Lesson 12 – White Collar
and Organized Crime
Robert Wonser
Introduction to Criminology
Crime and Delinquency
1
Introduction
• Corporate wrongdoing
• White-collar crime
• Organized crime
• All have dire economic consequences
2
White-Collar Crime
• Industrialization brought wealth for some
• Andrew Carnegie (steel)
• J.P. Morgan (banking)
• John D. Rockefeller (oil)
• Cornelius Vanderbilt (railroads)
• All gained massive fortunes through
monopolization
• Considered to be “robber barons”
3
Robber Barons
• “Robber barons” - businessmen who used
exploitative practices to amass their wealth,
exerting control over national resources, accruing
high levels of government influence, paying
extremely low wages, squashing competition by
acquiring competitors in order to create
monopolies and eventually raise prices, and
schemes to sell stock at inflated prices to
unsuspecting investors in a manner which would
eventually destroy the company for which the
stock was issued and impoverish investors.
4
Edwin Sutherland
and White-Collar Crime
• Sutherland coined term white-collar
crime
• Studied U.S. corporations
• Most engaged in antitrust violations,
false advertising, bribery, and other
offenses multiple times
5
Defining White-Collar Crime
• A crime committed by a person of
respectability and high social status in
the course of his occupation
• Sutherland's definition has been
criticized and revised
6
Contemporary Views
of White-Collar Crime
• Occupational crime
• Corporate crime
• Organizational crime
7
Occupational Crime:
Lawbreaking for Personal Gain
• Employee theft
• Pilferage
• Theft of merchandise, tools,
stationary, and other items
• Embezzlement
• Theft of cash and the
misappropriation or misuse of funds
• Collective embezzlement
8
Professional Fraud: Health Care
• Physicians, lawyers, and other
professionals
• Self-regulation
• Professional fraud
9
Health Care Fraud
• Exaggerating charges
• Billing for services not rendered or a real patient
• Billing for services for fictitious or dead patients
• “Pingponging” - the unethical practice of repeatedly
passing a patient from physician A to physician B and back
again to overcharge the patient’s third-party payer—e.g.,
Medicaid, or, less commonly, a private insurer.
• Family “ganging” - term for health care provided by some
physicians in financially disadvantaged regions in the US—
e.g., inner cities—in which a patient is encouraged to bring
his entire family along for a check-up or other evaluation
on a return visit, regardless of whether it is medically
indicated
10
Health Care Fraud
• “Churning” - In fee churning, a series of
intermediaries take commissions through
reinsurance agreements.
• “Unbundling” - Medicare and Medicaid often
have special reimbursement rates for a group of
procedures commonly done together, such as
typical blood test panels by clinical laboratories.
Some health care providers seeking to increase
profits will "unbundle" the tests and bill separately
for each component of the group, which totals
more than the special reimbursement rates.
11
Health Care Fraud
• Providing inferior products to patients
• Falsifying medical records
• Billing for inferior products never
provided
• Falsifying prescriptions
• Inflating charges for ambulance services
• Unnecessary surgery
12
Financial Fraud
• Collective embezzlement - the stealing of
company funds by top management. The
term was first used to refer to one type of
crime that characterized the U.S. savings
and loan scandals of the 1980's
• Insider trading - is the trading of a public
company's stock or other securities (such
as bonds or stock options) by individuals
with access to non-public information
about the company.
13
Police and Political Corruption
• Police corruption - is a form of police
misconduct in which law enforcement
officers break their social contract and
abuse their power for personal or
department gain.
• Political Corruption - is the use of powers
by government officials for illegitimate
private gain. An illegal act by an
officeholder constitutes political
corruption only if the act is directly related
to their official duties, is done under color
of law or involves trading in influence.
• Both involve violations of public
trust
14
Organizational Criminality and
Corporate Crime
• Corporate financial
crime
• Fraud
• Cheating
• Bribery
• Other corruption
• Not antitrust violations
or false advertising
15
Organizational Criminality and
Corporate Crime
• Antitrust violations are of laws designed to protect trade and
commerce from abusive practices such as price-fixing,
restraints, price discrimination, and monopolization. The
principal federal antitrust laws are the Sherman Act and the
Clayton Act.
• Price-fixing - an agreement between participants on the same
side in a market to buy or sell a product, service, or commodity
only at a fixed price, or maintain the market conditions such that
the price is maintained at a given level by controlling supply and
demand.
• Restraint of trade - common law doctrine relating to the
enforceability of contractual restrictions on freedom to conduct
business.
• False advertising - is the use of false or misleading statements in
advertising, and misrepresentation of the product at hand, which
16
may negatively affect many stakeholders,
especially consumers.
Corporate Violence
• Threats to health and safety
• Workers and workplace safety
• Data for workplace illness, injury, and
death not exact
• Annually
• Workplace deaths from illness =
50,000
• Workplace deaths from injury = 4,700
• Injuries and illness = 3,000,000
17
Workplace Problem
• Sometimes illness, injury, and death are
instantly visible, sometimes not
• Sometimes death comes much later
• Where's the crime?
• Asbestos industry example
18
Corporate Violence
• Consumers and
unsafe products
• Dangerous products
that kill or injure
• Three industries that
pose the greatest
danger
• Automobile
• Pharmaceutical
• Food
19
Corporate Violence
• Public/Environmental
Pollution
• Air, land, and water
• Very difficult to
determine total number
of injuries and deaths
resulting from pollution
• Toxic waste
• Profit
20
Economic and Human Costs of
White-Collar Crime
• Costs more in lives and money than
street crime
• Street crime = $16 billion
• White-collar crime = $575 billion
• All corporate crime = $483 billion
• Health care fraud = $77 billion
• Employee theft = $15 billion
21
Explaining White-Collar Crime
• In many ways, white-collar criminals are
similar to street criminals
• There are some differences
22
Similarities with Street Crime
• Both include stealing and violence
• Rely on opportunity and motivation
• Techniques of neutralization
• Self-control?
• Male offenders dominate both types of
crime
23
Differences from Street Crime
• Most criminological
theories do not
account for whitecollar criminals
• Influence of greed
• What would happen
if we treated white
collar criminals we
do street criminals?
24
Explaining White-Collar Crime
• Lenient treatment
• Weak/Absent regulations
• Difficulty in proving corporate crime
• Weak punishment
• Lack of news media coverage
• Race/Ethnicity and social class
25
Reducing White-Collar Crime
• Larger budgets for regulatory agencies
• Media emphasis
• Severe punishment
• Greater imprisonment
• Stiffer fines
26
Organized Crime
• Linked to demand and supply of goods
and services, legitimate or illegitimate
• Primary source of income is still illegal
• Drugs
• Prostitution
• Pornography
• Loan-sharking
• Extortion
27
History of Organized Crime
• Piracy
• New York gangs in the early 1800s
• By the 1900s, these gangs were well
organized operations
• 19th century robber barons
• Prohibition era
• Gambling
28
Alien Conspiracy Model and
Myth
• Mafia mystique
• Hierarchal, organized group of some
24 Italian families that control all
organized crime
• Best regarded as a myth
• Organized crime does not produce
the desire for vice or seduce honest
politicians
29
Controlling Organized Crime
• Reduce public demand for illicit goods
• Legalization of drugs and other illicit
products/activities
• Provide alternative economic
opportunities for young people
30