THE SOCIAL CONTROL OF WHITE COLLAR CRIME
"The harder you fall, the higher you bounce" (Doug Horton)
White collar crime is difficult to control because it occurs in so many forms and in so many different professions. It is not spread evenly across industries or occupations. Sure, there are some commonalities. For example, all businesses rely upon accounting and other common undertakings, but the differences outweigh the commonalities. For example, one would not expect to find the exact same offense patterns in the healthcare industry as one would expect to find in the clothing industry. This "diversity" of white collar crime creates an enormous burden upon any government attempting to control it. Witness the variety of agencies which have the authority to initiate a federal prosecution by bringing some matter to the attention of the Department of Justice or a U.S. Attorney. The more prominent agencies are:
Food and Drug Administration (FDA) – Falls under the Department of Health and Human Services. They regulate, inspect, monitor, test, and develop guidelines for food, drugs, cosmetics, and medical devices. The FDA’s effectiveness has been stifled by its focus on small companies (rather than on powerful, major corporations) and by their reviewers taking bribes from drug companies.
Federal Trade Commission (FTC) – An independent regulatory agency that polices financial transactions. They monitor trusts and attempt to prevent unfair competition and anticompetitive mergers. Most notable, they address deceptive advertisements or offers. The FTC has been knocked for providing ineffective protections to consumers and for interfering with legitimate operations of various businesses and professional groups.
Securities and Exchange Commission (SEC) – An independent regulatory agency that regulates and polices the securities market. It has been criticized by some as unnecessary and by others as not aggressive enough. Considering these five commissioners police hundreds of billions of dollars, it could be said they are under funded and under staffed. Plus, they have limited legal and investigative powers.
Environmental Protection Agency (EPA) – An independent executive branch agency that sets standards and monitors practices relating to air quality, water quality, and the disposal of various forms of hazardous waste. In recent years the EPA has weakened as the energy industry and other businesses had complained about the costs of environmental measures.
Occupational Safety and Health Administration (OSHA) – Develops and enforces procedures and standards for workplace health and safety and to compensate for limitations in workers compensation, civil tort suits, and criminal prosecutions. OSHA has been criticized as being a symbol for labor forces instead of a consequence of the government’s commitment to improve workplace conditions. It has also been criticized for not adopting stronger standards to protect workers.
Consumer Product and Safety Commission (CPSC) – They monitor the enforcement of consumer product standards and protect the public from dangerous products… they evaluate, set standards, and investigate suspect products.
Federal Bureau of Investigation (FBI) – While WCC has not always been the focus of the FBI, their expertise to continues to grow and evolve in this area. They have dealt with various white collar and government crimes as well as the savings and loan and healthcare frauds.
The Inspector General – This office investigates the submission of false records by contractors, bribery, and nepotism. They also investigate healthcare fraud and ensure that programs run by their department are not abused.
U.S. Postal Inspection Service – They have jurisdiction over embezzlement, identity frauds, lotteries, mail frauds, money laundering, workers compensation frauds, and electronic frauds; all that have a postal element to them.
U.S. Secret Service – Investigates WCC that includes counterfeiting or forgery of federal currency or warranted financial instrument
U.S. Customs Service – Investigates money laundering, falsified import or export documents, illegal product dumping, and foreign corrupt payments
U.S. Marshalls – Pursue and capture white collar crime fugitives.
Internal Revenue Service Criminal Investigation Division – Investigates aspects of WCC that involve tax fraud or misrepresentation involving corporations, businesses, and individuals.
Beyond the creation of more government agencies and/or expanding the powers of existing agencies, there are few ideas that seem to be promising for the control of white collar crime, or at least represent the field of criminology on the subject. Let's review a few of them first.
THE OPPORTUNITY PERSPECTIVE
Benson & Simpson (2009) argue that control efforts should target the opportunity structures. What they mean by opportunity structures are really the occupational mobility structures -- the things which allow privileged white males (for the most part) to rise to the top of their professions. It's a solution which begs the question of whether females or minorities can do a better job at running organizations while engaging in lower rates of white collar crime. There is, unfortunately, little to no research on this subject, and it is also unknown to what extent occupational discrimination (in the form of "glass ceilings" and racial barriers) might be a causative factor in white collar crime. It is possible, although highly speculative, that privileged white males who regularly discriminate against women and minorities might have the same set of psychological characteristics as white collar crime offenders. But, again, we don't know, and it seems just as likely that white collar criminals would be clever enough to avoid any appearance of sexism or racism. The following table presents what we do know about race and gender in the study of white collar crime:
Race and Gender and White Collar Crime
| It is well
known what the statistics are for African American
overrepresentation in conventional "street" crime (e.g., one in five
black children born any year are likely to wind up incarcerated),
but it is less well known what the white collar rates are (or would
be) for this demographic group. Gottfredson and Hirschi (1990)
suggest that they would be as proportionately represented as whites,
but this speculation is based on counting the FBI rate of welfare
fraud among blacks (30%) as a white collar crime. Weisburd et
al. (1991) are the ones who have probably studied the issue most
thoroughly, and they conclude that African Americans would likely be
"well represented" among certain low-level white collar crimes such
as embezzlement and fraud. They also speculate about such
offenders being more easily detected and prosecuted.
