1. Chapter 12
Enterprise Crime: White-Collar Crime,
Cyber Crime, and Organized Crime

2. Enterprise Crime
Crimes of the marketplace
White-collar crime: Illegal activities of people and institutions who profit through legitimate business transactions
Cyber crime: Involves people using instruments of modern technology for criminal purposes
Organized crime: Illegal activities of people and organizations, which profit through illegitimate business enterprise

3. Figure 12.1 Enterprise Crime: White Collar, Cyber Crime, and Organized Crime

4. White Collar Crime
Edwin Sutherland coined the phrase “white collar crime” to describe criminal activities of the rich and powerful
Contemporary definitions of white collar crime include both middle-income persons and corporate titans
Costs of white-collar crime are in the hundreds of billions of dollars and exceed any other type of crime
White-collar crimes both kill people and damage property

5. Components of White-Collar Crime
Stings and Swindles
A white collar crime in which people use their institutional or business position to bilk people out of their money
Swindlers often target elderly and religious organizations
Religious swindles
Use of religion and creation of fake religious organizations to bilk those out of money (Stelter and Vision Oil Company)

6. Components of White-Collar Crime
Chiseling
Involves cheating an organization, its consumers, or both on a regular basis
Bogus auto repairs
Professional chiseling: Use their position to chisel clients (doctors and pharmacists)
Securities fraud: Commodity and stock markets deceptions
Churning (repeated unnecessary buying/selling)
front running (placing personal orders ahead of clients)
bucketing (skimming profits)
insider trading ( information giving the trader unfair advantage)

7. Components of White-Collar Crime
Individual Exploitation of Institutional Position
Individuals’ exploiting their power or position in organizations to take advantage of other people who have an interest in how that power is used.
Occurs when the victim has a clear right to expect a service and offender threatens to withhold service unless an additional payment or bribe is forthcoming.

8. Components of White-Collar Crime
Influence Peddling and Bribery
Taking of “kickbacks” in return for contracts or favors
Influence peddling in government: acceptance of bribes for favor (Robin HUD and police examples)
Influence peddling in business: payoffs for business contracts (Gulf Oil and Lockheed)
Congress pas the Foreign Corruption Practices Act in 1977 in response to such violations

9. Components of White-Collar Crime
Embezzlement and Employee Fraud
Blue-collar fraud: Acts of pilferage
Management fraud:
Converting company assets for personal benefit
fraudulently receiving bonuses
fraudulently increasing personal holdings of company stock
manipulating of accounts
concealing unacceptable performance form stockholders

10. Components of White-Collar Crime
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11. Components of White-Collar Crime
Client Fraud
Health care fraud: Includes ping-ponging, Medicare/Medicaid frauds, kickbacks and self-referrals
Bank fraud: Includes check kiting, forgery, and illegal transactions
Tax evasion: Tax fraud by deliberately underreporting taxes

12. Components of White-Collar Crime
Corporate Crime (Organizational Crime)
Actual authority: Occurs when a corporation knowingly gives authority for an employee to act
Apparent authority: Occurs when third party reasonably believes the agent has the authority to act
Illegal restraint of trade and price fixing: Involves a scheme to stifle competition and create a monopoly (Sherman Antitrust Act)
Tying arrangement: Requiring customers to use other services connected to corporation
Group boycotts: Of retail stores not complying with rules or wishes
Price fixing: Conspiracy to set and control prices
Deceptive pricing: Occurs when corporations use incomplete or misleading information to fulfill contracts (defense contractors)
False claims and advertising: Involves unjustified claims about a product (telemarketing)
Worker Safety/Environmental crimes: includes unsafe working conditions and pollution

13. CNN Clip - Tyco CEO On Trial

14. Causes of White- Collar Crime
Greedy or Needy
Motivations include a need to keep or improve a job, satisfy egos, or keep up with inflation to support a family
Corporate Culture Theory
Involves placing excessive demands on employees
Self-Control View
Quick benefits with minimal effort

15. White-Collar Law Enforcement Systems
Controlling White-Collar Crime
Compliance strategies: Involve cooperation and self-policing among businesses (SEC and FDA)
Sarbanes-Oxley legislation (SOX) limits nonaudit services that auditing firms can perform publicly
Compliance strategies create marketplace incentives to obey the law and avoid the stigmatization of their crimes
Deterrence strategies: Involve detection and punishing the offenders

16. White-Collar Law Enforcement Systems
Is the Tide Turning?
Growing evidence that white-collar crime deterrence strategies have become normative
Get-tough approach appears to be affecting all classes of white-collar criminals
U.S. Sentencing Commission increased penalties in April 2001

17. Internet Crime
Involves the use of computers to illegally take possession of information, resources, or funds
Distributing Sexual Material
Denial of Service Attack
Illegal Copyright Infringement (I.E. warez)
Internet Securities Fraud
Market manipulation: Pump and dump and cyber-smear
Fraudulent offerings of securities
Illegal touting
Identity Theft
Ponzi/Pyramid Schemes
Nondelivery of Goods/Services (I.E. Ebay)

18. Computer Crimes
Theft of services
Use of computer data for personal gain
Unauthorized use for financial processing
Illegally copying and selling of software
Use of viruses to destroy data

19. Computer Crimes
Common Techniques
The Trojan horse: reprogramming computers for illicit purposes
The salami slice: dummy account in company records
Super-zapping: bypassing antitheft standards
The logic bomb: secret programs for monitoring a company’s computer system
Impersonation: Unauthorized access to computer systems
Data leakage: Illegally obtaining data in small amounts
Computer virus: Worms intended to disrupt or destroy programs

20. Controlling Cyber Crime
Counterfeit Access Device and Computer Fraud and Abuse Law (1984) and the National Information Infrastructure Protection Act (NIIPA) 1996
Controlling Internet Crime
Identity Theft and Assumption Act-1998
Creation of working groups
Internet Fraud Complaint Center
Private security companies

21. Organized Crime
Characteristics of Organized Crime
Conspiratorial activity
Economic gain is the primary goal
Not limited to illicit services
Employs predatory tactics
Effective control of its members
Mafia is a stereotype for organized crime
Terrorism is not associated with organized crime

22. Organized Crime
Activities of Organized Crime
Narcotics distribution
Gambling
Prostitution
Loan-sharking
Pornography
Theft-rings

23. Organized Crime
The Concept of Organized Crime
Mafia: first organized in Italy/Sicily
Alien Conspiracy Theory: national syndicate of 25 or so Italian-dominated crime families called La Cosa Nostra
Contemporary Organized Crime Groups: include Chicano, Cuban, and Asian racketeers
Eastern European Crime Groups: Include Russian and other groups (i.e. YACS)

24. Organized Crime
Controlling Organized Crime
In 1970 Congress passed the Organized Crime Control Act (Title IX-RICO)
Influenced and Corrupt Organization Act (RICO) created new categories of offenses:
Deriving income from racketeering
Acquiring an interest or control over an enterprise engaged in interstate or foreign commerce
Conspiring to make income, loans, or conducting business through racketeering means
Enterprise theory of investigation (ETI): model used by the FBI as an investigative tool that focuses on the structure of the criminal enterprise rather than on the criminal acts

25. Organized Crime
The Future of Organized Crime
Traditional crime syndicates are declining
Age of reining family heads
Lack of skill of younger generation
Active enforcement policies
Changing values in society