1. Lesson 12 – White Collar and Organized Crime Robert Wonser Introduction to Criminology Crime and Delinquency 1

2. Introduction Corporate wrongdoing White-collar crime Organized crime All have dire economic consequences 2

3. White-Collar Crime Industrialization brought wealth for some Andrew Carnegie (steel) J.P. Morgan (banking) John D. Rockefeller (oil) Cornelius Vanderbilt (railroads) All gained massive fortunes through monopolization Considered to be “robber barons” 3

4. Robber Barons “ Robber barons ” - businessmen who used exploitative practices to amass their wealth, exerting control over national resources, accruing high levels of government influence, paying extremely low wages, squashing competition by acquiring competitors in order to create monopolies and eventually raise prices, and schemes to sell stock at inflated prices to unsuspecting investors in a manner which would eventually destroy the company for which the stock was issued and impoverish investors. 4

5. Edwin Sutherland and White-Collar Crime Sutherland coined term white-collar crime Studied U.S. corporations Most engaged in antitrust violations, false advertising, bribery, and other offenses multiple times 5

6. Defining White-Collar Crime A crime committed by a person of respectability and high social status in the course of his occupation Sutherland's definition has been criticized and revised 6

7. Contemporary Views of White-Collar Crime Occupational crime Corporate crime Organizational crime 7

8. Occupational Crime: Lawbreaking for Personal Gain Employee theft Pilferage Theft of merchandise, tools, stationary, and other items Embezzlement Theft of cash and the misappropriation or misuse of funds Collective embezzlement 8

9. Professional Fraud: Health Care Physicians, lawyers, and other professionals Self-regulation Professional fraud 9

10. Health Care Fraud Exaggerating charges Billing for services not rendered or a real patient Billing for services for fictitious or dead patients “Pingponging” - the unethical practice of repeatedly passing a patient from physician A to physician B and back again to overcharge the patient’s third-party payer—e.g., Medicaid, or, less commonly, a private insurer. Family “ganging” - term for health care provided by some physicians in financially disadvantaged regions in the US— e.g., inner cities—in which a patient is encouraged to bring his entire family along for a check-up or other evaluation on a return visit, regardless of whether it is medically indicated 10

11. Health Care Fraud “Churning” - In fee churning, a series of intermediaries take commissions through reinsurance agreements. “Unbundling” - Medicare and Medicaid often have special reimbursement rates for a group of procedures commonly done together, such as typical blood test panels by clinical laboratories. Some health care providers seeking to increase profits will "unbundle" the tests and bill separately for each component of the group, which totals more than the special reimbursement rates. 11

12. Health Care Fraud Providing inferior products to patients Falsifying medical records Billing for inferior products never provided Falsifying prescriptions Inflating charges for ambulance services Unnecessary surgery 12

13. Financial Fraud Collective embezzlement - the stealing of company funds by top management. The term was first used to refer to one type of crime that characterized the U.S. savings and loan scandals of the 1980's Insider trading - is the trading of a public company's stock or other securities (such as bonds or stock options) by individuals with access to non-public information about the company. 13

14. Police and Political Corruption Police corruption - is a form of police misconduct in which law enforcement officers break their social contract and abuse their power for personal or department gain. Political Corruption - is the use of powers by government officials for illegitimate private gain. An illegal act by an officeholder constitutes political corruption only if the act is directly related to their official duties, is done under color of law or involves trading in influence. Both involve violations of public trust 14

15. Organizational Criminality and Corporate Crime Corporate financial crime Fraud Cheating Bribery Other corruption Not antitrust violations or false advertising 15

16. Organizational Criminality and Corporate Crime Antitrust violations are of laws designed to protect trade and commerce from abusive practices such as price-fixing, restraints, price discrimination, and monopolization. The principal federal antitrust laws are the Sherman Act and the Clayton Act. Price-fixing - an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand. Restraint of trade - common law doctrine relating to the enforceability of contractual restrictions on freedom to conduct business. False advertising - is the use of false or misleading statements in advertising, and misrepresentation of the product at hand, which may negatively affect many stakeholders, especially consumers. 16

17. Corporate Violence Threats to health and safety Workers and workplace safety Data for workplace illness, injury, and death not exact Annually Workplace deaths from illness = 50,000 Workplace deaths from injury = 4,700 Injuries and illness = 3,000,000 17

18. Workplace Problem Sometimes illness, injury, and death are instantly visible, sometimes not Sometimes death comes much later Where's the crime? Asbestos industry example 18

19. Corporate Violence Consumers and unsafe products Dangerous products that kill or injure Three industries that pose the greatest danger Automobile Pharmaceutical Food 19

20. Corporate Violence Public/Environmental Pollution Air, land, and water Very difficult to determine total number of injuries and deaths resulting from pollution Toxic waste Profit 20

21. Economic and Human Costs of White-Collar Crime Costs more in lives and money than street crime Street crime = $16 billion White-collar crime = $575 billion All corporate crime = $483 billion Health care fraud = $77 billion Employee theft = $15 billion 21

22. Explaining White-Collar Crime In many ways, white-collar criminals are similar to street criminals There are some differences 22

23. Similarities with Street Crime Both include stealing and violence Rely on opportunity and motivation Techniques of neutralization Self-control? Male offenders dominate both types of crime 23

24. Differences from Street Crime Most criminological theories do not account for white- collar criminals Influence of greed What would happen if we treated white collar criminals we do street criminals? 24

25. Explaining White-Collar Crime Lenient treatment Weak/Absent regulations Difficulty in proving corporate crime Weak punishment Lack of news media coverage Race/Ethnicity and social class 25

26. Reducing White-Collar Crime Larger budgets for regulatory agencies Media emphasis Severe punishment Greater imprisonment Stiffer fines 26

27. Organized Crime Linked to demand and supply of goods and services, legitimate or illegitimate Primary source of income is still illegal Drugs Prostitution Pornography Loan-sharking Extortion 27

28. History of Organized Crime Piracy New York gangs in the early 1800s By the 1900s, these gangs were well organized operations 19 th century robber barons Prohibition era Gambling 28

29. Alien Conspiracy Model and Myth Mafia mystique Hierarchal, organized group of some 24 Italian families that control all organized crime Best regarded as a myth Organized crime does not produce the desire for vice or seduce honest politicians 29

30. Controlling Organized Crime Reduce public demand for illicit goods Legalization of drugs and other illicit products/activities Provide alternative economic opportunities for young people 30