American Smuggling as White Collar Crime

Lawrence Karson

• Publisher: Taylor & Francis
• Year: 2014
• Print ISBN: 9781138792074
• eBook ISBN: 9781317647027
• Edition: 1
• Topic: Scienze sociali
• Subtopic: Storia nordamericana

When Edwin Sutherland introduced the concept of white-collar crime, he referred to the respectable businessmen of his day who had, in the course of their occupations, violated the law whenever it was advantageous to do so. Yet since the founding of the American Republic, numerous otherwise respectable individuals had been involved in white-collar criminality. Using organized smuggling as an exemplar, this narrative history of American smuggling establishes that white-collar crime has always been an integral part of American history when conditions were favorable to violating the law.

This dark side of the American Dream originally exposed itself in colonial times with elite merchants of communities such as Boston trafficking contraband into the colonies. It again came to the forefront during the Embargo of 1809 and continued through the War of 1812, the Civil War, nineteenth century filibustering, the Mexican Revolution and Prohibition. The author also shows that the years of illegal opium trade with China by American merchants served as precursor to the later smuggling of opium into the United States.

The author confirms that each period of smuggling was a link in the continuing chain of white-collar crime in the 150 years prior to Sutherland's assertion of corporate criminality.

1
The New World

When Edwin Sutherland first discussed white-collar crime, he stated that even prior to the modern corporations, white-collar criminality was present in America, the predatory business leaders of the nineteenth century known as the ‘robber barons’ being one major example.¹ He also recognized that ‘[c]ontrary to the assumption of later commentators, the modern gangster predated his bootlegger incarnation’.² The characterization of that modern gangster also includes the concepts of white-collar criminality and organized crime.³ ‘From earliest times, landlords, merchants, and holders of administrative and executive power have used the relative immunity that their status gave them to engage in or sponsor activity that today would be described as organized crime’.⁴ Those earliest times date at least to the early European and Mediterranean traders where many of the techniques for illicitly improving a merchant’s personal profits carried across the centuries to the North American shores years later.

Smuggling, defined as the illicit import or export of goods, can be inferred historically at least from the time of the Old Testament.⁵ In Ezra 7:24, King Artaxerxes declares that ‘it shall not be lawful to impose tribute, custom or toll upon any one of the priests, the Levites, the singers, doorkeepers, the temple servants, or other servants of this house of God’ in reference to the taxes or fees that local nobles levied upon merchants to increase their own revenue.⁶ With the imposition of tribute and customs or tolls, it was only a matter of time before their handmaidens, fraud and smuggling, followed.⁷ The earliest English record of merchant ships paying customs duties dates to AD 742.⁸ Customs would later be referred to in the Magna Carta with the Crown claiming its ‘ancient and rightful customs’ in the payment of its due for imported goods.⁹ Indeed customs funds could have the potential to make a kingdom quite wealthy; ‘[t]owards 1600 the coffers of the Venetian state treasury were overflowing with money; seven or eight hundred ships went in and out of her port every year’.¹⁰ The state’s ability to serve as an economic catalyst and developer was achieved in the sixteenth century as much as in the nineteenth century through those funds. That income led to a concern for smuggling, not so much to prevent the entry of illicit goods as for the effective collection of customs duties on taxed goods.¹¹

As early as the sixteenth century, the techniques later used by colonial and American smugglers caused consternation to legitimate merchants trading on the Baltic. To control trade and to prevent smuggling by English merchants trafficking with Poland, traders were required to post a bond and declare that all tolls would be paid; failing to do so leading to the forfeiture of the bond.¹² The bonds’ objective was to protect fellow merchants from ‘reprisals and losses should one of their number be caught evading tolls in the Danish Sound, at the Pillau entrance to the Frisches Haff, or in Elbing itself’.¹³ Yet much to the embarrassment of the merchants of England, even with the bonding system in place, frauds against Polish customs were identified by representatives of the government. The practice of passing expensive cloth off as cheaper material with the intent of lowering the duty paid to the Polish Crown was the most common fraud reportedly practiced, possibly in collusion with local customs officials.¹⁴ These merchants, organized as a trading company to control the traffic, were an early reflection of the formal and informal organizations that Sutherland referred to where techniques, justifications, and rationalizations for smuggling may be acquired in the day-to-day interactions of their members.

Even specie itself became contraband. With silver from the New World supporting Spanish imperialism, Spanish policy was to guard against the export of its precious metals. Yet merchants throughout Europe needed specie, leading inevitably to the smuggling of specie out of Spain. ‘A French boat, Le Croissant of St.-Malo for instance, was seized in Andalisa for illegal traffic in silver; another time, two Marseilles barques were stopped in the Gulf of Lions and found to be laden with Spanish coins’.¹⁵ In 1554, passengers leaving Catalonia for Italy were searched and seventy thousand ducats, primarily from Genoese merchants, were seized. In 1567, nine hundred thousand ducats, four hundred thousand of which were gold coins, had been determined to have entered Lyons from Aragon, the coins being smuggled in bales of leather.¹⁶ At one point, of an estimated ten million ducats worth of bullion shipped to Spain yearly, six million were then exported while the remaining four million stayed in Spain or were smuggled out by a variety of travelers.¹⁷

