White-Collar Crime

An Opportunity Perspective

Michael L. Benson, Sally S. Simpson

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351973557
• Edition: 3
• Topic: Betriebswirtschaft
• Subtopic: Wirtschaftssethik

White-Collar Crime: An Opportunity Perspective analyzes white-collar crime within a coherent theoretical framework. Using the opportunity perspective, which assumes that all crimes depend on offenders recognizing an opportunity to commit an offense, the authors uncover the processes and situational conditions that facilitate white-collar crimes. In addition, they offer potential solutions to this persistent and widespread social problem without being reductive in their treatment of the difficulties of control.

With this third edition, Benson and Simpson have added substantive online teaching materials and expanded their coverage with up-to-date case studies and discussions of recent investigations into white-collar crime and control. These timely updates reaffirm this accessible and rigorous book as a core resource for courses on white-collar crime.

PART I
WHITE-COLLAR CRIME

Introduction and Overview

Every republic runs its greatest risk not so much from discontented soldiers as from discontented multi-millionaires.

(The Nation, 1845)

On December 27, 1939, in the city of Philadelphia, Pennsylvania, a 56-year-old sociologist by the name of Edwin H. Sutherland gave a talk that forever altered the study of crime. Professor Sutherland was addressing the annual meeting of the American Sociological Association as its incoming president, and his talk was entitled “The White-Collar Criminal” (Sutherland, 1940). In his address, the professor took aim at what he regarded as a fundamental flaw in the criminological theory of his day, namely, the failure to recognize and take seriously the “monstrous amount of lawbreaking by persons in positions of power” (Geis and Goff, 1983, p. ix). He called this lawbreaking white-collar crime. Prior to Sutherland’s address, lawbreaking by persons in positions of power had been largely ignored by academic criminologists, who instead focused almost exclusively on the ordinary street crimes committed by the poor and disadvantaged. In the 75-plus years since his address, the concept of white-collar crime, though much criticized and debated, has become an established part of both criminological thinking and public concern. Academics and ordinary citizens now recognize that wrongdoing by the powerful poses a significant risk to everyone.

Part I of this book explicates the concept of white-collar crime and the debates that surround it. We begin by tracing the historical evolution of the concept and then introduce two different ways of defining it, called offender based and offense based. Next, we review what is known about the demographic, social, and psychological characteristics of white-collar offenders. Although Sutherland wanted to draw attention to lawbreaking by persons in positions of power, you will see that many of the people who commit what can only be called white-collar crimes are, compared with the scions of privilege, relatively powerless. Nevertheless, even though many white-collar criminals are not wealthy or powerful, they are also not like ordinary street criminals either. Rather, they are drawn from a distinctly different segment of the American population.

1
WHAT IS WHITE-COLLAR CRIME?

White-collar crime is a technical term that has migrated out of the realms of science and academia to become part of public discourse. Nowadays stories about white-collar crime are often in the news. If you were to ask the proverbial man or woman on the street, you would surely find that most everyone has heard of white-collar crime. However, if you pressed them to explain just what white-collar crime is, the answers you would receive would not be very informative. Most people would probably say something about men in suits who steal money and don’t go to prison and let it go at that. Yet, the problem of white-collar crime is enormously complex. It raises difficult social, legal, and scientific issues that have important implications for society and for the field of criminology. This book is designed to help you better understand the complexities of white-collar crime so that you can think critically and analytically about this important social problem, and for those who are looking for a more compelling reason to keep reading, we hope that what you learn in these pages also will help you avoid being victimized by white-collar offenders.

