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Theory on white collar crimes
Theory on white collar crimes
White collar crime and the criminal justice system
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Throughout history there have been many white collar crimes. These crimes are defined as non-violent and financial-based crimes that are full ranges of fraud committed by business and government professionals. These crimes are not victimless nor unnoticed. A single scandal can destroy a company and can lose investors millions of dollars. Today, fraud schemes are more sophisticated than ever, and through studying: Enron, LIBOR, Albert Wiggan and Chase National Bank, Lehman Brothers and Madoff, we find how the culprits started there deception, the aftermath of the scandal and what our country has done to prevent future scandals.
In the 1920’s, Wall Street was a very different place than it is today. There was a great lack of disclosure and a great amount of stock manipulation. It was common knowledge to Wall Street professionals, and even some of the general public, that Wall Street was a rigged system that was run by large and powerful investment pools. There were loose regulations on insider trading and shorting of shares, making it easy to take advantage of the system.
Share shorting is basically like an athlete betting on himself to lose, then throw the game. The head of companies or investors create a position in which they can make a profit by running their company to the ground. For example, an investor borrows stock from a broker and sells that stock in open market, that investor now has a short position in the stock. At some point the investor must buy back the stock from the market and return it to the broker. If the stock falls in price the investor can buy it back at a lower price than they sold it, therefore making a profit. This kind of action was not considered illegal in 1929, and Albert H. Wi...
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...the man for whom the scheme is named. It was also the largest investment fraud by a single person. The most important effect of the Madoff scandal is the reformation that occurred in the SEC afterward amid shock at their inability to catch Madoff in the act during their investigation. The enforcement division was revamped to focus on more concerning markets and was more heavily staffed with market experts. The Office of Market Intelligence was created with the responsibility of managing tips. The SEC began to employ more undercover agents and advocate for a protection program for whistleblowers. Back-office personnel oversight was enacted. Additional funding was approved for the SEC. Surprise examinations were approved to ensure the existence of reported assets. In general, the regulating power of the SEC was vastly expanded to prevent similar crimes from occurring.
2 Companies are exposed to crimes either from the inside, or the outside. White-collar crime is a complication; harming companies in our society, which costs millions. An example of a white-collar crime would be the Ford Pinto case. When gas prices were rising in the United States, people started to search for economical cars.
white-collar crime” (Shapiro, S. P.). It is no surprise to anyone that positions of trust regularly decentralize to corporations, occupations, and “white-collar” individuals. Nevertheless, the concept of “white-collar crime” involves a false relationship between role-specific norms and the characteristics of those who typically occupy these roles. Most of the time, it is the offender that is looked at more than the crime itself and assumptions about the individuals automatically come into play. It has be to acknowledged that “ class or organizational position are consequential and play a more complex role in creating opportunities for wrongdoing and in shaping and frustrating the social control process than traditional stereotypes have allowed” (Shapiro, S. P.). The opportunities to partake in white-collar crime and violate the trust in which ones position carries are more dependent upon the individuals place in society, not just the work place. The ways in which white-collar criminals establish and exploit trust are an important factor in truly exploring and defining the concept of white-collar crime.
Why does white collar and corporate crime tend to go undetected, or if detected not prosecuted? White collar and corporate crimes are crimes that many people do not associate with criminal activity. Yet the cost to the country due to corporate and white collar crime far exceeds that of “street” crime and benefit fraud. White collar and corporate crimes refer to crimes that take place within a business or institution and include everything from tax fraud to health and safety breaches. Corporate crime is extremely difficult to detect for many reasons.
150 Ponzi schemes collapsed in 2009 alone, resulting in more than $16 billion in losses to tens of thousands of investors. These victims confront the challenge of calculating their losses for recovery claims as well as tax purposes. Ponzi scheme investigations currently account for approximately 21% of the Securities and Exchange Commission’s (SEC’s) enforcement workload — up from 17% in 2008 and 9% in 2005
This case illustrated that there were real consequences to white collar crime. In addition to paying the fifty million dollar fine, he relinquished another fifty million dollars of his illegal trading profits. (He still had millions remaining, however, from his illegal gains.) His actual prison sentence was three years, yet he served only twenty-two months in the federal prison at Lompoc, California, which was known to have a “country-club” atmosphere.
There are three major factors associated with white-collar crime. The drive for profit is not a bad thing until all you care about is making money and the safety of people is no longer a priority. The structure of a company makes it very difficult to find one single individual who is responsible when an order can be carried out by a number of people just listening to the boss. The culture of an organizations are the beliefs and actions that influence the employees of a company. Michael L. Benson says in his book, "The offenders argued that they were merely following established and necessary industry practices.
