Trusted Criminals

WHITE COLLAR CRIME IN CONTEMPORARY SOCIETY 4TH ED.

CHAPTER 7ENTERPRISE CRIME,

CONTREPRENEURIAL CRIME, AND TECHNOCRIME

Trusted Criminals

Designed by: Jordan Land, M.S.

Enterprise Crime: Organized Crime and White Collar Crime

Enterprise refers to the interrelated dealings of legitimate businesspeople, political officials, and syndicated racketeers

Organized crime refers to any organized illegal activity, including organized professional theft, business theft, terrorist groups, motorcycle gangs, and “racketeers” who extort money by intimidation and violence


Organized crime is most commonly associated with the Mafia or La Cosa Nostra, an alleged national syndicate of criminals of Italian decent engaged in systematic illegal enterprises involving: The sale and distribution of illicit drugs Gambling Prostitution Loan sharking Labor racketeering


Perhaps the easiest solution is to refer to the popular image of Mafia-type syndicates, as syndicated crime and use the term organized crime more broadly

Several features are commonly associated with syndicated crime: It’s a self perpetuating organizational with a

hierarchy A limited membership Specialized roles Particular obligations

Omerta


Several obligations that are commonly associated with syndicated crime: Omerta- vow of secrecy Conspire to monopolize illegal enterprises by

threat of or actual use of: Force Violence Intimidation

Seek to protect itself from prosecution by corrupting the political and legal system


Legitimate businesses and syndicated crime engage in many of the same activities but in ways that are somewhat arbitrarily defined as legal or illegal

Syndicated crime performs important functions for corporate enterprises and the capitalist political economy Syndicated crime and capitalist institutions

coexist profitably


Perhaps the most accurate assessment of the economic impact of syndicated crime acknowledges that it cuts both ways

It benefits some elements of the capitalist political economy while harming others

The Relation between Governmental Crime

and Syndicated Crime

The survival of syndicated crime may depend on the cooperation or connivance of some governmental officials

Investigations have uncovered evidence linking governors, state legislators, judges, and various other government officials with syndicated crime

On the national level, ties between government agencies and syndicated crime go back at least as far as the early half of the 20th century

The Relation between Governmental Crime

and Syndicated Crime

Lucky Luciano assisted the U.S. Navy Intelligence in preventing sabotage and unrest on the New York docks

CIA enlisted the cooperation of syndicated crime in its attempts to overthrow Fidel Castro

Organized crime must be understood both as a product of a capitalist economy and as the illegal activity of a network of interdependent businesspeople, government officials, and racketeers

Historical Roots of Organized Crime

Piracy might be regarded as the first form of organized crime

John Hancock apparently operated an organized crime cartel that engaged in large-scale smuggling in the pre-Revolutionary colonies

The syndicated form of organized crime is often considered to have its roots in the Mafia, which emerged in southern Italy


Italian-American syndicated crime was widely regarded as the dominant form of authentic organized crime in the United States in the 20th century

Prohibition provided an ideal opportunity for the dramatic growth and expansion of syndicated crime because it created enormous demand for a product, alcoholic beverages, in the absence of a legal supply The repeal of Prohibition hardly diminished the

potency of syndicated crime


The objective of those involved in syndicated crime thus parallels those of individuals in legitimate occupations, and syndicated crime is simply seen as an unorthodox form of white collar crime

The Relation between Syndicated Crime and White Collar Crime

One thesis concerning the connections between syndicated crime and white collar crime suggests that the methods used to establish the great industrial empires and sprawling Western ranches of the 19th century were fundamentally no different from the methods used by 20th century mafiosi and syndicated crime members The 19th century Robber Barons and cattle

barons were the forerunners of 20th century organized crime


The general public perception of syndicated crime has in fact been somewhat ambivalent

Syndicated crime mobsters do not enjoy the same status of respectability that white collar offenders do They are more vulnerable to:

Suspicion Investigation Conviction


Legitimate businesses provide both a front and an important tax cover for illegal activities

They provide employment for associates and relatives who are on probation and parole

Altogether, increasing involvement with legitimate business can reduce the exposure of syndicated crime figures to prosecution and may also reflect an aspiration for greater respectability

Hazardous Waste Disposal

The business of disposing of toxic waste has been heavily infiltrated by syndicated crime because of its longstanding domination of the garbage-carting and disposal business

The illegal disposal of hazardous waste costs only a fraction of the cost of safe and legal disposal

Less than 20% of these wastes are disposed of properly

Hazardous Waste Disposal

Illegally disposed of hazardous waste endangers the health of people exposed to it

Corporations that generate hazardous waste strongly lobbied against laws that would impose substantial liability on them for the effects of improper or illegal disposal

This activity is an especially clear example of a hybrid type of white collar/organized crime

The Relations between Syndicated Crime and Finance Crime

The theft and manipulation of stocks and bonds by syndicated crime has been a major problem since the early 1970s

The longstanding practice of laundering the huge sums of money generated by illegal enterprises obviously requires some complicity on the part of banks, which benefit from these large deposits Syndicated crime outfits have had various forms of

suspect dealings with financial institutions and have sometimes infiltrated them

The Relations between Syndicated Crime and Finance Crime

Many connections exist between organized crime and white collar crime and the boundary lines between them have blurred

