WHITE COLLAR CRIME Lecture 12: Policing and Regulating White Collar Crime

State and Federal Enforcement Agencies Role of state agencies is limited. Federal agencies make the most substantial response: o U.S. Department of Justice: when criminal prosecution warranted.

o FBI: corporate scandals (e.g., Enron) o Some resources shifted to the war on terrorism. o Inspectors General: conduct audits and investigations of companies to which they are attached.

o U.S. Postal Inspection Service: frauds involving a postal element (e.g., mail fraud) o U.S. Secret Service, U.S. Customs, U.S. Marshals: counterfeiting or forgery of U.S. currency; money laundering; pursuit of white collar criminals o IRS Criminal Investigative Division: tax frauds

Regulation “Any attempt by the government to control the behavior of citizens, corporations, or subgovernments.” Allows for more flexible responses.

Economic Regulation Addresses market relations (e.g., securities, antitrust matters, interstate commerce) and the attempts to ensure stability.

Social Regulation Addresses harmful consequences to workers, consumers, and citizens. Less likely to serve business interests. Usually a government response to public pressure. Typically arises following a crisis, tragedy, or panic over some industrial condition or practice.

Selected Regulatory Agencies FDA – regulates, inspects, monitors, tests, and develops guidelines for a wide range of foods, drugs, cosmetics, and medical devices. FTC – primary weapon against monopolistic trusts (e.g., Standard Oil), also contends with unfair and deceptive business practices.

SEC – regulates and polices the securities markets. EPA – sets standards and monitors practices relating to air quality, water quality, and the disposal of various forms of hazardous wastes. OSHA – develops and enforces procedures and standards for workplace health and safety.

Evolution Of A Regulatory Agency: The SEC Between 1929 and 1941 the people of the United States suffered through the Great Depression, the deepest and most prolonged economic crisis in American history. Although many factors contributed to the economic depression, the crash of the stock market in October 1929 marked its beginning. Investors in securities, stocks, and bonds lost everything in the unregulated market.

Following the leadership of President Franklin D. Roosevelt, Congress passed new legislation known as the New Deal, designed to protect citizens from economic fluctuations. Two of these legislative remedies were the Securities Act of 1933 and the Securities Exchange Act of Both laws restored investor confidence in the market by providing more structure and government regulation.

The 1933 Securities Act required both businesses who desired to sell their stock and stockbrokers who sold stock to provide full information about stocks to potential investors. The Securities Exchange Act of 1934 prohibited certain activities in stock market trading and set penalties for violations. It also established the Securities and Exchange Commission (SEC) to oversee stock market trading.

These laws were based on two ideas: First, companies offering stock on the market had to tell the public the truth about their businesses and the risks involved in investing in them. Second, stockbrokers were to put the interests of investors above any other consideration and deal with them fairly and honestly.

The two 1930s acts remain the foundation of securities regulation. The SEC continues to be the top regulatory agency. The SEC oversees all key participants in the securities market including the stock exchanges, stock brokerage firms, the actions of individual stockbrokers, investment advisors, and mutual funds (groups of stocks in which people may invest). It is the overseer to protect investors against deceptive or illegal activities such as security fraud.