Unfortunately, avoiding such offenders is not easy. White-collar criminals lurk in every industry and profession. For example, whenever you engage in a business transaction with any sort of professional, there is the potential for what we will call a “white-collar victimization.” We use the term professional here in a very loose sense to include anyone who offers to provide a specialized service for a fee. Besides the traditional professions such as law, medicine, and accounting, our definition includes blue-collar and other service “professionals,” such as home remodelers, auto mechanics, plumbers, electricians, and real estate agents. Typically, when you hire any sort of professional to do something for you, it is because the professional knows more about it than you do, or can do it better than you can, or simply has more time than you do. In other words, you need the professional to do something that for some reason you can’t or don’t want to do yourself. However, how do you know that the professional did the right thing (i.e., the thing that was necessary and appropriate in your situation) in the right way (i.e., the most professional and cost-effective way)? It is always possible that the professional took advantage of your lack of expertise to defraud or cheat you in some way.

Talking about doing the right thing in the right way is obviously vague. So, consider as examples two situations involving professionals that most everyone encounters at some point in time—buying a home and going to the doctor. Buying a home can be a daunting experience, not only because it is for most of us the most expensive thing we will ever buy, but also because it is a very complicated process, involving lots of forms and paperwork (listings, offers, loan applications, titles, insurance, etc.) and lots of different people (realtors, appraisers, mortgage brokers, surveyors, originators, loan officers, lenders, etc.). Indeed, the process is so complicated that many home buyers simply trust the professionals who work in the home mortgage industry to guide them through it, and they sign a myriad of papers involved in the transaction without reading or understanding them. Unfortunately, between 2005 and 2008, this blind trust in the integrity of the home mortgage industry was often misplaced as literally thousands of Americans fell victim to deceptive and fraudulent lending practices, in which they were tricked by mortgage brokers into taking on loans that were not in their best interests. Besides marketing deceptive loans, the mortgage and banking industries also engaged in a host of other scams and schemes that we will explain more fully in Chapter 5.

Now, consider the health care industry. Suppose you have not been feeling well for a few days and decide to go to a doctor. She looks you over, asks some questions about your symptoms, and then recommends further tests in order to make a definitive diagnosis. You don’t really know if you need more tests. Of course, you could go and get a second opinion, but that’s going to take more time. Besides, the doctor is supposed to be an expert. You are likely to accept the doctor’s advice and agree to get the tests. However, unbeknownst to you, the doctor knows exactly what is wrong with you, but, for financial reasons, she orders unnecessary tests. Perhaps she is part owner of the testing company and so is interested in directing business that way or has an agreement with the lab to split the fee when she sends business to them. Regardless of her motives, she has committed fraud, and you (her patient) are the direct victim. However, it is important to point out that you are not the only victim in this particular transaction. Because a substantial portion of your costs for the tests are likely covered by insurance, your insurer is also a victim, and, because medical costs rise as a consequence of medical fraud, society as a whole is victimized.

Both of these examples illustrate different forms of fraud. In both cases, a professional uses his or her superior knowledge and expertise to take advantage of someone. Fraud is not limited to medicine and real estate. It can occur in every profession. It represents one of the most common types of white-collar crime, but there are many other types of white-collar crime that we will discuss in this book. For example, violations of environmental regulations, fraudulent accounting practices, exploitation of workers, securities violations, and antitrust violations are among a host of others that we will consider. Unlike the examples of fraud given here, many of these offenses do not involve a discrete interaction between an offender and a victim. Nevertheless, they are all forms of white-collar crime.

Although there are good reasons to believe that the frauds discussed earlier and other white-collar type of crimes are more common now than they have ever been (Weisburd et al., 1991), it would be a mistake to think that white-collar crime is a new invention of the criminal mind. Unfortunately, criminals have engaged in white-collar type crimes for literally thousands of years.

An Historical Look at White-Collar Crime

What we today would call white-collar crime is not new. It’s been around a long time. For example, in the fourth century bc, the Greek philosopher Aristotle wrote about embezzlement of funds by road commissioners and other officials. The theft of public money by government officers was a crime under the Athenian constitution, and a jury could sentence someone convicted of such a crime to pay ten times the amount stolen (von Fritz and Kapp, 1950). The Bible and other ancient religious texts condemn a number of exploitative business activities as harmful and counter to the common good. They may not have been legally defined as crimes, but they were certainly regarded as morally wrong (Geis, 1988). For example, admonitions about the immorality of cheating in the marketplace can be found in Proverbs (11:25): “He that holdeth corn, the people will curse him: But blessing shall be upon the head of him that selleth it.” Similarly, Deuteronomy (25:13) declares: “For every one practicing unfairness is abominable to the Lord your God.” According to Talmudic scholars, “The Talmud excoriated those who hoarded food in order to resell it at a high price, tampered with weights and measures … and raised prices unjustly” (Friedman, 1980, p. 47).

