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WHITE COLLAR CRIME IN CONTEMPORARY SOCIETY 4TH ED.

CHAPTER 12

RESPONDING TO THE CHALLENGE

OF WHITE COLLAR CRIME

Trusted Criminals

Designed by: Jordan Land, M.S.

Raising Consciousness about White Collar Crime

  • The first step in any program for a more effective response to white collar crime calls for an elevated level of consciousness

  • Criminologists can play a role in fostering broader attention to white collar crime in the media by engaging in newsmaking criminology which calls for criminologists to:
  • Appear on television and radio shows, write for and make themselves available for interviews with the press to reach a boarder public audience

Policy Options for Responding
to White Collar Crime

  • White collar crimes inspire everything from outrage to pragmatism to apathy

  • Historically, the perception of “folk devils” and “moral panics” has focused more upon street crime than “suite” crime

  • White collar crimes differ than conventional crimes because they are closely associated with productive, desirable activities

Policy Options for Responding
to White Collar Crime

  • One concern is that excessively restrictive and punitive responses toward such crime will deter such productive activities more than it will deter prohibited activities
  • Responses to white collar crime may be directed toward:
  • Structural, organizational or individualistic levels
  • Social control, opportunity structures or cognitive states
  • Persuading, appealing to reason or offering practical inducements, or relying on threats of intervention and punishment

Responding to White Collar Crime
as a Moral Issue

  • Moral outrage is an understandable response to white collar crime

  • That large and powerful corporations would knowingly flout the law and defraud or endanger the lives of employees, customers and citizens is outrageous

  • Anger and disgust are natural reactions to the greed of educated or affluent professionals, entrepreneurs, and retailers who engage in such activities

Business Ethics in the Curriculum

  • One response to the perception of an ethics crisis in U.S. business was the much wider introduction of business ethics courses

  • Business ethics courses first began to be introduced into the curriculum in the 1950s

  • Between the 1970s and 1980s, educational institutions increased fivefold in the number of business ethics courses offered

Business Ethics in the Curriculum

  • The corporate crime scandals of the early 2000s inevitably inspired a surge in demand for business ethics courses
  • Early in the 21st century, significant numbers of students began to express concern about the absence of attention to ethics in the business school curriculum
  • Unfortunately, it is not clear that integrating business ethics into the curriculum will measurably elevate the ethical behavior of businesspeople

Business Ethics within the Business World

  • Business ethics has become a big business itself

  • Many publications and conferences address business ethics

  • There are 3 ways in which businesses get themselves into trouble:

Ethical problems

Market failures

Liquidity problems

Business Ethics within the Business World

  • A code of ethics is the single most common element of corporate ethics programs

  • The success of any program incorporating a code of conduct significantly depends on the extent to which the targeted parties are consulted on and help formulate the codes rather than simply having the codes imposed upon them

Securing Compliance
and Sanctioning White Collar Crime

  • A variety of specific sanctions can be used to respond to white collar crime

  • Sanction is most commonly equated with punishment

  • Sanctions can be:
  • Positive
  • Grants, bounties, fees, loan guarantees, prizes and awards
  • Negative
  • Imprisonment, fines and occupational disqualification

Law and the Coercive Response
to White Collar Crime

  • The use of criminal law in response to white collar crime is generally more open to dispute than it is with respect to conventional crime
  • Since the 1970s, the criminal law has in fact been more broadly applied to corporate wrongdoing such as worker safety violations, toxic dumping, and environmental pollution
  • Simpson (2002) studied corporate crime deterrence
  • She concluded that the criminal law has basic limitations as an effective device for addressing corporate crime

Civil Suits and Penalties

  • The use of civil procedures allows prosecutors to avoid meeting the criminal law’s stringent standards for establishing proof and culpability

  • The severity of judgments that can be imposed in civil proceedings is comparable to or exceeds criminal penalties

  • Collecting a substantial civil judgment is far more economical than imposing prison sentences

Civil Suits and Penalties

  • Private parties who have been injured by white collar crime offenders have always had the option of a civil lawsuit

  • Historically, corporations have often found it less costly to contend with civil lawsuits than to limit profits by fully complying with the law or correcting the hazards they created

Compliance versus Punitive Approaches
to Corporate Crime

  • Ongoing debate centers on whether a response to white collar crime that relies on invoking criminal law as punishment is more appropriate and effective than a cooperative regulatory response that attempts to avoid using criminal sanctions

  • The compliance approach favors cooperative strategies and is rooted in the assumption that a cooperative strategy is both a practical necessity and a more effective way of limiting the harm of corporate activities

Compliance versus Punitive Approaches to Corporate Crime

  • For compliance to be achieved effectively, businesses and corporations have to be persuaded that the rules and laws directed at them are warranted and widely supported

  • Advocates argue that the criminalization of harmful corporate activity is long overdue and that the imposition of tough, punitive sanctions is either an essential component or the only strategy that is likely to have an impact on corporate crime

Deterrence and White Collar Crime

  • Even though deterrence is surely one of the central objectives of the criminal justice system, little consensus exists on how and whether legal sanctions have a deterrent effect

  • Deterrence is the deliberate decision to refrain from engaging in illegal activity out of fear of legal sanctions

Deterrence and White Collar Crime

  • Any theory of deterrence adopts the classical criminological model of human beings as rational creatures capable of making a calculated, cost-benefit analysis of prospective criminal activity

