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Chapter 12. Enterprise Crime: White-Collar Crime, Cyber Crime, and Organized Crime. Enterprise Crime . Crimes of the marketplace White-collar crime: Illegal activities of people and institutions who profit through legitimate business transactions

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Chapter 12

Enterprise Crime: White-Collar Crime,

Cyber Crime, and Organized Crime

enterprise crime
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
white collar crime
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
components of white collar crime
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)
components of white collar crime5
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)
components of white collar crime6
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.
components of white collar crime7
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
components of white collar crime8
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
components of white collar crime9
Components of White-Collar Crime
  • Weblink

components of white collar crime10
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
components of white collar crime11
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
causes of white collar crime
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
white collar law enforcement systems
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
white collar law enforcement systems14
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
internet crime
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)
computer crimes
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
computer crimes17
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
controlling cyber crime
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
organized crime
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
organized crime20
Organized Crime
  • Activities of Organized Crime
    • Narcotics distribution
    • Gambling
    • Prostitution
    • Loan-sharking
    • Pornography
    • Theft-rings
organized crime21
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)
organized crime22
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
organized crime23
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