Crime, Deviance, and Social Control - Corporate Crime PDF

CHAPTER 9 Corporate Crime and Wrongdoing and White-Collar Crime Dan Antonowicz and Claudio Colaguor...

CHAPTER 9 Corporate Crime and Wrongdoing and White-Collar Crime Dan Antonowicz and Claudio Colaguori LEARNING OBJECTIVES In this chapter, you will understand how the crimes of powerful individuals and business corpora- tions represent substantial harm to people and to the planet; learn the difference between corporate crime and white-collar crime and review various examples of each; develop an understanding of some of the main causes of corporate crime and wrongdoing; develop critical thinking skills that help you understand how criminal activities are woven into the fabric of elite society and the global economic system; and develop an understanding of the difficulties of prosecuting elite and cor- porate crimes. Copyright © 2023. Canadian Scholars. All rights reserved. INTRODUCTION Despite the major harm caused, discussion of crimes committed by people with power and privilege were virtually absent from early criminology. The primary focus was on traditional theories of criminality, which developed predominantly on the basis of clinical explanations of those deemed to be “degenerate” members of the “dangerous classes,” who were associated with conventional “street crimes” such as loitering, homicide, robbery, and assault. Thus, traditional criminology has long neglected to adequately consider and conceptualize crimes committed by economically privileged, high-status, elite individuals, whose wrongdoings Colaguori, C. (Ed.). (2023). Crime, deviance, and social control in the 21st century : A justice and rights perspective. Canadian Scholars. Created from york on 2025-01-21 16:26:08. CrimeDeviance_and_SocialControl_21Century.indd 315 2/8/2023 2:13:31 PM  316   Chapter 9   Corporate Crime and Wrongdoing and White-Collar Crime eventually came to be known as white-collar crime, and by powerful corpor- ate business enterprises in what is now referred to as corporate crime. Up to the present, public conceptions of crime have tended to focus on crimes committed by less powerful and often marginalized members of society. Such skewed, media- generated views of the reality of crime obscure the fact that crimes of the power- ful represent a substantial level of harm to individuals and to planetary ecology. The scale and scope of the crimes and wrongdoings committed by the profes- sional elites of society and by business corporations is extensive and ranges from wholesale financial fraud to species extinction. Thus, critical criminologists often remark how corporate crime and wrongdoing is responsible for substantially more death, destruction, and injustice on a global scale than all other types of crime combined (Clinard & Yeager, 2006). Elite professionals and the corporate business enterprises that are directly in- volved in the economic organization of society possess a substantial amount of power and privilege, which make their crimes particularly complex, troubling, and difficult to control. Even though the amount of criminal harm perpetrated by powerful business corporations and elite members of society vastly exceeds the damage, victimization, and harms committed by so-called street criminals, main- stream criminology had, for a long time, ignored the crimes of the powerful. Early criticisms of criminology overlooking the crimes of the powerful from pioneers in the field, such as Edwin Sutherland and William Chambliss among others, has prompted many 21st-century criminologists to focus on the scale and scope of the crimes and wrongdoings perpetrated by powerful corporations and elites. The expanding scope of criminological inquiry includes new subfields of study such as crimes against consumers (Rosoff et al., 2020) and green criminology, which focuses on crimes against the ecological environment (Lynch et al., 2017). Copyright © 2023. Canadian Scholars. All rights reserved. In today’s increasingly globalized world, it is virtually impossible to ignore the vast scale and scope of the criminal harms and wrongdoings perpetrated by elite individuals and business corporations. These acts often have such widespread, dis- astrous effects that they now form part of public awareness and civic activism. The crimes of the wealthy, of corporations, and crimes against the environment, once relegated to the margins, are also becoming more prominent in the news media and within criminology. Corporate crime is defined as organized criminal activity engaged in by the executives of business corporations in the course of conducting business and may include forms of wrongdoing such as the violation of labour laws, polluting the ecological environment, and manipulating the norms of fair and responsible Colaguori, C. (Ed.). (2023). Crime, deviance, and social control in the 21st century : A justice and rights perspective. Canadian Scholars. Created from york on 2025-01-21 16:26:08. CrimeDeviance_and_SocialControl_21Century.indd 316 2/8/2023 2:13:31 PM  Chapter 9   Corporate Crime and Wrongdoing and White-Collar Crime   317 business practices. Clinard and Yeager (2006) outline and describe types of legal violations by corporations and their executives in various industries including oil, pharmaceutical, and financial accounting. Some of the more noteworthy examples of corporate crime and wrongdoing include: The release of pollutants and toxins into waterways, on land, or into the air. There have been notorious cases such as the pollution of approximately 1,000 kilometres of the Ok Tedi and Fly rivers in Papua New Guinea for 30 years, caused by uncontrolled leakage of billions of tons of effluent waste from mining operations into the waterways. Another disaster is the collapse of a tailings dam in Brumadinho, Brazil, in 2019 that killed 272 people (London Mining Network, 2020). The negligent practices of extractive industries that result in ecological catastrophe, such as the Deepwater Horizon oil spill of 2010 that spewed 5 million barrels of oil into the Gulf of Mexico and is considered to be the largest oil spill in history (Dodd, 2021). The banking and mortgage fraud that led to the 