Unformatted text preview: White Collar Crime Significant White Collar Offenses Taylor, chap 5 Street crimes Traditional crime, Street crime, Bluecollar crime Crimes such as homicide, rape, armed robbery, and aggravated assault have garnered a vast amount of public and media attention. Criminal justice policies have been designed mainly to counteract these personal violent crimes. White-collar crimes Fraud--the art of deliberate deception for unlawful gain--is as old as history the term "whitecollar crime" was reportedly coined in 1939 by Professor Edwin Sutherland and has since become synonymous with the full range of frauds committed by business and government professionals. Today's con artists are more savvy and sophisticated than ever, engineering everything from slick online scams to complex stock and health care frauds. White-collar crimes Acts committed by corporate executives, corrupt politicians, and unscrupulous professionals. Whitecollar crimes were largely ignored because the perpetrators of these offenses comprised society's elite people with the economic wherewithal and status to shape the criminal law in their favor and avoid detection and punishment. White-collar crimes The largescale disseminating of computer and IT seems to have created greater opportunities for the whitecollar offender, and law enforcement officials are now faced with the unenviable task to looking for loopholes in the everexpanding technologies used to commit whitecollar offenses. White Collar Crime Crime committed by a person of respectability & high social status in his/her occupation Crimes committed by business people &/or professionals Deceptive practices &/or fraud used to obtain money Does not typically include violence or physical harm Overlaps with corporate crime because the opportunity for fraud, bribery, insider trading, embezzlement, computer crime & forgery is more available to whitecollar employees White Collar Crime Term "whitecollar crime" coined in Edwin Sutherland's 1939 speech to Am. Soc. Soc. "crime committed by a person of respectability and high social status in the course of his occupation" Today generally a variety of nonviolent crimes Usually committed in commercial setting Often difficult to prosecute because of sophisticated criminals Diffuse Victimization Attempted to conceal their activities Often use a series of complex transactions Harm not transparent Spread over many victims White Collar Crime under US Law FBI's 1989 definition ... illegal acts which are characterized by deceit, concealment, or violation of trust and which are not dependent upon the application or threat of physical force or violence" Therefore recordkeeping does not collect data on the socioeconomic status of offenders which, in turn, makes research and policy evaluation problematic. While the true extent and cost of whitecollar crime are unknown, it is estimated to cost the United States more than $300 billion annually, according to the FBI. Barnett concludes: "The true extent and expense of whitecollar crime are unknown" Significant White Collar Crimes Various Frauds: Forgery Embezzlement Counterfeiting MoneyLaundering Bankruptcy fraud Medical/Healthcare Fraud Credit Card Fraud Consumer fraud Tax Fraud Securities/Financial Fraud Insider trading Antitrust Bribery Environmental crime Pension fund crime RICO crimes Public corruption Extortion Computer crime Trade Secret Theft Economic Espionage Definitions of Particular WhiteCollar Crimes Bank Fraud: Blackmail: Act or pattern of activity, purpose is to defraud a bank of funds Demand for money or other consideration under threat to do bodily harm, injure property, accuse of a crime, or expose secrets Money, goods, services, information or anything else of value is offered with intent to influence the actions, opinions, or decisions of recipient; both offeror & offeree potentially liable Bribery: Definitions of Particular White-Collar Crimes Cellular Phone Fraud: Computer fraud: Unauthorized use, tampering, or manipulation of cellular phone or cellular service; accomplished by either use of stolen phone or contracts for service under false identification or "cloning" of valid electronic serial number (ESN) through interrogation w/ ESN reader to enable reprogramming of another cellular phone Hackers steal information sources contained on computers such as, e.g., bank information, credit cards, proprietary information Copying or imitation of an item w/o authority; then passing copy off for genuine or original; Most often money but also other items, e.g., designer clothing, handbags, watches Counterfeiting: Definitions of Particular White-Collar Crimes Credit Card Fraud: Currency Schemes: Unauthorized use of credit card to obtain goods or services of value Speculating on the future value of currencies outside accepted trading strategies in recognized markets Person entrusted with money or property of another appropriates for own use & benefit Unauthorized disposal or release of environmentally sensitive contaminants into the environment (air pollution, water pollution, illegal transportation, storage & disposal of solid & hazardous wastes) Embezzlement: Environmental Schemes: Definitions of Particular White-Collar Crimes Extortion: Forgery: Illegally obtaining property from another by actual or threatened force, fear, or violence, or under cover of official right Passing or negotiating a false or worthless instrument (e.g., check, counterfeit security) with