What You Should Know About White-Collar Crime: Simply Said Series

INTRODUCTION

This book is intended as a reference tool for readers who wish to expand their basic knowledge about white-collar crime. Knowledge is power. Simplifying complicated information for non-specialists can have a significant impact in the fight against crime, since knowledge of one’s enemy helps one to develop strategies to defeat him/her. It is important to note here that the facts presented are based on international unified practices which are non-exclusive to a specific geographical area. Therefore, this broad framework of information needs to be adapted to individual, particular scenarios.

The book is arranged as follows. Chapter one offers a theoretical framework and discusses the background, definition and forms of white-collar crime. Chapter two focuses on ways of preventing and dealing with it, describing the legal framework, legal instruments, case examples, investigative and competent authorities. Chapter three highlights the connection between white-collar and cross-border crime. Chapters four, five and six offer in-depth, real life examples of white-collar crime. The fourth chapter examines bribery in detail, the fifth analyzes fraud, whilst the sixth chapter is dedicated to money laundering. Finally, the last section presents conclusions and suggests the way forward.

CHAPTER ONE:

WHAT IS WHITE-COLLAR CRIME?

This chapter will explain the rationale behind the designation white-collar crime and summarize its definition narratives. It will also differentiate between white-collar and other forms of crime, offering examples of both.

What is white-collar crime? Why has it been given this name? The term white-collar crime was first recognized in 1939. The first public treatment of the subject began with the sociologist Edwin Sutherland’s presidential address to the American Sociological Society and culminated with the publication of his book White Collar Crime.(1) Although it was first recognized by Sutherland, it was originally developed from the criminaloid concept employed by Edward Alsworth Ross, the America sociologist and major figure in criminology, in his 1907 writings on sin and society.(2) As for the term’s composition, it is actually derived from the collared shirts that employees typically wear (white-collar blouses), when the nature of administrative and clerical work required that the workers wore crisp, white dress shirts, back in the 1920s.

However, the term white-collar was not generally recognized in the labor system, whereas blue-collar was. For instance, the United States Department of Labor, Bureau of Labor Statistics, offers a definition of a blue-collar worker.(3) At this stage, it is important to know the difference between white-collar and blue-collar workers, in order to avoid future complications related to the perceived definition of white-collar crime. This raises a question: are such acts limited only to individuals of a high social class? What constitutes white-collar crime? Blue-collar crime, which generally refers to crimes committed by uniformed workers (= blue), are also perceived as crimes committed by individuals from a lower social stratum. This surely contradicts the proposed idea that financially motivated crime should not be associated with social class. So, to correct the perception of the term and draw a clear distinction between white collars and blue collars, it is important to know that a blue-collar worker does not indicate a poor individual, rather it denotes the designation/occupation itself. For instance, in certain cases, a blue-collar classified individual can earn more than a white-collar individual on an average income of approximately $US 90,600-92,600, if he/she works as a senior piping designer or an air traffic controller.(4) Another distinction is that blue-collar crimes are often considered more obvious and easily detected by law enforcement. In addition, blue-collar can suggest a police force uniform. Put simply, a white-collar crime is a crime in which an office worker or someone in business illegally takes money from their employer or the people they deal with in their business.(5)

In Sutherland’s view, a white-collar crime is: a crime committed by a person of respectability and high social status in the course of their occupation. Yet in his writings, he further clarifies that crimes are not exclusively committed by lower-class offenders. Sutherland also explains that the total damages of white-collar crime are several times higher than those of all other crimes combined.(6) Thus, criminal behavioral patterns should not be solely attributed to the poor, due to their difficult social, environmental and psychological conditions, but also to the rich or so-called white-collar workers. However, Sutherland’s definition limits the perpetrators to certain groups of individuals who are white-collar workers, described as being high class, rich, educated, with no prior criminal or disciplinary record, etc.

1.1 The Definition

Since the term white-collar crime was coined by Edwin H. Sutherland, debate still persists, as scholars and practitioners have not reached consensus on the definition. Although Sutherland was aware of criticism of his proposed definition, he stated that:

The purpose of the concept of white-collar crime is to call attention to a vast area of criminal behavior which is generally overlooked as criminal behavior, which is seldom brought within the score of the theories of criminal behavior, and which, when included, calls for modifications in the usual theories of criminal behavior.(7)

In 1996, a convention of approximately 30 academic experts was convened, with the aim of reaching consensus on the definition of white-collar crime. They concluded with the following definition:

illegal or unethical acts that violate fiduciary responsibility or public trust, committed by an individual or organization, usually during the course of legitimate occupational activity, by persons of high or respectable social status for personal or organizational gain.(8)

However, it was widely criticized. It is important to highlight that the definition of white-collar crime should be approached in light of modern developments concerning this definition. It will also be useful to recall trends in the narratives of the definition and to share the common characteristics which may eventually help in producing a practical definition free from the past ambiguities surrounding it.

