The front pages of American newspapers during the months before the September 11, 2001, destruction of New York’s World Trade Center by Al-Qaeda terrorists often displayed pictures of corporate executives in very elegant business suits with handcuffs on their wrists and their arms pinioned behind their backs. They were being taken into custody or brought to a criminal court by government enforcement agents who often wore orange jackets with large black letters stenciled on the back that identified them as police and/or indicated their agency affiliation.
This development differed dramatically from earlier days when news that a business leader had been charged with a white collar crime was likely to be buried in the paper’s business section, if it was attended to at all. The business offender in those bygone days was treated by the police in a gentle and respectable manner. Roscoe Pound, one of the major scholars of criminal law, noted that you never heard of an upper-class criminal who had committed an offense such as insider trading or an antitrust violation being subjected to third-degree interrogation sessions or being pushed around in the police station (Frank and Frank 1957, 161).
There is, of course, no sensible reason to handcuff business executives and to notify the media beforehand that they are going to be taken into custody. They are not escape risks and there is virtually no likelihood that they will attack those arresting them. But the performance, like all play-acting, is meant to convey a message. The message in these scenarios is that the police and the criminal justice system are equal opportunity enforcers and that they will treat the rich and the poor—the street criminals and the suite criminals—in the same manner.
Businessmen and businesswomen taken into custody by the police in the early years of the current century were involved in some of the most outrageous scandals since corporate enterprises came into being in the United States in the mid-eighteenth century. Billions of dollars were fraudulently manipulated so that executives could realize exorbitant personal financial gains. The offenses of companies such as Arthur Andersen, Enron, HealthSouth, Adelphia Communications, and WorldCom, among many others, challenged investigators for regulatory agencies and brought into question the dedication of those in power to protect the average citizen from the depredations of organizations whose campaign contributions helped significantly to put the politicians in power who control law enforcement and often have close ties to business.
The pace of enforcement of the laws to control business wrongdoing, however, declined dramatically after 9/11 when police agents were shifted from white collar crime assignments to counterterrorism activities.
In Los Angeles, following 9/11 the number of FBI agents assigned to white collar crimes, public corruption cases, and related work was reduced by nearly 60%, from 185 agents to 75. The former supervisor of the Los Angeles FBI antifraud unit noted: ”The bureau can’t get out of that business without losing market share, contacts, and expertise. Once it is lost you never get it back” (Reckard 2004, C5). Referrals of white collar crimes to the U. S. attorney’s offices, where responsibility for prosecuting the cases is lodged, declined 6% from a total of 12,792 in the 2000 fiscal year to 12,507 two years later. In late 2004, the Securities and Exchange Commission reported that its total of enforcement actions had declined by 14.7% since the previous year. The agency thought that perhaps businesses had learned a lesson, though its head was quick to point out that ”one swallow does not a summer make.” Skeptics were inclined to believe that the reduction reflected changing enforcement strategies rather than changing business practices (Peterson 2004, C1). The lesson is that there always remains a ”dark figure” of criminal activity—the offenses that are not discovered—and that the magnitude of this dark figure is strongly influenced by enforcement resources and the way in which they are deployed.
The term white collar crime refers to a loosely defined category of illegal behavior that is differentiated from ”street” or ”traditional” forms of crime such as robbery, homicide, and burglary. Prototypical white collar crimes are insider trading in stocks (that is, trading on information that has not yet been made available to the public), antitrust agreements that undermine competitive bidding, the knowing maintenance of dangerous working conditions, and fraud by physicians against medical benefit programs. Beyond such areas of agreement, there are two competing definitions of white collar crime. The original conception, formulated by sociologist Edwin Sutherland (1949, 9), saw white collar crime as a “crime committed by a person of respectability and high social status in the course of his occupation.” Use of the term had two purposes for Sutherland: first, to demonstrate that the then-current explanations of criminal behavior, such as Oedipus complexes and inferior intelligence, fell far short when applied to white collar criminals. Second, the goal was to call attention to lawbreaking with severe fiscal and physical consequences that tended to be ignored by students of crime.
More recently, and particularly in police circles, white collar crime has come to be defined as the violation of specified statutes. Yale Law School researchers identified eight offenses as white collar crimes that they would study: antitrust violations, bribery, securities fraud, tax fraud, false claims, credit fraud, mail fraud, and embezzlement (Weisburd et al. 1991). For them, the status of the criminal was irrelevant: Only 29% of their offenders met Sutherland’s criteria and among the female white collar offenders in the Yale studies, almost a third were unemployed (Daly 1989).
