White Collar Crime and Organized Crime Lecture Outline

White-Collar crime (definition) (Barkan Ch. 13)

2 types: (Barkan Ch. 13)

1. Occupational Crime

2. Organizational / Corporate Crime

Occupational crime example-- Healthcare fraud cost in $ and lives (unnecessary surgery) (Barkan Ch. 13).

Example—Local Salisbury Hospital (PRMC) heart surgeon fraud case

Importance of Inside Whistle-Blowers – in revealing white-collar crime, especially due to complexity and otherwise not well monitored.

Frequency of White-Collar crime by Corporations (Corporate Crime) & typical penalties (in general)

Fraud & betrayal of trust—Key part of much White-Collar Crime

Showed portions of Video “Inside Job” on Wall Street / High Finance deviance and crimes leading to 2008 economic crisis. Mostly lecture on this (based on video) See also Popper et al. web reading.

Key role of more and more government deregulation of finance and banks over past 3 decades. Increased the opportunities for crime and fraud. In lead up to 2008 Economic crisis, much related to home aggressive risk-taking in mortgages/loans, securitization (bundling)of loans by Wall St. Banks & ratings agencies, then selling bundles of home mortgages as securities (many high-risk sub-prime type) to investors as low-risk safe investments, but lots of fraud involved and risks hidden… Lots of profits made in doing this, but ultimately the bubble burst and collapsed… & Banks bailed out by taxpayers, and economy is still not fully recovered…

Accounting Fraud (Barkan Ch. 13) -- Lehman Bros. accounting fraud example, as key aprt of start of the Great recession 2008 onward (Popper et al. web rdg.)

Large US Banks too Big to Fail, & too Big to jail… (Popper et al web rdg.)

Cost (human and economic) of White-collar crime Vs. Cost of Street Crime (Barkan ch. 13)

How can white-collar crime be violent? Worker (un)safety, product (un)safety, and Pollution & health effects (Barkan ch 13). Also, as an example, see Blinder et al. web rdg. on workplace explosions and loss of life. Esp. Massey Coal explosion and now a criminal prosecution for 1st time.

Leniency of WC crime enforcement (some fines and little jail time, etc.) compared to punishments for Street Crime– (Barkan ch. 13) Why White Collar criminals get away with it (invisible, low penalties, etc.). Even Massey Coal CEO found guilty of criminal offense only got 1 year in jail (for 29 miner deaths) (Blinder et al. web rdg.)

Wells Fargo/Wachovia Bank & HSBC banks drug money laundering for Mexican drug cartels—Amount of money involved, link to violent crime groups, lack of oversight, but some internal & ignored, too big to fail so little fine. Role of Internal Whistle Blower. Too big to prosecute? Penalties for Banks Compared to those for low level drug dealer? (Smith et al. web rdg.)

Explanations for White-Collar Crime-- Why is white Collar crime so common & so hard to prosecute -- Corporate Culture of Greed + Lenient treatment & Weak Punishment + Weak Regulations + Lack of Media Coverage + Hard to Prosecute & prove due to complexity

What are typical penalties for it? & How to reduce White-Collar Crime (increase press attention & penalties, etc.) (Barkan ch. 13) While big banks have paid large fines for fraud, still just minor part of what they earned of such practices…. (Popper et al. web drg.)

Other Things to be aware of but not covered in class (or not much):

Cost-Benefit decision making -- Ford Pinto case…(Barkan ch. 13)

Organizational Crime is more rational than other crimes—offenders weigh cost & benefits carefully, such as in case of Ford pinto car (Ford knew it was defective but did not fix)

Fraud (Barkan ch. 12 , p. 308-312)

Costs of check fraud, credit card fraud, and ID theft, Tax Fraud, Insurance Fraud (how big a problem?) Cost?

Price Fixing and Restraint of trade/ market manipulation (Barkn Ch. 13). Contemporary example of Currency/money trading and Interest rates both manipulated by large banks. (McLaughlin et al web rdg.)