Today, the concept of White-Collar Crime or Economic Crime is familiar to most Americans. The deceptions of executives at Enron, WorldCom, and Martha Stewart made the news. The junk-bond market and insurance scams are also regularlyreported in the news media. White-Collar Crime has become conventional in the American society, yet there is no legal definition for it and it does not appear as part of the criminal code, although some aspects are codified.This form of crime has grown into the twenty-first century and is expected to entrench itself into the American economic and social fabric, unless laws, conventions, and systems are put in place to address the concern.
Throughout history, defrauding or cheating people has been considered immoral and wrong, even in the absence of specific legal prohibitions. Religious moral codes have long provided prohibitions against fraud. Jews and Christians know that the Ten Commandments require them not to steal or bear false witness, while Muslims note that the Koran clearly says, “O you who believe, wherefore do you say what you do not? Very hateful is it to God that you say what you do not.” In the western legal tradition, attempts at avoiding fraud and other forms of theft through trickery led to many laws aimed at curbing such behaviors. Usually these laws were created after a problem had occurred, that is, once people had been cheated or deprived of their property in some way that society found noxious. The most economically disadvantaged members of society are not the only ones committing crimes,persons from the privileged socioeconomic class are also involved in criminal behavior. The types of crime may differ from those of the lower class but both crimes result to a harm in the society and are against the law. These crimes have aptly been christened “White-Collar Crimes.”
This essay presents a detailed literature review of White-Collar Crimes. It will cover the nature of the crime, typical characterization of white-collar offenders and present the typology of victims of White-Collar Crimes. The essay will finally present a case study relating to a White-Collar Crime committed in the United States.
Introduction to White-Collar Crimes
In its narrowest definition, White-Collar Crime is composed of those crimes committed by individuals in the upper and middle classes and/ or certain high-status occupations. Generally, these crimes involve acts that are non-violent, principally involving elements of deceit, deception, concealment, corruption, misrepresentation, and or breach of trust. It is a violation of the law that involves the use of a violator’s position of significant power, influence or trust for the purpose of illegal gain, or to commit an illegal act for personal or organizational gain.
The traditional, popular conception of White-Collar Crime is that it is the illegal and harmful actions of elites and respectable members of the society carried out for economic gain in the context of legitimate organizational or occupational activity. An operational definition of White-Collar Crime defines White-Collar Crime as violation of eight federal crime categories.These are bank embezzlement, securities fraud, false claims and statements, antitrust violations, postal and wire fraud, bribery, tax offenses, and credit and lending institution fraud (Gerber & Jensen, 2007). White-Collar Crimes cover many acts. These may include antitrust violations, public corruption, bribes, environmental pollution, and price fixing.
According to Simpson & Weisburd(2008)White-Collar Crimes are exemplified by the following characteristics.First, the crimes include a number of traditional civil or criminal violations, as well as certain new acts related to changing technological conditions that legislators have defined as illegal after problems come to their attention. Second, these illegal acts are often regulatory or other types of specialized violations that do not fall under the local police responsibilities. Third, evidence is difficult to collect and easy to destroy, either purposefully by perpetrator or accidentally by investigators. Fourth, these crimes are often difficult to detect, with discovery quite often started by accident or customer complaint rather than as the result of direct investigation.Lastly, the media views these crimes as newsworthy, often creating great pressure on public officials to act quickly by makingarrests and passing laws.
TheNature of White-Collar Crimes
As with organized crime, the desire for profit drives most White-Collar Crimes, and individuals or groups who wield considerable power perpetrate the crimes. Unlike organized crimes, however, well-respected members of society who enjoy high social status commit White-Collar Crime. In fact, it is precisely the offenders’ prominent status that provides the opportunity for the crime.According to Sutherland, as stated bySimpson & Weisburd (2008)White-Collar Crime is a crime perpetrated by a person of high social status and of respectability in the course of his occupation. The authors gave three reasons why such actions are criminal. First, the law states that these crimes harm the public. For example, misrepresentation in advertising, unfair labor practices, financial fraud, violations of war regulations, and infringements of patents, trademarks, and copyrights are all crimes. Second, penalties for such practices were already in the book. Lastly, these activities are willfully and intentional, and the motive (profit, personal gain) is usually clear.