2008 global financial crisis, caused by willful negligence and misrepresentation by a number of major financial institutions, which resulted in extensive economic damage virtually worldwide and forced the governments of many nations to bail out numerous large companies (Pontell et al., 2014). The negligent operation of machinery that leads to loss of life, as in the Lac-Mégantic rail disaster of July 2013. Forty-seven people lost their lives in eastern Quebec when “an unattended runaway train carry- ing 7.7m litres of petroleum crude oil barrelled into Lac-Mégantic at 104 km/h and jumped the tracks near the centre of town. It slammed Copyright © 2023. Canadian Scholars. All rights reserved. to a stop and erupted in flames. The ensuing inferno destroyed most of the lakeside town’s downtown core. Twenty-seven children lost parents, over 2,000 people were evacuated, and dozens of homes were destroyed. Over 40 buildings were razed—including the public library—and mil- lions of litres of oil seeped into the soil and the nearby Chaudiere river” (Murphy, 2018). The negligent decisions of auto manufacturers that fail to protect con- sumer safety, as evidenced in the example of General Motors failing to recall faulty ignition switches that shut off vehicles and caused drivers to lose control and crash to their deaths. “GM engineers knew about the faulty switch at least as far back as 2004 but failed to address it Colaguori, C. (Ed.). (2023). Crime, deviance, and social control in the 21st century : A justice and rights perspective. Canadian Scholars. Created from york on 2025-01-21 16:26:08. CrimeDeviance_and_SocialControl_21Century.indd 317 2/8/2023 2:13:31 PM  318   Chapter 9   Corporate Crime and Wrongdoing and White-Collar Crime until 2006—possibly because it would have been too expensive to fix. And the defective vehicles themselves didn’t get recalled until 2014” (Plumer, 2015). The negligent decisions of auto manufacturers that fail to protect the en- vironment through deliberate attempts to bypass environmental regu- lations, as evidenced in the Volkswagen emissions scandal, known as Dieselgate, where the company installed “defeat devices” to enable “cheat- ing on diesel-emissions tests” so that the toxic emissions of their diesel engines they touted as “clean diesel” could pollute substantially more than the legal limits of tailpipe emissions undetected (Atiyeh, 2019). Aircraft manufacturer Boeing’s complicity in the loss of 346 lives due to “two fatal crashes of Boeing 737 Max aircraft [that] were partly due to the plane-maker’s unwillingness to share technical details” of their new computerized flying system that led to pilot loss of control of the planes. A 250-page report on the tragedy cites company policies aimed at “Cost- cutting … that jeopardized the safety of the flying public,” a “culture of concealment” over issues with the aircraft, and “troubling mismanage- ment misjudgments” (BBC News, 2020). In the words of scholars … Corporate lawbreaking covers a very wide range of misbehaviour, much of it serious: among these violations are accounting malpractices, including false statements of corporate assets and profits; occupational safety and health hazards; unfair labour practices; the manufacture and sale of hazard- ous products and misleading packaging of products; abuses of competition Copyright © 2023. Canadian Scholars. All rights reserved. that restrain trade such as antitrust and agreements among corporations to allocate markets; false and misleading advertising; environmental violations of air and water pollution, and illegal dumping of hazardous materials; illegal domestic political contributions and bribery of foreign officials for corporate benefits. Marshall B. Clinard and Peter C. Yeager, Corporate Crime. 2006 Although it is related to corporate crime, white-collar crime is a distinct type of criminal wrongdoing that often (but not always) involves strategies to acquire money. It is committed by high-status or seemingly well-to-do individuals, who are generally trusted by others because they occupy positions of privilege, social Colaguori, C. (Ed.). (2023). Crime, deviance, and social control in the 21st century : A justice and rights perspective. Canadian Scholars. Created from york on 2025-01-21 16:26:08. CrimeDeviance_and_SocialControl_21Century.indd 318 2/8/2023 2:13:31 PM  Chapter 9   Corporate Crime and Wrongdoing and White-Collar Crime   319 status, and influence. Some of the more noteworthy examples of white-collar crime reported in the news media include: The infamous 2008 case of fraudulent American investor Bernie ­Madoff, who, for years, took money from individuals with the promise of re- turning profits, but instead used the money to perpetuate an elaborate Ponzi scheme that amounted to billions of dollars in losses for his clients (Thomson Reuters, 2021). In 2019, the Hollywood “tuition scandal” made headlines because it ­revealed how some rich celebrities abused their economic power and social influence by paying large sums of money to guarantee that their children gained acceptance into their preferred American universities (Friedman, 2019). Another disturbing case in what is referred to as professional malpractice, which can be classified as white-collar crime, is wrongdoing by medical practitioners. For example, each year in Canada, hundreds of objects such as medical instruments and gauze are negligently left inside the bod- ies of surgical patients, creating serious medical debilitation and poten- tial death (Canadian Press, 2019; Marchitelli, 2020). There is also the odd case of a British surgeon who violated basic medical ethics when he deliberately branded his initials onto the livers of his transplant patients (Domonoske, 2017)! Professional misconduct by lawyers is an ongoing problem in Canada. “An analysis of public records over six years shows law societies sanctioned 220 members for taking or mishandling money from clients or overcharging them, either negligently or intentionally.