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Theory on white collar crimes
Theory on white collar crimes
White collar crime and the criminal justice system
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Throughout history there have been many white collar crimes. These crimes are defined as non-violent and financial-based crimes that are full ranges of fraud committed by business and government professionals. These crimes are not victimless nor unnoticed. A single scandal can destroy a company and can lose investors millions of dollars. Today, fraud schemes are more sophisticated than ever, and through studying: Enron, LIBOR, Albert Wiggan and Chase National Bank, Lehman Brothers and Madoff, we find how the culprits started there deception, the aftermath of the scandal and what our country has done to prevent future scandals. In the 1920’s, Wall Street was a very different place than it is today. There was a great lack of disclosure and a great amount of stock manipulation. It was common knowledge to Wall Street professionals, and even some of the general public, that Wall Street was a rigged system that was run by large and powerful investment pools. There were loose regulations on insider trading and shorting of shares, making it easy to take advantage of the system. Share shorting is basically like an athlete betting on himself to lose, then throw the game. The head of companies or investors create a position in which they can make a profit by running their company to the ground. For example, an investor borrows stock from a broker and sells that stock in open market, that investor now has a short position in the stock. At some point the investor must buy back the stock from the market and return it to the broker. If the stock falls in price the investor can buy it back at a lower price than they sold it, therefore making a profit. This kind of action was not considered illegal in 1929, and Albert H. Wi... ... middle of paper ... ...the man for whom the scheme is named. It was also the largest investment fraud by a single person. The most important effect of the Madoff scandal is the reformation that occurred in the SEC afterward amid shock at their inability to catch Madoff in the act during their investigation. The enforcement division was revamped to focus on more concerning markets and was more heavily staffed with market experts. The Office of Market Intelligence was created with the responsibility of managing tips. The SEC began to employ more undercover agents and advocate for a protection program for whistleblowers. Back-office personnel oversight was enacted. Additional funding was approved for the SEC. Surprise examinations were approved to ensure the existence of reported assets. In general, the regulating power of the SEC was vastly expanded to prevent similar crimes from occurring.
2 Companies are exposed to crimes either from the inside, or the outside. White-collar crime is a complication; harming companies in our society, which costs millions. An example of a white-collar crime would be the Ford Pinto case. When gas prices were rising in the United States, people started to search for economical cars.
In the Frontline documentary “The Madoff Affair”, it is revealed and painfully evident that the ability to predict, prevent, and prosecute white collar crime is flawed and highly complicated even for the government. Frontline takes a look at the first global Ponzi scheme in history and helps create a better understanding of the illegal conduct that led to the rise and fall of Bernie Madoff and those associated with his empire (Frontline, 2017). When the leadership at the top of any organization is founded on lies, secrecy, and empowered by the leaders within the industry, the corruption is deep and difficult to prosecute. The largest stock market fraud in history reinforces the need for better government regulations, enforcement of the regulations, and oversight, especially in it’s own backyard (Yang, 2014).
There are three major factors associated with white-collar crime. The drive for profit is not a bad thing until all you care about is making money and the safety of people is no longer a priority. The structure of a company makes it very difficult to find one single individual who is responsible when an order can be carried out by a number of people just listening to the boss. The culture of an organizations are the beliefs and actions that influence the employees of a company. Michael L. Benson says in his book, "The offenders argued that they were merely following established and necessary industry practices.
Throughout history there have been many different types of crimes regarding money and greed. This paper will be focusing on fraudulent financial crimes and how they develop among a desperate hopeful society in which only the type of crime can flourish. These conmen are not only criminals, but performers in a sense, and maybe even appear to be magicians hiding ultimately a behind the scenes act. Nothing is ever as it seems, it is what it is made to look like.
White collar crimes are fraudulent acts committed for the determined and selfish gain of finance. Three of the most common white-collar crimes are typically fraud, money laundering, and embezzlement. Fraud can happen in many different forms such as insurance fraud, tax evasion, and securities fraud. Fraud is the use of deceitful statements or untrue business deals. Money laundering is a scheme for criminals to hide their identity. Criminals will sometimes launder money through banks and corporations to keep their activities going strong while staying hidden from the prosecution. Embezzlement is the theft of funds belonging to a workplace or one’s employer. Any person working with finances within their workplace who has access or granted authority to make decisions has the potential to become corrupted.
