Trusted Criminals

1. Trusted Criminals WHITE COLLAR CRIME IN CONTEMPORARY SOCIETY 4TH ED. CHAPTER 7 ENTERPRISE CRIME, CONTREPRENEURIAL CRIME, AND TECHNOCRIME Designed by: Jordan Land, M.S.

2. Enterprise Crime: Organized Crime and White Collar Crime • Enterprise refers to the interrelated dealings of legitimate businesspeople, political officials, and syndicated racketeers • Organized crime refers to any organized illegal activity, including organized professional theft, business theft, terrorist groups, motorcycle gangs, and “racketeers” who extort money by intimidation and violence

3. Enterprise Crime: Organized Crime and White Collar Crime • Organized crime is most commonly associated with the Mafia or La Cosa Nostra, an alleged national syndicate of criminals of Italian decent engaged in systematic illegal enterprises involving: • The sale and distribution of illicit drugs • Gambling • Prostitution • Loan sharking • Labor racketeering

4. Enterprise Crime: Organized Crime and White Collar Crime • Perhaps the easiest solution is to refer to the popular image of Mafia-type syndicates, as syndicated crime and use the term organized crime more broadly • Several features are commonly associated with syndicated crime: • It’s a self perpetuating organizational with a hierarchy • A limited membership • Specialized roles • Particular obligations • Omerta

5. Enterprise Crime: Organized Crime and White Collar Crime • Several obligations that are commonly associated with syndicated crime: • Omerta- vow of secrecy • Conspire to monopolize illegal enterprises by threat of or actual use of: • Force • Violence • Intimidation • Seek to protect itself from prosecution by corrupting the political and legal system

6. Enterprise Crime: Organized Crime and White Collar Crime • Legitimate businesses and syndicated crime engage in many of the same activities but in ways that are somewhat arbitrarily defined as legal or illegal • Syndicated crime performs important functions for corporate enterprises and the capitalist political economy • Syndicated crime and capitalist institutions coexist profitably

7. Enterprise Crime: Organized Crime and White Collar Crime • Perhaps the most accurate assessment of the economic impact of syndicated crime acknowledges that it cuts both ways • It benefits some elements of the capitalist political economy while harming others

8. The Relation between Governmental Crime and Syndicated Crime • The survival of syndicated crime may depend on the cooperation or connivance of some governmental officials • Investigations have uncovered evidence linking governors, state legislators, judges, and various other government officials with syndicated crime • On the national level, ties between government agencies and syndicated crime go back at least as far as the early half of the 20th century

9. The Relation between Governmental Crime and Syndicated Crime • Lucky Luciano assisted the U.S. Navy Intelligence in preventing sabotage and unrest on the New York docks • CIA enlisted the cooperation of syndicated crime in its attempts to overthrow Fidel Castro • Organized crime must be understood both as a product of a capitalist economy and as the illegal activity of a network of interdependent businesspeople, government officials, and racketeers

10. Historical Roots of Organized Crime • Piracy might be regarded as the first form of organized crime • John Hancock apparently operated an organized crime cartel that engaged in large-scale smuggling in the pre-Revolutionary colonies • The syndicated form of organized crime is often considered to have its roots in the Mafia, which emerged in southern Italy

11. Historical Roots of Organized Crime • Italian-American syndicated crime was widely regarded as the dominant form of authentic organized crime in the United States in the 20th century • Prohibition provided an ideal opportunity for the dramatic growth and expansion of syndicated crime because it created enormous demand for a product, alcoholic beverages, in the absence of a legal supply • The repeal of Prohibition hardly diminished the potency of syndicated crime

12. Historical Roots of Organized Crime • The objective of those involved in syndicated crime thus parallels those of individuals in legitimate occupations, and syndicated crime is simply seen as an unorthodox form of white collar crime

13. The Relation between Syndicated Crime and White Collar Crime • One thesis concerning the connections between syndicated crime and white collar crime suggests that the methods used to establish the great industrial empires and sprawling Western ranches of the 19th century were fundamentally no different from the methods used by 20th century mafiosi and syndicated crime members • The 19th century Robber Barons and cattle barons were the forerunners of 20th century organized crime