… More than 200 Canadian law- Copyright © 2023. Canadian Scholars. All rights reserved. yers who were disciplined by their law societies between 2010 and 2015 misappropriated about $160 million of their clients’ funds, a CBC News investigation has found. But most of those lawyers were never charged with crimes. CBC could find evidence of criminal prosecutions involving fewer than 10 per cent of the total number of disciplined lawyers in that time frame” (Pederson et al., 2017). As public awareness of the economic disparities between the wealthy and the working classes grows, criminological researchers with an active interest in progressive social change are becoming more likely to emphasize the harms and wrongdoings committed by the powerful as opposed to researching traditional criminological categories such as murder and robbery. One would hope that with Colaguori, C. (Ed.). (2023). Crime, deviance, and social control in the 21st century : A justice and rights perspective. Canadian Scholars. Created from york on 2025-01-21 16:26:08. CrimeDeviance_and_SocialControl_21Century.indd 319 2/8/2023 2:13:31 PM  320   Chapter 9   Corporate Crime and Wrongdoing and White-Collar Crime increased awareness of crimes of the powerful, there would be a corresponding effort to police such crimes. However, such a task is fraught with difficulty for numerous reasons, not the least of which is how business corporations occupy a paradoxical position in the modern global economic system. The corporate sector is relied upon by many as provider of jobs, and corporate economic growth estab- lishes the general economic prosperity of a nation, while at the same time corpor- ate wrongdoing and unfair practices are often a normal component in the pursuit of profit and shareholder value—all of which raise questions: Do we as citizens of a nation benefit financially by the ongoing commission of corporate crime? What sort of a citizen should the business corporation be? Aside from the questions of power, privilege, and justice, the problem of cor- porate crime is further complicated by the historic inadequacy of the legal system to properly define, prosecute, and punish it. Corporate and white-collar crimes are generally more elaborate and concealed than typical street crimes, thus posing fur- ther challenges to policing and control (Yeager, 2016). In addition to addressing such issues, this chapter provides an overview of this important area of criminol- ogy by examining various types of corporate and white-collar crime, including economic crime, crimes against consumers, crimes against employees and work- ers, and crimes against the ecological environment through the use of examples. Box 9.1: Edwin Sutherland and White-Collar Crime, and C. Wright Mills and The Power Elite Academic criminology has long minimized the crimes of the powerful; however, there is one significant early exception from a pioneer in the field. In his 1939 address to the American Sociological Association, Edwin H. Copyright © 2023. Canadian Scholars. All rights reserved. Sutherland sought to expose some commonly held misconceptions about crime and its causes. Sutherland suggested the types of crime based on data gathered from criminal justice statistics and explanatory theories that link crime with “poverty, feeble-mindedness, psychopathic deviations, slum neighbourhoods, and deteriorated families … are misleading and incorrect [since they neglect] the criminal behaviour of business and professional men [sic]” (1940, p. 1). Sutherland’s work indicated there is a vast array of criminal wrongdoing that goes underreported and undertheorized that is regularly committed by high-status, “white-collar” (i.e., well-dressed and seemingly respectable) individuals who are well placed within the echelons of business society and use their positions of economic privilege for personal gain. Colaguori, C. (Ed.). (2023). Crime, deviance, and social control in the 21st century : A justice and rights perspective. Canadian Scholars. Created from york on 2025-01-21 16:26:08. CrimeDeviance_and_SocialControl_21Century.indd 320 2/8/2023 2:13:31 PM  Chapter 9   Corporate Crime and Wrongdoing and White-Collar Crime   321 Sutherland defined white-collar crime as “a crime committed by a person of respectability and high status in the course of his [sic] occupation” (1949, p. 9). Sutherland emphasized the relation between crime and economic power in a manner that varies in significant ways from how Marxist-oriented criminologists (see Chapter 3) approached the issue at that time. Sutherland aimed to reorient criminologists to the fact that possessing the professional privilege of upper-class social status does not preclude a person from committing serious crimes and can actually shield elites from legal scrutiny and prosecution. As Simon writes, “elite deviance, in all its forms, now constitutes a major problem for … much of the world.… Notions of elite wrongdoing, white-collar crime, and related concepts are now the focus of intense debate in the social sciences” (2006, pp. 12–13). In 1956, C. Wright Mills also wrote about how those deemed the power elite occupied positions of political and economic influence that demanded greater critical scrutiny from social scientists. Criminal behaviours that can be classified as white-collar include money laundering to hide proceeds gained from illicit sources or to evade income taxes; the theft of intellectual property such as patent infringement, reverse engineering, and copyright violations; financial accounting fraud; bribery of public officials and business associates for the purpose of securing lucrative business contracts; fraudulent investment schemes; and the many sorts of professional wrongdoings that violate the ethical codes of conduct that aim to govern practitioners within professions such as law, engineering, and medicine, among others. Copyright © 2023. Canadian Scholars. All rights reserved. In the words of scholars … The power elite is composed of men [sic] whose positions enable them to transcend the ordinary environments of ordinary men and women; they are in positions to make decisions having major consequences. Whether they do or do not make such decisions is less important than the fact they do occupy such pivotal positions: their failure to act, their failure to make decisions, is itself an act of greater consequence than the decisions they do make. For they are in command of the major hierarchies and organizations of modern society. They rule the big corporations. They run the machinery of the state and claim Colaguori, C. (Ed.). (2023). Crime, deviance, and social control in the 21st century : A justice and rights perspective. Canadian Scholars. Created from york on 2025-01-21 16:26:08. CrimeDeviance_and_SocialControl_21Century.indd 321 2/8/2023 2:13:31 PM  322   Chapter 9   Corporate Crime and Wrongdoing and White-Collar Crime its prerogatives. They direct the military establishment. They ­occupy the ­strategic command posts of the social structure, in which are now centered the effective means of the power and the wealth and the celebrity which they enjoy. C. Wright Mills, The Power Elite. 