Donald Cressey speculated that at some point we would no longer be able to tell the difference between white collar crime and organized crime

Contrepreneurial Crime: Professional Criminals and White Collar

Crime

A professional criminal is anyone who engages in criminal activity regularly It has been used interchangeably with the term

career criminal

Professional criminals attempt to minimize the risk of arrest, prosecution, and imprisonment by carefully planning their crimes, avoiding violence, and putting in the “fix” with corruptible law enforcement and political officials

Historical Origins of Professional Crime

Origins of professional crime have been traced back to European feudalism when a certain proportion of the newly disenfranchised turned to: Robbery, poaching, banditry, and other outlaw

practices Jesse James & John Dillinger have been regarded

as one class of professional criminals

The Relation between Professional Crime and White Collar Crime

Several parallels exist between professional criminal and white collar offenders Both are prepared to take risks to make money Both are prepared to violate the law to maximize

profit Both seek to immunize themselves by bribing or

financing the campaigns of politicians or becoming informants for law enforcement officials

The classic professional criminal relies on skill and planning rather than direct force or intimidation to achieve an illegal objective

Both need to convey an aura of respectability and inspire some level of trust to carry out their crimes

The Relation between Professional Crime and White Collar Crime

Professional 1. More accepting of

their outlaw status2. More likely to make

a deliberate decision to become involved in criminal activities

3. Attempts a pure theft of money from a vulnerable victim or mark

White collar1. Regard themselves

as businesspeople 2. May drift into

fraudulent enterprises

3. Defrauds by giving something of little or no real value in return for money

What are the differences between the classical professional criminal and the contrepreneurial white collar criminals?

Fraudulent Businesses: Swindles, Scams, and Rackets

A vast number of enterprises are swindles, scams or rackets that annually cost consumers, investors and other unwitting parties billions of dollars

Are these activities properly classified as white collar crime? In some cases, the activity is more appropriately

described as organized crime or professional crime In other cases, a designation of white collar crime is clearly

justified

Fraud

The two key elements of fraud in legal terms are: Stealing by deception

Reports of fraud appear early in recorded history

Ex. In the 4th century BC in Greece, a ship owner attempting to defraud someone by seeking a cash advance for a ship laden with corn when all along the intent was to scuttle the ship instead of delivering the corn

Fraud

Other contemporary swindles and schemes include: Phony charities, long lost-heir searches, magazine

subscription rackets, referral schemes, travel deceptions, etc.

Consumer fraud has been understudied by criminologists despite the fact that it generates staggering annual losses that are estimated to be as high as $100 billion annually

Fraudulent businesses prey upon human vanity, fantasy, loneliness, insecurity and fear

Ponzi and Pyramid Schemes

In 1919, Charles Ponzi began advertising that he could return large profits to investors because he had learned how to take advantage of the international currency and postage markets

The claim was that international postal reply coupons purchased in a poor country such as Italy could be redeemed at a much higher rate in the United States


Ponzi was not investing the moneyHe was spending it on himself and paying off

early investors with some part of the money pouring in from newer investors

Eventually, the scheme was exposed and Ponzi went to prison High returns are promised Some early investors may receive payoffs, but

most of the invested money is spent on a lavish lifestyle for the perpetrators


March 12, 2009, Bernard L. Madoff pleaded guilty to 11 criminal counts in relation to a Ponzi scheme which the government claims involved $65 billion

The Madoff Ponzi scheme was surely the largest in history to date

Pyramid scheme is a special variant of a Ponzi scheme

Investment Frauds

Losses due to investments in fraudulent schemes and securities are especially widespread and substantial

By some estimates, Americans lose more than $2 billion annually by investing in low-price penny stocks

In recent years, fraudsters have been convicted in cases involving as many as 10,000 investors, and hundreds of millions of dollars in losses, in frauds involving bonds supposedly backed by a collection agency and the financing of leases on office equipment

Investment Frauds

The losses due to all such schemes are dwarfed by the losses to investors as a consequence of massive accounting fraud at Enron, WorldCom, HealthSouth and other major corporations

Home Improvement and Ownership Frauds

Some contractors are outright con artists

Many others are marginal contactors who mislead customers, do incomplete or shoddy work, and declare bankruptcy or engage in some other subterfuge to avoid settling claims

Builders, appraisers and mortgage brokers have conspired to sell poorly constructed homes at inflated prices with misrepresentation of tax obligations to prospective homeowners

Home Improvement and Ownership Frauds

In October 2008, Emmanuel Constant was accused of murder and torture in Haiti and was sentenced to 27 years in prison in connection with mortgage fraud using straw home buyers, falsified loan information, and inflated appraisals in Queens, NY

The FBI declared mortgage fraud as the fastest growing form of white collar crime in the early 2000s

Land Sale Frauds

In the 1920s, many people who bought “land” in Florida eventually discovered that their land was underwater