Persons who advocate particularly strong law enforcement action against white collar crime maintain that regular crime has a tendency to unite a society. “Good” and “decent” people unite in condemning the common criminal. In doing so, they reinforce their own commitment to conformity, in part because they learn that such acts can lead to ill fame and to prison sentences. White collar crimes, on the other hand, threaten the integrity of the social order and undermine trust and a sense of justice. Besides, they visit much more harm and death upon their victims than street offenses. More money is embezzled by bank officers than is stolen by bank robbers; more persons are killed by unnecessary surgery, sometimes prompted by mercenary goals, than are slain by more traditional forms of homicide.
The Police and White Collar Crime
Enforcement of the laws against white collar crime is largely the task of federal law enforcement agencies, such as the Food and Drug Administration, the Internal Revenue Service, the U.S. Postal Service, the Securities and Exchange Commission, the Federal Trade Commission, and, more generally, the Federal Bureau of Investigation (Friedrichs 2004). New concerns have led to a proliferation of additional federal agencies, including the Office of Surface Mining, the Environmental Protection Agency, the Occupational Safety and Health Administration, and a variety of federal bureaucracies that monitor nuclear plants.
In addition, fueled by a growing public cynicism about the honesty of those holding power that followed the Watergate scandal leading to President Richard Nixon’s resignation, major federal agencies are now watched over by inspector generals whose job, in the words of former President Ronald Reagan, is to be ”as mean as a junkyard watch dog.”
A major structural difficulty with these arrangements lies in the uncertain and overlapping authority of many of the groups, a situation that can lead to internecine conflict, as one or another policing force seeks to control the investigation and prosecution of a major case. George Wilson (1981) emphasizes that collaborative work among enforcement agencies requires a great amount of diplomacy and that recognition must be carefully allocated in proportion to each agency’s contribution. In the Archer Daniels Midland antitrust case, there was such a jumble of enforcement agencies vying for control of the case that, as Kurt Eichenwald (2000) has shown, mistakes, misunderstandings, and, most importantly, career considerations and turf wars seriously complicated the pursuit of the offenders.
Policing agencies live, and sometimes die, in terms of their performance record. They have to defend what they have accomplished before oversight committees that control their budget, and they are constantly concerned about whether to go after a large number of relatively insignificant offenders or to devote limited resources to tackle the much more demanding violations that are committed by wealthy corporations and their well-heeled executives who can employ notably intelligent and experienced attorneys to defend them.
State, Local, and Private Enforcement
Responses to fraudulent business, professional, and political practices have been less pronounced at levels below the federal government, primarily because of the absence of adequate resources to mount successful investigations and because of the federal preemption of much of the field.
Many states and counties have established economic crime units (ECUs) to deal with white collar offenses. These units tend to focus on quick-and-easy cases such as home improvement scams rather than on illegal acts of entrenched business interests. A handbook for economic crime investigators lists certain skills essential for this kind of work: (1) accounting, (2) computer sophistication, (3) advanced investigative ability, and (4) knowledge of the laws related to economic crimes (Somers 1984).
ECUs must prioritize the cases that they will handle. Typically, these are those in which conviction is likely to exert a strong deterrent force, those in which evidence can be gathered rather readily, cases in which the fraud appears likely to continue unless some intervention is made, and cases in which there is a strong likelihood that victims can recover some of their losses. ECU officers routinely denounce what they regard as the lenient sentences that judges impose on the offenders they bring to court. ”All things considered,” insists Laurel Farcas, chief of the Montgomery County ECU in Pennsylvania, ”for theses offenses, crime pays” (Fridrici 2000, 793).
On the local level, there is a need to get police officers to attend to white collar crime when possible. Some ECUs have generated reporting forms to be used whenever communication or squad car officers encounter what appear to be white collar offenses. What is wanted is a response such as that of an officer who observed an unusually large number of fights and arguments between the operators and customers at an auto repair shop and reported his suspicion that the owner was engaged in fraudulent activities. But one difficulty faced by police officers who concern themselves with white collar crime is that they may be disparaged by their fellows who see them as not dealing with ”real crime” and by administrators who may not reward their work with salary increases and promotions (Alvesalo 2002). For their part, officers assigned to deal with white collar crime note disparagingly that most cops do not know a computer chip from a potato chip. The lone detective in Kalispell, Montana, assigned to handle white collar frauds finds the work stimulating. ”It’s a whole new breed of crime,” Brian Fulford declares. ”The guy who is most likely to get you is armed with a keyboard. He has a business card and he doesn’t look anything like the guy your mother warned you about.” Fulford notes that he had to learn how to paint the offenses he brings to the prosecutor in stark terms. ”When the jury learns the charge is rape,” he says, ”the room falls silent. That doesn’t happen when it’s fraud or embezzlement. You need to find ways to engage the jury even though the evidence isn’t spicy” (Jamison 2004).
