wa2 summary

12/28/2021

1

Chapter 12: -Slides and data in this outline are from Adler, Mueller, and Laufer (2007, 2013,

2018, & 2022); Siegel (2015); and modified by Manning (2007, 2013, 2015, 2018, & 2022).

White Collar and Corporate Crime.

White Collar Crime defined

• Edwin H. Sutherland, 1940 defines White Collar Crime: • Crime “committed by a person of respectability and high social status in the

course of his occupation”. • Not Corporation inclusive!

• A violation of the law committed by a person or group of persons in the course of an otherwise respected and legitimate occupation or business.

12/28/2021

2

White Collar Crime Laws and policies

• Sarbanes-Oxley Act of 2002 • Adopts provisions to deter and punish corporate and accounting fraud and

corruption.

• Dodd-Frank Wall Street Reform and Consumer Protection Act 2010. • Consolidates regulatory agencies

• Created an oversight council to evaluate systematic risk

• Enacted comprehensive regulation of financial markets. • Increased transparency of derivatives

• Passed consumer protection reforms

• Gave authority to wind down bankrupt firms

• Increased the effect of international standards and cooperation

Occupational Crimes

• Committed by individuals for themselves in the course of rendering a service. • Medicare fraud, misuse of clients’ funds by lawyers and brokers, and

substitution of inferior goods.

12/28/2021

3

Types of White Collar Crimes • Securities-related crimes

• Churning: practice of trading a client’s shares of stock frequently in order to generate large commissions.

• Ponzi schemes: Broker takes client funds with promise of high return. • hides funds in various banks Create fake investment charts • Works until more want out then new investors can support. • Bernard Madoff 65 billion, June 29, 2009 150 years in prison

• Insider Trading: Use of material, nonpublic financial information to obtain an unfair advantage in trading securities.

• Stock manipulation: Trading stocks at low prices and making misleading statements to clients. • Some stocks are traded at very low prices. • Which creates an artificial demand for the stocks.

• Boiler rooms: operations run by stock manipulators. • Who manipulate uninformed individuals into buying stocks in obscure and poorly financed

corporations.

Types of White Collar Crimes continued

• Bankruptcy Fraud: Scams designed to take advantage of loopholes in the bankruptcy laws. • EX: Old company scam where employee bilks system for assets then files chapter 11.

10% of all bankruptcy claims include fraud. 2/3rds involve hidden assets.

• Fraud against government • Collusion in bidding • Payoffs and kickbacks to government officials • Expenditures by a government official that exceed the budget • Filing false claims

• Inflate cost to hide waste or corruption

• Hiring of friends or associates formerly employed by the government. • Dick Chainy ties to Halliburton and a closed bid contract to rebuild Iraq.

12/28/2021

4

Types of White Collar Crimes cont’d

• Consumer Fraud • Act of causing a consumer to surrender money through deceit or a

misrepresentation of a material fact. • Forms

• Home improvement fraud • Deceptive advertising – bait n switch • Land Fraud • Business opportunity fraud

• Insurance Fraud • Policyholders defraud insurers • Insurers defraud the public • Management defrauds • Third parties defraud insurers (car repair shops)

Types of White Collar Crimes cont’d

• Tax Fraud • Willful failure to file a tax return by keeping two sets of books, shifting funds,

and faking forms. Misdemeanor vs. felony

• Bribery, corruption, and political fraud • Used to gain favors, special privileges, services and business - felony

• Insider-related fraud • Use and misuse of one’s position for monetary gain or privilege.

• Embezzlement: conversion of property or money with which one is entrusted or for which one has a fiduciary responsibility (misappropriation of money or property)

• Employee-related thefts (fictitious overtime claims) • Sale of confidential information and trade secrets

12/28/2021

5

Corporate Crime

• Crimes committed by one or more employees of a corporation that are attributed to the organization itself • Phases

• Concerns with importance and meaning of corporate personhood

• Rise and immediate fall of vicarious liability

• Strategic risk-shifting by employers and employees

• New era of regulatory law

• Post-guidelines partnership

• Selective use of existing law

• Corporate violence: Hawk’s Next West Virginia example • Ford Pintos, and Dalcon Shield stories

Models of Corporate Culpability

• Proactive Corporate Fault (PCF) • Assumes blame where reasonable steps were not taken to prevent an offense

• Reactive Corporate Fault (RCF) • Considers the corporate reaction to the discovery of an offense

12/28/2021

6

Models of corporate Culpability cont’d

• Corporate Ethos (CE) • Culpability derives from corporate ethos, culture, or personality

• Corporate Policy (CP) • Corporate intentionally is found in decision communicated through policies.

• Constructive Corporate Culpability (CCC) • Corporate fault is found in the reasonableness of judgment

• What would the average corporation have done?

Government Control of Corporations • Sherman Antitrust Act (1890)

• Prohibited any contract, conspiracy, or combination of business interests in restraint of foreign or interstate trade.

• Difficult to regulate corporate conduct since corporate activity has a low level of visibility.

• Development of US Corporate Criminal Law • Courts determined corporations have no soul - not criminally liable. • 1909 courts determined management could be held responsible • As regulatory agencies and law grew in influence the focus shifted from punishment

to achieving compliance. • Corporation joined forces with government to rout-out corporate crime • Problem with sanction guidelines:

• For every sanction increase there is a reduction allowance created for evidence of organization due diligence.

12/28/2021

7

Environmental Crimes types of Green Collar Crimes

• Worker safety/environmental crimes • Over 20 million workers have been exposed to hazardous material or worked

with unsafe equipment so corporations can max profit.

• Illegal Logging • Taking trees from protected areas, going over quotas, exporting without paying export

duties.

• Illegal Wildlife Exports – Florida Everglades overrun by pythons. • Tiger parts, ivory, rhino horns, for hunting trophies, fashion, medicines or bush meat.

• Illegal Fishing – some species reduced by 99% since 1950. shark fin soup.

Environmental Crimes Types of Green Crime cont’d

• Illegal Dumping and Polluting • Criminal environmental polluting is dumping substances altering quality of waters

detrimental to human and animal use (fertilizers, herbicides, oil, and animal and livestock bacterial wastes).

• E-Waste (greed & planned obsolescence) • Millions of tons of annual high tech electronic waste.

• USA most toxic old phones, tvs, computers and so on ends up in landfills or is incinerated.

• Often ends up in poor countries dumped near people and water sources (Nigeria, Ghana, China, Pakistan and India).

12/28/2021

8

Environmental Crime Green Collar Crimes

• National Environmental policy Act (NEPA) • Created the Environmental Protection Agency (EPA)

• Charged with enforcing federal statutes and assisting the enforcement of state laws enacted to protect the environment

• Environmental Laws • Clean Water Act (1972)

• Clean Air Act (clear skies initiative)

• Emergency Planning and community Right to Know Act (1986)

• Endangered Species Act (1973)

• Oil Pollution Act (1990)