There is mixed and/or contradictory evidence about women. Some commentators are argued that women bring a more ethical perspective to the workplace, but feminist scholar Kathleen Daly (1989) long ago pointed out that lower-level clerical and administrative wrongdoing by women (so-called "pink collar crime") is quite prevalent. Dodge (2009) has recently tried to sort out any motivational differences, if they exist. It may be that female white collar crime will continue to follow the same "masculine" pattern followed by women such as Leona Helmsley, Martha Stewart, Diana Brooks (of Sotheby's), Lea Fastow (of Enron), and the 27 women involved in the Savings & Loan scandal (the worst financial disaster of the 20th century).
THE SHAMING PERSPECTIVE
Braithwaite (1989) argues that social controls from both within and outside the organization can reduce white collar crime. Social controls from within can be accomplished by strengthening internal controls against illegal behavior. Examples include promoting pro-social values, socializing members of the organization to these values, and creating strong internal control units to monitor compliance with the law. This is, frankly, a solution which would create overly legalistic organizations, and a number of "bad apples" might be weeded out, but deviant subcultures, climates, or cultures might continue to exist. No one has ever yet come up with a good way to permanently change organizational climates and cultures. Sure, a lot of "process" can be documented (in the form of meetings with consultants, etc.), but everyone knows that such "changes" have a fading life history. Braithwaite (1989) then introduces the idea of shaming imposed on offenders by the larger society. Shaming is usually carried out by a regulatory agency or the police in those media spectaculars known as "perp walks." However, the key, according to Braithwaite (1989), is to administer the shame ritual in a way which maintains bonds of respect with the offender (shame the evil deed; not the evil doer). This is called reintegrative shaming, as opposed to stigmatizing shaming which would likely push offenders (and potential offenders) deeper into deviant thinking which glorifies the evil-doer. Frankly, this theory of differential shaming is quite convoluted, and relies upon untestable assertions about labeling and anti-labeling, backlash, effects. Nonetheless, it appears in recent years that authorities are doing more "perp walks," but probably not because they are applying the theory, only showing off big time offenders they've caught. A more sophisticated version of these ideas might involve some sort of large-scale Information Operations (IO) which uses shaming in some way to strategically communicate society's displeasure with white collar crime and its ilk (but this is pure speculation). A lot of people also don't like the notion of "reintegration" because it smacks of putting ex-offenders back to work "guarding the chicken coop" so to speak. Nonetheless, the practice of a "perp walk" has gained some notoriety, as the following close-up details:
The Theory and Practice of "Perp Walks"
|Ken Lay (pictured at left) of Enron did the walk in 2004 on his way to face 45 years in prison (but died before sentencing). One of America's highest-paid CEO's (earning about $42 million a year), Lay (interestingly enough) worked as an energy regulator for the government before entering private business. His perp walk was almost as bad as Martha Stewart's (not pictured). It's somewhat curious who the government decides to walk and who it doesn't (Rush Limbaugh, e.g., didn't get one because he turned himself in, and Wesley Snipes didn't get one because he was too much of a celebrity; however WorldCom execs tried turning themselves in, but got a perp walk anyway). Theoretically, perp walks serve three (3) purposes: to deprive a person of privacy; bolster the image of law enforcement; and humiliate a suspect. In practice, they are unconstitutional, per Caldarola v. County of Westchester (2003), if staged for any purpose other than to boost the transparency of normal law enforcement action such as transport of a prisoner.|
THE CULTURE OF COMPETITION THESIS
Coleman (2005) is a widely-acclaimed authority on white collar crime, and he argues that all the neutralizations offenders use are rooted in a "culture of competition." This refers to a set of beliefs common to capitalistic societies that hold the pursuit of wealth and success are the central goals of life (i.e., the values of competitive individualism). Getting ahead and being successful is an adults-only, no-holds-barred game. It is the American dream on steroids. However, other than formulating the causes and motivations, Coleman (2005) is interested in discovering what can be done to control white collar crime. He proposes four (4) reforms: ethical; enforcement; structural; and political. Ethical reforms involve things like required ethics courses in business school. Enforcement reform involves increasing criminal penalties. Structural reform involves increasing the pay for employees in regulatory agencies. Coleman (2005) is somewhat sketchy on political reform, but it would most likely involve things that reduce the perceived selfishness of political leaders. As naive as it sounds, the only one of the above reforms which has actually been tried are ethics courses in business schools, and even that hasn't fared all too well, as the following in-depth examination explores:
