Impact on Society of White Collar Crime Case Study

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White Collar Crime on the Economy and Society

The objective of this study is to examine the impact of white collar crime on the economy and society.

White Collar Crime is reported to be a term that Edwin Southerland, Sociologist of Criminology defined and one that identifies "those illegal non-violent activities that involve traditional notions of deceit, deception, concealment, manipulation, breach of trust or illegal circumvention." (Soto, 2008, p. 1) These types of crimes are such that are generally committed by government agents and business professionals. (Soto, 2008, paraphrased) The Legal Institute at Cornell Law School defines white collar crime as "crime committed by a person of respectability and high social status in the course of his occupation." (Wayne State University, 2011, p. 1)

Expert Panel Reports on White Collar Crime

It is reported that in 2011 an expert panel reported on white collar crime and stated that the Federal Bureau of Investigation has related that white collar crime costs the United States in excess of $300 billion each year. Reported as recent examples of white collar crime are the "depredations of Bernard Madoff" reported to have "made near-paupers of many individual investors who trusted him with their savings, while at a corporate level energy company Enron disrupted state economies, made a mockery of energy trading networks, and stymied attempts to plan vital energy infrastructure." (Wayne State University, 2011, p. 1) It is reported that the housing bubble that resulted in the "worse national recession since the Great Depression has been fueled, in part by white-collar crime at many levels." (Wayne State University, 2011, p. 1)

II. Victims of White Collar Crime

Kouri (2005), Vice-President of the National Association of Chiefs of Police reports that the capacity of the United States Government and industry of the United States to "function effectively is likewise threatened by complex frauds. The amount of taxpayer funds involved in the government procurement process is staggering, as billions of dollars are spent each year on everything from highways to rockets. The GAO estimates that as much as 10% of appropriated funds for domestic programs may be lost to fraud in the government procurement and contracting process, and this type of crime is critically linked to public corruption imperatives" (p. 1) In addition, it is reported in the work of Kouri (2005) that frauds in the insurance, telemarketing and investment industries work in such a way that "often operate across jurisdictional and international boundaries. When losses to individual victims are aggregated, the economic impact can be dramatic. Additionally, antitrust offenses and bankruptcy fraud have a significant negative affect on the U.S. economy, and environmental crimes represent a serious threat to the public health and natural resources of our nation." (p. 1) Kouri additionally notes that fraud in the health care industry greatly impacts the United States as a whole and the individuals who rely on healthcare insurance and who pay healthy premiums for the benefit of health insurance. Stockholders are damaged by company executives and individuals who are in positions that the public trusts and this results in the erosion of confidence of the public in the corporate community overall. Telemarketing fraud is reported to be such that has the elderly as its target and this is a problem since the elderly are "one of the most vulnerable segments in our society." (Kouri, 2005, p. 1)

III. The Psychiatry and Law of White-Collar Crime

The work of Price and Norris (2009) reports that one individual, after losing the greatest part of his life savings in the scheme of Madoff related that he had gone into a deep depression and had "no desire to live, no prospect of earning a living, no way to pay the bills." (p. 1) This story is reported to be "one among hundreds recounting the financial losses suffered by individuals and organizations due to fraud by trusted business advisors and professionals.

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" (Price and Norris, 2009, p. 1) It is related that Walter Pavlo, who is a convicted felon and who "stole over $6 million from his employer MCI WorldCom, offers an insider's view of his path toward criminal behavior and punishment in his new book" entitled "Stolen Without a Gun: Confessions from Inside Hi Story's Biggest Accounting Fraud -- The Collapse of MCI WorldCom." (Price and Norris, 2009, p. 1) Pavlo was 32 years of age and managing $1 billion each month. Pavlo now tours the world lecturing and when he is asked about prison gangs, his response is "no gangs, unless you consider a bunch of guys with MBAs gang members." (Price and Norris, 2009, p. 1) It is reported that this illustrates "the far-reaching consequences of high-level corporate fraud." (Price and Norris, 2009, p. 1) It is reported that in Europe more than 42.5% of the largest companies "have been victimized by white-collar criminal activities, with embezzlement and breach of trust being the prevalent modes involved." (Price and Norris, 2009, p. 1)

IV. FBI's Three Categories of Corporate Fraud

It is reported that there are three categories of corporate fraud according to the FBI including:

(1) Falsification of financial information, including: false accounting entries; bogus trades designed to inflate profit or hide losses; and false transactions designed to evade regulatory oversight. (Price and Norris, 2009, p. 1)

(2) Self-dealing by corporate insiders, including: insider trading; kickbacks; backdating of executive stock options; misuse of corporate property for personal gain; and individual tax violations related to self-dealing. (Price and Norris, 2009. p. 1)

(3) Obstruction of justice designed to conceal any of the above-noted types of criminal conduct, particularly when the obstruction impedes the inquiries of the SEC, other regulatory agencies, and/or law enforcement agencies. (Price and Norris, 2009, p. 1)

V. Bank of Commercial Credit and Commerce International

It is reported that the Bank of Commercial Credit and Commerce International had a criminal structure that was "unique." (American Patriot Friends Network, nd, p. 1) The founder of BCCI, Abedi, and his assistant Naqvi are reported to have been accredited for BCCI's "spectacular growth and a guarantee of its eventual collapse." (American Patriot Friends Network, nd, p. 1) The structure of BCCI was one that evaded regulation and government control and as such was not a structure understood at all by anyone. BCCI is reported to have been comprised of "multiplying layers of entities, related to one another through an impenetrable series of holding companies, affiliates, subsidiaries, banks-within-banks, insider dealings and nominee relationships." (American Patriot Friends Network, nd, p. 1) In addition, there was systematic reliance on relationships and payoffs to political figures that were prominent in the 73 countries of BCCI's operations and it is reported that these relationships were "systematically turned to BCCI's use to generate cash needed to prop up its books." (American Patriot Friends Network, nd, p. 1) BCCI's operations were addressed by Federal prosecutors in 1988 related to laundering drug money however; BCCI still avoided prosecution until the early 1990s. The bank continued to operate even though the Bank of England had expressed concerns as early as the 1970s about the banks operations. The bank was well-connected in Washington and used lobbying and other methods to continue its operations. Furthermore, due to bank secrecy laws documents related to BCCI financing terrorism in many areas have remained unknown. The involvement of government officials including some of the biggest names in politics in the BCCI dealings are phenomenal and include such as George W. Bush, the Clintons, and even involvement in some form of the Regan administration, the Carter administration and as such reaches nearly every level of government throughout the United States. (American Patriot Friends Network, nd, paraphrased)

Summary and Conclusion

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