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.
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
In the 1920s, it seemed as if the stock market was the safest and easiest way of gaining money. When people heard of this, they started to purchase stocks as well, but by stock speculation. Stock speculation was the purchasing of stocks without any knowledge of the company’s financial situation, meaning people just assumed that every stock would give them a profit. To make matters worse, banks began loaning out money to investors, in order for them to purchase stocks. Soon enough, in early 1929, banks were receiving many warnings about loaning too much money. However, this did not pose a real threat to banks or investors, for they thought that the stock market was just going to keep on going up. Unfortunately, this was not the
Speculation in the 1920s caused many people to by stocks with loaned money and they used these stocks as collateral for buying more stocks. The stock market
Most people consider this crime to consist of CEO’s manipulating their way to making a large fortune. This of course, is true most of the time in high-profile cases. For example, in late 2001 Enron Corporation executives confessed to overstating the company’s earnings. This lead to artificially inflating what the company was worth and deceived the investors. It took some time to unravel all the fraud put behind this devious act but shows how sophisticated white-collar crime can be. Although it’s usually associated with upper management of corporations, people from all different levels and occupations can perform this crime ("How White-collar Crime Works").
The secrecy was another unethical factor that allowed this Ponzi Scheme to continue to grow. This fraudulent component would be agreed upon by Madoff and his clients and the incentivized feeder funds allowed the investors to turn a blind eye. He would not allow his clients to list him as the financial advisor and therefore dodged the surveillance and enforcement of the SEC. Secrecy and lies continued to pave the way to the collapse of this financial
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.
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.
Morgan only had to pay penalties totaling $2.6 billion which only came out to be $0.02 on every dollar the bank had earned after the 5 years since Madoff had been arrested. It was noted that even some of the fines such as one for $350 million was actually less than the profit that the bank generated from serving as Madoff’s main bank. The sad news is that was the main punishment, no bankers were indicted or taken into custody. There could have been actions taken against these indications to stop the fraudulent funds running through these bank accounts. All of the penalties and suffering will ultimately end up getting paid by all the shareholders and investors who had nothing to do with the theft, but ultimately were the ones being conned and perhaps did not even know it (Johnston, D
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.
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
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.
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.