1956 THE GLOBALIZATION OF CORPORATE POWER AND INFLUENCE Despite early criminology overlooking the fact, the commission of illegal acts, gross harms, and deliberate wrongdoings by corporate business enterprises and profes- sional elites, it is by no means a new phenomenon. The modern global capitalist sys- tem itself was founded upon the unjust exploitation of millions of enslaved A ­ frican people who were literally stolen from their homelands, many of them worked to death in the Americas—a criminal legacy whose effects remain with us up to the present. As Glasbeek writes, “In relatively recent history, wealth-seekers, supported by European nations such as England, France, Germany, Spain, ­Portugal, and the Netherlands, as well as, even more recently, the United States, have enslaved popu- lations and bought and sold human beings as if they were baubles” (2002, p. 2). The exploitation of people by those with the power to do so in the course of doing business is but one example of how wealth and profit is generated in the modern global economy where human rights are superseded by corporate rights. Of cen- tral importance to this system of exploitation as a means of profit generation is the invention of the legal entity known as the corporation. Once an entity whose Copyright © 2023. Canadian Scholars. All rights reserved. power was restricted by law in both the USA and Canada, the corporation has now become, as some have argued, the most dominant institution of the modern world order (Glasbeek, 2002; Korten, 2015; Rowland, 2005; Wood, 2013). The business corporation is a coordinated administrative business enterprise whose aim is to generate wealth for those who own it or own shares in it. It has exceptional powers granted under law, especially the power to claim limited ­liability, meaning that, to a large extent, persons who own or work for a business corporation cannot generally be held personally responsible or liable for wrong- doings committed in the course of operating their business. This legal protection power has given many corporations special privileges that often make corpor- ate executives unaccountable for certain criminal actions they may have under- taken. This point alone makes corporate crime a matter of serious concern, because Colaguori, C. (Ed.). (2023). Crime, deviance, and social control in the 21st century : A justice and rights perspective. Canadian Scholars. Created from york on 2025-01-21 16:26:08. CrimeDeviance_and_SocialControl_21Century.indd 322 2/8/2023 2:13:31 PM  Chapter 9   Corporate Crime and Wrongdoing and White-Collar Crime   323 limited liability protection hampers attempts at controlling acts of corporate crime through the criminal justice system. Since the 1980s, the status of business corporations has undergone some historically significant developments that have substantially expanded corporate power, especially globalization and corporate personhood. The first develop- ment, globalization, refers to the free trade process. This involves the removal of trade barriers such as import and export taxes and tariffs to allow goods and ser- vices to move more freely beyond the national borders of a country and expand globally into previously restricted foreign markets. Corporate globalization has increased the size of many corporations, so they are better poised to dominate specific sectors of the economy. For example, Nestlé, the largest food company in the world, owns over 8,000 brands in more than 80 countries throughout the world, including baby food, pet food, bottled water, cereal, coffee, chocolate, ice cream, and more (Nestlé, n.d.). The global scope of such business organizations makes them multinational corporations, which is a business enterprise that has production facilities, administrative offices, and sales forces spread out across vari- ous nations to increase market share, to take advantage of cheaper foreign labour and production costs, and to benefit from tax incentives wherever such advantages are possible. The second development, that of corporate personhood, relates to the status of a corporation to be deemed a legal person granted individual rights and free- doms, as if that corporation was a living person with legally granted entitlements (­Totenberg, 2014). This aspect of corporate power allows corporations to make substantial rights claims when pursuing profits; when facing obstacles in doing so, it will vigorously protect those claims through legal court challenges and ap- peals. Virtually all large corporations have in-house legal departments and spend Copyright © 2023. Canadian Scholars. All rights reserved. substantial amounts of money protecting and defending their business interests in the legal system. In Canada, a corporation that is called out for its misleading advertising claims, for example, may appeal to the courts under the Charter of Rights and Freedoms on the basis that the challenge violates their freedom of ex- pression rights. In 2012, the Canadian telecommunications company Rogers faced a lawsuit from the Competition Bureau for allegedly engaging in false advertising in one of their marketing campaigns. According to the Competition Bureau, the company did not conduct adequate tests on its product or have sufficient evidence to make certain claims. Rogers claimed that this violated their freedom of expres- sion rights under the Charter (da Silva, 2012). Through globalization and free trade