Spain’s continued policy of commercial restriction extended to the New World as well as to the Old. That policy meant, however, that others would profit from Spain’s own failure to supply the needs of her colonies. In 1661, the contraband trade by the English and Dutch with the port of Buenos Aires led to the establishment of an Audiencia responsible for civilian and military affairs of the Rio de la Plata in an attempt to stifle smuggling.¹⁸ The British South Sea Company, thanks to the Treaty of Utrecht, obtained an agreement, known as the Asiento, in 1713 to trade with various Spanish settlements in the New World, ‘opening possibilities for unloading merchandise that ultimately became a main source of smuggling’ with the endorsement of their chartering government and the involvement of the local English factors in collusion with various Spanish officials.¹⁹ The company was another example of a formal organization offering an opportunity for the development of a consensus among all concerned parties to successfully achieve their objective: successful contraband trade. Eventually the Spanish government would counter with the creation of the guarda-costas, private sailing vessels licensed to serve as a maritime customs preventive force.²⁰

The Dutch, besides being a nuisance to the Spanish trade in the New World, had to cope with their own smuggling concerns in New Netherland. As early as the 1620s, both colonists and employees of the Dutch West India Company—yet another formal organization involved in circumventing the law—were smuggling furs out of New Netherland in company ships, one case identified the company supercargo sharing in the profits. Many seemed to be following the advice of their fellow countryman, Gerhard Mercator, whose text of a map of the known world closed with the counsel, ‘Fare wel, and make thy proffyt’.²¹ Smuggling had reached such a level that by 1637, the company had strengthened established penalties for employees to include forfeiture of wages, personal trade goods, and personal belongings. Yet as with future colonial smuggling laws, their effect was questionable due to the limited ability to enforce them. Though restrictions also applied to free colonists, many continued to trade contraband furs with company sailors in an attempt to fulfill their own economic American Dream.²² The English eventually conquered New Amsterdam to suppress, among other justifications, the contraband trade of goods to and from English possessions.²³

As Spanish sea power declined in the seventeenth century, Holland, France, and England would continue to engage in contraband traffic. As trade became synonymous with politics, the English government itself would condone and protect contraband trade to the Spanish colonies to further its perceived economic interests—which were viewed as one and the same as its political interests. After its seizure from Spain, Jamaica was used as a base for extending British economic interest through illegal trade in the Caribbean. In time all involved in the carrying trade would demand a greater free trade policy; eventually even the definition of free trade would evolve from being a catch phrase against company monopolies such as the South Seas Company to a term encompassing smuggling itself.²⁴ All would help lead England into becoming the commercial empire of the eighteenth century and all would be a precursor to the concept of state crime—in this case the state supporting the illegal trade with Spain in the interest of its own national policy.

By the early eighteenth century, foreign merchants were operating over one hundred vessels off the Caribbean coast of New Granada, many with the connivance of local Spanish authorities. Smuggling was a critical component of the political economy not only of the Caribbean but of the New World itself.²⁵ All were the precursors of modern organized white-collar crime. As Grahn states:

As an alternative to the trans-Atlantic mercantilist economy, smuggling competed with legal trade for available market shares and corollary market niches for the buying and selling of controlled, or regulated, commodities. Conversely, it complemented licit commerce and cultural systems. It allowed consumers to obtain both common goods and scarce commodities at relatively reasonable prices, thus promoting purchasing power parity. It gave both producers and merchants another outlet of exchange that avoided Spanish taxation and regulation, thus enhancing market efficiency. It also quickened trade by increasing sellers’ profits, thus reinforcing capitalist tendencies. In a very real way, then, smuggling served a useful socioeconomic function and so strengthened the political economy of the colony.²⁶

His appraisal is no less applicable to the organized entrepreneurs of the future United States.

Colonial America

With the arrival of the Puritans in the New World in 1630, their version of the American Dream would eventually allow those who followed the opportunity to achieve their own.²⁷ In a short time revenue replaced religion for many as the American Dream. ‘In Massachusetts itself the commercial spirit was steadily growing, and with it went a decline in religious fervor’.²⁸ The idea of trade and profit, that which had sustained both New Netherland and the Spanish exploration in the Western Hemisphere, once again came to the forefront. As Barrow remarked, ‘In pursuit of profits, idealism receded in importance’.²⁹ Within a short time, the English Crown pursued its own profits. The notion of profit eclipsing idealism foreshadows Merton’s concept of anomie and the rationalizations of Suthe...

Table of contents

• Cover
• Title
• Copyright
• Dedication
• Contents
• Acknowledgments
• Introduction
• 1 The New World
• 2 The Embargo of 1807–1809 and the War of 1812
• 3 The Civil War
• 4 Filibustering and Revolutionaries
• 5 The Mexican Revolution, 1910–1920
• 6 Prohibition—Part 1
• 7 Prohibition—Part 2
• 8 The Drug Trade
• Conclusion
• Bibliography
• Index