White-Collar Crime: An Overview
The phrase "white-collar crime" was coined in 1939 during a presidential address given by Edwin Sutherland to the American Sociological Society. Sutherland defined the term as "crime committed by a person of respectability and high social status in the course of his occupation." Although there has been some debate as to what qualifies as a white-collar crime, the term today generally encompasses a variety of nonviolent crimes usually committed in commercial situations for financial gain.
The most common white-collar offenses include: antitrust violations, bankruptcy fraud, bribery, computer and internet fraud, counterfeiting, credit card fraud, economic espionage and trade secret theft, embezzlement, environmental law violations, financial institution fraud, government fraud, healthcare fraud, insider trading, insurance fraud, intellectual property theft/piracy, kickbacks, mail fraud, money laundering, securities fraud, tax evasion, phone and telemarketing fraud, and public corruption.
Many white-collar crimes are especially difficult to prosecute because the perpetrators use sophisticated means to conceal their activities through a series of complex transactions. Whistleblowers are particularly helpful, because they report internal wrongdoing that may be invisible outside the company. There has been a steady increase in whistleblowing; in 2015, the Securities and Exchange Commission received 3,923 tips reporting corruption, bribes, and other white-collar crimes.
According to the Federal Bureau of Investigation (FBI), white-collar crime is estimated to cost the United States more than $300 billion annually. Although typically the government charges individuals for white-collar crimes, the government has the power to sanction corporations as well for these offenses. The penalties for white-collar offenses include fines, home detention, community confinement, paying the cost of prosecution, forfeitures, restitution, supervised release, and imprisonment. Sentencing guidelines suggest longer prison sentence whenever at least one victim suffered substantial financial harm. However, sanctions can be lessened if the defendant takes responsibility for the crime and assists the authorities in their investigation.
Both state and federal legislation enumerate the activities that constitute white-collar criminal offenses. The Commerce Clause of the U.S. Constitution gives the federal government the authority to regulate white-collar crime, and a number of federal agencies, such as the FBI, the Internal Revenue Service, the U.S. Secret Service, U.S. Customs, the Environmental Protection Agency, and the Securities and Exchange Commission, participate in the enforcement of federal white-collar crime legislation. In addition, most states employ their own agencies to enforce white-collar crime laws at the state level.
Responsible Corporate Officer Doctrine
The “Responsible Corporate Officer” (RCO) doctrine (also referred to as the “responsible relation doctrine”) creates a presumption that a high-ranking corporate officer is aware of his or her corporation's wrongdoing. As the prosecutor does not need to prove that the officer had actual knowledge of the crime, a corporate officer could be found guilty of a crime he or she had no knowledge of. This doctrine was established in two Supreme Court cases, United States v. Dotterweich, 320 U.S. 277 (1943), and United States v. Park, 421 U.S. 658 (1975).
In United States v. Dotterweich, the government prosecuted Dotterweich, the president and general manager of Buffalo Pharmaceutical Company, for violating the Federal Food, Drug, and Cosmetic Act by shipping poor quality pharmaceuticals. The government provided no evidence that Dotterweich himself was responsible for the shipment, instead prosecuting the president for failing to prevent his company from committing a serious public welfare offense. The Supreme Court permitted Dotterweich to be convicted on this theory, convicting him for "doing nothing."
Thirty-two years later, Park, a president of a large national food store chain, was convicted for failing to end a rodent infestation in a food warehouse that his corporation owned. On appeal, Park defended himself by claiming to have delegated responsibility over such infestations to trusted members of his corporation, such that Park himself thought that the problem was taken care of. In United States v. Park, the Supreme Court rejected Park’s defense and upheld his conviction. The Supreme Court held Park responsible because he assumed a position of authority in a business enterprise that directly affected public health and welfare.
Currently, prosecutors may rely on the RCO doctrine whenever a company or corporation engages in white-collar criminal conduct. Thus, high-ranking officers may be found guilty of securities fraud, consumer fraud, antitrust violations and other felonies simply for doing nothing.
Public Fraud: Stolen Valor Act
On December 20, 2006, President George W. Bush signed into law the Stolen Valor Act, which made it a federal crime to fraudulently claim receipt of the Medal of Honor, the distinguished-service cross, the Navy cross, the Air Force cross, the Purple Heart, and other decorations and medals awarded by the President or the Armed Forces of the United States. The Act was meant to prevent public fraud and preserve the reputation and meaning of military service medals.
