Chapter 13 White-Collar Crime and Organized Crime PDF

Chapter 13 White-Collar Crime and Organized Crime Copyright © 2013 by Nelson Education Limited. 1  Introduction  Crimes of illicit entrepreneurship: 1) white-collar crime – involves illegal activities of people or institutions with an acknowledged purpose of illegal...

Chapter 13 White-Collar Crime and Organized Crime Copyright © 2013 by Nelson Education Limited. 1  Introduction  Crimes of illicit entrepreneurship: 1) white-collar crime – involves illegal activities of people or institutions with an acknowledged purpose of illegal profit through legal business transactions 2) organized crime – illegal activities of people, organizations with an acknowledged purpose of profit through illegal business transactions  Common characteristic of this criminal enterprise = goal of making money through criminal means Copyright © 2013 by Nelson Education Limited. 2 White Collar Crimes  Embezzlement  Price fixing  Bribery  False advertising  Theft  Fraud Copyright © 2013 by Nelson Education Limited. 3 Organized Crime  Threats  Smuggling  Drugs  Sex trade  Gambling  Loan sharking  Extortion Copyright © 2013 by Nelson Education Limited. 4  Introduction  Similarities between white-collar crime and organized crime: Both involve illegal enterprise crimes Can consider both the Mafia and a business chamber of commerce as associations of businesspeople who join to further business careers Copyright © 2013 by Nelson Education Limited. 5  Both corrupt and taint the free market system Both can include violence Some criminal enterprises involve both white-collar crime and organized crime Copyright © 2013 by Nelson Education Limited. 6 White-Collar Crime  Edwin Sutherland (1930s): Focused on corporate criminality White-collar crime involved conspiracies by the wealthy to use their position in commerce, industry for personal gain without regard for the law Cost of white-collar crime likely several times greater than all crimes that are viewed as “crime problems” White-collar crime offences breed distrust in economic, social institutions Copyright © 2013 by Nelson Education Limited. 7 White-Collar Crime Now also includes middle-income earners and corporate executives (e.g. income tax evasion, credit card fraud, soliciting bribes, and embezzlement)  Some white-collar criminals become involved in criminal conspiracies to improve market share, profitability of their corporations Called “corporate crimes” (e.g. antitrust violations, price fixing, false advertising) Copyright © 2013 by Nelson Education Limited. 8 White-Collar Crime  Hard to estimate extent and influence of white-collar crime on victims  2009: 30% of companies worldwide reported being victim of economic crime in previous year >50% of Canadian companies in >50% of cases, losses >$500,000  White-collar crime can also damage property, kill people in addition to $$ losses Copyright © 2013 by Nelson Education Limited. 9 Types of White-Collar Crime  Victims can be the public, offender’s employer, competing organization  Mark Moore’s typological of white-collar crime (1980): 1) Stings and swindles 2) Chiselling 3) Individual exploitation of institutional position 4) Influence peddling and bribery 5) Theft and employee fraud 6) Client fraud 7) Corporate crime 8) High-tech crime *new addition to original 7-element typology* Copyright © 2013 by Nelson Education Limited. 10  Stings and Swindles  Involves stealing through deception by people who use their institutional, business position to bilk people out of their money  E.g. door-to-door selling of faulty merchandise, passing of counterfeit stock certificates  Usually charged with theft or fraud Copyright © 2013 by Nelson Education Limited. 11 Albert Walker case Copyright © 2013 by Nelson Education Limited. 12  Chiselling  Regularly cheating an organization, its customers or both  May involve: People looking to make quick profits in own businesses; or Employees of big organizations who cheat on obligations to the organization by doing something illegal or against company policy  Professional chiselling Professionals using their position to chisel clients Copyright © 2013 by Nelson Education Limited. 13  Chiselling  Securities fraud Deceptive, illegal practices that take place on the commodity, stock markets Many different types of chiselling: a) Churning – form of stockbroker chiselling involving repeated, excessive, unnecessary buying/selling of stock b) Front running – form of stockbroker chiselling in which broker places personal orders ahead of a large customer’s order to profit from the market effects of the trade Copyright © 2013 by Nelson Education Limited. 14  Chiselling Many different types of chiselling: c) Bucketing – skimming customer trading profits by falsifying trade information d) Insider trading – buying and selling securities based on business information gained from a position of trust and not available to general public  In 2004, Bill C-13 established the criminal offences of insider trading, tipping, whistle-blowing retaliation Copyright © 2013 by Nelson Education Limited. 15  Individual Exploitation of Institutional Position  Individuals exploiting their power, position in an organization by extorting money from people who do business with that organization by threatening to withhold services that the victim has a clear right to expect E.g. fire inspector threatens to find non- existent fire code violations unless business owner pays him Copyright © 2013 by Nelson Education Limited. 