Millions of people in today’s society entrust their money to various financial markets in an attempt to seek high returns or gains for taking certain risks or even simply creating nest eggs so they can take advantage when their [retirement] day comes. Whether you are investing for short term gains or planning for retirement, a risk is certainly what is being taken when investing your hard earned money. Investors should certainly make informed decisions regarding investment opportunities and heavily scrutinize all potential investments. Unfortunately, as we have seen in recent history with Enron and Bernie Madoff, there are companies and/or individuals that are among us trying to take advantage of what they feel is an opportunity to make easy money. Essentially, these companies and/or individuals are committing some type of financial fraud to cover up their “robbing Peter to pay Paul” type schemes (Museum of…, 2010).
This [financial fraud] epidemic is not something that is new to the financial world, it’s been around for quite some time and some scandals can actually be dated back to as early as 1792 (Beattie, n.d.). “Since then scandals have surfaced throughout American history, inciting outrage and often spurring reforms to ensure that similar events never recur” (Museum of…, 2010). The only difference is that in today’s financial world there are many more creative types of schemes, such as Ponzi schemes and misappropriation of funds, in financial markets creating financial burdens for the millions of investors and companies that rely on the returns of such investments. Today, “we are faced with an irrefutable challenge to find solutions to the growing threat” of financial scandals, which are also known as “white-collar crimes”...
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Securities and Exchange Commission. Retrieved March 1, 2011 from
http://www.sec.gov/index.htm
Silverstone, H., Sheetz, M. (2007). Forensic Accounting and Fraud Investigation For Non-
Experts (Second Edition). Hoboken, NJ; John Wiley & Sons, Inc. Retrieved March 3, 2011 from http://books.google.com/books?id=cr7tMOsTdqAC&pg=PA8&lpg=PA8&dq=financial+fraud+affects+unemployment&source=bl&ots=UDLX1nBg&sig=EnljfLYG8dtmI2DQ2uaAxvQK3NU&hl=en&ei=kihwTfKE4H7lwfb7ZCdAQ&sa=X&oi=book_result&ct=result&resnum=3&ved=0CCcQ6AEwAg#v=onepage&q&f=false
The Madoff Scandal. (2009). The Largest Fraud That The World Has Ever Seen.
TheMadoffScandal.com. Retrieved March 2, 2011 from http://www.madoffscandal.com/
Wolfe, M. (2010). Types of Financial Statement Fraud. Retrieved March 3, 2011 from
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Jordan Belfort is famous for his crooked way of earning his millions as a stockbroker on Wall Street. Even Belfort started at the bottom, on his first day in Wall Street he was told he was “lower than pond scum”(Belfort 1). After writing a book about his happenings on Wall Street, we’ve seen the
Madura, Jeff. What Every Investor Needs to Know About Accounting Fraud. New York: McGraw-Hill, 2004. 1-156
White-collar crime is defined as committed by public officials or businesspeople, defined as non-violent, and usually revolve around financial crimes. These crimes can cause companies to be destroyed, cost investors thousands of dollars, and even wipe a family’s entire life-savings. Insider trading, Ponzi schemes, and embezzlement are just a few types of white-collar crimes. In 1939, Edwin H. Sutherland, described white-collar crime as any violation of the law by a person of high status in their work-place. Sutherland also noted the white-collar criminals are less likely to be prosecuted than other offenders. The concept of white-collar crimes has been changed over recent decades. Blue-collar crimes are people who do not work in prestigious work-places; these are white-collar crimes, and work mundane jobs, like maintenance. This changed how people see white-collar crime, as it no longer only relates to people of high status. To help the concept of work-related crime, occupational...
Kittle, M.D. "Fraud Still a Problem in Extended Unemployment Benefit Programs « Watchdog.org." Watchdogorg RSS. N.p., 8 Jan. 2014. Web. 26 Mar. 2014. .
One of the most recent white-collar crime involved Wells Fargo, a banking and financial services provider. In 2016 San-Francisco based bank Wells Fargo (WFC) employees secretly created millions of unauthorized bank and credit card accounts without permission of their customers. Opening about 1.5 million fraudulent deposit accounts and submitting 565,443 credit card applications allowed Wells Fargo employees to boost their sales targets and receive bonuses. Consequently, customers were wrongly charged fees for accounts they did not know existed. In this business crime scenario, Wells Fargo involved to pay $185 million in fines and refund $5 million to affected customers. Also, around 5,300
Today, worldwide, there are several thousands of crimes being committed. Some don’t necessarily require a lethal weapon but are associated with various types of sophisticated fraud, this also known as a white-collar crime. These crimes involve a few different methods that take place within a business setting. While ethical business practices add money to the bottom line, unethical practices are ultimately leading to business failure and impacting the U.S. financially.