  • It is difficult to demonstrate conclusively that the threat of criminal sanctions deters white collar crime

  • Top management may be guided more by self-interest than by rational determinations of the corporation’s interest

Deterrence and White Collar Crime

  • Altogether, we still lack an even remotely adequate base of knowledge and understanding of how complex of factors involved in corporate behavior interact and of just which policies actually deter corporate illegality

Rehabilitation, Probation,
and Enforced Self-Regulation

  • Rehabilitation is the most recent rationale for penal response to crime

  • It provides convicted offenders with the education and job training they need to be able to support themselves by legitimate activities

  • For many white collar offenders, their educational credentials and job skills were often instrumental in putting them in a position to commit crimes in the first place

Rehabilitation, Probation,
and Enforced Self-Regulation

  • To the extent white collar offenders become rehabilitated in prison, such rehabilitation is much more likely to be a personal realization of the wrongfulness of their conduct and a willful repudiation of such conduct in the future

Probation

  • Probation has typically been regarded as more appropriate for individual white collar offenders than for conventional offenders
  • The white collar offender is unlikely to be viewed as a direct physical threat to the community
  • He or she is also more likely to be viewed as capable of remaining in the community as a constructive, gainfully employed citizen
  • The U.S. Sentencing Commission established organizational probation as an option

Enforced Self-Regulation

  • John Braithwaite has advocated enforced self-regulation by corporations
  • He argued that a restorative justice system that privileges cooperative initiatives may deter, incapacitate, and rehabilitate more effectively than a punitive system
  • He contends that although corporations cannot typically be expected to adopt self-regulation on an entirely voluntary basis, they will be responsive to enforced self-regulation

Fines, Restitution and Community Service

  • White collar crimes are mainly thought of as a form of economic crime

  • Economic sanctions have been especially commonly imposed on convicted offenders

  • These sanctions can take the form of:
  • The forfeiture of assets
  • Mandatory restitution to victims
  • Criminal or civil fines

Fines, Restitution and Community Service

  • Fines can be punitive and even rehabilitative if they enable the corporation to pay for the harm done and compensate victims

  • Many additional issues are involved in imposing fines, including:
  • Challenges to setting the appropriate amount
  • Determining whether the fine should be based in losses to society or gains to offenders

Sentencing Guidelines for Fines

  • The U.S. Sentencing Commission’s attempts to establish guidelines for fines took onto account various factors:
  • Amount of loss, the offense “multiple” (difficulty of detecting and prosecuting, to ensure that the fine is both a deterrent and a just punishment), and the enforcement costs involved

  • Taken together, these factors produce a total monetary sanction of restitution, forfeitures and fines

Sentencing Guidelines for Fines

  • Various alternatives to traditional fines have been proposed:
  • Equity fines, days fines, installment fines, pass-through fines and superadded liability

  • Equity fines call for convicted corporations to issue equity securities and place them with a state-run victim compensation board

Restitution

  • White collar offenders are especially well positioned to make restitution to victims and to pay compensation for the losses they have caused

Community Service

  • Individuals and organizations may be required to perform community service

  • The most appealing dimension of this sanction is that a direct, positive benefit accrues to the community without significant costs

Occupational Disqualification

  • Occupational disqualification, or loss of license, can be a fairly drastic penalty for an individual
  • It is punitive and intended as a deterrent
  • It also incapacitates offenders by depriving them of opportunities for committing their occupationally related crimes
  • If occupational disqualification is to be effective, it must be administered from outside the corporation because corporations may be reluctant to disqualify their own executives

Incarceration

  • Few white collar criminals are sent to prison

  • Rational agreements against imprisoning white collar offenders are many, but if it is indeed true that corporate executives and other white collar offenders fear imprisonment most, then incarceration is probably necessary in at least some cases

Organizational Reform
and Corporate Dissolution

  • Some of the most harmful white collar crime is committed by or through an organization

  • An ongoing debate centers on whether we should punish only the capable individual executives within an organization or the organization itself

  • Prosecutors may sometimes determine that both the organization and some of its executives are appropriate targets

Organizational Reform
and Corporate Dissolution

  • Perhaps the most extreme sanction that can be imposed on a corporation is “capitalistic punishment” or the forced dissolution of the corporation

  • Such a sanction would seem to be justified for corporations involved in massively harmful activities over some extended period

Controlling Governmental Crime

  • Government crime has been treated here as a cognate form of white collar crime

  • Such crime is extraordinarily difficult to control because those who commit the crimes also often have disproportionate power to shield themselves from criminal investigation and prosecution

  • International tribunals would have both the jurisdiction and the means to mount an effective response to state crime

Controlling Governmental Crime

  • The existing means of financing political campaigns are widely recognized to promote corrupt arrangements between public officials and corporations or other entities that donate money to their campaigns

  • Even though campaign-financing reforms have been undertaken, they hardly eliminate the problem of corrupt public officials
  • The revolving-door syndrome

Structural Transformation
as a Response to White Collar Crime

  • In an optimistic view, a substantial reduction of white collar crime requires a transformation of society’s political, economic, and cultural structure
  • Critics regard the following to be fundamental factors contributing to socioeconomic inequality
  • The immense harms caused by the current model of capitalism must be fully recognized and addressed
  • A global movement has been a major force in challenging a world dominated by transnational corporations