During the 1920s, approximately 20 million Americans took advantage of post-war prosperity by purchasing shares of stock in various securities exchanges. When the stock market crashed in 1929, the fortunes of many investors were lost. In addition, banks lost great sums of money in the Crash because they had invested heavily in the markets. When people feared their banks might not be able to pay back the money that depositors had in their accounts, a “run” on the banking system caused many bank failures. After the crash, public confidence in the market and the economy fell sharply. In response, Congress held hearings to identify the problems and look for solutions; the answer was found in the new SEC. The Commission was established in 1934 to enforce new securities laws that were passed with the Securities Act of 1933 and the Securities Exchange Act of 1934. The two new laws stated that “Companies publicly offering securities must tell the public the truth about their businesses, the securities they are selling and the risks involved in the investing.” Secondly, “People who sell and trade securities must treat investors fairly and honestly, putting investors’ interests first.”2
Morgan only had to pay penalties totaling $2.6 billion which only came out to be $0.02 on every dollar the bank had earned after the 5 years since Madoff had been arrested. It was noted that even some of the fines such as one for $350 million was actually less than the profit that the bank generated from serving as Madoff’s main bank. The sad news is that was the main punishment, no bankers were indicted or taken into custody. There could have been actions taken against these indications to stop the fraudulent funds running through these bank accounts. All of the penalties and suffering will ultimately end up getting paid by all the shareholders and investors who had nothing to do with the theft, but ultimately were the ones being conned and perhaps did not even know it (Johnston, D
White collar crimes are fraudulent acts committed for the determined and selfish gain of finance. Three of the most common white-collar crimes are typically fraud, money laundering, and embezzlement. Fraud can happen in many different forms such as insurance fraud, tax evasion, and securities fraud. Fraud is the use of deceitful statements or untrue business deals. Money laundering is a scheme for criminals to hide their identity. Criminals will sometimes launder money through banks and corporations to keep their activities going strong while staying hidden from the prosecution. Embezzlement is the theft of funds belonging to a workplace or one’s employer. Any person working with finances within their workplace who has access or granted authority to make decisions has the potential to become corrupted.
White-collar crimes are defined as criminal violations committed by people of high respectability and high social status in the course of their occupations (Humphrey, J. A.2012) Individuals, businesses, and governments may engage in white-collar crimes (Humphrey, J. A.2012). White-collar criminals are rarely arrested or punished for their offenses (Reurink, A. 2017). For the most part corporate elites have reaped considerable financial profit from their wrongdoing; and most have avoided criminal prosecution (Humphrey, J. A., and Schmalleger, F. (2012 and Reurink, A. (2017).
White-collar crimes and organizational structure are related because white collar-crimes thrive in organizations that have weak structures. According to Price and Norris (2009), the elites who commit white collar-crimes usually exploit weaknesses in organizational structure and formulate rules and regulations that favor their crimes. Makansi (2010) examines case studies to prove that white-collar crime is dependent on organizational structure. For example, the financial crisis that Merchant Energy Business faced in 2001-2002 occurred due to the liberal Financial Accounting Board, which failed to provide a standard model of valuing natural gas and fuel. Moreover, a financial crisis that rocked the securitization market in 2008 was due to fraudulence in the pricing of securitization products. These examples ...
White collar crime has become as interwoven in the criminal fabric as the murders perpetrated by mobsters of the 1950’s. According to our text, white collar crime has increased in cost and volume from 2006 to 2009. The cost of white collar crime in 2006 was estimated at just under $200 million and in 2009 it topped $559 million (p. 170). A so called ‘victimless’ crime represents the devastation left by a Madoff Ponzi scheme that bilks the final savings of trusting investors losing not only their nest eggs but the innocence of trusting someone you have had a relationship, in some cases from the early 90’s. What can be done to ensure a scheme like this doesn’t occur in the future is answered with the pie in the sky resolve that if every
In today’s society, crime rates are drastically increasing, causing a huge deficit in our economic, and thus causing our society’s Gross Domestic Product (GDP) to plummet. The cost of crimes adds up no matter if the crime is a small offense against the law or even a larger and deliberate offense such as homicide; in today's world, crime committed feeds the nefarious side of our human nature within our society. The most dangerous and impactful crime that is problematic within our nation is the executions of white collar crimes. White collar crimes damage our society in more ways than one. Today, people in our nation need to be more informed about the concept and damages that results from white collar crimes, as it affects them indirectly, economically, and may come to directly affect them as they become the unwilling victim to the crime.
Criminal acts performed by individuals of a higher economic class for the intent of advancement of their career is classified as a White-collar crime. This category of crime often goes unnoticed and if apprehended, have minimal repercussions. The aspect of money in these crimes provides both an explanation and reason for inquiry. For instance, a lawyer claiming that the stigmatization the defendant endured from the public is an adequate punishment for deceiving people out of numerous amounts of money represents utilizing money as an explanation. As well as, portraying that his financial and social status outweighs the deviance of the crime.
C. (2007). The goals and promise of the Sarbanes–Oxley Act. The Journal of Economic Perspectives, 21(1), 91-116. Cohen, M. A. (2016). The Costs of White-Collar Crime.