agreements, there has been a significant increase in the power and influence of multinational corporations in particular. Colaguori, C. (Ed.). (2023). Crime, deviance, and social control in the 21st century : A justice and rights perspective. Canadian Scholars. Created from york on 2025-01-21 16:26:08. CrimeDeviance_and_SocialControl_21Century.indd 323 2/8/2023 2:13:31 PM  324   Chapter 9   Corporate Crime and Wrongdoing and White-Collar Crime They have risen to become dominant players on the global political stage. The rise of corporate power has had many negative outcomes on the wages and rights of workers, environmental protections, and on issues such as food safety, among others. Placing profits over people and safety in order to remain globally competi- tive has become commonplace in business practice. TYPES OF CORPORATE CRIME The phrase corporate crime refers to a wide variety of wrongdoings, and they often overlap with other categories of illegal activity. For the sake of clarity of organiza- tion, this section will outline and describe four major types of corporate crime and wrongdoing: economic and financial crime, crimes against consumers, crimes against employees and workers, and crimes against the ecological environment. Economic and Financial Crime Economic or financial crimes are one of the major forms of corporate crime. They may include misrepresentations in financial statements, bribery, anti-competitive activities such as price-fixing, and monopolization of markets and stock market manipulation such as pump and dump schemes. An example of the latter is the infamous case of Bre-X gold mining company, where stock investors lost billions in the late 1990s (CBC Digital Archives, n.d.). Economic crime and wrongdoing accounts for enormous financial losses to private individuals while serving to pro- tect the business interests of powerful corporations and economic elites. Misrepresentation in the Financial Statements of Corporations The misrepresentation of values on financial statements involves deliberate falsifica- Copyright © 2023. Canadian Scholars. All rights reserved. tions of monetary amounts on the accounting records of a company with the intent to deceive investors and shareholders. One of the most highly publicized ­examples of financial misrepresentation involved the publicly traded energy c­ ompany En- ron (McLean & Elkind, 2003). The company was betting on the f­uture price of commodities such as natural gas and electricity. Ultimately, ­Enron’s success was based on its exploitation of the existing accounting regulations. As a result of their apparent success, Enron became the seventh largest company in the United States in terms of sales. Enron executives also used illegal financial measures to make it appear as if profits were increasing when, in fact, the company had been hiding billions of dollars in debt via various accounting loopholes and inflating profits in financial statements. The company collapsed after revelations of systemic Colaguori, C. (Ed.). (2023). Crime, deviance, and social control in the 21st century : A justice and rights perspective. Canadian Scholars. Created from york on 2025-01-21 16:26:08. CrimeDeviance_and_SocialControl_21Century.indd 324 2/8/2023 2:13:31 PM  Chapter 9   Corporate Crime and Wrongdoing and White-Collar Crime   325 accounting fraud and then declared bankruptcy. At the time, it was the largest corporate bankruptcy in American history. Why didn’t the auditors pick up on the accounting irregularities? Investigations revealed that the ­accounting firm ­A rthur Andersen helped facilitate the accounting coverup. This accounting firm was per- forming both auditing and consulting work for Enron. Others that facilitated this fraud included large banks on Wall Street and brokerage firms, members of Enron’s board of directors, auditors, and lawyers. Unfortunately, ­Enron was not an isolated incident or anomaly. Other cases such as WorldCom, a telecom- munications company whose less-sophisticated accounting fraud led to a larger restatement of earnings, followed. During this same period, numerous other cor- porations experienced accounting scandals as well. This included an American national drugstore chain named Rite Aid; Halliburton, one of the world’s largest providers of products and services to the energy industry; and Adelphia, the fifth largest cable company in the US at the time. Europe also witnessed the Parmalat financial reporting scandal in 2003. Parmalat is a dairy company based in Italy. More recently, the company Wirecard in Germany was involved in an accounting scandal in 2020. This is a payments processor company that has been referred to as the “Enron of Germany” (Browne, 2020). Price-Fixing In a fair, competitive market, companies attract consumers by holding prices down while at the same time maintaining product quality. When competitors conspire to fix prices, however, consumers pay higher prices for these goods and services. Those individuals in a company whose salary/compensation are tied to the finan- cial performance of the business have an incentive to engage in price-fixing in order to increase profits. These violations are widespread across industries. Over Copyright © 2023. Canadian Scholars. All rights reserved. a 14-year period, a number of Canada’s leading bread makers and bread sellers conspired to fix the price of bread (Russell, 2018). This included Loblaws, Sobeys, Walmart, and Metro. As part of their agreement, these companies agreed to not lower their prices in order to maximize profits for mutual gain. Furthermore, these companies would raise their prices at about the same time. The competition watchdog in Canada has also investigated price-fixing schemes in the country’s chocolate industry and Quebec’s gasoline industry. One other notable case was the Archer Daniels Midland (ADM) lysine case (Walsh, 1996). Lysine is an amino acid used in animal feed. ADM and several other companies in the 1990s conspired to increase the price of lysine and were uncovered after an inquiry by the American Federal Bureau of Investigation (FBI). Colaguori, C. (Ed.). (2023). Crime, deviance, and social control in the 21st century : A justice and rights