WhiteCollar Organized Crime MAN3 Erlan Bakiev Ph D

White-Collar & Organized Crime MAN-3 Erlan Bakiev, Ph. D.

White-Collar & Organized Crime

Session Summary ü This session is an overview of white-collar, corporate, and organized crimes. ü The session begins with the definitions and prevalence of white-collar crime. ü This is followed with a discussion of corporate crime, as well as theories that address corporate crime. ü This section concludes with a discussion of law enforcement’s response to corporate crime.

Session Summary ü The second half of the Session discusses organized criminal groups both nationally and internationally. ü This is followed with a discussion of theoretical implications regarding organized crime. ü The Session concludes with a discussion of law enforcement’s response to organized crime. ü After reading this chapter, students should be able to: ü Define white-collar crime

Session Summary ü Discuss the difference between occupational crime and corporate crime ü Understand theories regarding corporate crime ü Discuss law enforcement’s response to corporate crime ü Define organized crime ü Discuss organized crime both nationally and internationally ü Explain theories of organized crime ü Discuss law enforcement’s response to organized crime

Introduction ü People who wear white collars to work steal and kill, but they use guilt and deceit. ü More money is stolen and more people die every year as the result of scams and willful illegal corporate activity than as a result of the activities of street criminals.

The Concept of White-Collar Crime ü The white-collar crime is definedas an illegal act or series of illegal acts committed by nonphysical means and by concealment or guile, to obtain money or property, or to obtain business or personal advantage.

The Concept of White-Collar Crime ü The term white-collar crime was coined in the 1930’s by Edwin Sutherland who defined it as crime committed by a person of respectability and high social status in the course of his occupation.

How much White-Collar Crime is There? ü White-collar crimes are absent from the yearly crime tally of the UCR and NCVS. ü Tallies of occupational and corporate wrongdoings are collected and distributed each year by state and federal regulatory agencies such as the FTC and the FTC.

How much White-Collar Crime is There? ü Many of the more serious white-collar crimes are incredibly complex and require thousands of person hours and millions of dollars to unravel, thus making them difficult to equate with street crime in terms of being able to neatly discover, tabulate, and report them.

Occupational Crime ü Occupational crime: Crime committed by individuals in the course of their employment. ü Professional occupational crime: Crimes committed by professionals such as physicians and lawyers in the course of their practices. ü It seems that every occupational category generates a considerable number of criminals and the higher the prestige of the occupation, the more their criminal activities cost the general public.

Causes of Occupational White-Collar Crime: Are they Different? ü According to Hirschi and Gottfredson, occupational crime differs crime common street crime in that it is committed by people in a position to do so. ü The motives of occupational criminals are the same as those of street criminals.

Causes of Occupational White-Collar Crime: Are they Different? ü A study of federal white-collar criminals showed that most of them were much less involved in crime and deviance than street offenders, that chronic white-collar offenders were similar to street criminals in their patterns of prior deviance. ü High status white-collar criminals are about 10 years older than the average street criminal, and males are overrepresented.

Corporate Crime ü Corporate crime: Criminal activity on behalf of a business organization. ü Crimes of fraud, concealment, and misrepresentation continue to victimize all sorts of groups and individuals in society.

The S&L Scandal: The Best Way to Rob a Bank is to Own One ü The savings and loan scandal of the 1980’s amounted to one of the most costly crime sprees in American history and is likely to cost the U. S. taxpayer up to $473 billion.

The Enron Scandal: Crooks Cooking Books ü The Enron scandal did tremendous damage to the economy, and created a crisis of investor confidence the likes of which hasn’t been since the Great Depression.

Theories about the Causes of Corporate Crime ü Those who hold classical assumptions about human nature have no difficulty in appreciating the motivation for individuals to engage in corporate crime. ü The prevalence of corporate crime can also be appreciated given the weakness of formal and informal controls over business activities and the lenient penalties imposed.

Theories about the Causes of Corporate Crime ü General explanations that invoke assumptions about human nature or about the economic system do not explain differences between companies and individuals who do and do not participate in illegal activities. ü Strain can be evoked as a motive for corporate crime but not for the choice to engage in it.

Corporate Characteristics ü There are criminogenic corporations with a tradition of wrongdoing. ü Newcomers entering such corporate environments are socialized into the prevailing way of doing things.

Individual Characteristics ü It appears that people who choose business careers tend to have lower ethical and moral standards than people who choose other legitimate careers. ü Efforts to differentiate between offenders and non-offenders in the white-collar world have focused largely on locus of control, moral reasoning, and Machiavellianism. ü The literature indicates that those who engage in corporate crime tend to have an external locus of control.

Individual Characteristics ü The lower the stage of moral development, the more likely the person will engage in corporate wrongdoings. ü Machiavellianism is the unprincipled and uncaring manipulation of others for personal gain.

Law Enforcement Response to Corporate Crime ü Corporate crime is monitored and responded to by a variety of criminal, administrative, and regulatory bodies, but very few corporate crooks are ever the recipients of truly meaningful sanctions. ü Great wealth does confer a certain degree of immunity from prosecution and/or conviction.

Law Enforcement Response to Corporate Crime ü The Sarbanes-Oxley Act requires company CEO’s and chief financial officers to personally vouch for their companies’ financial disclosures, ensuring that such people can no longer assume a stance of plausible deniability. ü The White-Collar Crime Penalty Enhancement Act creates new substantive offenses, significantly enhances financial and incarceration penalties, and relaxes some procedural evidentiary requirements for prosecutors.

