Chapter 12 Enterprise Crime WhiteCollar Crime Cyber Crime
Chapter 12 Enterprise Crime: White-Collar Crime, Cyber Crime, and Organized Crime
Enterprise Crime § § Crimes of the marketplace White-collar crime: Illegal activities of people and institutions who profit through legitimate business transactions Cyber crime: Involves people using instruments of modern technology for criminal purposes Organized crime: Illegal activities of people and organizations, which profit through illegitimate business enterprise
Figure 12. 1 Enterprise Crime: White Collar, Cyber Crime, and Organized Crime
White Collar Crime • Edwin Sutherland coined the phrase “white collar crime” to describe criminal activities of the rich and powerful § Contemporary definitions of white collar crime include both middle -income persons and corporate titans § Costs of white-collar crime are in the hundreds of billions of dollars and exceed any other type of crime § White-collar crimes both kill people and damage property
Components of White-Collar Crime • • Stings and Swindles § A white collar crime in which people use their institutional or business position to bilk people out of their money § Swindlers often target elderly and religious organizations Religious swindles § Use of religion and creation of fake religious organizations to bilk those out of money (Stelter and Vision Oil Company)
Components of White-Collar Crime • Chiseling § Involves cheating an organization, its consumers, or both on a regular basis § Bogus auto repairs § Professional chiseling: Use their position to chisel clients (doctors and pharmacists) § Securities fraud: Commodity and stock markets deceptions • Churning (repeated unnecessary buying/selling) • front running (placing personal orders ahead of clients) • bucketing (skimming profits) • insider trading ( information giving the trader unfair advantage)
Components of White-Collar Crime • Individual Exploitation of Institutional Position § Individuals’ exploiting their power or position in organizations to take advantage of other people who have an interest in how that power is used. § Occurs when the victim has a clear right to expect a service and offender threatens to withhold service unless an additional payment or bribe is forthcoming.
Components of White-Collar Crime • Influence Peddling and Bribery § Taking of “kickbacks” in return for contracts or favors § Influence peddling in government: acceptance of bribes for favor (Robin HUD and police examples) § Influence peddling in business: payoffs for business contracts (Gulf Oil and Lockheed) § Congress pas the Foreign Corruption Practices Act in 1977 in response to such violations
Components of White-Collar Crime • Embezzlement and Employee Fraud § Blue-collar fraud: Acts of pilferage § Management fraud: • Converting company assets for personal benefit • fraudulently receiving bonuses • fraudulently increasing personal holdings of company stock • manipulating of accounts • concealing unacceptable performance form stockholders
Components of White-Collar Crime • Weblink www. whistleblowers. org/
Components of White-Collar Crime • Client Fraud § Health care fraud: Includes ping-ponging, Medicare/Medicaid frauds, kickbacks and self-referrals § Bank fraud: Includes check kiting, forgery, and illegal transactions § Tax evasion: Tax fraud by deliberately underreporting taxes
Components of White-Collar Crime • Corporate Crime (Organizational Crime) § Actual authority: Occurs when a corporation knowingly gives authority for an employee to act § Apparent authority: Occurs when third party reasonably believes the agent has the authority to act § Illegal restraint of trade and price fixing: Involves a scheme to stifle competition and create a monopoly (Sherman Antitrust Act) § Tying arrangement: Requiring customers to use other services connected to corporation § Group boycotts: Of retail stores not complying with rules or wishes § Price fixing: Conspiracy to set and control prices § Deceptive pricing: Occurs when corporations use incomplete or misleading information to fulfill contracts (defense contractors) § False claims and advertising: Involves unjustified claims about a product (telemarketing) § Worker Safety/Environmental crimes: includes unsafe working conditions and pollution
CNN Clip - Tyco CEO On Trial
Causes of White- Collar Crime • • • Greedy or Needy § Motivations include a need to keep or improve a job, satisfy egos, or keep up with inflation to support a family Corporate Culture Theory § Involves placing excessive demands on employees Self-Control View § Quick benefits with minimal effort
White-Collar Law Enforcement Systems • Controlling White-Collar Crime § Compliance strategies: Involve cooperation and self-policing among businesses (SEC and FDA) § Sarbanes-Oxley legislation (SOX) limits nonaudit services that auditing firms can perform publicly § Compliance strategies create marketplace incentives to obey the law and avoid the stigmatization of their crimes § Deterrence strategies: Involve detection and punishing the offenders
White-Collar Law Enforcement Systems • Is the Tide Turning? § Growing evidence that white-collar crime deterrence strategies have become normative § Get-tough approach appears to be affecting all classes of whitecollar criminals § U. S. Sentencing Commission increased penalties in April 2001
Internet Crime • Involves the use of computers to illegally take possession of information, resources, or funds § Distributing Sexual Material § Denial of Service Attack § Illegal Copyright Infringement (I. E. warez) § Internet Securities Fraud • Market manipulation: Pump and dump and cyber-smear • Fraudulent offerings of securities • Illegal touting • Identity Theft § Ponzi/Pyramid Schemes § Nondelivery of Goods/Services (I. E. Ebay)
Computer Crimes § § § Theft of services Use of computer data for personal gain Unauthorized use for financial processing Illegally copying and selling of software Use of viruses to destroy data
Computer Crimes • Common Techniques § The Trojan horse: reprogramming computers for illicit purposes § The salami slice: dummy account in company records § Super-zapping: bypassing antitheft standards § The logic bomb: secret programs for monitoring a company’s computer system § Impersonation: Unauthorized access to computer systems § Data leakage: Illegally obtaining data in small amounts § Computer virus: Worms intended to disrupt or destroy programs
Controlling Cyber Crime • Counterfeit Access Device and Computer Fraud and Abuse Law (1984) and the National Information Infrastructure Protection Act (NIIPA) 1996 § Controlling Internet Crime • Identity Theft and Assumption Act-1998 • Creation of working groups • Internet Fraud Complaint Center • Private security companies
Organized Crime • Characteristics of Organized Crime § Conspiratorial activity § Economic gain is the primary goal § Not limited to illicit services § Employs predatory tactics § Effective control of its members § Mafia is a stereotype for organized crime § Terrorism is not associated with organized crime
Organized Crime • Activities of Organized Crime § Narcotics distribution § Gambling § Prostitution § Loan-sharking § Pornography § Theft-rings
Organized Crime • The Concept of Organized Crime § Mafia: first organized in Italy/Sicily § Alien Conspiracy Theory: national syndicate of 25 or so Italiandominated crime families called La Cosa Nostra § Contemporary Organized Crime Groups: include Chicano, Cuban, and Asian racketeers § Eastern European Crime Groups: Include Russian and other groups (i. e. YACS)
Organized Crime • Controlling Organized Crime § In 1970 Congress passed the Organized Crime Control Act (Title IX-RICO) § Influenced and Corrupt Organization Act (RICO) created new categories of offenses: • Deriving income from racketeering • Acquiring an interest or control over an enterprise engaged in interstate or foreign commerce • Conspiring to make income, loans, or conducting business through racketeering means § Enterprise theory of investigation (ETI): model used by the FBI as an investigative tool that focuses on the structure of the criminal enterprise rather than on the criminal acts
Organized Crime • The Future of Organized Crime § Traditional crime syndicates are declining • Age of reining family heads • Lack of skill of younger generation • Active enforcement policies • Changing values in society
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