liability, so their owners and directors are not personally responsible for many types of corporate misconduct. Damage judgements or financial penalties have a limited impact on managers (BP has not paid 42.2B in damages/compensations for the 2010 Gulf of Mexico oil spill) The problem with treating organizations as 'juristic persons'
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Juristic Person
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The legal concept that corporations are liable to the same laws as natural persons. Treating Corporations as individuals raise practical issues for legal enforcement and punishment.
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Legal Sanctions (2)
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Legislation such as anti-combines legislation has limited impact because business has an influence on how the law is written and enforced. Many harms committed by high status or corporate offenders are not criminal offenses.
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Legal Sanctions (3)
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Sentences for white-collar and corporate offenders tend to be light in Canada. More severe in US: -some move in recent years to make sentencing tougher, but this may not continue because of Canada's news conditional sentencing law of 1995 that discourages jail sentences for many offenders -the conditional sentence law was repealed on May 31, 2007 and came into effect six months later
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Occupational Crime - Unprofessional Conduct and Malpractice
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Two issues: 1. misconduct 2. and failure of organizations to deal with misconduct -often hidden because it is dealt with by professional associations -for instance, society is now less tolerant of the way Catholic church has dealt with sexually abusive priests and gov't ignoring professional misconduct
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Occupational Crime - Investment and Securities Fraud (1)
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Breach of trust: stealing from investors Insider Trading: using knowledge not avail. to ppl outside of company to profit from stocks Eg: Mark Cuban, owner of Dallas Mavericks charged with insider trading allegations avoided a loss of 750,000 -Mr Cuban was found not guilty Martha Stewart: Avoided a loss of $49,673 through insider information. Received five-month prison sentence and two-year supervised release.
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Occupational Crime - Investment and Securities Fraud (2)
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Pump and dump scams: Bre-X Minerals Lrd. 'Salting' (adding gold or silver to ore) in its site in Busang, Indonesia -established in 1989. Share price rose to 286.50 per share. Had $4.4 B market capitalization -went bankrupt 2002 -nobody was found guilty of any wrongdoing
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Occupational Crime - Internet Fraud
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-Spam Email -Hacking company sites -Not delivering articles on E-Bay
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Occupational Crime - Tax Fraud
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-Many employees such as restaurant servers do not report income that is not recorded by employers -Construction companies avoid gst and pst (taxes) by getting cash payment
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Occupational Crime - Political Corruption
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-Bribery -Influence peddling -Misusing government funds -Repressing dissent -Denying human rights: even in democratic societies, there are serious issues with balancing public security and human rights after 9/11 and London subway bombings
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Occupational Crime - Blue Collar Crime
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-Trades people working 'off the books' to avoid taxes -Some business such as auto repair do unnecessary work
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Occupational Crime - Employee Fraud
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-Almost all companies victimized -US Chamber of Commerce estimate that US employers lose 20B to 40B a year due to employee theft -Most fraud committed by 'honest employees' -Only 12% of fraudsters had a criminal record -30% of all business failures are caused by employee theft -Very large losses in the financial industry (Baring's Bank, Phoenix Trading and Research)
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Monopolistic Enterprise
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Any Corporation that controls all, or the majority of the market for particular product or service.
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Anticombines Law
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In order to protect principle of competition, laws have been created to prevent and punish corporations that work together to reduce competition.
