White-collar crime generally encompasses a variety of nonviolent crimes usually committed in commercial situations for financial gain.
The following is an inclusive list of white-collar offenses : 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 to prosecutors of white-collar crime, because these whistleblowers report internal wrongdoing. 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.
Penalties and Regulations
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. Federal 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. A number of federal agencies, including the FBI, the Internal Revenue Service (IRS), and the Securities and Exchange Commission (SEC), 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 such, a corporate officer could be found guilty of a crime of which the officer had no knowledge. 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 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 the conviction.
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. 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.
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, 567 U.S. 709 (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 guaranteed by the First Amendment. 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.
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 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, 573 U.S. __ (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.
Some Relevant Supreme Court Decisions
- 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)
For more on white-collar crime, see this University of Florida Law Review article: Toward a Specific Intent Requirement in White Collar Crime Statutes (Sheyn), this Harvard Law School Forum on Corporate Governance and Financial Regulation article, and this University of Georgia Law Review article: “White-Collar Crime”: Still Hazy after All These Years (Dervan and Podgor).