14. The Relation between Syndicated Crime and White Collar Crime • The general public perception of syndicated crime has in fact been somewhat ambivalent • Syndicated crime mobsters do not enjoy the same status of respectability that white collar offenders do • They are more vulnerable to: • Suspicion • Investigation • Conviction

15. The Relation between Syndicated Crime and White Collar Crime • Legitimate businesses provide both a front and an important tax cover for illegal activities • They provide employment for associates and relatives who are on probation and parole • Altogether, increasing involvement with legitimate business can reduce the exposure of syndicated crime figures to prosecution and may also reflect an aspiration for greater respectability

16. Hazardous Waste Disposal • The business of disposing of toxic waste has been heavily infiltrated by syndicated crime because of its longstanding domination of the garbage-carting and disposal business • The illegal disposal of hazardous waste costs only a fraction of the cost of safe and legal disposal • Less than 20% of these wastes are disposed of properly

17. Hazardous Waste Disposal • Illegally disposed of hazardous waste endangers the health of people exposed to it • Corporations that generate hazardous waste strongly lobbied against laws that would impose substantial liability on them for the effects of improper or illegal disposal • This activity is an especially clear example of a hybrid type of white collar/organized crime

18. The Relations between Syndicated Crime and Finance Crime • The theft and manipulation of stocks and bonds by syndicated crime has been a major problem since the early 1970s • The longstanding practice of laundering the huge sums of money generated by illegal enterprises obviously requires some complicity on the part of banks, which benefit from these large deposits • Syndicated crime outfits have had various forms of suspect dealings with financial institutions and have sometimes infiltrated them

19. The Relations between Syndicated Crime and Finance Crime • Many connections exist between organized crime and white collar crime and the boundary lines between them have blurred • Donald Cressey speculated that at some point we would no longer be able to tell the difference between white collar crime and organized crime

20. Contrepreneurial Crime: Professional Criminals and White Collar Crime • A professional criminal is anyone who engages in criminal activity regularly • It has been used interchangeably with the term career criminal • Professional criminals attempt to minimize the risk of arrest, prosecution, and imprisonment by carefully planning their crimes, avoiding violence, and putting in the “fix” with corruptible law enforcement and political officials

21. Historical Origins of Professional Crime • Origins of professional crime have been traced back to European feudalism when a certain proportion of the newly disenfranchised turned to: • Robbery, poaching, banditry, and other outlaw practices • Jesse James & John Dillinger have been regarded as one class of professional criminals

22. The Relation between Professional Crime and White Collar Crime • Several parallels exist between professional criminal and white collar offenders • Both are prepared to take risks to make money • Both are prepared to violate the law to maximize profit • Both seek to immunize themselves by bribing or financing the campaigns of politicians or becoming informants for law enforcement officials • The classic professional criminal relies on skill and planning rather than direct force or intimidation to achieve an illegal objective • Both need to convey an aura of respectability and inspire some level of trust to carry out their crimes

23. The Relation between Professional Crime and White Collar Crime What are the differences between the classical professional criminal and the contrepreneurial white collar criminals? • Professional • More accepting of their outlaw status • More likely to make a deliberate decision to become involved in criminal activities • Attempts a pure theft of money from a vulnerable victim or mark • White collar • Regard themselves as businesspeople • May drift into fraudulent enterprises • Defrauds by giving something of little or no real value in return for money

24. Fraudulent Businesses: Swindles, Scams, and Rackets • A vast number of enterprises are swindles, scams or rackets that annually cost consumers, investors and other unwitting parties billions of dollars • Are these activities properly classified as white collar crime? • In some cases, the activity is more appropriately described as organized crime or professional crime • In other cases, a designation of white collar crime is clearly justified

25. Fraud • The two key elements of fraud in legal terms are: • Stealing by deception • Reports of fraud appear early in recorded history • Ex. In the 4th century BC in Greece, a ship owner attempting to defraud someone by seeking a cash advance for a ship laden with corn when all along the intent was to scuttle the ship instead of delivering the corn