Ethical Reform in Business Schools
|The idea of ethics courses in B-Schools hasn't caught on very well. After all, these are professional graduate institutions, so the notion of wasting time on ethics is about as foreign as the idea of teaching scientific research methods in law school. Sure, a few places have experimented with "applied" or "business" ethics and even made the subjects mandatory (like at Harvard and Columbia), but most have simply given up (Weber 1990). Friedrichs (2010) reports that most research shows business students have already formed a hardened ethical mindset by the time they get to business school, and any attempt to reshape their high levels of tolerance for "unethical business practices" or "getting ahead by any means" is doomed to have short-lived benefits. In fact, study after study has shown higher levels of cheating and plagiarism in business school more than any other kind of academic institution (Yu & Zhang 2006; Powers 2007).|
One promising development, however, is the MBA Oath Movement, a student-led, grassroots initiative launched in 2009 to help professionalize the managerial profession, especially in wake of the 2008-2009 financial downturns. Similar to efforts within some corporations to establish codes of ethics, ethics committees, ethical ombudsmen, and ethics judiciary boards, the Oath Movement aims to help minimize exposure of unethical business practices by discouraging unethical behavior itself. Reasonable doubt exists, of course, whether such efforts represent a serious commitment or are just "window dressing" designed to curry favorable public opinion. Presumably, the Oath is given in a solemn, ceremony-like occasion, and goes as follows:
I will act with utmost integrity and pursue my work in an ethical manner
I will safeguard the interests of my shareholders, co-workers, customers and the society in which we operate
I will manage my enterprise in good faith, guarding against decisions and behavior that advance my own narrow ambitions but harm the enterprise and the societies it serves
I will understand and uphold, both in letter and in spirit, the laws and contracts governing my own conduct and that of my enterprise
I will take responsibility for my actions, and I will represent the performance and risks of my enterprise accurately and honestly
I will develop both myself and other managers under my supervision so that the profession continues to grow and contribute to the well-being of society
I will strive to create sustainable economic, social, and environmental prosperity worldwide
I will be accountable to my peers and they will be accountable to me for living by this oath
POSITIVE AND NEGATIVE SOCIAL SANCTIONS
Positive sanctions tend to have more effect than negative sanctions. This may be because powerful egomaniacs tend to respond better to praise and flattery, or it may be that it is simply true, psychologically, that people in general prefer rewards for good behavior than punishment for bad behavior. What limited research exists on the subject has dealt with nursing home supervisors (Braithwaite et al. 1994) or those involved in tax evasion (Smith & Stalans 1991). Nonetheless, there are some possible applications for this line of research. Public administrators who work in government regulatory agencies could "soften" the way they deliver bad news to some regulated entity while at the same time "play up" or celebrate the good news. A whole series of "exemplary programs" or "model agency" awards could be manufactured and given out, much like how such programs helped jump-start the police agency accreditation movement in the 1980s and 90s. Nor has the value of positive incentive been lost on the Internal Revenue Service, who has time and time again softened their operations in numerous ways, such as increasing the number of private letter rulings as well as tolerance of taxpayer abuse. In fact, at a 2007 Senate hearing, one IRS witness-employee stated: "If the public only knew the number of taxpayer abuses "covered up" by the IRS, there would be a tax revolt."
Negative sanctions range from imprisonment to fines to occupational disqualification, and in the case of organizations as a whole, from loss of charter to fines to adverse publicity. The most frequently used negative sanctions are fines, and corporations (as well as rich people in general) have always found it less costly to pay a fine than fix the hazard they've created in the first place, the Ford Pinto case (Cullen et al. 2006) being a prime example of this. Nonetheless, citizen advocates such as Ralph Nader have long argued for an increase to sky-high fines and sterner punishment for white collar criminals, and such ideas appear to merit strong public support (Cullen et al. 2009).