Gerber & Jensen (2007) provide two factors that account for why White-Collar Crime is widespread and pervasive in the United States. These they state include the economic difficulty and greed of White-Collar offenders. Further support is given to White-Collar Crime by the criminogenic nature of corporate culture, and this is fueled by the prevailing values of power, materialism, individualism, and immediate gratification that characterize the society. White-Collar Crime is known to cause more injuries and deaths in the society than conventional crimes. It is also considered to be the most pervading and amorphous of all crimes because of its potential to undermine social relations. Consequently Simpson & Weisburd(2008)called for a change in public values so that respectable white-collar offenders would be viewed as being equally as criminal as their street-level counterparts. The author further adds that White-Collar Crime is not treated as seriously as street crime because the upper classes have the power to influence the creation and administration of the law. He further believed that white-collar offenders learned their methods, motives and drives through interactions in small personal groups.
The Impact of White-Collar Crime
Unquestionably, White-Collar offenses are as harmful to the public as street crimes. Estimates indicate that the annual economic loss due to White-Collar Crimes in the United States exceeds forty billion dollars. The comparable figure for traditional crimes is approximately four billion dollars only. Additionally, conservative estimates show that each year, at least 10,000 lives are lost due to unnecessary surgeries, 20,000 to errors in prescribing drugs, 20,000 to doctors spreading diseases in hospitals, 100,000 to industrial diseases, 200,000 to environmentally caused cancer, and an unknown number to lethal industrial products. These deaths dwarf the number of murders recorded each year.Additionally, the impact of White-Collar and economic crime on American society is considerable and alarming. Almost 3.25 million adult Americans discovered that their personal information had been misused through identity theft; the total cost of identity theft approaches $50 billion per year, with an average loss of $4800 per victim; healthcare frauds totals 10 percent of the total healthcare expenditure each year, check fraud is estimated to cost businesses $10 billion each year and internet fraud losses are over $14 million each year (Vito, Maahs, & Holme, 2007).
Behavioral, Cognitive, and Psychobiological Characteristics of White-Collar Criminals
Some of the common criminal behavior-related issues of White-Collar Crimes are: they are often committed through non-violent means, although certain industrial, consumer, and environment-related crimes have life-threatening consequences; access to computers or computer storage media through employment-related knowledge or technical skills is often needed; and these acts often involve ‘respectable’ persons who have not previously been convicted of any crime. Additionally, White-Collar Crimes generally involve an individual, and/or several individuals working in collusion, and/or organizations, with the victims in the latter case ranging from individual clients, customers, to employees of other organizations.
According to Simpson & Weisburd(2008), most White-Collar Crime offenders come from the middle class of society. That is, they are average citizens with moderate incomes. The authors further contend that contrary to existing assumptions, a substantial proportion of convicted white-collar offenders had at least one prior arrest.
Friedrich, as cited by Gerber & Jensen(2007), describes the personality traits of White-Collarcriminals asnarcissistic and as often having an overrated sense of self-importance and superiority. They are obsessed with power and control, and have little or no respect for laws. They also have a tendency towards trampling upon other people’s rights with impunity.Further, Friedrichs(2010) identified additional personality traits that are common among White-Collar offenders. Such personality traits, according to their study include risk-taking and recklessness, ambitiousness, and drive, and egocentricity and a hunger for power. The author further notes that these personality traits are also present in people who achieve success through legitimate means, suggesting that risk-taking is not necessarily an undesirable attribute. However, these personality traits can become problematic and lead to excessive and illegal behavior when they are intermixed with paranoia and megalomania. Individuals with a propensity to commit White-Collar offenses are also characterized by an inability to show contrition for any wrongdoing because of their penchant to view their actions as having some messianic purpose and their warped sense of self-importance.
It is also common among white-collar offenders to rationalize their illegal conduct. Most often, such offenders tend to be clever people but have a tendency to be aloof and easily frustrated, especially when things do not go their way. Gerber & Jensen (2007) further add that most White-Collar criminals have a greater tendency towards irresponsibility, lack of dependability, and disregard for rules. They are driven by greed and an air of invincibility and poor judgment. Other studies have also identified excessive fear of failure and inability to defer gratification as important attributes in White-Collar criminals. They have greater difficulty in exercising self-control.
In general, most White-Collar offenders tend to be overachievers, clever and possess an incredible ability to manipulate others. They have a pervasive tendency to disregard laws and have no pang of conscience in violating other people’s rights’. These personality traits are encouraged by the prevailing culture of individualism, self-centeredness, competition and winner-takes-all mentality in contemporary society.
Characterization of White-CollarCrime Offenders
White-Collar and conventional crime offenders differ in a number of ways. They can be categorized based on age, class, race, gender, and other demographic variables and differences.