16  Influence Peddling and Bribery  Individuals holding important powers in an organization selling their power, influence, information to outsiders who either: a)Have no legitimate interest in the organization; or b)Who want to obtain a favourable position by influencing activities of the institution  E.g. government officials selling information about future government activities Copyright © 2013 by Nelson Education Limited. 17  Influence Peddling and Bribery  Influence peddling in government Investigation of Bruce Carson initiated by Prime Minister Stephen Harper  Corruption in the criminal justice system Agents of criminal justice system can get caught up in corruption too Police officers particularly vulnerable to such charges Copyright © 2013 by Nelson Education Limited. 18 Toronto Drug Squad Corruption, 2003 Copyright © 2013 by Nelson Education Limited. 19 Toronto Drug Squad Corruption, 2003  https://www.cbc.ca/player/play/video/1.1706353 Copyright © 2013 by Nelson Education Limited. 20  Theft and Employee Fraud  Involves individuals’ use of their positions to embezzle or steal company funds or take company property for themselves Company becomes a victim Can reach all levels of the organizational structure  Pilferage – employee theft of company property Usually not done for economic reasons Workers say they steal because of strain, conflict Management level fraud is also quite common Copyright © 2013 by Nelson Education Limited. 21  Management-level Fraud 1. Converting company assets for own benefit 2. Fraudulently receiving increase in compensation (bonuses) 3. Fraudulently increasing personal holdings of company stock 4. Retaining one’s present position within company by manipulating accounts to show success 5. Concealing poor performance fromm stockholders Copyright © 2013 by Nelson Education Limited. 22  Client Fraud  Theft from an organization that advances credit to its clients or reimburses them for services 1)Health-Care Fraud Some physicians have been caught cheating the government out of government-sponsored health-care payments (e.g. billing for unnecessary services, billing for a more expensive service) Copyright © 2013 by Nelson Education Limited. 23  Client Fraud 2) Bank Fraud To obtain money or property from a financial institution by false pretences (forgery or misrepresentation) e.g. cheque forgery, bank credit card fraud, illegal transactions with offshore banks 3) Tax Evasion Victim is the government who is cheated by one of its clients (the taxpayer to whom it has extended credit by allowing taxpayer to delay paying taxes on $$ already earned) Canada Revenue Agency responsible for enforcement Copyright © 2013 by Nelson Education Limited. 24  Corporate Crime  Corporate crime –institutions wilfully violate laws that restrain them from doing social harm or that require them to do social good Done to further business interests Target of these crimes: public, environment, companies’ workers Offender is the corporation, not an individual even though it is company employees or owners who actually commit the crime and ultimately benefit Copyright © 2013 by Nelson Education Limited. 25 Ford Pinto What is a life worth? Copyright © 2013 by Nelson Education Limited. 26  Corporate Crime  Examples of corporate crime: a)Price-fixing Conspiracy to set, control price of a necessary commodity e.g. large companies agree to set the price of an object below fair market value so that smaller/weaker companies can no longer compete and close to stifle competition Copyright © 2013 by Nelson Education Limited. 27  Corporate Crime  Examples of corporate crime: b) Illegal restraint of trade Contract or conspiracy designed to stifle competition, create a monopoly, artificially maintain prices, otherwise interfere with free market competition c) Deceptive Pricing Contactors give incomplete, misleading information on how much will cost to fulfil contracts they are bidding on Use mischarges once contracts have been signed Copyright © 2013 by Nelson Education Limited. 28  Corporate Crime  Examples of corporate crime: d)False claims and advertising Making claims about product that are not founded in actual product performance It is illegal to knowingly and purposefully advertise a product as possessing qualities that the manufacturer knows it doesn’t have or can’t do Copyright © 2013 by Nelson Education Limited. 29  Corporate Crime  Examples of corporate crime: e)Environmental crimes Using company practices to violate environmental protection laws Many different types of environmental crimes e.g. maintain unsafe conditions in plants and mines, thus endangering workers Copyright © 2013 by Nelson Education Limited. 30  High-Tech Crimes  Recently added to Mark Moore’s typology: a) Computer crime Also known as cyber crimes 2 categories: 1) ‘traditional crimes’ committed with aid of a computer e.g. money laundering, illegal gambling 2) ‘pure’ high-tech crimes which are crimes committed against a computer or computer network e.g. hacking, spreading viruses Copyright © 2013 by Nelson Education Limited. 31  High-Tech Crimes  Theft styles and methods: 1) The Trojan horse 2) The salami slice 3) “Super-zapping” 4) The logic bomb 5) Impersonation 6) Data leakage Copyright © 2013 by Nelson Education Limited. 32  High-Tech Crimes  Controlling Internet crime 1993: established Canadian Anti-Fraud Centre that collects & disseminates information about telemarketing crime 2000: established Reporting Economic Crime On-Line (RECOL) 2002: established of Office of Critical Infrastructure Protection and Emergency Preparedness to provide leadership in protecting Canada’s infrastructure Copyright © 2013 by Nelson Education Limited. 