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More about Chapter 12

Enterprise Crime . Crimes of the marketplaceWhite-collar crime: Illegal activities of people and institutions who profit through legitimate business transactionsCyber crime: Involves people using instruments of modern technology for criminal purposesOrganized crime: Illegal activities of people and organizations, which profit through illegitimate business enterprise.

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Enterprise Crime: White-Collar Crime, Cyber Crime, and Organized Crime

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Chapter 12

Enterprise Crime: White-Collar Crime,

Cyber Crime, and Organized Crime

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Enterprise Crime

  • Crimes of the marketplace

  • White-collar crime: Illegal activities of people and institutions who profit through legitimate business transactions

  • Cyber crime: Involves people using instruments of modern technology for criminal purposes

  • Organized crime: Illegal activities of people and organizations, which profit through illegitimate business enterprise

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White Collar Crime

  • Edwin Sutherland coined the phrase “white collar crime” to describe criminal activities of the rich and powerful

    • Contemporary definitions of white collar crime include both middle-income persons and corporate titans

    • Costs of white-collar crime are in the hundreds of billions of dollars and exceed any other type of crime

    • White-collar crimes both kill people and damage property

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Components of White-Collar Crime

  • Stings and Swindles

    • A white collar crime in which people use their institutional or business position to bilk people out of their money

    • Swindlers often target elderly and religious organizations

  • Religious swindles

    • Use of religion and creation of fake religious organizations to bilk those out of money (Stelter and Vision Oil Company)

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Components of White-Collar Crime

  • Chiseling

    • Involves cheating an organization, its consumers, or both on a regular basis

    • Bogus auto repairs

    • Professional chiseling: Use their position to chisel clients (doctors and pharmacists)

    • Securities fraud: Commodity and stock markets deceptions

      • Churning (repeated unnecessary buying/selling)

      • front running (placing personal orders ahead of clients)

      • bucketing (skimming profits)

      • insider trading ( information giving the trader unfair advantage)

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Components of White-Collar Crime

  • Individual Exploitation of Institutional Position

    • Individuals’ exploiting their power or position in organizations to take advantage of other people who have an interest in how that power is used.

    • Occurs when the victim has a clear right to expect a service and offender threatens to withhold service unless an additional payment or bribe is forthcoming.

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Components of White-Collar Crime

  • Influence Peddling and Bribery

    • Taking of “kickbacks” in return for contracts or favors

    • Influence peddling in government: acceptance of bribes for favor (Robin HUD and police examples)

    • Influence peddling in business: payoffs for business contracts (Gulf Oil and Lockheed)

    • Congress pas the Foreign Corruption Practices Act in 1977 in response to such violations

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Components of White-Collar Crime

  • Embezzlement and Employee Fraud

    • Blue-collar fraud: Acts of pilferage

    • Management fraud:

      • Converting company assets for personal benefit

      • fraudulently receiving bonuses

      • fraudulently increasing personal holdings of company stock

      • manipulating of accounts

      • concealing unacceptable performance form stockholders

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Components of White-Collar Crime

  • Weblink

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Components of White-Collar Crime

  • Client Fraud

    • Health care fraud: Includes ping-ponging, Medicare/Medicaid frauds, kickbacks and self-referrals

    • Bank fraud: Includes check kiting, forgery, and illegal transactions

    • Tax evasion: Tax fraud by deliberately underreporting taxes

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Components of White-Collar Crime

  • Corporate Crime (Organizational Crime)

    • Actual authority: Occurs when a corporation knowingly gives authority for an employee to act

    • Apparent authority: Occurs when third party reasonably believes the agent has the authority to act

    • Illegal restraint of trade and price fixing: Involves a scheme to stifle competition and create a monopoly (Sherman Antitrust Act)

    • Tying arrangement: Requiring customers to use other services connected to corporation

    • Group boycotts: Of retail stores not complying with rules or wishes

    • Price fixing: Conspiracy to set and control prices

    • Deceptive pricing: Occurs when corporations use incomplete or misleading information to fulfill contracts (defense contractors)

    • False claims and advertising: Involves unjustified claims about a product (telemarketing)