In terms of age, while conventional crime offenders are disproportionately young, White-Collar offenders are more likely to be middle-aged or older and likely to begin their offending at a later age. Conditional that these form of crime encompass the acts of physicians, corporate executives, entrepreneurs, and retailers, among others, it isexpected that they are predictably middle-aged or older.
In terms of class, White-Collar Crime is a crime associated withthe better-off classes and the upper class of the society. It is not regarded as a crime of the poor. In the United States, millionaires, and even billionaires have been accused of committingWhite-Collar Crimes and in some cases convicted and imprisoned. However, it is worth noting that with the introduction of the concept of occupational crime, it has resulted in an approach of thinking about such crimes that substantively de- stresses the relationship with social the upper class and elites and emphasizes in its place the occupational context of the illegality. Occupational crime criminals are every so often middle-class and in the broadest application of the term, may even be lower-class citizenslaboring in minimum wage jobs. However, examining the class membership of those formally charged with White-Collar offenses, shows White-Collar Crimes to be principally a crime of the middle class (Friedrichs, 2010).
With regards to the race of White-Collar offenders, AfricanAmericans and other disadvantaged minorities are highly unlikely to be charged with White-Collar Crimes such as antitrust or corporate wrongdoing. However, they are well represented among low-level White-Collar Crimeoffenders guilty of embezzlement and fraud (Friedrichs, 2010). According to data from the Uniform Crime Report, Americansof African descents are as proportionately overrepresented for White-Collar Crime arrests (30 percent) as for conventional offenses. The types of crimes for which African American rates of arrest are notably higher than those of whites are often not occupational-related. According to Simpson & Weisburd(2008), there is no truly reliable demographic data on the whole class of White-Collar offenders, but the available data strongly suggests that if African Americans are overrepresented for lower-level offenses, white are overrepresented for middle and higher level offenses.
With regards to gender, it is widely understood that males greatly outnumber females among White-Collar offenders.Statisticsreveals that the female arrest rate for White-Collar Crimes is one-quarter or one-fifth of the male arrest rate. Women are better represented among those engaging in low-level frauds. The male genderdomination of outside-the-home occupations and corporation’soccupations, specifically the more powerful and senior positions, would seem to be evidently the single most significant factor rationalizing the overall discrepancy or under-representation of female offenders.Friedrichs(2010), states that the female share of corporate or organizational crime was low, with only 1 percent of the women’s’ White-Collar cases compared to 14 percent of the men’s falling into the category. The author adds that the female share of most forms of occupational crime was low, although for bank embezzlement it was 50 percent, and females were less prospective than males to work in criminal groups and more likely to perpetrate their White-Collar Crimes alone. However, if the socialization of females and the job opportunity structure for women increasingly comes to resemble that for males, it is expected that patterns of involvement in all forms of White-Collar Crimewould become more similar (Simpson & Weisburd, 2008).Friedrichs(2010) concludes by stating that females were much more likely to claim financial need of their families as a motivation for their involvement with White-Collar Crime.
According to Gottschalk(2010),White-Collar offenders tend to differ from other conventional crime offenders on variable other than age, class, race and gender. They are more likely to be employed, as employment is virtually by definition a precondition for the commission of White-Collar Crimes. They are also more likely to be better educated, and a certain proportion is exceptionally well educated. In sofar as they are older and more probable to be in the society’s middle-class and in gainful employment, they are also more likely to be in a marriage and have more stableand established family situations. They are also more likely than conventional crime offenders to have community group and church affiliations.
White Collar Crime Victims Typology
There are limited literature and research applying victimological theory to the area of White-Collar Crime. The most common image of a crime is the victim of murder, rape, robbery, or burglary. However, most people are victims of various collar crimes, often without being aware of it.There are characteristics or behaviorsthat can increase or decrease an individual’s risk of becoming a victim of crime. These factors might include age, gender, socio-economic status, health and fitness levels, place of residence and lifestyles.Victims of White-Collar Crimes can be compared with victims of violent crimes in terms of their responses and reaction to their victimization. According toGerber & Jensen(2007), like victims of violent crime, White-Collar victims tend to be older, more affluent and are relatively more likely to be female.