perspective. Canadian Scholars. Created from york on 2025-01-21 16:26:08. CrimeDeviance_and_SocialControl_21Century.indd 325 2/8/2023 2:13:31 PM  326   Chapter 9   Corporate Crime and Wrongdoing and White-Collar Crime The informant was a one-time ADM executive. The case was made into a Holly- wood movie based on a book about the ADM scheme (Russell, 2018). The Monopolization of Markets Economic competition is touted as being the wellspring of market dynamics that benefits consumers, yet many corporations seek to eliminate free competition by attempting to secure a monopoly or oligopoly over a particular industry. In ­Canada, for example, a very small group of corporations have come to dominate key sectors of our economy such as technology platforms, telecommunications, and banks. With increased market concentration, and without essential competi- tion, concerns have been raised by anti-monopoly experts (Dayen, 2020; Teach- out, 2020). Through market dominance, corporations come to yield considerable power over the economy. The loss of competition means that consumers pay higher prices for lower-quality items. Over the last several decades, nearly every single industry has become more concentrated (Dayen, 2020; Teachout, 2020). With less competition, these corporate giants are able to take advantage of consumers, suppliers, stifle innovation, drive down workers’ wages, and even influence the outcome of elections with their tremendous economic power and political clout. In Canada, Bell, Telus, and Rogers control 91 percent of the wireless telecom industry based on both revenue and subscribers (Hearn, 2020). This places them in a position whereby they can resist access into their industry from competitors. Hearn (2020) also points out that high degrees of concentration also exist in other industries like funeral services, beer and alcohol, pharmacies, eyeglasses, and gro- cers. The COVID-19 pandemic further worsened concentration, with many larger companies able to purchase financially distressed companies at much lower prices. Copyright © 2023. Canadian Scholars. All rights reserved. Banking and Mortgage Finance Crime Wrongdoing in the financial sector is among the most economically damaging of all forms of corporate crime. Financial losses to individuals and their invest- ments have been in the hundreds of billions of dollars and have disrupted job cre- ation, home ownership, pensions, investments, and the quality of life of masses of populations on a global scale. In addition to the Great Depression of the 1930s, when many banks went bankrupt and unemployment and poverty levels were at an all-time high, one of the costliest of all financial failures is the crime known as the US Savings and Loan crisis of the 1980s and 1990s. As Calavita and col- leagues write, “the estimated cost to taxpayers, not counting the interest pay- ments on government bonds sold to finance the industry’s bailout, is $150 to Colaguori, C. (Ed.). (2023). Crime, deviance, and social control in the 21st century : A justice and rights perspective. Canadian Scholars. Created from york on 2025-01-21 16:26:08. CrimeDeviance_and_SocialControl_21Century.indd 326 2/8/2023 2:13:31 PM  Chapter 9   Corporate Crime and Wrongdoing and White-Collar Crime   327 $175 billion … economists and financial experts have attributed the disaster to faulty business decisions or business risks gone awry. We argue instead that delib- erate insider fraud was at the very centre of the disaster” (1997, p. 1). Contrary to the widely held idea that financial market fluctuations are the result of a naturally occurring, wavering, and hidden economic logic, if there is a hidden hand orches- trating economic ups and downs, it is controlled by those who, in their positions of economic privilege, put personal economic gain above the economic well-being of the society as a whole. The global financial crisis of 2008 has come to be known as the world’s largest financial crisis since the Great Depression. Although it is referred to as a “crisis,” which seems to imply that it happened by accident due to causes beyond human con- trol, that is not the case. It was caused by reckless risk-taking by banking and lend- ing institutions who, among other unethical activities, engaged in lending mortgage monies to homeowners with deceptive terms and conditions that would eventually lead to inability to pay by borrowers, and the subsequent collapse of a substantial part of the mortgage market along with other sectors of the global economy. Morgan Stanley, an American multinational investment bank, was one of the organizations that misrepresented the risks of mortgage-backed securities lead- ing up to the 2008 housing and financial crisis. Bankers in the US had developed a lucrative business of buying up the US mortgages of low-income Americans (known as “subprime”), packaging them together with better quality mortgages, and selling them on as essentially risk-free assets known as mortgage-backed se- curities. “Morgan Stanley knew that it was selling securities backed by residential mortgages with ‘material defects’—such as loans that were ‘underwater,’ where the loan was larger than the value of the house.… [Eventually] M ­ organ Stanley reached a $3.2 billion settlement with state and federal authorities, the New York Copyright © 2023. Canadian Scholars. All rights reserved. attorney general’s office announced Thursday. In the deal, the investment bank ac- knowledges that it misrepresented the risks of ­mortgage-backed securities leading up to the 2008 housing and financial crisis” (­Domonoske, 2016). Box 9.2: Tax Evasion, Legal Malpractice, and Money Laundering Wealthy and powerful individuals as well as criminals all over the globe will often shift their money to other countries to avoid paying taxes on their money or to conceal the purposes of transactions. In order to evade taxes or conceal the proceeds of crime, these individuals or businesses require the expertise of legal and financial organizations that promote or sell such Colaguori, C. (Ed.). (2023). Crime, deviance, and social control in the 21st century : A justice and rights perspective. Canadian Scholars. Created from york on 2025-01-21 