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

2. 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

3. 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

4. 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)

5. 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)

6. 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.

7. 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

8. 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

9. Components of White-Collar Crime Weblink www.whistleblowers.org/

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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)

16. 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

17. 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

18. 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

19. 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

20. Organized Crime Activities of Organized Crime Narcotics distribution Gambling Prostitution Loan-sharking Pornography Theft-rings

21. 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)

22. 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

23. 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