White Collar

and
Corporate Crime
.
White Collar and Corporate Crime
• Costs 30 to 40 times as much as traditional
crime
• Enron and World.com alone ran up losses in
excess of $100 Billion
• Individuals involved are rarely caught, and if
caught are rarely convicted, and if convicted
generally receive light sentences (the more
you steal, the less severe the penalty!)
• White collar crime is a high returns/low risk
venture
 Pace and Styles: White Collar and
Corporate Crime Components
1. Premeditated intent to commit wrongful acts
(note - not always a theft)
2. Premeditated intent to hide the acts from the
public and legal authorities (covert)
3. Involves a violation of a relationship of
trust/trust exploitation
 Pace and Styles, continued:
4. Involves some measure of creativity
5. Reliance on victim:
a. Ignorance
b. Carelessness
c. Irresponsibility, and/or
d. Greed
 Prosecutorial Challenges
1. Difficult and costly to prosecute, so cases are often not pursued, and if
pursued hard to win:
a. often complex; difficult to explain to the jurors
b. very easy for defense to confuse jurors
c. defendants are often “upstanding citizens”
2. To increase probably of prosecutorial success, obtain the cooperation
of/grant immunity to “the mark,” but pragmatic and ethic issues.
3. To increase the probably of prosecutorial success, obtain the
cooperation of/grant immunity to the co-conspirators, but pragmatic
and ethical issues.
 Ermann and Lundman typology
Deviance Against Owners
Deviance Against Employees
Deviance Against Customers
Deviance Against the Public
 Deviance Against Owners:
* Planned bankruptcy:
- Constitution Foods, Lumber, and Mint
- Travel Chalet
* Land-flipping (Commonwealth bank)
* Slip-sliding/debt hiding (Enron)
* Sand-bagging:
- Equity Funding
- Wells Fargo
* Bank fraud (owners, employees, customers
and public all potentially harmed)
 Deviance Against Employees
* Unsafe working conditions (OSHA)
– Coal mines
– Asbestos
– Meat packing plants
* Raiding pension funds
– Enron
– Hoffa
– Deposit/loan kickback schemes
 Deviance Against Customers
*Filing false financial reports (Enron; Equity
Funding)
*Sale of defective products (Corvair; Pinto)
*Dumping defective products
*Manufacturing & sale of counterfeit products
 Liability – Corporate Entities
Santa Clara Co. v. Southern Pacific Railroad (1886)
Indiana v. Ford Motor Company (1980)
• Corporations can be prosecuted for any crime
• Corporations are civilly and criminal
accountable for their actions
• Corporations can be prosecuted for failing to
warn user of their products’ dangers (assuming
that corporate executives are aware of those
dangers/no internal concealment efforts)
 Liability – Corporate Officials
U.S. v Park (1975)
Corporate officials can be held personally liable.
Criminally and civilly, for their corporations’
misconduct IF, they were in a position where
they could have prevented/corrected the matter
in question and failed to do so. IF, they were
involved in the operations and/or management
of the criminal enterprise
 Liability – Stock Holders
Can the corporate veil be pierced?
*Stockholders cannot be held criminally liable
for corporate misdeeds
* No clear precedent per stockholder civil
liability for corporate misdeeds
Liability – Stock Holders…continued
Corporations fight stockholder civil liability because:
• Stockholders (the owners) would demand to see
financial statements, memos, show up at meetings
and ask questions, review management actions.
Easier for management to move without this kind
of oversight
* It would be harder to get investors if investing
included civil liability risks due to corporate
misconduct
 Deviance Against Customers
*Stock and bond fraud (Ponzi scams; insider
trading)
*Bid rigging and price fixing (I-80; TVA scandal)
 Deviance Against the Public
* Environmental degradation (Bhopal: Love
Canal; Rocky Flats)
* Identity theft
* General financial fraud (land fraud, oil fraud,
medical fraud, contract fraud)
* Money laundering
* Tax fraud/tax evasion (Times Mirror)
 Chandler-Times Mirror Tax Evasion Fraud
• Chandler Trust buys $220 M of Times Mirror stock
• Value increases to $380M and they decide to sell
• To sell means $160 M in profits, minus $75 M in taxes
• Times Mirror learns of Chandler interest to sell and wants to buy
• FTC 80% joint venture dissolution asset transfer rule
• TMCT is created – each puts up $475 M (note that 80% is $380 M)

* Times Mirror puts up $475 M in cash

* Chander puts up $475 M in stock
• TMCT is dissolved and per the 80% rule:
* $380 M of Times Mirror cash goes to Chandler (and Chandler
keeps $90 M of the stock it put up but didn’t want to sell)
* $480 M of Chandler owned Times Mirror stock goes to Times
Mirror (and Times Mirror keeps $90 M in cash it put up)
 White Collar/Corporate Crime in
Contemporary Society
• There is an alliance between power and
money, and there always have been
• White collar/corporate crime a normal part of a
capitalistic society/any society that values wealth
• Multi-sector, multi-generational cultural changes
needed
• Laws and enforcement still needed
Thank you for coming today
ceskridge@unl.edu