One of the most recent stories involving white-collar crimes in the United States involves the Wells Fargo. Wells Fargo is banking and a financial institution that offers financial services to very many people in the United States as well as around the world. As reported by the Washington Post, Wells Fargo as banking and a financial institution was involved defrauding its customers millions of dollars through their employees. It was reported that the employees were involved in the opening of close to 2 million bank accounts with Wells Fargo and proceeded to offer credit cards towards the same as a way of attracting the huge bonuses that were being offered (Merle, 2017). The white-collar crime perpetuated by Wells Fargo falls under the Corporate
This case illustrated that there were real consequences to white collar crime. In addition to paying the fifty million dollar fine, he relinquished another fifty million dollars of his illegal trading profits. (He still had millions remaining, however, from his illegal gains.) His actual prison sentence was three years, yet he served only twenty-two months in the federal prison at Lompoc, California, which was known to have a “country-club” atmosphere.
The stock market was so unregulated that many people started margin buying which meant that customers borrowed up to 75 percent of the purchase price of stocks, in result that lured many speculators and less creditworthy investors into the stock market. The Federal Reserve warned banks not to lend money because many of the people investing would not be able to pay back their debts if the prices dropped but people didn’t listen. The stock market began falling in early September but the investors still ignored the warning. Between October 24, 1929 and October 29, 1929 more than 28 million shares changed hands in frantic trading. It is then that investors found themselves in a lot of debt so they began trying to sell their stocks but no one was willing to buy any stocks at any
During the 1920s, approximately 20 million Americans took advantage of post-war prosperity by purchasing shares of stock in various securities exchanges. When the stock market crashed in 1929, the fortunes of many investors were lost. In addition, banks lost great sums of money in the Crash because they had invested heavily in the markets. When people feared their banks might not be able to pay back the money that depositors had in their accounts, a “run” on the banking system caused many bank failures. After the crash, public confidence in the market and the economy fell sharply. In response, Congress held hearings to identify the problems and look for solutions; the answer was found in the new SEC. The Commission was established in 1934 to enforce new securities laws that were passed with the Securities Act of 1933 and the Securities Exchange Act of 1934. The two new laws stated that “Companies publicly offering securities must tell the public the truth about their businesses, the securities they are selling and the risks involved in the investing.” Secondly, “People who sell and trade securities must treat investors fairly and honestly, putting investors’ interests first.”2
White-collar crimes are defined as criminal violations committed by people of high respectability and high social status in the course of their occupations (Humphrey, J. A.2012) Individuals, businesses, and governments may engage in white-collar crimes (Humphrey, J. A.2012). White-collar criminals are rarely arrested or punished for their offenses (Reurink, A. 2017). For the most part corporate elites have reaped considerable financial profit from their wrongdoing; and most have avoided criminal prosecution (Humphrey, J. A., and Schmalleger, F. (2012 and Reurink, A. (2017).
White collar crime has become as interwoven in the criminal fabric as the murders perpetrated by mobsters of the 1950’s. According to our text, white collar crime has increased in cost and volume from 2006 to 2009. The cost of white collar crime in 2006 was estimated at just under $200 million and in 2009 it topped $559 million (p. 170). A so called ‘victimless’ crime represents the devastation left by a Madoff Ponzi scheme that bilks the final savings of trusting investors losing not only their nest eggs but the innocence of trusting someone you have had a relationship, in some cases from the early 90’s. What can be done to ensure a scheme like this doesn’t occur in the future is answered with the pie in the sky resolve that if every
In today’s society, crime rates are drastically increasing, causing a huge deficit in our economic, and thus causing our society’s Gross Domestic Product (GDP) to plummet. The cost of crimes adds up no matter if the crime is a small offense against the law or even a larger and deliberate offense such as homicide; in today's world, crime committed feeds the nefarious side of our human nature within our society. The most dangerous and impactful crime that is problematic within our nation is the executions of white collar crimes. White collar crimes damage our society in more ways than one. Today, people in our nation need to be more informed about the concept and damages that results from white collar crimes, as it affects them indirectly, economically, and may come to directly affect them as they become the unwilling victim to the crime.
Criminal acts performed by individuals of a higher economic class for the intent of advancement of their career is classified as a White-collar crime. This category of crime often goes unnoticed and if apprehended, have minimal repercussions. The aspect of money in these crimes provides both an explanation and reason for inquiry. For instance, a lawyer claiming that the stigmatization the defendant endured from the public is an adequate punishment for deceiving people out of numerous amounts of money represents utilizing money as an explanation. As well as, portraying that his financial and social status outweighs the deviance of the crime.
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 ...
C. (2007). The goals and promise of the Sarbanes–Oxley Act. The Journal of Economic Perspectives, 21(1), 91-116. Cohen, M. A. (2016). The Costs of White-Collar Crime.