White Collar and Corporate Crime - Essay Example

Critically discuss the extent to which white collar and corporate crime may be seen as a product of capitalism. Corporate misconduct that involves violations of criminal statutes can be recognized in an assortment of forms. It may include illegal price-fixing, government contract fraud, bribery, illegal kickbacks, income tax evasion, money laundering, insider trading, wire and mail fraud, and forgery (Coleman, James W. 1992, 11-12). These organized crimes are committed by and for business and pose a serious threat to the health, safety, and financial welfare of consumers and workers as well as to the orderly functioning of the economy and the government. Most of these crimes contain two common elements: the intent to cheat someone and the intent to deceive or conceal the truth. Concealment of misconduct usually involves falsifying records or documents to disguise discrepancies. The higher the degree of effort to conceal a corporate misconduct the more difficult detection will be for unsuspecting management, the public, investors, directors, auditors, and the government. Crime was defined only by traditional "street crimes" during the 30-year period between 1940 and 1970, and there was minimal public concern with the issue of corporate criminal conduct. Since the early 1970s, however, "crime in the suites" has emerged as an important political, social, and economic problem. The extent and seriousness of criminal behavior by corporations, corporate officials, and employees led to the development of organized crime as a separate type of white-collar crime and, more importantly, an increased recognition of the need for criminal statutes that address corporate misconduct and more severe criminal corporate sanctions (Clinard, Marshall, and Peter Yeager. 1980, 132). Thus, White-collar crime is a relatively recent addition to criminological theory. Sutherland defined white-collar crime as "crime committed by a person of respectability and high social status in the course of his occupation," and used the term to refer primarily to "business managers and executives." (Edwin Sutherland, 1961, p. 19) His studies and conclusions indicate, however, that white-collar crime meant corporate crime. Later studies divided white-collar crimes into two separate types -- occupational crimes and corporate crimes. Organized crimes were initially defined as "the offenses committed by corporate officials for their corporation and the offenses of the corporation itself" and occupational crimes were the "offenses committed by individuals for themselves in the course of their occupations and the offenses of employees against their employers." (Marshall B. Clinard and Richard Quinney, 1973, p. 188). Occupational crimes are committed by lawyers, doctors, businessmen, and politicians, for example, and may include crimes like income tax evasion, embezzlement, and check kiting. Corporate crimes are organizational crimes and can only occur in the context of the complicated relationships among executives, corporate officers, managers, and corporate agents on the one hand, and among parent corporations, corporate divisions, and subsidiaries on the other hand. Nevertheless, a distinctive feature of organized crime is that the crime is committed primarily for the benefit of an ongoing legitimate business enterprise rather than for the individual who actually carries out the offense. Thus, organized crime is a specific type or form of white-collar crime and includes criminal conduct, intended to benefit the corporation, by corporations and by individual corporate employees, officials, or agents. In the late 1980s and early 1990s has served to bring potentially dangerous corporate activities to the general attention of the public and has inspired the academic legal community to pay greater consideration to several very basic questions concerning the potential use of the criminal law in this area. (Fisse, B And Braithwaite, J, 1993, 134) The criminal statistics show unequivocally that crime, as popularly conceived and officially measured, has a high incidence in the lower class and a low incidence in the upper class; less than 2 per cent of the persons committed to prisons in a year belong to the upper class. These statistics refer to criminals handled by the police, the criminal and juvenile courts, and the prisons, and to such crimes as murder, assault, burglary, robbery, larceny, sex offenses, and drunkenness; it does not include traffic violations. The criminologists have used the case histories and criminal statistics derived from these agencies of criminal justice as their principal data. From them, they have derived general theories of criminal behavior. These theories are that, since crime is concentrated in the lower class, it is caused by poverty or by personal and social characteristics believed to be associated statistically with poverty, including feeblemindedness, psychopathic deviations, slum neighborhoods, and "deteriorated" families (Farrington, David P. 1992, 521-536). White-collar criminality in business is expressed most frequently in the form of misrepresentation in financial statements of corporations, manipulation in the stock exchange, commercial bribery, bribery of public officials directly or indirectly in order to secure favorable contracts and legislation, misrepresentation in advertising and salesmanship, embezzlement and misapplication of funds, short weights and measures and misgrading of commodities, tax frauds, misapplication of funds in receiverships and bankruptcies. These are what Al Capone called "the legitimate rackets." These and many others are found in abundance in the business world. In the medical profession, which is here used as an example because it is probably less criminalistic than some other professions, are found illegal sale of alcohol and narcotics, abortion, illegal services to underworld criminals, fraudulent reports and testimony in accident cases, extreme cases of unnecessary treatment, fake specialists, restriction of competition, and fee splitting. Fee splitting is a violation of a specific law in many states and a violation of the conditions of