26. Fraud • Other contemporary swindles and schemes include: • Phony charities, long lost-heir searches, magazine subscription rackets, referral schemes, travel deceptions, etc. • Consumer fraud has been understudied by criminologists despite the fact that it generates staggering annual losses that are estimated to be as high as $100 billion annually • Fraudulent businesses prey upon human vanity, fantasy, loneliness, insecurity and fear

27. Ponzi and Pyramid Schemes • In 1919, Charles Ponzi began advertising that he could return large profits to investors because he had learned how to take advantage of the international currency and postage markets • The claim was that international postal reply coupons purchased in a poor country such as Italy could be redeemed at a much higher rate in the United States

28. Ponzi and Pyramid Schemes • Ponzi was not investing the money • He was spending it on himself and paying off early investors with some part of the money pouring in from newer investors • Eventually, the scheme was exposed and Ponzi went to prison • High returns are promised • Some early investors may receive payoffs, but most of the invested money is spent on a lavish lifestyle for the perpetrators

29. Ponzi and Pyramid Schemes • March 12, 2009, Bernard L. Madoff pleaded guilty to 11 criminal counts in relation to a Ponzi scheme which the government claims involved $65 billion • The Madoff Ponzi scheme was surely the largest in history to date • Pyramid scheme is a special variant of a Ponzi scheme

30. Investment Frauds • Losses due to investments in fraudulent schemes and securities are especially widespread and substantial • By some estimates, Americans lose more than $2 billion annually by investing in low-price penny stocks • In recent years, fraudsters have been convicted in cases involving as many as 10,000 investors, and hundreds of millions of dollars in losses, in frauds involving bonds supposedly backed by a collection agency and the financing of leases on office equipment

31. Investment Frauds • The losses due to all such schemes are dwarfed by the losses to investors as a consequence of massive accounting fraud at Enron, WorldCom, HealthSouth and other major corporations

32. Home Improvement and Ownership Frauds • Some contractors are outright con artists • Many others are marginal contactors who mislead customers, do incomplete or shoddy work, and declare bankruptcy or engage in some other subterfuge to avoid settling claims • Builders, appraisers and mortgage brokers have conspired to sell poorly constructed homes at inflated prices with misrepresentation of tax obligations to prospective homeowners

33. Home Improvement and Ownership Frauds • In October 2008, Emmanuel Constant was accused of murder and torture in Haiti and was sentenced to 27 years in prison in connection with mortgage fraud using straw home buyers, falsified loan information, and inflated appraisals in Queens, NY • The FBI declared mortgage fraud as the fastest growing form of white collar crime in the early 2000s

34. Land Sale Frauds • In the 1920s, many people who bought “land” in Florida eventually discovered that their land was underwater • The basic scheme in these cases is to entice prospective retirees and other investors with some attractive brochures of beautiful developments complete with landscaping, gold courses, and lakes • They use high pressure sales tactics to persuade people to pay exorbitant prices for arid desert plots that turn out to be virtually worthless when promised development plans never materialize

35. Travel Scams and Time-Share Vacation Resorts Millions of Americans receive postcards or e-mails informing them that they’ve won a glamorous vacation If they respond to the inducements they are persuaded to pay a “travel club” or “service” fee before receiving their “prize” The free vacation would turn out to have so many restrictions it would be useless to the recipient Recipients often ended up with no vacation at all or with one for which they paid a substantial amount of money

36. Payday Loans, Debt Relief, and Credit Repair Payday lenders operating online or from storefronts target people with modest incomes who need small loans to make it through till payday Some debt relief companies advise consumers to stop making payments on their debt on the claim that they will negotiate settlements on favorable terms, but by extracting large fees directly from clients’ bank accounts, often put clients in a deeper hole Some companies that offer to raise credit scores do so by falsifying the customer’s credit history—a form of fraud—and charge a hefty fee to do so

