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WHITE COLLAR CRIME IN CONTEMPORARY SOCIETY 4TH ED.

CHAPTER 9

LAW AND THE SOCIAL CONTROL

OF WHITE COLLAR CRIME

Trusted Criminals

Designed by: Jordan Land, M.S.

Formal Law and White Collar Crime

  • Sutherland insisted that the term crime should be applied more broadly to forms of white collar harm that are not specifically prohibited by criminal law but rather some other form of law

  • Sutherland’s basic argument was that corporations and other elements of the white collar world have too much influence over the criminalization process

Formal Law and White Collar Crime

  • Even when laws attempting to control certain forms of corporate activities are adopted, elite interests often have the power to influence the meaning of the laws
  • Unlike most conventional crime, white collar crime typically occurs in the context of legitimate and productive activities
  • And the proper lines of demarcation between acceptable and unacceptable practices are not always clear

Formal Law and White Collar Crime

  • Various factors influence whether criminal law, civil law, administrative law, or tax law is adopted in response to perceived harmful activities of businesses and professionals

  • One form of white collar criminal law is antitrust law
  • Which is directed against monopolistic practices that interfere with the operation of a truly competitive free market

Formal Law and White Collar Crime

  • Smith seemed to believe that most laws directed at businesses would simply be manipulated and evaded by more powerful businesspeople
  • Which would lead to more harm rather than less
  • The larger framework of social control, the more difficult it becomes to formulate laws that can be implemented and can garner broad support
  • Traditionally, social control has focused on the behavior of individuals, but the incidence of corporate white collar crime, has highlighted the need to control organizations

The Historical Origins of White Collar Crime

  • According to Drapkin (1989), the first known legal documents were contracts of land sales and other transactions conducted around 2400 BC in ancient Mesopotamia
  • The Old Testament includes proscriptions against deceitful and unfair market practices
  • The classical Greek lawmaker Solon established laws against embezzling from the state
  • English common law addresses occupational offenses less clearly than conventional forms of harm such as homicide or assault

The Historical Origins of White Collar Crime

  • The law was not structured to respond effectively to the exploitative and harmful practices of businesses as corporate entities

  • Many harmful commercial and occupational practices were not addressed

  • The U.S. Supreme Court has historically waxed and waned in its response to regulatory law, which addresses harmful business practices

Contemporary Legislative Lawmaking
and White Collar Crime

  • Lawmaking is a complex process that may reflect a variety of influences
  • Specific white collar crime laws emerge out of particular historical circumstances and may reflect various mixtures of consensual, rationalistic, and power-based dimensions
  • An instrumentalist perspective on lawmaking advances the view that in a capitalist society, law reflects the elite class’s control over the state and is intended to serve the purpose of that class

The Influence of Business
on the Lawmaking Process

  • Because the evolution of white collar crime is complex, laws governing economic crimes are likely to be products of various competing constituencies, and thus powerful economic interests do not always prevail

  • Business has generally had disproportionate influence over the lawmaking process

The Influence of Business
on the Lawmaking Process

  • The politicians who make the laws often depend on business leaders and corporations for financial support for their campaigns, for personal gifts and favors, and for post-political career employment or contracts

  • In the 20th century, 3 major eras featuring laws regulating various forms of business conduct can be identified:

The Progressive era

The New Deal era

Great Society era

The Influence of Business
on the Lawmaking Process

  • Legislators must necessarily be responsive to many constituencies, some of whom are harmed by business practices or are antagonistic toward business generally

  • The relative success of the civil rights movement in challenging the legal status of segregation was one important source of inspiration for social movements representing disadvantaged and beleaguered constituencies

The Influence of Business
on the Lawmaking Process

  • Most social movements’ law reform initiatives did not focus on white collar crime but were directed instead toward imposing more regulation of and greater control over a range of potentially harmful business practices

  • Government agencies or entities may actively lobby for white collar crime laws, inspired either by self-interest or by a principle perception of a need for new laws

The Constitution and Constitutional Law

  • The U.S. Constitution and many state constitutions do not specifically address white collar crime

  • The Constitution provides a basic framework for the response to white collar crime through the establishment of a federal court system

  • Its allocation of powers to the different branches of the government and its imposition of limitations on the exercise of governmental power in the investigation and prosecution of criminal cases

The Constitution and Constitutional Law

  • The Commerce Clause of Article I, Section 8 of the Constitution authorized Congress to make laws regulating commerce between the states and provided one basis for federal intervention in the affairs of private businesses

  • Marbury v. Madison
  • Established both the supremacy of the Constitution and the Court’s own right of judicial review

