WHITE-COLLAR CRIME

If you were asked to picture a criminal in your mind, what image would you be likely to think of first: a scruffy young male with a scowl or sneer on his face, or a handsome middle-aged man dressed in a three-piece business suit? No doubt the former image would come to mind first, if only because violent crime and property crime dominate newspaper headlines and television newscasts and because many of us have been victims of violent or property crime. Yet white-collar crime is arguably much more harmful than street crime in terms of economic loss, physical injury, illness, and even death. (University of Minnesota, 2015, 8.2 section, para. 14)

How do we define white-collar crime? Edwin Sutherland, a sociologist writing in the 1940s, first introduced the term and defined it as a “crime committed by a person of respectability and high social status in the course of his occupation” (1949, p. 9). Sutherland examined the behavior of the 70 largest U.S. corporations and found that they had violated the law hundreds of times. Several had engaged in crimes during World War I or II; they provided defective weapons and spoiled food to U.S. troops and even sold weapons to Germany and other nations the United States was fighting. (University of Minnesota, 2015, 8.2 section, para. 15)

There are countless examples of white-collar crime to be found in our communities today. These crimes occur in the form of embezzlement or other forms of theft by employees occupying lower-status jobs in local businesses, such as retail clerks, cashiers, and bookkeepers, or owners of auto repair shops. While these examples seem to fly in the face of Sutherland’s research, there are plenty of white-collar crimes being committed under the “respectability and high social status” definition. Today, investigators of white-collar crimes focus on transgressions involving fraud by attorneys, physicians, elected officials or their agents, and other professionals. Investigators also examine corporate executives’ illegal behavior that is designed to protect, improve, obscure, or launder corporate profits.

Health-care fraud, among other professional fraudulent behaviors, ranks among the highest annually in terms of its breadth and cost to American consumers. “Health-care fraud is thought to amount to more than $100 billion per year, compared to less than $20 billion for all property crime combined” (University of Minnesota, 2015, 8.2 section, para. 17). Fraudulent crimes within the health-care sector are many and, in some cases, difficult to detect and far-reaching in scope. If your physician chooses to bill Medicare or private insurance carriers for services that patients are not qualified to receive or do not need, the costs likely will not be questioned by the insurer as they trust the provider of care. In some cases, medical supply companies may provide substandard equipment. Because someone has to be responsible for the economic losses incurred due to health-care fraud, the consumer pays more as a result of medical expenses that are driven up to compensate for the loss.

Corporate crime is far and away the leading white-collar crime in terms of the economic loss created. Prominent examples of corporate crime include fraudulent activities, price fixing, false advertising, and investment schemes. The 2001 Enron scandal involved the energy corporation’s chief executives practice of exaggerating the company’s profits (Constable, 2021). Month after month, investors and employees were led to believe that the company was thriving and that the financial condition of the business was rock-solid. When the scheme unraveled and the dire financial state was revealed, the company’s stock experienced a near-immediate free fall to irreversible levels, and the Enron corporation went bankrupt. Without a mechanism for recovery, thousands of workers were plunged into unemployment, losing not only their jobs but their workers’ benefits and pensions. Loyal investors, none the wiser to the financial condition of the company, lost their fortunes as the stock values lost billions of dollars. By no means was Enron the only example of accounting fraud in the late 1990s through early 2000s; there are several other prominent corporations that were actively engaging in or under scrutiny for accounting fraud. Enron, however, was the most notorious example of a white-collar scandal during this period.

TRANSNATIONAL AND ORGANIZED CRIME

Organized crime is a general classification referring to criminal activities conducted by groups or organizations whose primary purpose is to commit such crimes. The crimes generally associated with organized crime involve goods and services the public seeks but which are either unavailable in certain areas or which carry criminal sanctions for engaging in them. Such crimes have historically included trafficking in illegal drugs, pornography, prostitution, gambling, loan sharking, or protection rackets. Human trafficking is currently one of the largest criminal enterprises on the planet and has quadrupled since the COVID-19 pandemic (R. Durbin, personal communication, January 24, 2024). Another contemporary example of a transnational crime involves the case of Sam Bankman-Fried, who was convicted of fraud in a cryptocurrency scheme and sentenced to 25 years in prison (Office of Public Affairs, 2024). Protection rackets differ from other organized crimes in that the activities being protected are legal activities, such as garbage hauling, vending machines, and setting up and operating certain legal establishments, such as taverns in an area controlled by an organized crime syndicate. Despite decades of attempts by law enforcement to curtail organized crime through the traditional arrest, prosecution, and incarceration process, organized crime continues to flourish. Legal scholars now believe that reducing the public demand for the goods and services that drives the criminal activity may be one way to deal with organized crime in America.