Jordan Belfort is the notorious 1990’s stockbroker who saw himself earning fifty million dollars a year operating a penny stock boiler room from his Stratton Oakmont, Inc. brokerage firm. Corrupted by drugs, money, and sex he went from being an innocent twenty – two year old on the fringe of a new life to manipulating the system in his infamous “pump and dump” scheme. As a stock swindler, he would motivate his young brokers through insane presentations to rile them up as they defrauded investors with duplicitous stock sales. Toward the end of this debauchery tale he was convicted for securities fraud and money laundering for which he was sentenced to twenty – two months in prison as well as recompensing two – hundred million in restitution to any swindled stock buyers of his brokerage firm (A&E Networks Television). Though his lavish spending and berserk party lifestyle was consumed by excessive greed, he displayed both positive and negative aspects of business communications.
Hanson, J. R. (n.d.). Fraud or confusion? RDH Magazine, 19(4). Retrieved 3 15, 2014, from http://www.rdhmag.com/articles/print/volume-19/issue-4/feature/fraud-or-confusion.html
"This is why the market keeps going down every day - investors don't know who to trust," said Brett Trueman, an accounting professor from the University of California-Berkeley's Haas School of Business. As these things come out, it just continues to build up"(CBS MarketWatch, Hancock). The memories of the Frauds at Enron and WorldCom still haunt many investors. There have been many accounting scandals in the United States history. The Enron and the WorldCom accounting fraud affected thousands of people and it caused many changes in the rules and regulation of the corporate world. There are many similarities and differences between the two scandals and many rules and regulations have been created in order to prevent frauds like these. Enron Scandal occurred before WorldCom and despite the devastating affect of the Enron Scandal, new rules and regulations were not created in time to prevent the WorldCom Scandal. Accounting scandals like these has changed the corporate world in many ways and people are more cautious about investing because their faith had been shaken by the devastating effects of these scandals. People lost everything they had and all their life-savings. When looking at the accounting scandals in depth, it is unbelievable how much to the extent the accounting standards were broken.
Weld, L. G., Bergevin, P. M., & Magrath, L. (2004). Anatomy of a financial fraud. The CPA
The stock market is an enigma to the average individual, as they cannot fathom or predict what the stock market will do. Due to this lack of knowledge, investors typically rely on a knowledgeable individual who inspires the confidence that they can turn their investments into a profit. This trust allowed Jordan Belfort to convince individuals to buy inferior stocks with the belief that they were going to make a fortune, all while he became wealthy instead. Jordan Belfort, the self-titled “Wolf of Wall Street”, at the helm of Stratton Oakmont was investigated and subsequently indicted with twenty-two counts of securities fraud, stock manipulation, money laundering and obstruction of justice. He went to prison at the age of 36 for defrauding an estimated 100 million dollars from investors through his company (Belfort, 2009). Analyzing his history of offences, how individual and environmental factors influenced his decision-making, and why he desisted from crime following his prison sentence can be explained through rational choice theory.
White-collar crimes and organizational structure are related because white collar-crimes thrive in organizations that have weak structures. According to Price and Norris (2009), the elites who commit white collar-crimes usually exploit weaknesses in organizational structure and formulate rules and regulations that favor their crimes. Makansi (2010) examines case studies to prove that white-collar crime is dependent on organizational structure. For example, the financial crisis that Merchant Energy Business faced in 2001-2002 occurred due to the liberal Financial Accounting Board, which failed to provide a standard model of valuing natural gas and fuel. Moreover, a financial crisis that rocked the securitization market in 2008 was due to fraudulence in the pricing of securitization products. These examples ...
150 Ponzi schemes collapsed in 2009 alone, resulting in more than $16 billion in losses to tens of thousands of investors. These victims confront the challenge of calculating their losses for recovery claims as well as tax purposes. Ponzi scheme investigations currently account for approximately 21% of the Securities and Exchange Commission’s (SEC’s) enforcement workload — up from 17% in 2008 and 9% in 2005
Jordan Belfort is the notorious 1990’s stockbroker who saw himself earning fifty million dollars a year operating a penny stock boiler room from his Stratton Oakmont, Inc. brokerage firm. Corrupted by drugs, money, and sex, he went from being an innocent twenty – two year old on the fringe of a new life to manipulating the system in his infamous “pump and dump” scheme. As a stock swindler, he would motivate his young brokers through insane presentations to rile them up as they defrauded investors with duplicitous stock sales. Toward the end of this debauchery tale he was convicted for securities fraud and money laundering for which he was sentenced to twenty – two months in prison as well as recompensing two – hundred million in restitution to any swindled stock buyers of his brokerage firm. Though his lavish spending and berserk party lifestyle was consumed by excessive greed, he displayed both positive and negative aspects of business communications.
Have you ever invested in the stock market? If so, do you know where your money is really going? The stock market is a risky business and it can make or break people’s lives. The stock market is used to daily to keep America on its trembling feet; it’s also being used at this very moment to cheat people out of money for personal gain. This happens every day in the stock market and its evolving rapidly, super computers that can trade faster than a blink of an eye, social media trends that can predict share values, and intricate stock market schemes that are getting harder and harder to find and take down. While the stock market keeps the world turning and the economy steady, the stock market is also being used in manipulative ways that are not always legal.