admission to the practice of medicine in all. The physician who participates in fee splitting tends to send his patients to the surgeon who will give him the largest fee rather than to the surgeon who will do the best work. It has been reported that two-thirds of the surgeons in New York City split fees and that more than one-half of the physicians in a central western city who answered a questionnaire on this point favored fee splitting. These varied types of white-collar crimes in business and the professions consist principally of violation of delegated or implied trust, and many of them can be reduced to two categories: (1) misrepresentation of asset values and (2) duplicity in the manipulation of power. The first is approximately the same as fraud or swindling; the second is similar to the double-cross. The latter is illustrated by the corporation director who, acting on inside information, purchases land which the corporation will need and sells it at a fantastic profit to his corporation. The principle of this duplicity is that the offender holds two antagonistic positions, one of which is a position of trust that is violated, generally by misapplication of funds, in the interest of the other position. A football coach, permitted to referee a game in which his own team is playing, would illustrate this antagonism of positions. Such situations cannot be completely avoided in a complicated business structure, but many concerns make a practice of assuming such antagonistic functions and regularly violating the trust thus delegated to them. When compelled by law to make a separation of their functions, they make a nominal separation and continue by subterfuge to maintain the two positions. An accurate statistical comparison of the crimes of the two social classes is not available. The most extensive evidence regarding the nature and prevalence of white-collar criminality is found in the reports of the larger investigations to which reference was made. Because of its scattered character, that evidence is assumed rather than summarized here. White-collar crime affects the equation in terms of the punishments meted out to affluent white defendants who've stolen thousands of times more than any mugger and destroyed infinitely more lives-even if the victims don't appear in the hospital emergency rooms, or at least not right away. The images of a U.K. president's son being involved in "significant conflicts of interest" in the operations of a bank (and its effect on investors and taxpayers), of five U.K. senators intervening on behalf of a savings-and-loan operator who created enormous financial ruin, of the fraudulent televangelists who have bilked gullible believers, and of billionaires who speak contemptuously of those who pay taxes as if they were suckers-all confirm the suspicions of the poor that the odds are stacked against them. Crime is, above all things, an economic problem. The ability of organized crime to hire the brightest legal talent and thus gain advantages not available to impecunious defendants also skews the vision of "equal justice under law." Scandals involving defense contracts, U.K. Treasury certificates, high government officials, and medical frauds-and the relatively light penalties given the offenders-work to undermine faith in the system and to engender anger and frustration. Crime is fueled by society's double standards. If corporations are to be focused to the criminal law, then an proper sentencing regime is a precondition. This cannot be deprived from the substantive argument. From a penal perspective, it is presently accepted that certain crimes are inapt to corporations (i.e. those crimes for which incarceration is an obvious sanction). There have been ingenious approaches to penal sanctions in this area although the limitations are understandable. Clarkson, C (1996, 557) James Gobert believed the company as the definitive rational actor - acting or responding while it is in its financial interests to do so. subsequent to reviewing the modern regime, Gobert recognizes a need in any penal retort to corporate crime to distinguish this rational characteristic of corporate life. Present approaches already underline the economic facets to sentencing via the fine. as a result, it is right to distinguish this behavior and offer a financial inducement for corporations, not simply to fulfill with the law but also proactively to police its actions and report its own infringement. (Gobert, J 1994, 722) The theory that criminal behavior in general is due either to poverty or to the psychopathic and sociopathic conditions associated with poverty can now be shown to be invalid for three reasons. First, the generalization is based on a biased sample which omits almost entirely the behavior of white-collar criminals. The criminologists have restricted their data, for reasons of convenience and ignorance rather than of principle, largely to cases dealt with in criminal courts and juvenile courts, and these agencies are used principally for criminals from the lower economic strata. Consequently, their data are grossly biased from the point of view of the economic status of criminals and their generalization that criminality is closely associated with poverty is not justified. (Benson, Michael, and Elizabeth Moore. 