What is Organized Crime? ü The major difference between corporate and organized crime is that corporate criminals are created from the opportunities available to them in companies organized around doing legitimate business, whereas members of organized crime members must be accomplished criminals before they enter such groups, which are organized around creating criminal opportunities.

What is Organized Crime? ü Organized crime: A continuing criminal enterprise that works rationally to profit from illicit activities that are often in great public demand. Its continuing existence is maintained through the use of force, threats, and/or corruption of public officials. ü La Cosa Nostra (LCN): Commonly referred to as the Mafia.

Structure ü LCN are structured in hierarchical fashion reflecting various levels of power and specialization, with a national ruling body known as the Commission. ü At the top of the family is the boss. ü Beneath the boss is a counselor and an under -boss. ü Beneath the under-boss are the lieutenants. ü Below the lieutenants.

Structure ü Membership in the family entitles the member to run his own rackets using the family’s connections and status. ü Corporate model: A formal hierarchy in which the day-to-day activities of the organization are planned and coordinated at the top and carried out by subordinates. ü The feudal model of the LCN views it as a loose connection of criminal groups held together by kinship and patronage.

Figure 15. 1 Hierachical Structure of a Typical Organized Crime Family Adapted from President's Commission on Organized Crime, 1986, p. 469.

Continuity ü Organized crime is like a mature corporation in that it continues to operate beyond the lifetime if its individual members. Membership ü LCN is restricted to males of Italian descent of proven criminal expertise.

Criminality ü Most of organized crime’s income is derived from supplying the public with goods and services not available in the legitimate market, such as drugs, gambling, and prostitution.

Organized Crime in the United States ü Most organized crime scholars believe that the phenomenon is a normal product of the competitive and free-wheeling nature of American society. ü The Tammany Society began as a fraternal and patriotic society, bust soon evolved into a corrupt political machine consisting mostly of ethnic Irishmen.

Organized Crime in the United States ü The Volstead Act, or Prohibition, ushered in a vicious 10 -year period of crime, violence, and political corruption as gangsters fought over the right to provide the drinking public with illicit alcohol. ü The Capone era provided America with its stereotypical image of organized gangsters. ü The Americanization of LCN saw the emergence of the five New York LCN families active today.

Reaffirming the Existence of Organized Crime ü In 1950, the Kefauver Committee was formed to investigate organized crime’s involvement in interstate commerce. ü The Apalachin meeting in 1957 provided further evidence for the existence of a national and coordinated crime syndicate, and once again riveted national attention.

Reaffirming the Existence of Organized Crime ü The Mc. Clellan Commission was formed in 1956 to look into financial irregularities in the Teamster’s Union, but the star witness was a drug trafficker and made man in the Genovese Family named Joe Valachi. ü Valachi decided to testify as to what he know about the mafia in front of the Mc. Clellan Commission.

The Russian “Mafiya” ü The Russian “Mafiya” is a catch-all phrase for a group of organized gangs that many experts consider to be the most serious organized crime threat in the world today.

The Russian “Mafiya” ü ROC has existed since at least the 17 th century and that it became firmly entrenched in Russian society in the 1920’s. ü ROC is the biggest factor threatening Russia’s democratization, economic development, and security. ü Russian organized crime metastasized to the United States with the influx of Russian immigrants in the 1970 s and 1980 s.

The Japanese Yakuza ü Japanese organized crime (JOC) groups are probably oldest and largest in the world. ü The official Japanese term for organized criminals is Boryokudan, but they are more commonly referred to as yakuza. ü Members of the JOC groups are recruited from the two outcast groups in Japanese society.

The Japanese Yakuza ü The burakumin (部落民) ü Japanese born Koreans ü The Yakuza are not shadowy underworld figures, their affiliations are proudly displayed on insignia worn on their clothes and on their offices and buildings, and they publish their own newsletter.

Theories about the Causes of Organized Crime ü Some argue that we create our own organized crime problem by creating laws that prevent members of the public from acquiring goods and services they desire and demand. ü Early theories of organized crime relied on the anomie/strain tradition.

Theories about the Causes of Organized Crime ü Ethnic succession theory: Upon arrival in the United States, each ethnic group was faced with prejudicial and discriminatory attitudes that denied them legitimate means to success. ü Organized crime affords those who commit it he rewards for relatively little risk. . ü Almost all mob members live in neighborhoods where they were constantly surrounded by criminals and criminal values.

Theories about the Causes of Organized Crime ü It would not be too much of a stress to posit that many men attracted to the outlaw lifestyle are predatory psychopaths and sociopaths. ü There is no reason to assume that the rank and file gangster in any different in background and personal characteristics than the ordinary unaffiliated street criminal, or the street criminal affiliated with ad hoc criminal gangs.

Law Enforcement’s Response to Organized Crime ü The Organized Crime Control Act (OCCA) and the Bank Secrecy Act (BSA) both passed in 1970. ü The witness immunity provision allows federal prosecutors to grant lower level members of organized crime groups immunity from prosecution for their own crimes in exchange for testimony incriminating higher-level members.

Law Enforcement’s Response to Organized Crime ü Witness protection program: Provides for around-the-clock protection while witnesses are awaiting court appearances. After testifying, witnesses in the program are provided with new identification documents, employment, housing, and other assistance until they become established.

Law Enforcement’s Response to Organized Crime ü The RICO statutes address ordinary crimes, but they differ from traditional statutes relevant to the same crimes in that they specifically target the continuing racketeering activities of organized criminals. ü The primary function of the BSA is the prevention and detection of money laundering.