A Widespread Problem
White collar crime is a widespread problem, yet it is often overlooked because many deem it to be somehow less serious than most other categories of crime and therefore fail to recognize its tremendous cost to American businesses and consumers. This article will document the problem of white collar crime in the United States and explore its impact on American business and the quality of American life.
White collar crime, often referred to as ‘crime in the suites’ (as opposed to ‘crime in the streets,’) has been defined by Edwin H. Sutherland, in his classic, White Collar Crime (Holt, Rhinehart, and Winston, NY 1967,) as “crime committed by a person of respectability and high social status in the course of his occupation.” It was, in fact, Sutherland himself who coined the term in 1939 in a speech given before the American Sociological Society.
The unlawful acts broadly referred to as white collar crime fall into two major categories: crimes committed by individuals and crimes committed by corporations (or other businesses.) White collar crime by individuals may be committed against an employer or other business, another individual, or the government. Similarly, corporate crime may be directed at another corporation (or business), the government, employees, or the public.
The various types of white collar crime affect the businesses and citizens of America in numerous ways–some direct and some indirect.
It is clear, from the data which follows, that white collar crime–whether committed by individuals or corporations–has serious financial and social repercussions in American society.
Where financial costs are concerned, the net result of the various types of white collar crime is increased economic hardship for the average citizen and consumer. One reason for this is that such crime increases the cost of doing business, and any such increase in business costs is ultimately passed on to the consumer through increased prices and decreased services.
In addition, large scale tax evasion, such as that practiced by wealthy individuals and multi-million-dollar corporations, whose fortunes reside in secret, foreign bank accounts or other illegal tax shelters, translates into frequent and ever-higher tax hikes for the average citizen, who must bear a grossly unequal proportion of the nation’s tax burden.
Such crimes as unfair labor practices and swindles cost many people their jobs and life savings, and hazardous products cost untold millions of dollars in medical costs and lost wages, not to mention the immense amounts of money Americans have already spent to purchase them in the first place. Other products, which are designed to give out after a certain period of time (known as “planned obsolescence,”) also cost Americans a great deal in the form of replacement purchases.
The FBI has estimated the overall cost of white collar crime in the United States today to be $300 billion dollars annually (Cornell Law School website.*)
The social consequences of white collar crime are far more difficult to quantify, though every bit as real as its financial costs. Injury, illness, disability, and death–with their attendant psychological suffering–are all too common by-products of certain types of white collar crime. In addition, such social consequences have the potential of causing yet another serious social phenomenon: the gradual erosion of the American citizen’s long-held faith in “the American way.”
Crime Committed by the White Collar Worker
Against an employer or other business. Embezzlement and theft of company goods are common crimes committed against employers. Employees embezzle and pilfer millions of dollars annually from their employers. Equally widespread (and far more costly) to American business is employee time theft. It was estimated, in 1994, by Stanley D. Eitzen and Maxine Baca Zinn, in their book, Social Problems (Allyn and Bacon, Boston 1994) that time theft by employees due to faked illness, excessive breaks, and long lunches costs U.S. businesses as much as $200 billion annually.
Computer crimes, forgery, bad checks, and fraudulent use of credit cards also affect a wide range of American businesses. For example, computer crimes, which are becoming increasingly common due to the wide accessibility of the internet, significantly increase the cost of doing business for America’s banks. Staggering amounts of money are electronically transferred along data transmission lines between banks each day, making computer security an absolute necessity and costing millions of dollars a year. But despite these expensive precautions, savvy cyber criminals are sometimes able to hack into banks’ computer systems, bilking these financial institutions out of millions of dollars.
Against the government. Income tax evasion is perhaps the most common category of white collar crime committed by individuals against the government. The amount of tax monies lost every year due to unreported or under-reported income, padded expenses, and so-called “charitable” donations–which are often nothing more than tax shelters for the rich–would be impossible to calculate. In the classic Dirty Business: The Corporate-Political Money-Power Game (Harper’s Magazine Press, NY 1974,) author Ovid Demaris refers to “the uncharitable rich man (who,) faced with the loathsome alternative of having to bequeath to federal and state governments the lion’s share of his worldly goods (would much prefer to, as Mark Twain once wrote) ‘remember the poor-it costs nothing.'” (In fact, for the rich, remembering the poor at tax time can cost less than nothing; it can actually prove to be quite profitable.)