intent to defraud or injure recipient Unlicensed health care provider provides services under the guise of license & obtains monetary benefit Health Care Fraud: Definitions of Particular White-Collar Crimes Insider Trading: Insurance Fraud: Use of inside, confidential, or advance information to trade in ssecurities of (mostly publiclyheld) corporations Engage in act or pattern of activity to obtain proceeds from an insurance company through deception (e.g., file false claims) Promise of large investment return on a small investment Seller returns a portion of purchase price to the buyer to influence purchase decision, purchaser typically an agent Wrongfull acquisition of another's money or property with intent to appropriate, convert or steal Investment Schemes: Kickback: Larceny/Theft: Definitions of Particular White-Collar Crimes Money Laundering: Racketeering: The investment or transfer of money from racketeering, drug transactions or other embezzlement schemes so that it appears that its original source either cannot be traced or is legitimate. The operation of an illegal business for personal profit. The act of artificially inflating the price of stocks by brokers so that buyers can purchase a stock on the rise. When a person commits fraud in filing or paying taxes. Securities Fraud: Tax Evasion: Definitions of Particular White-Collar Crimes Telemarketing Fraud: Welfare Fraud: Telephone solicitations to residences & businesses requesting donation to alleged charitable organization; actor requests immediate money payment or credit card authorization & funds acquired thereby not used as promised; often from boiler rooms Act(s) intended to obtain benefits (e.g., welfare, food stamps, Medicaid) from government agency Offering items for sale at one price while charging higher price or short weighing item(s) Weights & Measures: Financial Crimes The Federal Bureau of Investigation (FBI) investigates matters relating to fraud, theft, or embezzlement occurring within or against the national and international financial community. These crimes are characterized by deceit, concealment, or violation of trust, and are not dependent upon the application or threat of physical force or violence. Such acts are committed by individuals and organizations to obtain personal or business advantage. The FBI focuses its financial crimes investigations on such criminal activities as corporate fraud, health care fraud, mortgage fraud, identity theft, insurance fraud, mass marketing fraud, and money laundering. These are the identified priority crime problem areas of the Financial Crimes Section (FCS) of the FBI. Corporate fraud As the lead agency investigating Corporate Fraud, the FBI has focused its efforts on cases which involve accounting schemes, selfdealing by corporate executives and obstruction of justice. The majority of Corporate Fraud cases pursued by the FBI involve accounting schemes designed to deceive investors, auditors and analysts about the true financial condition of a corporation. Through the manipulation of financial data, the share price of a corporation remains artificially inflated based on fictitious performance indicators provided to the investing public. In addition to significant financial losses to investors, Corporate Fraud has the potential to cause immeasurable damage to the U.S. economy and investor confidence. Corporate Fraud Corporate Fraud remains the highest priority of the Financial Crimes Section and the FBI is committed to dealing with the significant crime problem. As of the end of Fiscal Year (FY) 2006, 490 Corporate Fraud cases are being pursued by FBI field offices throughout the U.S., 19 of which involve losses to public investors that individually exceed $1 billion. Corporate Fraud Corporate Fraud investigations involve the following activities: (1) Falsification of financial information, including: (a) False accounting entries (b) Bogus trades designed to inflate profit or hide losses (c) False transactions designed to evade regulatory oversight (2) Selfdealing by corporate insiders, including: (a) Insider trading (b) Kickbacks (c) Backdating of executive stock options (d) Misuse of corporate property for personal gain (e) Individual tax violations related to selfdealing (3) Fraud in connection with an otherwise legitimatelyoperated mutual or hedge fund: (a) Late trading (b) Certain market timing schemes (c) Falsification of net asset values (d) Other fraudulent or abusive trading practices by, within, or involving a mutual or hedge fund (4) Obstruction of justice designed to conceal any of the abovenoted types of criminal conduct, particularly when the obstruction impedes the inquiries of the Securities and Exchange Commission (SEC), other regulatory agencies, and/or law enforcement agencies. ENRON CORPORATION As a result of its deceptive accounting practicesincluding the creation of earnings, the manufacture of cash flow, and the concealment of debtthe Enron Corporation (Enron) generated financial statements that were misleading and wholly inaccurate. As of December 1, 2006, 35 individuals have been charged in connection with the energy corporation's illegal accounting practices. Of these individuals, 23 have pled guilty or been convicted, including former Enron Chief Financial Officer (CFO) Andrew Fastow, former Chief Executive Officer (CEO) Jeffrey Skilling, and former Chairman and CEO Kenneth Lay (whose conviction was later vacated due to his death). Fastow has