Besides state and local police, a large number of private investigators are engaged in discovering white collar crimes committed against the companies that employ them. This has become one of the fastest growing professional fields and many sworn police officers, who tend to retire relatively early, make a second career in private security work. There also is a cadre of private enforcement specialists, known under a variety of names, such as fraud examiners, fraud auditors, and forensic accountants. The Association of Certified Fraud Examiners, founded in 1988 and headquartered in Austin, Texas, now has twenty-five thousand members and offers training courses nationwide on how to deal with offenses such as embezzlement, loan frauds, false claims, mail and wire fraud, money laundering, bribes and kickbacks, and contract and procurement frauds.
White Collar Crime Policing Styles
Clear differences are generally seen between the performance of regulatory agency investigators and the police who work street crime details. Regulatory inspectors, particularly if they have scientific training (and many former police officers take special courses when they enter regulatory work), come to think of themselves more as technical experts than as police officers. Their work pattern becomes much the same as a police officer who views his or her job as social service more than as crime control. Assumption of the “cooperative technical expert” role permits investigators to build mutually satisfying relationships with the businesses they oversee. These companies are believed to be more likely to inform the investigator of difficulties rather than to try to cover them up, thereby allowing rapid remedy and improving protection of the public. A tougher stance is taken toward violators who are seen to be ”amoral calculators,” those who are willing to violate the law and guidelines whenever they believe they can get away with it (Kagan and Scholz 1983, 67-68).
Rule-oriented inspectors, in contrast to those with a compliance orientation, issue citations for every violation they observe. They minimize negotiation strategies, such as consultation and bargaining. This crime enforcement style is faulted on the grounds that while it is likely to demonstrate short-term gains in compliance, it suffers in the long term because the businesses never develop an internal commitment to conformity. “A network of rules and regulations, backed by threats of litigation, breed distrust, destruction of documents, and an attitude that I won’t do anything more than I am absolutely required to do,” Stone (1975, 104) maintains.
White collar crime investigators typically keep a keen watch on the priorities of the prosecuting agency. Prosecutors tend to be reluctant to take on complicated white collar crimes because, among other things, they demand technical knowledge that may take a good deal of effort to master. They also are likely to be time consuming and to lack the glamor of big drug cases and dramatic crimes of violence.
George Wilson (1981, 173) emphasizes that for white collar crimes, compared to street crimes, ”there is an absolute necessity for integrating the prosecutor in the investigative effort from the very beginning. This is probably the single most important aspect of investigating a complex economic crime.” The prosecutor, Wilson points out, must continually analyze the facts, alter his or her anticipated courtroom strategy if necessary, and redirect the investigator’s efforts.
See also: Computer Crimes; Environmental Crime; Federal Bureau of Investigation; Fraud Investigation; Politics and the Police; Styles of Policing
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- Daly, Kathleen. 1989. Gender and varieties of white collar crime. Criminology 27: 769-83.
- Eichenwald, Kurt. 2000. The informant: A true story. New York: Broadway Books.
- Frank, Jerome, and Barbara Frank. 1957. Not guilty. Garden City, NY: Doubleday.
- Friedrichs, David O. 2004. Trusted criminals: White collar crime in contemporary society. 2nd ed. Belmont, CA: Wadsworth.
- Fridrici, Peter. 2000. Does economic crime pay in Pennsylvania?: The perception of leniency in Pennsylvania’s economic offender sentencing. Villanova Law Review 45: 793-825.
- Jamison, Michael. 2004. Fraud poses new police challenges. http://missoulian.com/news/state-and-regional/fraud-poses-new-police-challenge/article_7e01f302-afa4-577c-9dba-446e15a3c9b7.html (December 2004).
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- Peterson, Jonathan. 2004. Corporate fraud cases decline. Los Angeles Times, August 2, C1.
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- Somers, Leigh E. 1984. Economic crimes: Investigative principles and techniques. New York: Clark Boardman.
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- Sutherland, Edwin H. 1949. White collar crime. New York: Dryden.
- Weisburd, David, et al. 1991. Crimes of the middle classes: White collar offenders in the federal courts. New Haven, CT: Yale University Press.
- Wilson, George E. 1981. Economic crime. Albany, NY: Bureau of Prosecution and Defense Services, Executive Of