White-Collar Crime
White-collar crimes can be prosecuted in state or federal courts depending on what laws were violated. The white-collar crimes being committed today are different then of the past possibly due to the change in demographic and economic forces. Technological advances that have increased white-collar crimes such as financial crime likely influence the shift in white-collar crime.
The New York Times recently reported that white-collar crimes are on the rise due to the bursting of the stock market bubble, real estate issues and the banking crisis. Street crimes have decreased in the past decade, yet the rise in white-collar crimes is attributed to the baby-boom generation that is aging. The most publicized white-collar crimes of recent have included Enron, Adelphia, Global Crossing, Kmart, Qwest Communications Int'l, Schering-Plough, WorldCom, and Xerox.
The Association of Certified Fraud Examiners comments that white collar crime increases are due to society aging as well as the increase of education level. A white-collar crime often has a lesser punishment and the way white-collar crimes are being committed continues to become more complex. The head of the criminal division at the Justice Department has seen a large increase in accounting and disclosure cases, amongst other types of white-collar crimes. The largest increase of possible accounting white-collar crimes has been in the telecommunications, software, and energy areas. The Justice Department attributes the increase in accounting fraud white-collar crimes to the pressure for companies to meet revenues and projections.
Federal civil lawsuits have shown a large decrease, but the number of white-collar crimes involving securities fraud and other financial violations has over doubled from 1997 to 2001. With white collar crimes the defendants will usually find out that an investigation is in progress for the white-collar crime in question. The 2001 Enron investigation sparked numerous tips from investors and from corporate insiders with violation information for white-collar crimes involving accounting and financial reporting.
White-Collar Crime: An Overview
The phrase "white-collar crime" was coined in 1939 during a speech given by Edwin Sutherland to the American Sociological Society. Sutherland defined the term as "crime committed by a person of respectability and high social status in the course of his occupation." Although there has been some debate as to what qualifies as a white-collar crime, the term today generally encompasses a variety of nonviolent crimes usually committed in commercial situations for financial gain. Many white-collar crimes are especially difficult to prosecute because the perpetrators are sophisticated criminals who have attempted to conceal their activities through a series of complex transactions. The most common white-collar offenses include: antitrust violations, computer/internet fraud, credit card fraud, phone/telemarketing fraud, bankruptcy fraud, healthcare fraud, environmental law violations, insurance fraud, mail fraud, government fraud, tax evasion, financial fraud, securities fraud, insider trading, bribery, kickbacks, counterfeiting, public corruption, money laundering, embezzlement, economic espionage, and trade secret theft (see definitions at bottom). According to the Federal Bureau of Investigation, white-collar crime is estimated to cost the United States more than $300 billion annually.
Although white-collar criminal charges are usually brought against individuals, corporations may also be subject to sanctions for these types of offenses. The penalties for white-collar offenses include fines, home detention, community confinement, costs of prosecution, forfeitures, restitution, supervised release, and imprisonment. However, sanctions can be lessened if the defendant takes responsibility for the crime and assists the authorities in their investigation. Any defenses available to non-white-collar defendants in criminal court are also available to those accused of white-collar crimes. A common refrain of individuals or organizations facing white-collar criminal charges is the defense of entrapment. For instance, in United States v. Williams, 705 F.2d 603 (2nd Cir. 1983), one of the cases arising from "Operation Abscam," Senator Harrison Williams attempted unsuccessfully to argue that the government induced him into accepting a bribe.Both state and federal legislation enumerate the activities that constitute white-collar criminal offenses. The Commerce Clause of the U.S. Constitution gives the federal government the authority to regulate white-collar crime, and a number of federal agencies (see sidebar), including the FBI, the Internal Revenue Service, the Secret Service, U.S. Customs, the Environmental Protection Agency, and the Securities and Exchange Commission, participate in the enforcement of federal white-collar crime legislation. In addition, most states employ their own agencies to enforce white-collar crime laws at the state level.
White-Collar Crime Terms (from list above)
Antitrust Violations::: Infractions of the Sherman Act (15 U.S.C. 1-7) and the Clayton Act (15 U.S.C. 12-27) constitute antitrust violations. The goal of antitrust laws is to shelter trade and commerce from price fixing, monopolies, etc., and to foster competition.
Bankruptcy Fraud: Committed by individuals and corporations who conceal and misstate assets, who mislead creditors, and who illegally pressure bankruptcy petitioners.
Bribery: The offer of money, goods, services, information or anything else of value, which is presented with the intent of influencing the actions, opinions, or decisions of the taker.