Exhibiting many of the hallmark characteristics of organized crime, transnational crimes exploit all corners of the globe. Many policy issues exist. Anti-corruption and transparency in governance, arms control and nonproliferation, climate and environment, drugs and associated crimes and, of course, terrorism, are but a few transnational crimes. In an effort to combat transnational crimes, with a specific focus on human and sex trafficking and drug cartels, President Donald J. Trump signed Executive Order 13773, Enforcing Federal Law with Respect to Transnational Criminal Organizations and Preventing International Trafficking, in 2017. This executive order also bolstered existing federal laws, such as the Lacey Act (1900), RICO Act (1970), and other federal laws that cross state and international borders. Because of the complex issues of authority and jurisdiction involved in world law enforcement, the Diplomatic Security Service (DSS), a division of the U.S. Department of State, is considered the most appropriate agency in the world to enforce transnational laws. The DSS is widely represented globally with over 2,000 special agents and hundreds of local criminal investigators, forensics specialists, and assistants whose mission is to combat transnational crime abroad. The broad-based inventory of possible crimes—visa and passport fraud, wildlife trafficking, cybercrime, document fraud, and money laundering—creates a diverse opportunity for people motivated to protect their country and the world from exploitation and the greedy self-serving acts of others.

ENTERPRISE CRIME

Enterprise crime is the overarching umbrella of criminal activity that includes white-collar crimes, organized crime, and even state-sponsored crimes. An important and often identifying factor in the definition of enterprise crimes is the commission of crime without violence. It would follow that facilitative crimes, such as those committed by drug cartels and organizational-enforced protection rackets, are so violent as to not be classed as a true enterprise crime.

Turning quick profits on the misfortune of victims of fraud, auto theft, blackmail, forgery, and bribery is one of the primary goals of enterprise crime. In some regions of the country, myriad vehicles are stolen every day. While some are taken for mere joy rides, many are taken to clandestine garages where the cars or trucks are “chopped.” The chopping process involves literally taking a vehicle apart and, in some cases, cutting it to pieces. The components may be then resold either on the black market or to repair shops who represent them as original equipment replacement parts. In more sophisticated operations, the vehicles receive new (but illegal) vehicle identification numbers (VIN) and are retitled for sale in the U.S. or markets abroad.

Individuals who engage in enterprise crime tend to have higher education levels, specifically in computer science, accounting, and business practices. This does not mean that individuals with high self-esteem, charisma, and leadership qualities are excluded. The common denominators in this level of crime are that the criminals have the ability to communicate well, are well-connected with corporations and government entities, and have creative minds.

One other type of enterprise crime is tax evasion. Crimes like embezzlement of funds, transnational smuggling, and money laundering can often be cleverly hidden from the government. Filing of a tax return under the U.S. tax code is a mandated annual exercise required of individuals and businesses. Although many attempts have been made to simplify the code, it is still complex and overwhelming to many. There also exist many legal loopholes and situational opportunities where monies can be sheltered from taxation, so long as it is not done to evade taxation. Although the Internal Revenue Service (IRS) is a large investigative organization chartered to monitor and enforce the tax code, it cannot possibly catch all errors or intentional breaches through either underreporting or underpayment of taxes. While more than 80% of U.S. taxpayers report and pay taxes on time, American corporations underreport approximately $41 billion per year, and some of America’s wealthiest individuals keep trillions of dollars of personal assets legally in offshore tax havens (Tørsløv et al., 2022).

Attributions

1. Figure 3.22: Crime by Nick Youngson is released under CC BY-SA 3.0