The basic scheme in these cases is to entice prospective retirees and other investors with some attractive brochures of beautiful developments complete with landscaping, gold courses, and lakes They use high pressure sales tactics to persuade

people to pay exorbitant prices for arid desert plots that turn out to be virtually worthless when promised development plans never materialize

Travel Scams and Time-Share Vacation Resorts

Millions of Americans receive postcards or e-mails informing them that they’ve won a glamorous vacation

If they respond to the inducements they are persuaded to pay a “travel club” or “service” fee before receiving their “prize”

The free vacation would turn out to have so many restrictions it would be useless to the recipient

Recipients often ended up with no vacation at all or with one for which they paid a substantial amount of money

Payday Loans, Debt Relief, and Credit Repair

Payday lenders operating online or from storefronts target people with modest incomes who need small loans to make it through till payday

Some debt relief companies advise consumers to stop making payments on their debt on the claim that they will negotiate settlements on favorable terms, but by extracting large fees directly from clients’ bank accounts, often put clients in a deeper hole

Some companies that offer to raise credit scores do so by falsifying the customer’s credit history—a form of fraud—and charge a hefty fee to do so

Employment Agency and Education-Related Scams

People have paid fees to “employment agencies” that guarantee them jobs. After sending in their money, many clients never hear from the agency again, or receive sloppily-prepared resumes or outdated lists of jobs or corporate contacts. In most cases, applicants do not obtain jobs

“Educational consultants” collect thousands of dollars in return for the false promise that the consultant will ensure their place in a school

Other scams exist involving diplomas, training, and financial assistance

Telemarketing or “Boiler Room” Scams

The National Consumers League estimated in a recent year that telemarketing frauds extract an average of $845 from each victim.

These operations may offer tempting investments, prizes, vitamins, etc.

Examples include enticements for “cash loans” in which callers are charged for generic information packages on how to apply for bank loans, “one-shot” credit cards, bogus health product promotions, and penny-stock offerings based on misleading information about new companies.

Schemes to Defraud the Wealthy

Middle-class people seeking a high return on their investments can be susceptible to fraud

Ex. About 6,000 people who invested $350 million in Colonial Realty in the 1980s lost much of their money when the operation turned out to be fraudulent

Some victims of investment fraud are quite wealthyEx. A New York college student persuaded 100

well-off individuals to invest millions with the investing entity he established and instead of investing the money, he spent most of it on a lavish lifestyle

Technocrime, Including Computer Crime

Technocrime is any crime facilitated by any sophisticated form of technology

It has been described as a subset of or new form of white collar crime

But not all illegalities committed with technology are white collar crimes. Ex.—technocrime committed by spies or terrorists, the use of computers for disseminating child pornography, or the use of the internet by pedophiles to solicit victims

Computer Crime

Computer crime is an illegal act wherein computers and computer technology are used to commit the offense

A computer may be the tool of a crime or the target of a crime

Categories include internal computer crimes (sabotaging programs), telecommunications crimes (hacking and illegal bulletin boards), computer manipulation crimes (embezzlements and frauds), computers in support of criminal enterprises, and hardware/software thefts

Computer Crime

An increasing proportion of theft today takes the form of stealing information, pirating software and electronic products, and copying intellectual property

An estimated 1/3 of business software is pirated

Business transactions carried out on the internet have generated broad new opportunities for criminal conduct

The relative anonymity of the internet can facilitate crime

Computer Crime

Businesses have become increasingly concerned about “click fraud”

Advertisers must pay for each “click” on their ads, but believe that in some cases competitors are deliberately driving their advertising costs up by fraudulent clicking

The internet has also facilitated identity theft and the theft of confidential information

Computer Crime

A considerable amount of computer crime or cybercrime is carried out by or through businesses or by people within the context of a legitimate occupation, victimizing consumers and individuals

The use of computers greatly increases the potential size and scope of thefts

It also enables people working in certain occupations to use a “salami technique”— that is, to steal small amounts of assets from many sources

The Law and Computer Crime

Despite increasing publicity about computer crimes, prosecutions for such crimes are relatively few in number, constituting a fraction of prosecutors’ caseloads

The single most common charges pertain to child pornography

Traditional criminal laws are not always applicable to crimes committed by manipulation of electronic software

The Law and Computer Crime

Most state and federal laws applicable to computer crime came into being in the 1980s

1986—Congress passed a computer Fraud and Abuse Act, which intended to make the use of computers for fraud and theft a felony

1996—passage of the National Information Infrastructure Protection Act eliminated some of the common defenses in computer crime cases

2000—Internet False Identification Prevention Act2000—USA Patriot Act added amendments to the

1996 law

The Pursuit of Computer Crime Cases

Investigation of computer crime require specially trained personnel and tend to be quite time consuming

Criminal justice agencies on all levels must devote more resources to technocrime

It is often necessary to resolve computer crimes privately and informally, in part because special complications arise if cases are pursued through the criminal justice system

Other Types of Technocrime

ATMs, telecommunications systems, facsimile machines and other forms of technology also provide a range of opportunities for misappropriation or theft

Advances in all forms of copying technology have provided new opportunities for organized and professional crime

Businesses of all sizes are victimized by technocrime, but commit some of it as well

Documents

Trusted Criminals