However,Friedrichs(2010)states that victims of White-Collar Crimes have no unique characteristic that identifies them.Most often than not, it is at the discretion of the offender to commit the offense. The white-collar criminal does not evaluate the characteristics or vulnerability of the victim; rather, he or she looks at the availability of opportunity to commit the crime the incentives and disincentive of being caught and the probable benefits of getting away with the crime. The author states that it is therefore, very difficult, even wrong to assume that victims of White-Collar Crime have character traits that make them more susceptible to criminals.Due to the discreet and unobtrusive nature of White-Collar Crimes, most people are victimized in many capacities.White-Collar Crime victimization is especially diffuse, and victims’ attributes are especially heterogeneous. Workers or employees are victimized by hazardous and illegal conditions in the workplace or by managerial practices that illegally deprive them of their just compensations and otherlabor-related rights. Consumers are victimized by such corporate crimes as price fixing and the sale of unsafe products. Customers, clients and patients are victimized by fraudulent and unethical practices of small businesses, entrepreneurs, and professionals. Citizens and resident of particular areas are victimized by corporate pollution. Taxpayers are victimized by defense contract frauds and by frauds involving thrift institutions with government-insured deposits. Among the many other classes of victims of White-Collar Crime are businesses, business partners, shareholders, investors, and pension holders. It therefore, becomes erroneous when victims of White-Collar Crimes get characterized.
It is worth noting that, it is possible that, many of the White-Collar Crimes committed against victims are unrecorded in official records due to one of four reasons. One, the individual does not know he/she was a victim; two, the person is unable to report the victimization due to failing health; three, the victim feels more harm might occur from reporting; and four, the person does not define the actions as criminal.
White-Collar CrimeLaw Enforcement
The government has employed the use ofa range of law enforcementapproaches to tacklingWhite-Collar Crime. Some encompass deterrence, which employs punishment to startle prospective abusers. Others involve economic or compliance strategies, which create economic incentives to obey the law. Most White-Collar Crime offenders do not regard themselves as criminals;as a result, they do not seem to be dissuaded by criminal statutes. While thousands of White-Collaroffenders are indicted each year, their numbers are paltry compared with the magnitude of the problem. Detection and enforcement are primarily in the hands of administrative departments and agencies, including the Internal Revenue Service, the Environmental Protection Agency, the secret service, U.S customs, the Securities and Exchange Commission, and the FBI. On the state and local levels, law enforcement officials have made progress in a number of areas, such as controlling consumer fraud. One approach is to ensure compliance with business rules and law by threatening economic sanctions. Another is to deter White-Collar Crime by punishing individual offenders and putting them in prison as a deterrent to other would-be criminals.
White-Collar Crime is a serious crime committed during the course of one’s occupation. With the advent of laws regulating business, White-Collar Crime has come to be associated with economic crime, but virtually any organization can commit White-Collar Crime as well. There are different definitions of White-Collar Crime, but the most common defines White-Collar Crime as crimes committed by individuals, usually for self-gain.White-Collar Crimes are characterized by sophistication and planning. White-Collar criminals usually have a noncriminal self-concept. The fact that most of these crimes are not handled by uniformed police or criminal courts and the fact that the offenders are immersed in a web of conventional roles helps to insulate them from a criminal self-concept.
To aptly address White-Collar Crimes, two aspects need to be put in place. First, there needs to be a change in the society’s’ perception of White-Collar Crimes from viewing it as a lesser crime, and seeing it as a crime like any conventional crime. Secondly, there needs to be put in place additional instruments and institutional that would aptly prosecute persons involved in White-Collar Crime. This will deter these forms of crimes, and make the United States a safer country.
Case Study: Bernard Madoff Ponzi Scheme
Since the start of the financial crisis in 2007, there have been several high profile White-Collar Crimes that have either emanated from it or been exposed by it. One of the most high profile and extensively covered White-Collar Crime is the Bernard Madoff Ponzi scheme.BernardL Madoff was arrested in December 2008 for defrauding thousands of individuals and organizations of billions of dollars for over two decades. The part of Madoff’s investment advisory company involved in private investment or asset management was where all of his illicit activities were carried out. Madoff had perpetrated an outsized Ponzi scheme. In March 2009, he pleaded guilty of soliciting funds to buy securities and failing to invest the money. He used the money instead, as did the notorious Charles Ponzi, to pay returns to early investors and for his own benefit. According to the initial reports of the office of the U.S attorney general, at the end of November 2008, Madoff’s investment advisory company reported that they held a balance of $64.8 billion. The global reach of Madoff’s swindle was enormous: individuals and institutions from 40 countries, 339 funds of funds, and 59 management companies were invested in him.Everything about Bernard Madoff’s con game that ended on December 11, 2008, was immense. Its reach was global: individuals and institutions in Europe, Asia, South America, and the Middle East had invested with Madoff. Billions of dollars were involved and thousands of people were swindled. International banks, large charities, and even a major league baseball franchise became entangled in Madoff’s crime.