    • Worker Safety/Environmental crimes: includes unsafe working conditions and pollution

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Causes of White- Collar Crime

  • Greedy or Needy

    • Motivations include a need to keep or improve a job, satisfy egos, or keep up with inflation to support a family

  • Corporate Culture Theory

    • Involves placing excessive demands on employees

  • Self-Control View

    • Quick benefits with minimal effort

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White-Collar Law Enforcement Systems

  • Controlling White-Collar Crime

    • Compliance strategies: Involve cooperation and self-policing among businesses (SEC and FDA)

    • Sarbanes-Oxley legislation (SOX) limits nonaudit services that auditing firms can perform publicly

    • Compliance strategies create marketplace incentives to obey the law and avoid the stigmatization of their crimes

    • Deterrence strategies: Involve detection and punishing the offenders

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White-Collar Law Enforcement Systems

  • Is the Tide Turning?

    • Growing evidence that white-collar crime deterrence strategies have become normative

    • Get-tough approach appears to be affecting all classes of white-collar criminals

    • U.S. Sentencing Commission increased penalties in April 2001

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Internet Crime

  • Involves the use of computers to illegally take possession of information, resources, or funds

    • Distributing Sexual Material

    • Denial of Service Attack

    • Illegal Copyright Infringement (I.E. warez)

    • Internet Securities Fraud

      • Market manipulation: Pump and dump and cyber-smear

      • Fraudulent offerings of securities

      • Illegal touting

      • Identity Theft

    • Ponzi/Pyramid Schemes

    • Nondelivery of Goods/Services (I.E. Ebay)

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Computer Crimes

  • Theft of services

  • Use of computer data for personal gain

  • Unauthorized use for financial processing

  • Illegally copying and selling of software

  • Use of viruses to destroy data

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Computer Crimes

  • Common Techniques

    • The Trojan horse: reprogramming computers for illicit purposes

    • The salami slice: dummy account in company records

    • Super-zapping: bypassing antitheft standards

    • The logic bomb: secret programs for monitoring a company’s computer system

    • Impersonation: Unauthorized access to computer systems

    • Data leakage: Illegally obtaining data in small amounts

    • Computer virus: Worms intended to disrupt or destroy programs

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Controlling Cyber Crime

  • Counterfeit Access Device and Computer Fraud and Abuse Law (1984) and the National Information Infrastructure Protection Act (NIIPA) 1996

    • Controlling Internet Crime

      • Identity Theft and Assumption Act-1998

      • Creation of working groups

      • Internet Fraud Complaint Center

      • Private security companies

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Organized Crime

  • Characteristics of Organized Crime

    • Conspiratorial activity

    • Economic gain is the primary goal

    • Not limited to illicit services

    • Employs predatory tactics

    • Effective control of its members

    • Mafia is a stereotype for organized crime

    • Terrorism is not associated with organized crime

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Organized Crime

  • Activities of Organized Crime

    • Narcotics distribution

    • Gambling

    • Prostitution

    • Loan-sharking

    • Pornography

    • Theft-rings

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Organized Crime

  • The Concept of Organized Crime

    • Mafia: first organized in Italy/Sicily

    • Alien Conspiracy Theory: national syndicate of 25 or so Italian-dominated crime families called La Cosa Nostra

    • Contemporary Organized Crime Groups: include Chicano, Cuban, and Asian racketeers

    • Eastern European Crime Groups: Include Russian and other groups (i.e. YACS)

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Organized Crime

  • Controlling Organized Crime

    • In 1970 Congress passed the Organized Crime Control Act (Title IX-RICO)

    • Influenced and Corrupt Organization Act (RICO) created new categories of offenses:

      • Deriving income from racketeering

      • Acquiring an interest or control over an enterprise engaged in interstate or foreign commerce

      • Conspiring to make income, loans, or conducting business through racketeering means

    • Enterprise theory of investigation (ETI): model used by the FBI as an investigative tool that focuses on the structure of the criminal enterprise rather than on the criminal acts

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Organized Crime

  • The Future of Organized Crime

    • Traditional crime syndicates are declining

      • Age of reining family heads

      • Lack of skill of younger generation

      • Active enforcement policies

      • Changing values in society