been sentenced to six years in prison for his role in the accounting scandal. Skilling was sentenced to 24 years, four months in prison, the largest term handed down in connection to the case. The case has been handled by the Enron Task Force, which is made up of members of the DOJ, FBI, and IRS. The SEC also provided considerable assistance in this investigation. Enron video Enron video http://youtube.com/profile_videos?user=ethan061 Assignment SECURITIES AND COMMODITIES FRAUD With losses totaling approximately $40 billion per year, combating Securities and Commodities Fraud remains a priority for the FBI. The losses are associated with decreased market value of businesses, reduced or nonexistent return on investments, and legal and investigative costs. The victims of Securities and Commodities Frauds include individual investors, financial institutions, public and private companies, government entities, and retirement funds. As of FY 2006, the FBI is investigating 1655 cases of Securities and Commodities Fraud and has 157 agents dedicated to the problem. The importance of this issue is further evidenced by the fact that these 157 agents represent a 25 percent increase in staffing for this type of fraud over the last two years. Significant Case Rogue Trader Crushes Bank Societe Generale http://youtube.com/watch?v=IckSTDOZRu0 HEALTH CARE FRAUD All health care programs are subject to fraud, however, Medicare and Medicaid programs are the most visible. Estimates of fraudulent billings to health care programs, both public and private, are estimated between 3 and 10 percent of total health care expenditures. The fraud schemes are not specific to any area, but are found throughout the entire country. The schemes target large health care programs, public and private, as well as beneficiaries. Certain schemes tend to be worked more often in certain geographical areas, and certain ethnic or national groups tend to also employ the same fraud schemes. The fraud schemes have, over time, become more sophisticated and complex, and are now being perpetrated by more organized crime groups. Health Care Fraud is carried out by many segments of the health care system using various methods. Some of the most prevalent schemes include: Billing for Services not Rendered These schemes can have several meanings and could include any of the following: No medical service of any kind was rendered. The service was not rendered as described in the claim for payment. The service was previously billed and the claim had been paid. Upcoding of Services This type of scheme involves a billing practice where the health care provider submits a bill using a procedure code that yields a higher payment than the code for the service that was truly rendered. The upcoding of services varies according to the provider type. Examples of service upcoding include: A routine, followup doctor's office visit being billed as an initial or comprehensive office visit. Group therapy being billed as individual therapy. Unilateral procedures being billed as bilateral procedures. 30minute sessions being billed as 50+ minute sessions. Federal Criminal Offenses Mail Fraud 18 U.S.C. 1341 Wire Fraud 18 U.S.C. 1343 Health Care Fraud 18 U.S.C. 1347 Conspiracy 18 U.S.C. 371 Counterfeiting & Forgery 18 U.S.C. 470514 Embezzlement & Theft 18 U.S.C. 641649 Money Laundering 18 U.S.C. 1956, Racketeering 18 U.S.C. 19611964 Bribery 18 U.S.C. 201 Fraud and False Statements 18 U.S.C. 10011036, Obstruction of Justice 18 U.S.C. 15011518, Tax Crime 26 U.S.C. 72017217 Bank Fraud 18 U.S.C. 1344 Economic Espionage 18 U.S.C. 18311839 Telemarketing Fraud 18 U.S.C. 23252327 Corporate Crime Crimes committed either by a corporation or by individuals identified with corporation Corp. is business entity with separate legal personality from natural persons that either:
Own it, manage its activities, or are employed by it 5th & 14th Amendment Due Process Clauses "No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws." Corp. is a "person' to receive due process Corp can be charged with a crime Individuals can be charged with a crime Fines, imprisonment, home detention, community confinement, costs of prosecution, forfeitures, restitution, supervised release Amelioration White-Collar/Corp. Crime Penalties Sanctions can be lessened if: Defendant takes responsibility Assists with investigation Testifies against other perpetrators Some Corporate Crime Sites TOP TEN Corporate Crime Prosecutors 2004 TOP TEN Corporate Crime Defense Attorneys: http://www.corporatecrimereporter.com/toptenprosecu tors081304.htm If you are the U.S. Attorney in Manhattan, you have little choice but to prosecute corporate crime. Manhattan is the corporate crime center of the universe. http://www.corporatecrimereporter.com/05_27_03_pressrelease. html TOP 100 CORPORATE CRIMINALS: Corporate Crime Enforcement Reform: http://www.corporatecrimereporter.com/top100.html http://www.corporatepolicy.org/issues/crime.htm Risks of Corporate & White-Collar Crime are Diffuse Victims Risks: General public & environmental quality (pollution) Consumer (price fixing, unsafe products) Employee (unsafe working conditions) Government (tax fraud) Competitor (pricefixing) Economic security, Safety, Government Integrity & Effectiveness, Market Integrity ...
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- Spring '08
- The Land, Health Care Fraud, fraud Medical/Healthcare Fraud, Particular White-Collar Crimes, fraud Tax Fraud