Bernie Madoff was, before he went to jail, considered a solid and reputable citizen. A man well thought of in the world of finance, he worked out of offices in the prestigious Lipstick Building at the corner of Third Avenue and East 53rd Street in midtown Manhattan, the world center of financial capitalism. He was for a time chair of NASDAQ and, as would later prove ironic, of the National Society of Security Dealers, which regulated members of his profession. A noted philanthropist, he lived in great luxury with a penthouse apartment on the Upper East Side and houses in Palm Beach and the French Riviera. Madoff was considered so good at what he did that people jostled and cajoled to gain his company and to invest with him.He was in no way a marginal man; he was well adjusted and integrated into society. Yet he committed what has been called one of the greatest thefts in history through a Ponzi scheme that stretched across the globe.
If literature on the characterization of a white-collar offender was to be used, Bernard Madoff would fit to be an exemplary case. He was the right gender, the right class, ethnicity and age. He was in no way an outcast or loner; by all means he has been described as a solid, reputable and well-respected citizen. A man well thought off, a noted philanthropist and was well adjusted and integrated into the society. By all means, he was the ideal citizen, and by every measure met the standards of a probable White-Collar criminal according to Friedrichs(2010) characterization of a White-Collar criminal.
According to Gottschalk(2010)White-Collar offenders are better educated, and a certain proportion is exceptionally well educated. They are older and more likely to be middle class and employed.They are also more likely to be married and have more stable family situations. They are also more likely than conventional crime offenders to have community group and church affiliations. Bernard Madoff fit this bill;he pursued his education at the University of Alabama and Hofstra University in 1960 where he graduated with a Bachelor of Arts in political science. He was married to his wife for 50 years and had two sons. He was very much involvedwith his family, securing top jobs for his relatives and was well involved in community activities. He established a family foundation, the Madoff Charitable Foundation, and was the chairman of many non-profit institutions many of which entrusted his firm with their investments. In every way Madoff was a good man, similarly, in many ways he met the description of a White-Collar offender as described by Gottschalk(2010).
Friedrichs(2010)characterized White-Collar offenders as persons with personality traits, such as ambitiousness and drive, hunger for power, all personality traits that are also present in people who achieve success through legitimate means. The author further added that most White-Collar offenders tend to be overachievers, clever and possess an incredible ability to manipulate others.Bernard Madoff was such a man, having been raised by two immigrant parents, a mother who was a housewife and a father who was a plumber, Madoff was ambitious, had the drive and hungered for success. From such humble beginnings, he was able to start a company that would be a top market maker on Wall Street. He was an overachiever, and he is said to have been an obsessive control freak. The driving force in Madoff’s life since childhood was to become wealthy. He wanted to be rich and he dedicated his life to it. There are many accounts of how he, through any means legal or illegal wanted to succeed, as long as he did.
In conclusion, Bernard Madoff was a man driven by his ambition, hunger for success and driven by greed for wealth. By everyother definition he was a good man, sociable, generous, a family man and a man who the society looked up to for guidance, leadership and direction.Unfortunately, he will be remembered as being the man who perpetrated the greatest white collar crime in twenty-first century America.
Friedrichs, D. (2010). Trusted Criminals: White Collar Crime In Contemporary Society (4 ed.). Belmont, CA: Cengage Learning.
Gerber, J., & Jensen, E. L. (2007). Encyclopedia of White-collar Crime. WestPort, Connecticut: Greenwood Publishing Group.
Gottschalk, P. (2010). White-Collar Crime: Detection, Prevention and Strategy in Business Enterprises. Boca Raton, Florida: Universal-Publishers.
Gottschalk, P. (2013). Policing White-Collar Crime: Characteristics of White-Collar Criminals (illustrated ed.). Boca Raton, Florida: CRC Press.
Simpson, S. S., & Weisburd, D. (2008). The Criminology of White-Collar Crime. New York, NY: Springer Science & Business Media.
Vito, G. F., Maahs, J. R., & Holme, R. M. (2007). Criminology: Theory, Research, and Policy (illustrated ed.). Sudbury, MA: Jones & Bartlett Learning.
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