1992, 251-272) Second, the generalization that criminality is closely associated with poverty obviously does not apply to white-collar criminals. With a small number of exceptions, they are not in poverty, were not reared in slums or badly deteriorated families, and are not feebleminded or psychopathic. They were seldom problem children in their earlier years and did not appear in juvenile courts or child-guidance clinics. The proposition, derived from the data used by the conventional criminologists, that "the criminal of today was the problem child of yesterday" is seldom true of white-collar criminals. The idea that the causes of criminality are to be found almost exclusively in childhood is similarly fallacious. Even if poverty were extended to include the economic stresses which afflict business in a period of depression, it is not closely correlated with white-collar criminality. Probably at no time within the last fifty years have white-collar crimes in the field of investments and of corporate management been as extensive as during the boom period of the twenties. Third, the conventional theories do not even explain lower-class criminality. The sociopathic and psychopathic factors which have been emphasized doubtless have something to do with crime causation, but these factors have not been related to a general process that is found both in white-collar criminality and lower-class criminality; therefore, they do not explain the criminality of either class. They may explain the manner or method of crime--why lower-class criminals commit burglary or robbery rather than false pretenses. In view of these defects in the conventional theories, a hypothesis is needed that will explain both white-collar criminality and lower-class criminality. For reasons of economy, simplicity, and logic, the hypothesis should apply to both classes, for this will make possible the analysis of causal factors freed from the encumbrances of the administrative devices which have led criminologist's astray (Farrington, David P. 1995, 929-964). Shaw and McKay and others, working exclusively in the field of lower-class crime, have found the conventional theories inadequate to account for variations within the data of lower-class crime and from that point of view have been working toward an explanation of crime in terms of a more general social process. Efforts to curb the growth of organized crime have not been successful. It is helpful in devising a program for the future to examine the problems encountered in attempting to combat organized crime. Criminal cartels have organized their groups and operations to insulate their higher echelon personnel from law enforcement and regulatory agencies. Every measure has been taken to insure that governmental investigation, no matter how intensive, will be unable to secure live witnesses the sine qua non of prosecution. Documentary evidence is equally difficult to obtain. Bookmakers at the street level keep no detailed records. Main offices of gambling enterprises can be moved often enough to keep anyone from getting sufficient evidence for a search warrant for a particular location. Mechanical devices are used that prevent even the telephone company from knowing about telephone calls. And even if an enforcement agent has a search warrant, there are easy ways to destroy written material. While the agent fulfills the legal requirements of knocking on the door, announcing his identity and purpose, and waiting a reasonable time for a response before breaking into the room. No State or local law enforcement agency is adequately staffed to deal successfully with the problems of breaking down criminal organizations. Just one major organized crime case may take 2 to 3 years to develop and then several more years to complete through prosecution and appeal. Cases may require several man-years of investigative resources. The percentage of investigations that result in arrests is quite low. Requests for increased budgets in government are usually granted only upon a showing of success; i.e., a high number of arrests. An effective organized crime investigative effort may not be able to produce such statistics without years of intelligence gathering, and the drive for statistics may divert investigative energy to meaningless low-level gambling arrests that have little effect on the criminal organizations. Even with these known problems, the organized crime units of all but a few city police departments are staffed by less than 10 men, and only 6 prosecutors' offices have assigned assistants to work exclusively or particularly in organized crime cases. Local police are hampered by their limited geographical jurisdiction, and law enforcement has not responded by developing sufficient coordination among the agencies. Gambling is the largest source of revenue for the criminal cartels, but the members of organized crime know they can operate free of significant punishment. Street workers have little reason to be deterred from joining the ranks of criminal organizations by fear of long jail sentences or large fines. Judges are reluctant to jail bookmakers and lottery operators. Even when offenders are convicted, the sentences are often very light. Fines are paid by the organization and considered a business expense. The public demands action only sporadically, as intermittent, sensational disclosures reveal intolerable violence and corruption caused by organized crime. Without sustained public pressure, political office seekers and office holders have little incentive to address themselves to combating organized crime. References: Edwin Sutherland, White Collar Crime (New York: Holt, Rinehart, and Winston, 1961), p. 19. Edwin Sutherland, "White Collar Criminality," American Sociological Review, 5 (Feb. 1940): 12. Gobert, J (1994) Corporate Criminality: New Crimes for the Times' Criminal Law Review 722 Fisse, B And Braithwaite, J, Corporations, Crime and Accountability (Cambridge University Press, 1993) Clarkson, C (1996) Kicking Corporate Bodies and Damning Their Souls' 59 Modern Law Review 557 Marshall B. Clinard and Richard Quinney, Criminal Behavior Systems: A Typology (New York: Holt, Rinehart, Winston, 1973), p. 188. Farrington, David P. 1992. "Criminal Career Research in the United Kingdom." British Journal of Criminology32 (4):521-536. Benson, Michael, and Elizabeth Moore. 1992. "Are White-Collar and Common Offenders the Same An Empirical and Theoretical Critique of a Recently Proposed General Theory of Crime. " Journal of Research in Crime and Delinquency29 (3):251-272. Farrington, David P. 1995. "The Development of Offending and Antisocial Behavior from Childhood: Key Findings from the Cambridge Study in Delinquent Development." Journal of Child Psychology and Psychiatry36 (6):929-964. Coleman, James W. 1992. "The Theory of White-Collar Crime: From Sutherland to the 1990s." In White-Collar Crime Reconsidered, edited by Kip Schlegel and David Weisburd. Boston: Northeastern University Press, 11-12 Clinard, Marshall, and Peter Yeager. 1980. Corporate Crime. New York: Free Press, 132 Read More