Computer/Internet Fraud: Fraud of this type includes using or applying for credit cards online under false names, unauthorized use of a computer, manipulation of a computer's files, computer sabotage, etc. Violators may be prosecuted under:
18 U.S.C. 1029, Fraud and Related Activity in Connection with Access Devices18 U.S.C. 1030, Fraud and Related Activity in Connection with Computers
18 U.S.C. 1362, Communication Lines, Stations, or Systems
18 U.S.C. 2511, Interception and Disclosure of Wire, Oral, or Electronic Communications Prohibited
18 U.S.C. 2701, Unlawful Access to Stored Communications
18 U.S.C. 2702, Disclosure of Contents
18 U.S.C. 2703, Requirements for Governmental Access
Credit Card Fraud: The unauthorized use of a credit card to obtain merchandise.
Counterfeiting: Occurs when someone copies or imitates an item without having been authorized to do so and passes the copy off for the genuine or original item. While counterfeiting is most often associated with money it can also be applied to designer clothing, handbags and watches.
Economic Espionage/Trade Secret Theft: Economic Espionage involves the theft or misappropriation of proprietary economic information (trade secret) from an individual, a business, or an industry.
Embezzlement: When someone who has been entrusted with money or property appropriates it for their own use and benefit.
Environmental Law Violations: Discharge of a toxic substance into the air, water, or soil which poses a significant threat of harm to people, property, or the environment, including air pollution, water pollution, and illegal dumping, in violation of federal environmental law.
Financial Fraud: Financial Institution Fraud (FIF) involves fraud or embezzlement occurring within or against financial institutions that are insured or regulated by the U.S. Government. Financial institutions are threatened by a wide array of frauds, including commercial loan fraud, check fraud, counterfeit negotiable instruments, mortgage fraud, check kiting, false applications, and a variety of traditional and non-traditional FIF scams.
Government Fraud: Fraud against the government may consist of fraud in connection with federal government contracting and fraud in connection with federal and/or federally-funded entitlement programs, including public housing, agricultural programs, defense procurement fraud, educational programs, and corporate frauds. As it relates to federal government contracting, investigations often involve bribery in contracts or procurement, collusion among contractors, false or double billing, false certification of the quality of parts or of test results, and substitution of bogus or otherwise inferior parts.
Healthcare Fraud: Types of fraud include kickbacks, billing for services not rendered, billing for unnecessary equipment, and billing for services performed by a lesser qualified person. The health care providers who commit these fraud schemes encompass all areas of health care, including hospitals, home health care, ambulance services, doctors, chiropractors, psychiatric hospitals, laboratories, pharmacies, and nursing homes.
Insider Trading: According to the SEC, insider trading is trading that takes place when those privileged with confidential information about important events use the special advantage of that knowledge to reap profits or avoid losses on the stock market, to the detriment of the source of the information and to the typical investors who buy or sell their stock without the advantage of "inside" information.
Insurance Fraud: A variety of fraudulent activities committed by applicants for insurance, policyholders, third-party claimants, or professionals who provide insurance services to claimants. Such fraudulent activities include inflating or "padding" actual claims and fraudulent inducements to issue policies and/or establish a lower premium rate.
Kickbacks: The return of a certain amount of money from seller to buyer as a result of a collusive agreement.
Mail Fraud: Mail fraud occurs when the U.S. Mail is used in furtherance of a criminal act.
Money Laundering: A process or series of actions through which income of illegal origin is concealed, disguised or made to appear legitimate to evade detection, prosecution, seizure and taxation. Illicit proceeds must be laundered to make it appear as though the funds were generated through some legitimate means. This allows criminals to enjoy the "fruits" of their criminal activity without raising suspicion.
Public Corruption: Public corruption involves a breach of public trust and/or abuse of position by federal, state, or local officials and their private sector accomplices. By broad definition, a government official, whether elected, appointed or hired, may violate federal law when he/she asks, demands, solicits, accepts, or agrees to receive anything of value in return for being influenced in the performance of their official duties.
Securities Fraud: Includes theft from manipulation of the market, theft from securities accounts, and wire fraud.
Tax Evasion: Fraud committed by filing false tax returns, or not filing tax returns at all.
Telemarketing Fraud: According to the U.S. Department of Justice, telemarketing fraud is any scheme to defraud in which the perpetrators use the telephone as the primary means of communicating with the potential victims of the scheme. Typical fraudulent telemarketers use multiple aliases, telephone numbers, and locations. They frequently change their product line, sales pitch, and recently many have moved their operations to Canada in response to effective U.S. law enforcement efforts.
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