When a person hears the word “crime,” images of dead bodies or hapless victims being mugged in dark alleys easily come to mind. But violent crime isn’t the only form of crime. When high-flying corporate executives in expensive custom suits commit elaborate schemes for financial gain or a harmless-looking deliveryman charms the old man next door out of his retirement money, they’re guilty of nonviolent but equally serious crimes called “white collar crimes.”
White collar crimes such as insider trading, antitrust violations, counterfeiting, intellectual property theft, and credit card fraud may not involve violence, but their impact on individuals, society and even the economy can be debilitating. Bernie Madoff, for example, operated a multibillion-dollar Ponzi scheme that victimized thousands of investors, while Bank of America contributed to the 2008 financial crisis by selling billions in troubled mortgage-backed securities.
Common Forms of White Collar Crimes
There are many types of white collar crimes, but the following are the most common:
According to the FBI, the majority of the cases of corporate fraud they pursue involve falsification of financial information, insider trading, and schemes designed to conceal corporate fraud activities and impede the regulating bodies such as the Securities and Exchange Commission from conducting their inquiries.
Embezzlement happens when a person entrusted by an employer or another person to handle money or property uses their position to misappropriate funds. An example of embezzlement is when an employee finds ways to funnel company money into their own bank account. Another is when a politician spends campaign funds for their personal expenses.
Named after Charles Ponzi, a con man who reportedly made $250,000 a day via his mail coupon fraud in the 1920s, a Ponzi scheme is a type of investment scam that promises high returns for little to no risk. People or organizations engaged in Ponzi schemes focus their efforts on attracting new investors to pay the older ones. The scheme falls apart when new customers stop coming in and the flow of new investments dry out.
Extortion occurs when a person coerces an institution or another person into giving up property, money, or services. An example is when gangs force store owners to pay “protection” money. Another is when a blackmail victim pays money to keep someone from publicly divulging information that can potentially harm their reputation.
A person burdened by insurmountable debt can find relief by filing for bankruptcy. This relief, however, comes at the expense of creditors who can only receive a portion of the debtor’s nonessential assets (or assets not necessary to maintain a household and a job). So if a filer intentionally hides property when filling out bankruptcy paperwork, they can be accused of bankruptcy fraud.
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.