Put simply, a white-collar crime is defined as an illegal act of a commercial or professional financial nature committed by persons of high social status in the course of exercising their professional activity. In the words of another sociologist, such crimes are: Acts committed by persons from the highest strata of society . . . some acts are crimes . . . may be criminal or noncriminal in nature.(9) Dr. Simons’ definition eliminates some limitation when it comes to legal ambiguities surrounding Sutherland’s definition, yet it is still vague in terms of strata attribution. This supports Bookman and Brightman’s criticisms regarding the restrictive scope of Sutherland’s definition.(10)

Furthermore, Brightman asserts the fact that the term white-collar crime should be broader in scope and include virtually any non-violent act committed for financial gain, regardless of one’s social status.(11) Needless to say, many people have argued in favor of a status-neutral approach, since it is arbitrary to distinguish identical behaviors, involving similar people with similar motives, calling one white-collar crime, and the other something else.(12) These critics include Edelhertz (1970),(13) who defined white-collar crime as an illegal act or series of illegal acts committed by nonphysical means and by concealment and guile, to obtain money or property, to avoid payment or loss of money or property, or to obtain business or personal advantage.(14)

Building on Sutherland’s work, a significant contribution to white-collar crime research was made by Marshall Barron Clinard, the American sociologist and criminologist, and his colleague Richard Quinney, an American philosopher and criminologist, who both followed the white-collar crime research of Edwin Sutherland. They divided white-collar crime into two types: corporate crime and occupational crime. Corporate crime was defined as: illegal behaviors that are committed by employees of a corporation to benefit the corporation, company, or business.(15) Or it can also be defined as: Offenses committed by corporate officials for their corporation and the offenses of the corporation itself.(16)

On the other hand, occupational crime is: violations of legal codes in the course of activity in a legitimate occupation.(17) Or it can be defined as: Offenses committed by individuals in the course of their occupations and the offenses of employees against their employers.(18) Such classification is also used across different levels: the organizational, state authority, professional and individual levels.(19) The term occupational white-collar crime was also later defined from a moral perspective as: Any act punishable by law which is committed through opportunity created in the course of an occupation that is legitimate.(20) However, there are still some doubts, raised by Pontell, about the corporate-occupational dichotomy. These doubts stem from the idea that such a distinction neglects the possibility of considering the organization as a vehicle for perpetrating crime against itself, thus constituting an organizational crime,(21) especially when acts of theft are perceived as collective instead of being viewed as individually committed by employees for personal gain.

Further, Schrager and Short defined the term as:

an illegal act of omission or commission of an individual or a group of individuals in a formal organization in accordance with the operative goals of the organization, which has a serious physical or economic impact on employees, consumers, or the general public.(22)

In the recent past, scholars have adopted a more systemic approach in defining white-collar crime, an example of which is a profit-driven crime typology that shifts the focus from actors to actions by distinguishing between market crime, predatory crime and commercial crime. This suggests that financial crimes are opportunity driven, where executives and managers identify opportunities for illegal gain.(23)

On the other hand, Friedrich’s typology included the following five categories: occupational crime, governmental crime, hybrid crime as a type of white-collar crime that refers to enterprise crime, contrepreneurial crime, technocrime and avocational crime.(24)

Enterprise Crime is the interrelated dealings of legitimate businesspeople, political officials and syndicate racketeers.(25) Contrepreneurial crime is non-violent crime focused on financial gain, it is not violent by definition but it can lead to violence.(26) Examples of this include get-rich-quick schemes, land swindles, Ponzi and pyramid schemes.(27) Technocrime is a subset of white-collar crime in which technology is used to commit illegal activity, for instance, hacking.(28) Avocational crime refers to what Friedrichs calls a residual type of white-collar crime, that is, the avocational means related to an occupation or employment.(29) This means that crime is committed by the respectable members of a profession outside their field of occupation. An example would be copyright violation.(30) Another example of a different typology is a Norwegian study conducted by Catherine Filstad and Petter Gottschalk, where these two scholars claimed to offer a fresh perspective on characteristics of white-collar crime. Their outcomes challenged U.S. literature, which in their view was limited.(31) Filstad and Gottschalk placed white-collar crime into four main categories: fraud, corruption, manipulation and theft.(32)

A middle ground typology of defining white-collar crime in terms of offense, the offender or both was also adopted by certain scholars. From the offense perspective, white-collar crime is a crime against property committed by non-physical means and by concealment or deception for personal or organizational gain. From the offender perspective, it is crime committed for personal or organizational gain by individuals who are wealthy, highly educated and socially connected, and who are typically employed by and in legitimate organizations.(33)

However, there are also instances where crime can be grouped under certain umbrellas. White-collar crime often includes many legal infringements in a specific field, such as banking. Infringements committed by employees of banking institutions (in this case the banks) include tax evasion, smuggling of illegal capital and money laundering. Infringements linked to public office and committed by public officials include bribery, fraud and embezzlement.

White-collar crime has also been defined in a non-systematic manner, on a case-by-case basis, where the object of the crime is money or assets, regardless of the offender’s social status.

In the institutional world, especially that of competent organizations, white-collar crime has been defined as being:

synonymous with the full range of frauds committed by business and government professionals. These crimes are characterized by deceit, concealment, or violation of trust and are not dependent on the application or threat of physical force or violence. The motivation behind these crimes is financial—to obtain or avoid losing money, property, or services or to secure a personal or business advantage.(34)

To achieve consistency in the definition of white-collar crime, some analysts have highlighted its common characteristics, in an effort to distinguish it from most forms of traditional street crime. They have noted that first, there is legitimate access to the object of the crime, as a result of either occupational or