Fines can be issued either in civil court or criminal court, and are the only clear alternative for corporate crime because corporations per se cannot be incarcerated (it also being questionable whether a corporation's assets can be completely taken away from them via asset forfeiture). The criminal justice purpose of a fine (as a punishment) is to both deter and rehabilitate at the same time. Conceptually, a fine is just supposed to be so much that it is uncomfortable to pay for it. However, as Friedrichs (2010) points out, there is a great debate in this area over whether the appropriate amount of a fine ought to be based on: (a) losses to society; or (b) gains to offenders. Some countries, like England, have vastly increased the amounts of a corporate fine (as well as toyed with the idea of establishing a "corporate manslaughter" offense). In a globalized world, excessive fines force businesses to move overseas; and those who stay simply pass on the costs to customers or shareholders. Corporations often indemnify their chief executives, anyway (except when they have a "fall guy" or "Vice President in charge of going to prison"), and stash away money, anyway for just such occasions, so paying fines simply becomes a cost of doing business. In fact, some companies regard it as a badge of honor to join the $10 million club (the typical penalty for an antitrust violation); a few companies adding a little more to the amount in order to ensure their place in the club. A typical large corporation earns that kind of money back in about nine days. In the long run, as Croall (2001) demonstrates in so many ways, excessive fines are unproductive as a method of social control.
A far better idea is community service. Whole businesses can be subjected to this kind of punishment, and it has the added benefit of allowing the offenders to rationalize that something other than a crime was involved. A corporation is normally required to perform community service that is directly related to its crime somehow, as in service to underprivileged neighborhoods or community cleanup projects. While those are noble activities, in other cases, it might be a waste of corporate talent and skill, which would be better put to use helping government agencies operate more efficiently. The possibility of cross-contamination by criminality would be minimized if community service were closely monitored, as it ought to be.
Incarceration is a relatively infrequent sanction. Few white collar criminals are sent to prison. However, it is something they fear, and this penalty rests as the strongest deterrent. It is, again, wasteful to put highly competent, skilled, and well-educated people in prison. They are not "dangerous" in the sense of being predatory. Club Feds (where such offenders are likely to go) anyway, are an additional waste of taxpayer dollars. A few parties have suggested the death penalty (admittedly a disproportionate punishment) ought to be on the table. For the foreseeable future, the problem of figuring out which kind of punishments ought to be considered is likely to be with us for some time.
American Antitrust Institute
A Gallery of White Collar Criminal "Perp Walks"
How Stuff Works: Punishing White Collar Crime
Sentencing Corporations to Community Service
Sentencing of Corporate Fraud and White Collar Crime
The Trend Toward Higher Corporate Fines
Women Who Commit White Collar Crime (doc) and html
Benson, M. & Simpson, S. (2009). White collar crime: An opportunity perspective. NY: Routledge.
Braithwaite, J. (1989). Crime, Shame and Reintegration. Cambridge: Cambridge Univ. Press.
Braithwaite, V. & J., Gibson, D. & Makkai, T. (1994). "Regulatory styles, motivational postures, and nursing home compliance." Law & Policy 9:315-43.
Coleman, J. (2005). The criminal elite, 6e. NY: Worth.
Croall, H. (2001). Understanding white collar crime. Buckingham, UK: Open Univ. Press.
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Cullen, F., Hartman, J. & Jonson, C. (2009). "Bad buys: Why the public supports punishing white collar offenders." Crime, Law & Social Change 51:31-44.
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Friedrichs, D. (2010). Trusted criminals, 4e. Belmont, CA: Thomson Wadsworth.
Dodge, M. (2009). Women and white collar crime. Upper Saddle River, NJ: Pearson.
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Passas, N. & Goodwin, N. (Eds.) (2004). It's legal but it ain't right. Ann Arbor: Univ. of Michigan Press.
Powers, C. (2007). "Cheating on a different level." Inside Higher Ed (May 10).
Smith, K. & Stalans, L. (1991). "Encouraging tax compliance with positive incentives." Law & Policy 13:35-53.
Vaughn, D. (1983). Controlling unlawful corporate behavior. Chicago: Univ. of Chicago Press.
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Weisburd, D., Wheeler, S., Waring E. & Bode, N. (1991). Crimes of the middle class. New Haven: Yale Univ. Press.
Yu, O. & Zhang, I. (2006). "Does acceptance of corporate wrongdoing begin on the training ground of professional managers?" Journal of Criminal Justice 34:185-94.
Last updated: July 06, 2011
Not an official webpage of APSU, copyright restrictions apply, see Megalinks in Criminal Justice
O'Connor, T. (2011). "The Social Control of White Collar Crime," MegaLinks in Criminal Justice. Retrieved from http://www.drtomoconnor.com/4220/4220lect08.htm accessed on July 06, 2011.