16:26:08. CrimeDeviance_and_SocialControl_21Century.indd 327 2/8/2023 2:13:31 PM  328   Chapter 9   Corporate Crime and Wrongdoing and White-Collar Crime tax arrangements and financial tax haven schemes (Fitzgibbon & Hallman, 2020). These “experts” deliberately misrepresent or make false statements involving tax shelters or arrangements to assist clients in exchange for obtaining a financial benefit. According to Bernstein (2017), this network conceals the identities of the individuals who benefit from these activities and is assisted by bankers, lawyers, and auditors. Clients have included wealthy individuals, corrupt politicians, and organized crime groups. Some are evading taxes while others are trying to conceal the money generated by criminal activities such as drug trafficking. The process of making large amounts of money generated by criminal activities appear legitimate is referred to as money laundering and is an illegal practice (Chen, 2021). When the International Consortium of Investigative Journalists (ICIJ) released the Panama Papers in 2016, millions of leaked documents and hundreds of thousands of secret tax shelter companies revealed an illicit money laundering network that served to financially benefit the global elite (Bernstein, 2017). The Panama Papers leak focused on millions of financial and legal documents from the files of the Panamanian law firm Mossack Fonseca that set up secret tax shelter companies for the global elite in various tax haven locations such as the British Virgin Islands—an event that was satirized in the 2019 film The Laundromat (Fitzgibbon & Hallman, 2020). The Panama Papers revealed how the rich and powerful hid billions of dollars in complex financial networks. The anonymous disclosure of files from Mossack Fonseca, one of the world’s largest offshore law firms, further revealed how the wealthy exploit tax havens through various forms of legal manoeuvring and trickery. “The Panama Papers exposed the wealthy’s— including 12 national leaders, 131 politicians, and others—exploitation of Copyright © 2023. Canadian Scholars. All rights reserved. offshore tax havens” (Green, 2021). In 2017, another trove of document leaks from the offshore law firm Appleby and other corporate services providers highlighted even more financial and tax shelter schemes. These document leaks, known as the Paradise Papers, consisted of 13.4 million documents and 1.4 terabytes of data documenting the deceptive offshore activities of national leaders, wealthy individuals, and numerous companies. The Paradise Papers leak shows how deeply the offshore financial system is entangled with the overlapping worlds of political players, private wealth, and corporate giants, including Apple, Nike, Uber, and other global companies that avoid taxes through increasingly imaginative bookkeeping manoeuvres (Green, 2021). Colaguori, C. (Ed.). (2023). Crime, deviance, and social control in the 21st century : A justice and rights perspective. Canadian Scholars. Created from york on 2025-01-21 16:26:08. CrimeDeviance_and_SocialControl_21Century.indd 328 2/8/2023 2:13:31 PM  Chapter 9   Corporate Crime and Wrongdoing and White-Collar Crime   329 The Paradise Papers expand on the revelations from the leak of offshore documents that produced the 2016 Panama Papers. The new files shine a light on a different cast of underexplored island havens, including some with cleaner reputations and higher price tags, such as the Cayman Islands and Bermuda. The Paradise Papers exposed a series of links that connected the offshore financial industry with organized crime and large-scale financial wrongdoing. Also exposed were public officials and high-powered executives who used this secretive financial system for personal gain. These leaked documents show how the offshore financial system is connected with the overlapping worlds of political players, private wealth, and corporations. The promise of tax havens is secrecy—offshore locales create and oversee companies that often are difficult, or impossible, to trace back to their owners. While having an offshore entity is often technically legal, the built-in secrecy attracts money launderers, drug traffickers, kleptocrats, and others who want to conceal their finances. Offshore companies, often “shells” with no employees or office space, are also used in complex tax- avoidance structures that drain billions from national treasuries. Addressing tax evasion and other financial crimes is important because the taxes owed help fund important programs and services such as healthcare, childcare, education, scientific research, and infrastructure projects (e.g., public transportation)—all of which are essential to the functioning of modern society. Canadian elites are also complicit in the practice of tax evasion. A 2020 National Post article states, “Canada Revenue Agency [is] claiming $4.4 billion from Canadian companies and individuals suspected of tax evasion” (Nardi, 2020). Copyright © 2023. Canadian Scholars. All rights reserved. Bribery Bribery, the act of offering someone money or other incentive to compel them to return a favour, is considered by some to be an acceptable way of doing business. It is often associated with conducting business involving public officials in foreign countries, although bribery in some form or another takes place in virtually all contexts. The practice of bribery gives an unfair advantage to those who wish to compete for services and contracts in a fair and transparent manner and is often the major component in the corruption of corporate officials. Colaguori, C. (Ed.). (2023). Crime, deviance, and social control in the 21st century : A justice and rights perspective. Canadian Scholars. Created from york on 2025-01-21 16:26:08. CrimeDeviance_and_SocialControl_21Century.indd 329 2/8/2023 2:13:31 PM  330   Chapter 9   Corporate Crime and Wrongdoing and White-Collar Crime In Canada, the Corruption of Foreign Officials Act (Government of Canada, 2017) outlines in detail the legal prohibition against bribery by Canadian compan- ies and their employees from bribing foreign officials to gain an advantage while doing business abroad. It helps to ensure that Canadian companies