Case Law

  • Case law is a product of appellate court opinions and has played an important role in the realm of white collar crime for several years

  • Defendants in white collar crime cases are often better able to finance a full-scale appeal of criminal convictions than are conventional crime defendants

  • The claim that the courts directly bring about important social change is not uniformly accepted

Case Law

  • The counterargument is that change is likely to occur only when court decisions are complemented by social and political forces that are already moving society in that direction

  • Some areas of white collar crime law are more fully developed in case law than in statutory law

  • Case law lays down consequential decisions on both the scope for white collar crime law and the legal remedies for victims of white collar crime

Executive Lawmaking

  • The executive branch is less directly involved in making law than the other two branches of the government

  • Executive lawmaking occurs through this branch’s control of agencies that investigate, enforce, and prosecute crime

  • Any laws the executive branch fails to enforce and prosecute in effect do not “exist”

Executive Lawmaking

  • The executive branch appoints all federal judges and many state-level judges as well; Supreme Court justices and appellate court judges are especially important

  • This branch also plays the same role in appointing the top people in many regulatory agencies

  • This branch has the power to administer penal sanctions, and chief executives on both the federal and the state levels have the power to pardon

Executive Lawmaking

  • White collar offenders have had great advantages in the parole process because they are more likely than conventional offenders to have a social background and demeanor that enables them to make a favorable impression on parole boards

Administrative Law

  • The regulatory agencies that produce state and federal administrative law are among the less conspicuous participants in our legal system

  • This type of law is of special importance in any discussion of white collar crime insofar as many of the activities commonly classified under that heading are violations of administrative rather than statutory law

Administrative Law

  • There is some dissension over whether administrative law is really law in the conventional sense or more viewed as a body of rules

  • Agencies produce rules of several different forms
  • Interpretative & legislative rules

  • Agencies have enjoyed considerable discretion in this rule-making process

Administrative Law

  • In 1790, Congress delegated to the president certain legislative powers, such as prescribing rules and regulations to govern trade with Native Americans

  • The New Deal era had concern over improper use of discretionary powers by regulatory agencies, which led to the:
  • Administrative Procedure Act
  • To ensure that regulatory agencies would act fairly, with appropriate attention to due process, but it also imposed some limits on judicial powers to rule on or overturn agency actions

Antitrust Law

  • In Adam Smith’s A Wealth of Nations, Smith argued that the entire community benefits when individual entrepreneurs compete freely with each other because they are motivated to produce the highest-quality goods at the lowest possible price in the interest of enticing consumers to buy their products

Antitrust Law

  • In the years following the Civil War, the emergence of trusts was especially disturbing
  • Trusts, which were legal entities or holding companies for corporations engaged in the same type of business, fixed prices, controlled production, and organized geographical monopolies for an entire industry
  • Years after the Civil War, the country suffered through stock market crashes and periods of economic depression blamed on the maneuvers of the trusts and other members of the economic elite

Antitrust Law

  • Antitrust law is broadly defined as law that regulates economic competition

  • In the new American Republic, individual states attempted to prohibit monopolistic practices but increasingly national character of the 19th century economy limited the effectiveness of such laws

  • Congress passed the Sherman Act

Antitrust Law

  • Sherman Act:
  • Banned efforts to “prevent full and free competition” and also prohibited combinations that tended to raise the cost to the consumer and actions causing a “restraint in trade” that could lead to monopolies

  • This gave private parties the right to sue for treble damages for violations of the act and gave the state in which such violations occurred the power to criminally prosecute and to see injunctions

Antitrust Law

  • In the century following the passing of the Sherman Act, several laws were passed to address various perceived limitations of the original antitrust law

  • Early criminal prosecutions of corporations for violations of the Sherman Act were few and rarely successful

Occupational Safety and Health Laws

  • A great deal of evidence suggests that each year, workers by the thousands die prematurely from occupationally related accidents and illnesses, and that workers by the millions are seriously injured or become ill due to occupational conditions

  • Little substantial legal protection for workers existed before 1970

Occupational Safety and Health Laws

  • The historical absence of laws has been attributed to industry’s mobilization against such legislation
  • Its ability to control access to much of the information necessary for the development of any such laws
  • Its considerable success in blaming workers for on-the-job injuries and illnesses
  • All of this began to change in the late 1960s

Occupational Safety and Health Laws

  • A rising work-related injury rate began to receive some attention which led to the passing of the Occupational Safety and Health Act of 1970 (OSHA)

  • During the Regan administration, although OSHA legislation was not repealed, its implementation was much more limited

  • The George W. Bush administration eliminated many of the existing safety standards

