1. White-Collar Crime Chapter 20

2. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 2 WHAT IS WHITE-COLLAR CRIME? White-collar crime – A non-violent crime committed by an individual or a corporation that is a breach of trust, confidence, or duty. – Edwin Sutherland, is credited with having coined the term. – White-collar crimes are categorized by: Deceit Concealment Violation of trust Are not dependent on the application or threat of physical force or violence. Such acts are committed by individuals and organizations to obtain money, property, or services, to avoid the payment or loss of money or services, or to secure a personal or business advantage.

3. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 3 WHAT IS WHITE-COLLAR CRIME? White-collar crimes are a form of sophisticated theft. Historically, law enforcement has virtually ignored many aspects of white-collar crime. Convicted offenders have typically gotten off with a fine and a slap on the wrist by the courts, and jail time was seldom associated with white-collar crimes. During the past decade, white-collar crimes have become of greater concern to Americans.

4. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 4 WHAT IS WHITE-COLLAR CRIME? Notable Recent White-Collar Trials Enron Jim Bakker Ivan Boesky Michael Milken

5. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 5 IDENTIFYING WHITE-COLLAR CRIMES White-collar crimes fall into three major categories: – Occupational crimes, Corporate crimes, and Individual crimes. Occupational crime – The use of one’s occupation to illegally obtain personal gain. Corporate crime – Any activity that is undertaken by a corporation for its benefit but which violates the law. Individual crimes – Individuals acting on their own behalf or with others to defraud the public.

6. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 6 Categories of White-Collar Crime Herbert Edelhertz (1970) divided white-collar crimes into four distinct categories: – ad hoc violations – abuses of trust – collateral business crimes – con games Ad Hoc Violations – illegal activities committed by individuals for personal gain or profit. – Examples: Tax evasion or various welfare and social service frauds

7. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 7 Categories of White-Collar Crime Abuses of Trust – Abuses of trust include any misuse of authority or malfeasance or public corruption committed by an individual in a place of trust in an organization or government. – Examples: embezzlement and bribery Collateral Business Crimes – encompass any prohibited activities by which organizations intend to further the business interests of a company. – Examples: Falsifying odometer readings on used cars, attempting to conceal environmental crimes, or using uncalibrated gasoline pumps or weighted scales.

8. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 8 Categories of White-Collar Crime Con Games – Confidence games, or con games, involve a variety of activities designed to swindle people out of their money or property. – These may include fraudulent gold mine sales, sales of phony vacations, and other promises of “something for nothing” that never materialize.

9. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 9 Elements of White-Collar Crimes Five basic elements of white-collar crimes: – (1) intent – (2) disguise of purpose – (3) reliance on the victim’s ignorance – (4) voluntary assistance from the victim – (5) concealment Intent – Offender’s awareness that the activities are wrong or illegal. Disguise of Purpose – Refers to the offender’s conduct while carrying out the scheme. – Covertness

10. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 10 Elements of White-Collar Crimes Reliance on the Victim’s Ignorance – Literally means that the victim is unable to see that he or she is being deceived. Voluntary Assistance from the Victim – Most white-collar crimes involve duping or inducing the victim to voluntarily become involved in the crime. – Voluntary assistance may refer to actions on the part of the victim who is to be defrauded of money or property.

11. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 11 Elements of White-Collar Crimes Concealment – Concealment to cover up their criminal activities is the goal of all white-collar criminals.

12. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 12 TYPES OF WHITE-COLLAR CRIME Embezzlement and Employee Thefts – Embezzlement - The misappropriation or misapplication of money or property entrusted to one’s care, custody, or control. – Typically, this sort of white-collar crime involves the use of one’s position in a business or organization to steal company funds or company property for personal use, gain, or profit. Industrial Espionage – Espionage work undertaken in corporate and industrial areas to keep up with or surpass competitors.

13. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 13 TYPES OF WHITE-COLLAR CRIME Insider Trading – An employee’s or manager’s use of information gained in the course of his or her job and not generally available to the public to benefit from fluctuations in the stock market. – Martha Stewart Case – The problem for law enforcement investigations involves distinguishing a good stock tip from insider information.

14. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 14 Bribery, Kickbacks, and Payoffs Bribe – The payment of cash, goods, or services to someone in exchange for some special service, product, or behavior. Kickback – The payment back of a portion of the purchase price to the buyer or a public official by the seller to induce a purchase or to improperly influence future purchases. Payoff – Receiving compensation or money from an individual in exchange for some favor. Payola – A payment to a disc jockey for a favor such as promoting a favorite recording.

15. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 15 Tax Evasion Perhaps the most common form of white-collar criminality is tax cheating or tax evasion. Average American citizens do it by underreporting their income, claiming false deductions, inflating the amount of charitable contributions, smuggle goods or assets, or undertaking some other type of deception.

16. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 16 Corporate Crime Corporate crimes are crimes committed for the benefit of a legitimate business organization or enterprise. Corporate crime may take many forms: – Price fixing – Bribery – Kickbacks – Tax evasion or other tax violations – Assorted frauds – Environmental crimes or concealments

17. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 17 Corporate Crime For the most part, like many aspects of white-collar criminality, corporate violations are policed by various regulatory agencies. The Federal Trade Commission, established in 1914, is responsible for examining many corporate trade practices. In all, more than fifty federal regulatory agencies have varying degrees of police power over corporate violations of law.

18. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 18 INVESTIGATING WHITE-COLLAR CRIME Investigation at: – Federal Level – State Level – Corporations themselves In some jurisdictions, local, state, and federal law enforcement agencies and prosecutors’ offices have teamed together to detect and apprehend white-collar criminals.

19. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 19 Computer and Cyber Crime Some people have begun referring to computer-related crime as cyber crime and to the people who perpetrate it as cyber criminals. Cyber crimes – Crimes committed on the Internet using the computer as either a tool or a targeted victim.

20. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 20 Computer and Cyber Crime A National Institute of Justice report outlined five distinct categories of computer crime: 1.Internal computer crimes 2.Telecommunications crimes 3.Computer manipulation crimes 4.Support of criminal enterprises 5.Hardware or software thefts

21. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 21 Internal Computer Crimes Includes any alteration of an existing computer program that causes it to operate in a manner other than that for which it was designed. Computer virus – A computer program, usually hidden within another computer program, that inserts itself into programs and applications and destroys data or halts execution of existing programs. If an infected computer is discovered soon after a virus has attached itself, it can be cured with any of a number of commercial antivirus programs. Unfortunately, if the virus is discovered too late, it can ruin the data and memory sectors of a computer’s hard drive.

22. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 22 Telecommunications Crimes Involve illegal access to or use of computer systems over telephone lines.

23. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 23 Computer Manipulation Crimes Involve changing data or creating records in a system for the specific purpose of advancing some other crime. Example: – Writing false bills to the hospital and then authorizing them to be paid.

24. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 24 Support of Criminal Enterprises Criminals can use computer-based account ledgers to keep track of their drug business or the profits and expenses of an auto theft ring. Computers may even be used by criminals to maintain information or to simulate a planned crime. Computers can be used to create counterfeit concert, theater, and sporting event tickets, certificates of authenticity, stocks, and even money.

25. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 25 Hardware and Software Thefts The theft of computers, monitors, and other hardware. Software piracy is a serious problem because it is relatively easy to accomplish. Pick program – A computer program designed to bypass security measures against duplication of electronic files. Hacker – A person proficient at using or programming a computer and who is capable of infiltrating other computer systems.

26. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 26 INVESTIGATING COMPUTER CRIME As technology advances, so do the ways criminals adapt to these innovations. Electronic crime scene investigations The general principles of investigation for computer crimes are similar to those for other crimes. However, if an investigator is not conversant with computer lingo or comfortable with and knowledgeable about computer hardware, he or she should seek the assistance of a computer specialist.

27. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 27 The Latent Nature of Electronic Evidence Electronic evidence includes all information and data of investigative value that may be stored on or transmitted by an electronic device. In their natural state, one may not be able to see what is contained in the physical object (the device) that holds the evidence.

28. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 28 What Is Electronic Evidence? Electronic evidence – Latent evidence in the form of information stored on computers on hard drives in user-created files that may be useful in a criminal investigation.

29. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 29 What Is Electronic Evidence? Electronic evidence may include information stored on computers on hard drives in user-created files such as: – Address books – Audio/video files – Calendars – Database files – Document or text files – E-mail files – Image/graphic files – Internet bookmarks/favorites files – Spreadsheet files

30. Copyright ©2008 The McGraw-Hill Companies, Inc. All rights reserved. 30 Problems Investigators May Face The lack of clear and unambiguous definitions of computer crimes is a problem for law enforcement agencies. Several categories of computer crime may overlap, creating a potential problem in determining charges. Computer illiteracy and computer fears in police departments hinder some investigations and prosecutions. To resolve some of these problems, criminal investigators should become more familiar with computers, computer jargon, and methods of computer crime.