The Stolen Valor Act's constitutionality was challenged in United States v. Alvarez, 132 S. Ct. 2537 (2012). Xavier Alvarez introduced himself as a recipient of the Congressional Medal of Honor at a 2007 District Board meeting and was convicted under the Stolen Valor Act. Alvarez challenged the Stolen Valor Act as violating his Freedom of Speech. The Supreme Court agreed, declaring the Stolen Valor Act in violation of the First Amendment and, therefore, unconstitutional.
On June 3, 2013, President Barack Obama signed into law a revised version of the Stolen Valor Act, now 18 U.S.C. § 704(b)-(d). Unlike the original Stolen Valor Act, which punished an individual for fraudulently claiming receipt of a medal or a decoration, the 2013 Stolen Valor Act punishes individuals who, through such fraudulent claims, intend to obtain money, property, or other tangible benefit.
White-Collar Crime: Defenses
Any defense available to non-white-collar defendants in criminal court is also available to those accused of white-collar crimes. Additionally, the Supreme Court considered the following arguments:
- In cases of bribery charges, individuals or organizations facing white-collar criminal charges plead the defense of entrapment. For instance, in United States v. Williams, 705 F.2d 603 (2nd Cir. 1983), one of the cases arising from "Operation Abscam," Senator Harrison Williams attempted unsuccessfully to argue that the government induced him into accepting a bribe.
- In cases of real property fraud, some individuals challenged the proximate cause element of the offense. In Robers v. United States, 134 S. Ct. 1854 (2014), for example, Robers argued that he caused no harm because the real estate market crash would have lowered property values regardless of Robers's involvement. The Supreme Court rejected Robers's argument, holding that foreseeable market fluctuations do not sever proximate causation.
- In cases of financial institution fraud, individuals have argued that a conviction requires the prosecutor to prove that the individual had the intent to defraud a specific financial institution. The Supreme Court rejected this argument in Loughrin v. United States, 134 S. Ct. 2384 (2014), holding that financial institution fraud requires proof of only two elements: (1) intent to obtain bank property; and (2) obtain bank property by means of false or fraudulent pretenses, representations, or promises.
- In cases of mail fraud, individuals have argued that a person is only injured by misrepresentation if the person receives the false document. In other words, an individual is not responsible for harming third-parties by his mail fraud. The Supreme Court rejected this argument in Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008), holding that parties harmed collaterally by the misrepresentation are also entitled to recover.
- In cases of wire fraud involving foreign countries, individuals have challenged their convictions on grounds that the conviction violated the common law revenue rule, which forbids courts from enforcing tax laws of foreign countries. In Pasquantino v. United States, 544 U.S. 349 (2005), however, the Supreme Court upheld Pasquantino's conviction, holding that fraud involving foreign countries fell within the wire fraud statute.
Menu of Sources
- 18 U.S.C. § 201, Bribery
- 18 U.S.C. § 371, Conspiracy
- 18 U.S.C. §§ 470-514, Counterfeiting and Forgery
- 18 U.S.C. §§ 641-670, Embezzlement and Theft
- 18 U.S.C. § 704(b)-(d), Fraud Involving Military Medals
- 18 U.S.C. §§ 1001-1036, Fraud and False Statements
- 18 U.S.C. § 1341, Mail Fraud
- 18 U.S.C. § 1343, Wire Fraud
- 18 U.S.C. § 1344, Bank Fraud
- 18 U.S.C. § 1347, Health Care Fraud
- 18 U.S.C. §§ 1501-1521, Obstruction of Justice
- 18 U.S.C. §§ 1831-1839, Economic Espionage
- 18 U.S.C. § 1956, Money Laundering
- 18 U.S.C. §§ 1961-1968, Racketeering Influenced and Corrupt Organizations Act (RICO)
- 18 U.S.C. §§ 2325-2327, Telemarketing Fraud