Environmental Protection Laws

  • The first law to criminalize the dumping of wastes into navigable waters, the Refuse Act of 1899, was passed to protect business interests by ensuring their unobstructed use of waterways
  • The Environmental Protection Agency (EPA) was established by executive order in 1970
  • Throughout the 1970s, a series of environmental protection laws were passed, although criminal prosecutions of environmental offenders did not ensue until late in the decade during the Carter administration

Environmental Protection Laws

  • Today, virtually all environmental statutes include criminal provisions
  • Although they differ on the degree of liability
  • Violations of the Clean Air Act
  • Many constraints have limited full implementation of the environmental law enacted since the early 1980s
  • Regulatory agencies have often been unwilling or unable to implement environmental crime laws fully
  • Judges have been reluctant to impose the criminal penalties permitted by the law on environmental offenders

The RICO Law

  • In 1970, as part of the Organized Crime Control Act, Congress enacted a special section on Racketeer-Influenced and Corrupt Organizations (RICO) to provide prosecutors with a more effective weapon for combating organized crime

  • The RICO law prohibits acquisitions, operation, or income from an “enterprise,” through a “pattern” of “racketeering activity,” common law crimes, including those prohibited by any state, that are punishable by 1 year or more in prison

The RICO Law

  • This powerful prosecutorial tool broadens federal criminal jurisdiction to include violations of state law, including that individuals convicted under the RICO law face up to 20 years in prison, substantial fines and mandatory asset forfeiture

  • To be prosecuted under this law is to face formidable consequences

Civil and Criminal Law and White Collar Crime

  • Civil law has played a much larger role in responding to white collar crime than to conventional crime

  • Civil law (tort) concerns itself with private, individual harms and objective responsibility

  • Whereas criminal law focuses on public, social harms and morally culpable conduct

Civil and Criminal Law and White Collar Crime

  • John Coffee Jr. identified several other differences between criminal and civil law:

The role of intent is greater in criminal law

Criminal law focuses on the creation of risk rather than on actual harm

Criminal law insists on greater evidentiary certainty and is less tolerant of procedural informality

Criminal law relies on public enforcement

Criminal law involves the deliberate imposition of punishment and the maximization of stigma and censure

Civil and Criminal Law and White Collar Crime

  • Both types of law require intent and have somewhat parallel rules for establishing culpability

  • Although ordinary negligence is sufficient in tort cases, whereas most state laws require more for establishing criminal liability

Law, Corporations,
and the Concept of Criminal Liability

  • A central issue for a system of criminal law is the imputation of criminal liability or responsibility
  • The notion of an individual capable of forming criminal intent, or mens rea, developed as a key element in the legal conception of crime
  • Individual white collar crime offenders are generally assumed to have willfully and voluntarily engaged in illegal behavior
  • In assessing the level of culpability of individual white collar offenders, some judges and jurors may hold them to a higher standard than conventional offenders

Corporate Criminal Liability

  • The question of whether corporations should be held responsible for illegal acts has been a contentious issue in our legal history

  • Alternative views center on whether a corporation is an entity with an existence separate from shareholders and other participants or is simply an aggregation of natural individuals

  • In the most recent era, a movement toward imposing corporate criminal liability has generally intensified

Corporate Criminal Liability

  • Under common law tradition, a corporation could not face criminal charges
  • Until the 15th century, the law recognized only “natural persons”
  • It appears that corporations have been held civilly liable for the harm they caused since early in their development
  • Through at least the middle of the 18th century, English legal authorities held that private corporations could not form criminal intent and could not be indicted or held directly responsible for crimes

Corporate Criminal Liability

  • In Great Britain and the United States alike, railroads were held criminal responsible for harmful actions in the 19th century

  • The notion of corporate criminal intent was not clearly recognized by the U.S. Supreme Court until New York central and Hudson River Railroad Co. v. U.S. (1909)
  • The railroad had violated the 1903 Elkins Act prohibiting the granting of rebates in interstate commerce

Corporate Criminal Liability

  • The criminal liability of a corporation for the actions of its employees has come to be based on two major theories:
  • Imputation theory
  • Corporations are liable for the intent and acts of its employees on any level in the corporate hierarchy
  • Identification theory
  • Liability is direct insofar as corporate actors are acting on behalf of the corporation

Corporate Personhood
and Corporate Decision Making

  • Just as modern law in the Anglo-American tradition has assigned criminal responsibility to the corporation, it has also accorded to corporations most if not all of the constitutional rights guaranteed to “natural persons”

  • The legal paradigms for the treatment of corporations have tended to be divided between a holistic view of the corporation as analogous to a person and the atomistic view of the corporation as an aggregate of individuals