5.1.6: White-Collar Crime

White-collar crime encompasses financially motivated offenses perpetrated by individuals or organizations in positions of trust or authority. These non-violent crimes involve deceit, manipulation, or abuse of power for monetary gain and include activities such as fraud, embezzlement, insider trading, bribery, money laundering, and tax evasion. Perpetrators often leverage their knowledge of financial systems and regulations to carry out illicit activities, leading to significant financial losses and undermining the integrity of financial markets and institutions (Barnett, 2000). Detecting and prosecuting white-collar crimes can be challenging due to their complexity and sophisticated methods, trial costs, necessitating specialized investigative techniques and expertise.

White-collar crime is crime committed as part of one’s occupation. It ranges from fraudulent repairs by auto repair shops to corruption in the high-finance industry to unsafe products and workplaces in some of our largest corporations. It also includes employee theft of objects and cash. Have you ever taken something without permission from a place where you worked? Whether or not you have, many people steal from their employees, and the National Retail Federation estimates that employee theft involves some $20 billion annually (National Retail Federation, 2007). White-collar crime also includes health-care fraud, which is estimated to cost some $100 billion a year as, for example, physicians and other health-care providers bill Medicaid for exams and tests that were never done or were unnecessary (Rosoff, Pontell, & Tillman, 2010). And it also involves tax evasion: the IRS estimates that tax evasion costs the government some $300 billion annually, a figure many times greater than the cost of all robberies and burglaries (Montgomery, 2007).

Figure \(\PageIndex{1}\): In June 2009, investment expert Bernard Madoff was sentenced to 150 years in prison for defrauding thousands of investors of tens of billions of dollars. This was the largest such crime in U.S. history.
Wikimedia Commons – public domain.

One of the most serious recent examples of white-collar crime came to light in December 2008, when it was discovered that 70-year-old investment expert Bernard Madoff had engaged in a Ponzi scheme (in which new investments are used to provide the income for older investments) since the early 1990s in which he defrauded thousands of investors of an estimated $50 billion, the largest such scandal in U.S. history (Creswell & Thomas, 2009). Madoff pleaded guilty in February 2009 to 11 felonies, including securities fraud and money laundering, and was sentenced to 150 years in prison (Henriques & Healy, 2009).

Some of the worst crimes are committed by our major corporations (corporate crime). As just one example, price fixing in the corporate world costs the U.S. public about $60 billion a year (Simon, 2006). Even worse, an estimated 50,000 workers die each year from workplace-related illnesses and injuries that could have been prevented if companies had obeyed regulatory laws and followed known practices for safe workplaces (AFL-CIO, 2007). A tragic example of this problem occurred in April 2010, when an explosion in a mining cave in West Virginia killed 29 miners. It was widely thought that a buildup of deadly gases had caused the explosion, and the company that owned the mine had been cited many times during the prior year for safety violations related to proper gas ventilation (Urbina, 2010).

Corporations also make deadly products. In the 1930s the asbestos industry first realized their product was dangerous but hid the evidence of its danger, which was not discovered until 40 years later. In the meantime, thousands of asbestos workers came down with deadly asbestos-related disease, and the public was exposed to asbestos that were routinely put into buildings until its danger came to light. It is estimated that more than 200,000 people will eventually die from asbestos (Lilienfeld, 1991).

Asbestos is not the only unsafe product. The Consumer Product Safety Commission and the U.S. Centers for Disease Control and Prevention estimate that about 10,000 Americans die annually from dangerous products, including cars, drugs, and food (U.S. Consumer Product Safety Commission, 2003; Petersen & Drew, 2003). In perhaps the most notorious case, Ford Motor Company marketed the Pinto even though company officials knew the gas tank could catch fire and explode when hit from the rear end at low speeds. Ford had determined it could fix each car’s defect for $11 but that doing so would cost it more money than the amount of lawsuits it would eventually pay to the families of dead and burned Pinto victims if it did not fix the defect. Because Ford decided not to fix the defect, many people—estimates range from two dozen up to 500—people died in Pinto accidents (Cullen, Maakestad, & Cavender, 2006). In a more recent example involving a motor vehicle company, Toyota was fined $16.4 million by the federal government in April 2010 for allegedly suppressing evidence that its vehicles were at risk for sudden acceleration. The government’s announcement asserted that Toyota “knowingly hid a dangerous defect for months from U.S. officials and did not take action to protect millions of drivers and their families” (Maynard, 2010, p. A1).

Corporations also damage the environment, as the BP oil spill that began in April 2010 reminds us. Because federal laws are lax or nonexistent, corporations can and do pollute the environment with little fear of serious consequences. According to one report, one-fifth of U.S. landfills and incinerators and one-half of wastewater treatment plants violate health regulations (Armstrong, 1999). It is estimated that between 50,000 and 100,000 Americans and 300,000 Europeans die every year from the side effects (including heart disease, respiratory problems, and cancer) of air pollution (BBC News, 2005); many of these deaths would not occur if corporations followed the law and otherwise did not engage in unnecessary pollution of the air, water, and land. Critics also assert that laws against pollution are relatively weak and that government enforcement of these laws is often lax.

Is white-collar crime worse than conventional crime? The evidence seems to say yes. A recent estimate put the number of deaths from white-collar crime annually at about 110,000, compared to “only” 16,000 to 17,000 from homicide. The financial cost of white-collar crime to the public was also estimated at about $565 billion annually, compared to about $18 billion from conventional crime (Barkan, 2012). Although we worry about conventional crime much more than white-collar crime, the latter harms the public more in terms of death and financial costs.

(We will cover more on White Collar Crime in another section)