33  High-Tech Crimes  Controlling Internet crime 2002: Bill C-15A passed – created the criminal offence of “luring” or exploiting children through the internet (child pornography) 2007: passed Personal Information Protection and Electronic Documents Act (PIPEDA) to protect e- commerce transactions in Canada Copyright © 2013 by Nelson Education Limited. 34 Cause of White-Collar Crime  Many possible explanations: Because acts don’t look like street crimes, offenders may not feel they are really committing “crimes” Belief that government regulators really don’t understand the business world and issues of competing in the free enterprise system Because it happens so often, some white-collar criminals feel it is not so bad if everyone else is doing it Greed Everybody does it! Copyright © 2013 by Nelson Education Limited. 35 Cause of White-Collar Crime Need to keep or improve their jobs, satisfy their egos, support their children, gambling debts, living beyond means Corporate culture view – some business organizations promote white-collar crime by maintaining a business climate that stresses profit over fair play Places huge demands on employees in a business climate that is tolerant of employee deviance Copyright © 2013 by Nelson Education Limited. 36 Cause of White-Collar Crime  Many possible explanations Self-control view –white-collar crime motives are same as for any other criminal behaviour: “desire for relatively quick, relatively certain benefit, with minimal effort” White-collar criminals have low self-control, impulsive, do not consider long-term consequences of behaviour Copyright © 2013 by Nelson Education Limited. 37 Controlling White-Collar Crime  Enforcement usually involves 2 types of strategies: 1) Compliance strategies 2) Deterrence strategies Copyright © 2013 by Nelson Education Limited. 38 Controlling White-Collar Crime  Compliance strategies Foster law conformity, cooperation, self-policing in the business community through use of economic incentives and administrative agencies These strategies depend on threat of economic sanctions, civil penalties to deter/control offenders e.g. issuing fines Copyright © 2013 by Nelson Education Limited. 39 Controlling White-Collar Crime  Deterrence strategies Detect criminal violations, identify who is responsible, and penalize the offenders as a way of deterring future violations Copyright © 2013 by Nelson Education Limited. 40 Controlling White-Collar Crime  Bill C-13 allowed for harsher penalties  Created offences of insider trading, tipping, whistle blowing retaliation  Increased maximum sentences Copyright © 2013 by Nelson Education Limited. 41 Organized Crime  Ongoing criminal enterprise groups whose primary purpose is own personal economic gain through illegitimate means  System may resemble a legitimate business  Characteristics of secrecy, power, wealth  Most of the general public do believe that organized crime families do exist and that they should be feared  pornography, gambling, narcotics, prostitution Copyright © 2013 by Nelson Education Limited. 42 Organized Crime: Characteristics  General traits of organized crime: Conspiratorial activity usually structured as a hierarchy Primary goal is economic gain Involved in more activities than just provision of illicit services Copyright © 2013 by Nelson Education Limited. 43 Organized Crime: Characteristics  General traits of organized crime: Employs predatory tactics (intimidation, violence, corruption) Quick and effective in exerting control over members, associates, victims = threats, violence, death There are more organizations than just the Mafia (Do not include political terrorists who are dedicated to political and/or social change) Copyright © 2013 by Nelson Education Limited. 44 Major Organized Crime Groups and Their Activities  ~18 organized crime groups operating in Canada  Mainly engaged in smuggling cigarettes, alcohol, drugs; luxury car theft; credit card fraud; extortion; smuggling of immigrants  Criminal Intelligence Service of Canada (CISC) reports annually on organized crime  3 main Italian-based criminal organizations in Canada: the Sicilian Mafia, the ‘Ndrangheta, and La Cosa Nostra Copyright © 2013 by Nelson Education Limited. 45 Outlaw motorcycle gangs  Prostitution  Fraud  Extortion  Drug trafficking  Telemarketing  Illegal weapons  Stolen goods  Contraband Copyright © 2013 by Nelson Education Limited. 46 The Concept of Organized Crime  One view of organized crime is that it is a direct offshoot of a criminal society (Mafia) Alien conspiracy theory – view that organized crime in the US is controlled by Mafia, centrally coordinated by a national committee Many criminologists see alien conspiracy theory as media imagination Others view organized crime as a loose confederation of ethnic, regional crime groups bound by common economic and political objectives Copyright © 2013 by Nelson Education Limited. 47  Summary  White-collar crime and organized crime are not the same thing but are both linked to illicit enterprise, the goal of making $$ through criminal means  7 subcategories of white-collar crime: stings and swindles, chiselling, individual exploitation of institutional position, influence peddling and bribery, theft and employee fraud, client fraud, corporate crime, high-tech crime  There are many potential causes for white-collar crime identified by criminologists Copyright © 2013 by Nelson Education Limited. 48  Summary  Both compliance strategies and deterrence strategies are used to try to prevent white-collar crime and bring violators to justice  Although each organization has unique features, there are general traits that can be used to characterize organized crime  There are 18 organized crime groups in Canada and 3 main Italian-based criminal organizations in Canada Copyright © 2013 by Nelson Education Limited. 49