If we move forward several centuries to the late Middle Ages in England, we find that the common law outlawed three business-related activities: regrating, engrossing, and forestalling (Geis, 1988). Each of these activities represented a different way in which someone could try to control the market on important commodities, especially foodstuffs, in order to charge high prices and make exorbitant profits. For example, engrossing involved buying up the entire stock of some commodity, say corn or wheat, in order to resell it at monopoly prices. These sorts of behaviors foreshadow what today we call antitrust offenses (Geis, 1988). Embezzlement by knights and other officers of the king was also a common offense during the Middle Ages (Pike, 1873), and in Dante’s Inferno the eighth circle of hell is reserved for the counsellors of fraud and the betrayal of trust (Chevigny, 2001).

Continuing our journey through time, in the early twentieth century, the noted American sociologist Edward Alsworth Ross railed against “the criminaloid,” that is, powerful business owners and executives who exploit people and manipulate the marketplace out of an uninhibited desire to maximize their profits, all the while pretending to be pious and respectable. As examples of economic duplicity combined with the appearance of respectability, Ross noted that

[t]he director who speculates in the securities of his corporation, the banker who lends his depositors’ money to himself under divers corporate aliases, the railroad official who grants a secret rebate for his private graft, the builder who hires walking delegates to harass his rivals with causeless strikes, the labor leader who instigates a strike in order to be paid for calling it off, the publisher who bribes his textbooks into the schools, these reveal in their faces nothing of the wolf or vulture.

(Ross, 1907, p. 50)

Ross accused these individuals of moral insensibility and held them responsible for the deaths of workers and consumers. Thus, long before the term white-collar crime was coined, depredations committed by the rich and powerful in the pursuit of profit and wealth have been recognized and denounced.

Many of the themes that run through this book and that permeate the study of white-collar crime can be found in the historical record. For example, the crime of engrossing involves a perversion of legitimate business activities to serve illegitimate ends and to exploit others. As we will see, a defining feature of white-collar crime is its link to legitimate business or economic activities. Another important theme is the observation that supposedly respectable people, who are not thought of by others and certainly do not think of themselves as ordinary criminals, commit these offenses. Aristotle complained about road commissioners and public officials who embezzle public funds, not about ordinary thugs. Also prominent is the idea that these crimes are committed out of greed and a lust for power, not out of desperation or any sort of psychological abnormality. As E. A. Ross argued, the criminaloid’s obsession with profit makes him morally insensitive but not crazy.

But what exactly is white-collar crime?

Defining White-Collar Crime

Throughout his career, Edwin H. Sutherland, who coined the term, used several different definitions of “white-collar crime.” In his most famous book, White-Collar Crime, he defined it “as a crime committed by a person of respectability and high social status in the course of his occupation” (Sutherland, 1983, p. 7). He went on to note that this definition “excludes many crimes of the upper class, such as most of their cases of murder, adultery, and intoxication, since these are not customarily a part of their occupational procedures.” In a footnote, he added that the term “white-collar is used here to refer principally to business managers and executives.” This definition has provoked both admiration and condemnation for more than 50 years. It continues to be a source of debate and controversy, but we will get to those issues a little later.

Sutherland expanded on and further clarified his conception of white-collar crime in a 1949 entry in the Encyclopedia of Criminology (Branham and Kutash, 1949, p. 511). In the encyclopedia article, he wrote that “the white collar criminal is defined as a person with high socio-economic status who violates the laws designed to regulate his occupationa...