Against the individual. Mailorder, internet, and telemarketing scams, land swindles, franchising frauds, investment schemes, and identity theft steal the savings of untold thousands of people in America today, many of whom can ill afford it. Telemarketing swindlers alone cheat U.S. consumers out of billions of dollars each year. Add to this the billions lost in stock manipulation schemes, sale of inferior real estate (e.g., the classic “swampland swindle,”) and various forms of investment fraud, and the toll paid by the unfortunate Americans who deal with these unethical “businesspeople” climbs even higher.
Crime Committed (or Condoned) by the Corporation
Against the competition. Many (if not most) corporations engage in such questionable to outright illegal acts as corporate spying; patent, trademark, or copyright infringement; restraint of trade; breach of contract; bribery, insider trading, and accepting preferential treatment in the form of kickbacks, which provide them with an unfair advantage over their competitors.
For example, Sutherland states that “decisions have been made against corporations for violations in hundreds of…cases, (and some of these)…raise questions regarding the reliability of these corporations, which are among the largest in the United States.”
Many such acts are, in fact, formally organized, which has led such experts as Sutherland to compare corporate crime to organized crime. Of the present category of corporate crime he writes, “Formal organization for crimes of corporations is found most generally in restraint of trade, as illustrated by gentlemen’s agreements, pools, many of the practices of the trade associations, patent agreements, and cartels.”
Against the government. Such crimes as tax fraud, illegal tax shelters, bribery of public officials, theft of utilities, fraud in Customs duties, and violation of government regulations are committed by many corporations on a regular basis. These illegal activities have, in many cases, become just another aspect of “business as usual” in the corporate world.
In the book America, Inc.: Who Owns the United States? (Dial Press, NY 1971) Morton Mintz and Jerry S. Cohen tell us: “Secret, numbered bank accounts in foreign countries, mainly Switzerland, have been widely used to conceal criminal activities, including evasion of income taxes and Federal Reserve Board regulations on margins for stock trading.”
The authors cite as one example the arrangement made by Coggeshall & Hicks, a member of the New York Stock Exchange, “for (its) employees and customers to trade, over a five-year period, $20 million worth of stock through secret, numbered Swiss bank accounts.” They also state that “Robert Morgenthau, former U.S. Attorney General, has estimated that ‘hundreds of millions of dollars’ are held for illegal purposes in secret bank accounts abroad.” These are, of course, early examples of practices that are every bit as widespread today–if not more so.
Against its employees. Besides maintaining unsafe or unhealthy working conditions, the principal offense committed by corporations against their employees involves unfair labor practices (i.e., the refusal of a company to participate “in good faith with employees in…collective bargaining” or “interference with the efforts of employees to develop their own organization for collective bargaining” (Sutherland.) These breaches of the National labor Relations Law may include such actions as dismissing or demoting employees who join a union and refusing to rehire employees who have participated in strikes, employing “labor-spies” to infiltrate labor unions, and using threats, intimidation, or outright violence to “discourage” union participation.
In fact, at the time Sutherland wrote his widely regarded treatise on white collar crime (1961,) he reported that an astonishing “72% (of the corporations involved in labor-related offenses were) recidivists in unfair labor practices.” He then clarified the magnitude of the problem by offering the following comparison: “This is a larger percentage of recidivism than is found among prisoners in state and federal prisons except among habitual and professional criminals.”
Against the public. Corporate crimes committed against the public include patent infringement, false or misleading advertising, intentional pollution of the environment, sale of products known to be hazardous, adulteration of food or drugs, financial misrepresentation, and insider trading.
Regarding patent infringement, Sutherland stated that, at the time, “explicit (court) decisions of infringement of patents (had) been made against 42 of the 70 large corporations…(and) the total number of these explicit decisions (was) 114, with a range of one to 13 per corporation…” These cases involved well over half of all corporations doing business at the time his book was written!
Faulty goods, monopolistic practices, and similar illegal corporate maneuvers likewise cost consumers billions of dollars annually.
The Price We Pay is High
As we have seen, the cost of white collar crime in America is high indeed–for the government, for private enterprise, and ultimately, for the taxpayer/consumer. Though many of us are either unaware of or apathetic toward the proliferation of white collar crime in our country today, few, if any, escape its effects.
The true extent and expense of white collar crime will never be known. Yet, as more of us become aware of its hidden costs to the average American, perhaps we as a nation will begin to recognize that ‘crime in the suites’ is every bit as serious as ‘crime in the streets.’