- 18 U.S.C. § 3553, Sentencing
- 26 U.S.C. §§ 7201-7217, Tax Crimes
- Securities Act of 1933
- Securites Exchange Act of 1934
Federal Judicial Decisions
- Supreme Court:
- Dep't of Homeland Sec. v. Maclean, 135 S. Ct. 913 (2014) (Whisteblower protection)
- Robers v. United States, 134 S. Ct. 1854 (2014) (Proximate Cause)
- Loughrin v. United States, 134 S. Ct. 2384 (2014) (Bank Fraud)
- United States v. Alvarez, 132 S. Ct. 2537 (2012) (Stolen Valor Act)
- Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008) (RICO Act)
- Pasquantino v. United States, 544 U.S. 349 (2005) (Wire Fraud and Foreign Countries)
- Neder v. United States, 527 U.S. 1 (1999) (Tax Fraud)
- Mistretta v. United States, 488 U.S. 361 (1989) (Sentencing Reform Act)
- Braswell v. United States, 487 U.S. 99 (1988) (5th Amendment and white-collar crime)
- United States v. Park, 421 U.S. 658 (1975) (Responsible Corporate Officer Doctrine)
- California Bankers Ass'n v. Shultz, 416 U.S. 21 (1974) (Bank Secrecy Act of 1970)
- liibulletin Oral Argument Previews
- U.S. Circuit Courts of Appeals: Recent Decisions Dealing with White-Collar Crime
New York State Penal Law
- NY Penal L. §§ 70.00 - 70.85, Sentences of Imprisonment
- NY Penal L. §§ 100.00 - 100.20, Criminal Solicitation
- NY Penal L. §§ 105.00 - 105.35, Conspiracy
- NY Penal L. §§ 155.00 - 155.45, Larceny and Embezzlement
- NY Penal L. §§ 170.00 - 170.75, Forgery
- NY Penal L. §§ 175.00 - 175.45, Offenses Involving False Written Statements
- NY Penal L. §§ 176.00 - 176.70, Insurance Fraud
- NY Penal L. §§ 177.00 - 177.30, Health Care Fraud
- NY Penal L. §§ 180.00 - 180.57, Bribery Not Involving Public Servants
- NY Penal L. §§ 185.00 - 185.15, Frauds on Creditors
- NY Penal L. §§ 187.00 - 187.25, Residential Mortgage Fraud
- NY Penal L. §§ 190.00 - 190.89, Other Fraud
- NY Penal L. §§ 195.00 - 195.20, Official Misconduct and Obstruction of Public Servants
- NY Penal L. §§ 200.00 - 200.56, Bribery Involving Public Servants
New York State Judicial Decisions
- NY Court of Appeals:
- People v. Wolf, 98 N.Y.2d 105 (2002) (Commercial Bribery)
- People v. Feerick, 93 N.Y.2d 433 (1999) (Public Corruption)
- In re Claim of Sinker, 89 N.Y.2d 485 (1997) (Mail Fraud)
- Guice v. Charles Schwab & Co., 89 N.Y.2d 31 (1996) (Commercial Bribery/Securities Law Violation)
- People v. Colavito, 87 N.Y.2d 423 (1996) (Embezzlement)
- People v. Tran, 80 N.Y.2d 170 (1992) (Bribery)
- People v. Zinke, 76 N.Y.2d 8 (1990) (Larceny)
Key Internet Sources
- U.S. Department of Justice
- Federal Bureau of Investigation
- U.S. Department of the Treasury
- U.S. Secret Service
- U.S. Customs Service
- U.S. Postal Inspection Service
- Securities and Exchange Commission
- Internal Revenue Service
- Environmental Protection Agency
- Financial Crimes Enforcement Network
- National White Collar Crime Center
- University of Exeter - Financial Scandals Guide
- The Cybrary
- Wired.com - Cyber Crime
White-Collar Crime In The News
- Savings and Loan Crisis
- Management Company Faces Charges of White Collar Crime (5/26/2016)
- Prosecutions Rise for Cyber and White-Collar Crimes (5/23/2016)
- US Pushes Apple for Access to iPhones in Criminal Cases (4/8/2016)
- Volkswagen Defeat Device Scandal (12/10/2015)
- Enron (5/11/2010)
- Tyco International Ltd. (4/17/2006)
- SEC v. WorldCom (7/13/2005)
- Adelphia Communications Corporation (7/24/2002)
- Martha Stewart (7/15/2002)
- Xerox Corporation (6/28/2002)
- Rite Aid (6/21/2002)
- Waste Management (11/7/2001)
- MicroStrategy (12/14/2000)
- Cendant (12/7/1999)
- ICN Pharmaceuticals (8/12/1999)
Good Starting Point in Print:
- Kathleen F. Brickey, Corporate & White Collar Crime, Aspen Publishers (2006)
- Ellen Podgor and Jerold Israel, White Collar Crime in a Nutshell, West Group (2004).
- Category: Commercial Transactions
- Category: Intellectual Property
- Category: Taxation
- Category: Criminal Law
- Category: Government
Last updated in June of 2016 by Eugene Temchenko.