1. Lecture 8: State-Corporate Crime, Crimes of Globalization, and Finance Crime (“Hybrid” White Collar Crime)
White collar crime

2. State-Corporate Crime
Crimes that result from the relationship between the policies of the state and the policies and practices of commercial corporations.

3. The Paradox: States rely on businesses to provide an economic base consistent with each government’s political policies.
Without policies that are supportive of economic activity, businesses will not be profitable and so will not be able to provide the economic support that the state desires.

4. State-Corporate Crime: An Example
State A seeks to attract investment from large corporations and offers new investors loans, guarantees, and other financial support on preferential terms; directly targeted granted and other subsidies; and, a purpose-built infrastructure to subsidize the set-up costs.
Once State A commits to this offer, it may be difficult to enforce local laws addressing pollution, health and safety, etc.

5. Crimes of Globalization
When global or international institutions adopt policies that:
Fail to address human suffering in the world, OR
Aggravate existing suffering.

6. Crimes of Globalization: A Case Study
The Oil-for-Food program was established by the United Nations in It was intended to allow Iraq to sell oil on the world market in exchange for food, medicine, and other humanitarian needs for Iraqi citizens without allowing Iraq to rebuild its military. The Program was created in response to arguments that Iraqi citizens were inordinately affected by international sanctions aimed at the demilitarization of Saddam Hussein’s Iraq (imposed after the first Gulf War).

7. Throughout its existence, there were accusations that some of its profits were unlawfully diverted to the government of Iraq and to UN officials. One of the earliest allegations of wrongdoing surfaced on January 25, 2004 when al Mada, a daily newspaper in Iraq, published a list of individuals and organizations alleged to have received oil sales contracts via the UN’s Oil-for-Food Program. The list came from over 15,000 documents which were reportedly found in the state-owned Iraqi oil corporation, which had close links to the Iraqi Oil Ministry.

8. Allegedly, the scheme worked as follows: individuals and organizations sympathetic to the Iraqi regime, or those just easily bribed, were offered oil contracts through the Oil-for-Food Program. These contracts for Iraqi oil could then be sold on the open world market and the seller was allowed to keep a transaction fee, said to be between $0.15 and $0.50/barrel (0.94 and 3.14 $/m³) of oil sold. The seller was then to refund the Iraqi government a certain percentage of the commission.

9. Indeed, evidence acquired after the United States invasion of Iraq led to accusations that skimmed profits were being used to buy influence at the UN and with UN Secretary, Kofi Annan himself. Additionally, according to an interim report released on February 23, 2005, much of the food aid supplied under the Program was “unfit for human consumption.” The report concluded that the head of the Program had accepted nearly $150,000 in bribes over the course of the Program.

10. After numerous investigations and criminal indictments, the Oil-for-Food Program was terminated in 2003.

11. Finance Crime
Large-scale illegality that occurs in the world of finance and financial institutions.
May be committed on behalf of major financial institutions or for the benefit of individuals occupying financially-privileged status.

12. Examples of finance crime include:
Taking advantage of unsophisticated borrowers with modest incomes (e.g., predatory lending practices)
Requiring mortgage lenders to maintain excessive balances in their escrow accounts
Accounting fraud
Money Laundering