37. Employment Agency and Education-Related Scams People have paid fees to “employment agencies” that guarantee them jobs. After sending in their money, many clients never hear from the agency again, or receive sloppily-prepared resumes or outdated lists of jobs or corporate contacts. In most cases, applicants do not obtain jobs “Educational consultants” collect thousands of dollars in return for the false promise that the consultant will ensure their place in a school Other scams exist involving diplomas, training, and financial assistance

38. Telemarketing or “Boiler Room” Scams The National Consumers League estimated in a recent year that telemarketing frauds extract an average of $845 from each victim. These operations may offer tempting investments, prizes, vitamins, etc. Examples include enticements for “cash loans” in which callers are charged for generic information packages on how to apply for bank loans, “one-shot” credit cards, bogus health product promotions, and penny-stock offerings based on misleading information about new companies.

39. Schemes to Defraud the Wealthy Middle-class people seeking a high return on their investments can be susceptible to fraud Ex. About 6,000 people who invested $350 million in Colonial Realty in the 1980s lost much of their money when the operation turned out to be fraudulent Some victims of investment fraud are quite wealthy Ex. A New York college student persuaded 100 well-off individuals to invest millions with the investing entity he established and instead of investing the money, he spent most of it on a lavish lifestyle

40. Technocrime, Including Computer Crime Technocrime is any crime facilitated by any sophisticated form of technology It has been described as a subset of or new form of white collar crime But not all illegalities committed with technology are white collar crimes. Ex.—technocrime committed by spies or terrorists, the use of computers for disseminating child pornography, or the use of the internet by pedophiles to solicit victims

41. Computer Crime Computer crime is an illegal act wherein computers and computer technology are used to commit the offense A computer may be the tool of a crime or the target of a crime Categories include internal computer crimes (sabotaging programs), telecommunications crimes (hacking and illegal bulletin boards), computer manipulation crimes (embezzlements and frauds), computers in support of criminal enterprises, and hardware/software thefts

42. Computer Crime An increasing proportion of theft today takes the form of stealing information, pirating software and electronic products, and copying intellectual property An estimated 1/3 of business software is pirated Business transactions carried out on the internet have generated broad new opportunities for criminal conduct The relative anonymity of the internet can facilitate crime

43. Computer Crime Businesses have become increasingly concerned about “click fraud” Advertisers must pay for each “click” on their ads, but believe that in some cases competitors are deliberately driving their advertising costs up by fraudulent clicking The internet has also facilitated identity theft and the theft of confidential information

44. Computer Crime A considerable amount of computer crime or cybercrime is carried out by or through businesses or by people within the context of a legitimate occupation, victimizing consumers and individuals The use of computers greatly increases the potential size and scope of thefts It also enables people working in certain occupations to use a “salami technique”— that is, to steal small amounts of assets from many sources

45. The Law and Computer Crime Despite increasing publicity about computer crimes, prosecutions for such crimes are relatively few in number, constituting a fraction of prosecutors’ caseloads The single most common charges pertain to child pornography Traditional criminal laws are not always applicable to crimes committed by manipulation of electronic software

46. The Law and Computer Crime Most state and federal laws applicable to computer crime came into being in the 1980s 1986—Congress passed a computer Fraud and Abuse Act, which intended to make the use of computers for fraud and theft a felony 1996—passage of the National Information Infrastructure Protection Act eliminated some of the common defenses in computer crime cases 2000—Internet False Identification Prevention Act 2000—USA Patriot Act added amendments to the 1996 law

47. The Pursuit of Computer Crime Cases Investigation of computer crime require specially trained personnel and tend to be quite time consuming Criminal justice agencies on all levels must devote more resources to technocrime It is often necessary to resolve computer crimes privately and informally, in part because special complications arise if cases are pursued through the criminal justice system

48. Other Types of Technocrime ATMs, telecommunications systems, facsimile machines and other forms of technology also provide a range of opportunities for misappropriation or theft Advances in all forms of copying technology have provided new opportunities for organized and professional crime Businesses of all sizes are victimized by technocrime, but commit some of it as well