act in good faith and aims to create a level playing field for international business. Neverthe- less, internationally recognized Canadian engineering and construction firm SNC Lavalin engaged in bribery in order to be awarded lucrative government contracts for construction and infrastructure projects overseas. The Montreal-based firm faced charges of fraud and corruption in connection with nearly $48 million in ­payments made to Libyan government officials between 2001 and 2011. If con- victed, the company could have been blocked from competing for federal gov- ernment contracts for a decade. Reports are that SNC Lavalin settled criminal charges in 2019 related to business dealings in Libya, with its construction division pleading guilty to a single count of fraud that helped tie off a long-standing scan- dal that tarnished its reputation and involved the highest office of the C ­ anadian government (Reynolds, 2019). CRIMES AND WRONGDOINGS AGAINST CONSUMERS Many people are familiar with the open deceptions that were part of the early days of consumer society, where so-called snake oil salesmen would offer bogus cure-all concoctions often made from dangerous substances that had no medicinal value at all. With the passage of time, such products, for the most part, fell out of favour or were restricted from sale and replaced by more scientifically proven health remedies. Nowadays consumers expect that the products they purchase are safe, reasonably priced, and authentic. They trust the companies that manufacture and sell products largely because they assume that government regulators per- Copyright © 2023. Canadian Scholars. All rights reserved. form their duties in the enforcement of consumer protection laws. Yet consum- ers continue to suffer the consequences of crimes and wrongdoings perpetrated against them. On a regular basis, people encounter fake online product reviews; they consume tainted and adulterated foods; they overpay for staple goods because manufacturers have engaged in market manipulation and price-fixing; people are deceived by false and misleading advertising, marketing, and promotion; people are prescribed pharmaceutical drugs that pose serious health risks; people are sold so-called health foods that have questionable health value; people buy automobiles that are sold by their manufacturers despite known safety issues; people are sold counterfeit products, from fake designer handbags and shoes to toxic cosmetics— the list goes on. In this context, consumers are often the victims of various types of consumer crimes (Croall, 2009). Colaguori, C. (Ed.). (2023). Crime, deviance, and social control in the 21st century : A justice and rights perspective. Canadian Scholars. Created from york on 2025-01-21 16:26:08. CrimeDeviance_and_SocialControl_21Century.indd 330 2/8/2023 2:13:31 PM  Chapter 9   Corporate Crime and Wrongdoing and White-Collar Crime   331 Each year, numerous individuals are injured or die as a result of unsafe prod- ucts: “Everyday products are associated with at least 15.5 million injuries and 8,000 deaths per year” (Consumer Reports, n.d.). They may include injury, poi- soning, or death from faulty airbags in automobiles, children’s car seats, baby formula, laundry detergent pods, pharmaceutical products, household chemicals, leaded gasoline, breast implants, and tobacco, among other items. Although gov- ernments have become more active in regulating consumer products for safety reasons, ­unsafe products continue to cause injury and death. Not only do individ- uals become victims of consumer crime but the United Nations also reports that “unsafe consumer products cost the US economy [alone] $1 trillion each year” (UNCTAD, 2018). One case of consumer product wrongdoing involved a company that manu- factures children’s car seats (Porat & Callahan, 2020). It is alleged that Evenflo Company, one of the largest sellers of booster seats, falsely marketed and adver- tised its car booster seat as “side-impact tested” and safe for children as small as 30 pounds. However, internal company documents revealed that the company’s side-impact safety tests were not stringent whatsoever. Nevertheless, Evenflo con- tinued to market its products as being safe. As a result of the ongoing problem of crimes against consumers, the concept of consumer rights has arisen. A Canadian example of consumer rights can be found in the legislation regarding air passenger rights. In 2019, the Canadian Transportation Agency finalized Air Passenger Protection Regulations: “The regu- lations provide for clearer and more consistent air passenger rights by imposing certain minimum airline requirements in air travel—including standards of treat- ment and, in some situations, compensation for passengers. The regulations set out airlines’ obligations to passengers in the following areas: delayed or cancelled Copyright © 2023. Canadian Scholars. All rights reserved. flights [and] lost or damaged baggage [among others]” (Canadian Transportation Agency, 2019). In some cases, there are significant legal and financial consequences for those organizations that perpetrate crimes against consumers. A few cases worth men- tioning are as follows: As of a spring 2020 report, the Apple corporation “will pay up to 500 ­million US to settle [a] slow iPhone lawsuit … [the] proposed class- action suit accused Apple of quietly slowing down older iPhones as it launched new models” (Thomson Reuters, 2020). The BBC reported how “A French drug maker has been found guilty of aggravated deceit and involuntary manslaughter over a weight loss pill at the centre of a major health scandal. The drug Mediator was developed Colaguori, C. (Ed.). (2023). Crime, deviance, and social control in the 21st century : A justice and rights perspective. Canadian Scholars. Created from york on 2025-01-21 16:26:08. CrimeDeviance_and_SocialControl_21Century.indd 331 2/8/2023 2:13:31 PM  332   Chapter 9   Corporate Crime and Wrongdoing and White-Collar Crime for use in overweight diabetics and was on the market for 33 years. It was eventually withdrawn in 2009 over concerns it could cause serious heart problems. Hundreds of people are believed to have died as a result of the