Enterprise Crime: White-Collar Crime, Cyber Crime, and Organized Crime

Chapter 12
Enterprise Crime: White-Collar Crime,

Cyber Crime, and Organized Crime
Enterprise Crime
 Crimes of the marketplace

 White-collar crime: Illegal activities of people and institutions who
profit through legitimate business transactions
 Cyber crime: Involves people using instruments of modern
technology for criminal purposes
 Organized crime: Illegal activities of people and organizations,
which profit through illegitimate business enterprise
Figure 12.1 Enterprise Crime: White Collar, Cyber Crime, and
Organized Crime
White Collar Crime
• Edwin Sutherland coined the phrase “white collar crime” to describe

criminal activities of the rich and powerful
 Contemporary definitions of white collar crime include both
middle-income persons and corporate titans
 Costs of white-collar crime are in the hundreds of billions of
dollars and exceed any other type of crime
 White-collar crimes both kill people and damage property
Components of White-Collar Crime
• Stings and Swindles

 A white collar crime in which people use their institutional or
business position to bilk people out of their money
 Swindlers often target elderly and religious organizations
• Religious swindles
 Use of religion and creation of fake religious organizations to bilk
those out of money (Stelter and Vision Oil Company)
• Chiseling
 Involves cheating an organization, its consumers, or both on a
regular basis
 Bogus auto repairs
 Professional chiseling: Use their position to chisel clients (doctors
and pharmacists)
 Securities fraud: Commodity and stock markets deceptions
• Churning (repeated unnecessary buying/selling)
• front running (placing personal orders ahead of clients)
• bucketing (skimming profits)
• insider trading ( information giving the trader unfair
advantage)
• Individual Exploitation of Institutional Position

 Individuals’ exploiting their power or position in organizations to
take advantage of other people who have an interest in how that
power is used.
 Occurs when the victim has a clear right to expect a service and
offender threatens to withhold service unless an additional
payment or bribe is forthcoming.
• Influence Peddling and Bribery

 Taking of “kickbacks” in return for contracts or favors
 Influence peddling in government: acceptance of bribes for favor
(Robin HUD and police examples)
 Influence peddling in business: payoffs for business contracts
(Gulf Oil and Lockheed)
 Congress pas the Foreign Corruption Practices Act in 1977 in
response to such violations
• Embezzlement and Employee Fraud

 Blue-collar fraud: Acts of pilferage
 Management fraud:
• Converting company assets for personal benefit
• fraudulently receiving bonuses
• fraudulently increasing personal holdings of company stock
• manipulating of accounts
• concealing unacceptable performance form stockholders
• Weblink
www.whistleblowers.org/
• Client Fraud
 Health care fraud: Includes ping-ponging, Medicare/Medicaid
frauds, kickbacks and self-referrals
 Bank fraud: Includes check kiting, forgery, and illegal transactions
 Tax evasion: Tax fraud by deliberately underreporting taxes
• Corporate Crime (Organizational Crime)

 Actual authority: Occurs when a corporation knowingly gives authority
for an employee to act
 Apparent authority: Occurs when third party reasonably believes the
agent has the authority to act
 Illegal restraint of trade and price fixing: Involves a scheme to stifle
competition and create a monopoly (Sherman Antitrust Act)
 Tying arrangement: Requiring customers to use other services
connected to corporation
 Group boycotts: Of retail stores not complying with rules or wishes
 Price fixing: Conspiracy to set and control prices
 Deceptive pricing: Occurs when corporations use incomplete or
misleading information to fulfill contracts (defense contractors)
 False claims and advertising: Involves unjustified claims about a
product (telemarketing)
 Worker Safety/Environmental crimes: includes unsafe working
conditions and pollution
CNN Clip - Tyco CEO On Trial
Causes of White- Collar Crime
• Greedy or Needy
 Motivations include a need to keep or improve a job, satisfy egos,
or keep up with inflation to support a family
• Corporate Culture Theory
 Involves placing excessive demands on employees
• Self-Control View
 Quick benefits with minimal effort
White-Collar Law Enforcement Systems
• Controlling White-Collar Crime

 Compliance strategies: Involve cooperation and self-policing
among businesses (SEC and FDA)
 Sarbanes-Oxley legislation (SOX) limits nonaudit services that
auditing firms can perform publicly
 Compliance strategies create marketplace incentives to obey the
law and avoid the stigmatization of their crimes
 Deterrence strategies: Involve detection and punishing the
offenders
White-Collar Law Enforcement Systems
• Is the Tide Turning?

 Growing evidence that white-collar crime deterrence strategies
have become normative
 Get-tough approach appears to be affecting all classes of white-
collar criminals
 U.S. Sentencing Commission increased penalties in April 2001
Internet Crime
• Involves the use of computers to illegally take possession of

information, resources, or funds
 Distributing Sexual Material
 Denial of Service Attack
 Illegal Copyright Infringement (I.E. warez)
 Internet Securities Fraud
• Market manipulation: Pump and dump and cyber-smear
• Fraudulent offerings of securities
• Illegal touting
• Identity Theft
 Ponzi/Pyramid Schemes
 Nondelivery of Goods/Services (I.E. Ebay)
Computer Crimes
 Theft of services
 Use of computer data for personal gain
 Unauthorized use for financial processing
 Illegally copying and selling of software
 Use of viruses to destroy data
Computer Crimes
• Common Techniques
 The Trojan horse: reprogramming computers for illicit purposes
 The salami slice: dummy account in company records
 Super-zapping: bypassing antitheft standards
 The logic bomb: secret programs for monitoring a company’s
computer system
 Impersonation: Unauthorized access to computer systems
 Data leakage: Illegally obtaining data in small amounts
 Computer virus: Worms intended to disrupt or destroy programs
Controlling Cyber Crime
• Counterfeit Access Device and Computer Fraud and Abuse Law

(1984) and the National Information Infrastructure Protection Act
(NIIPA) 1996
 Controlling Internet Crime
• Identity Theft and Assumption Act-1998
• Creation of working groups
• Internet Fraud Complaint Center
• Private security companies
Organized Crime
• Characteristics of Organized Crime

 Conspiratorial activity
 Economic gain is the primary goal
 Not limited to illicit services
 Employs predatory tactics
 Effective control of its members
 Mafia is a stereotype for organized crime
 Terrorism is not associated with organized crime
Organized Crime
• Activities of Organized Crime

 Narcotics distribution
 Gambling
 Prostitution
 Loan-sharking
 Pornography
 Theft-rings
Organized Crime
• The Concept of Organized Crime

 Mafia: first organized in Italy/Sicily
 Alien Conspiracy Theory: national syndicate of 25 or so Italian-
dominated crime families called La Cosa Nostra
 Contemporary Organized Crime Groups: include Chicano,
Cuban, and Asian racketeers
 Eastern European Crime Groups: Include Russian and other
groups (i.e. YACS)
Organized Crime
• Controlling Organized Crime

 In 1970 Congress passed the Organized Crime Control Act (Title
IX-RICO)
 Influenced and Corrupt Organization Act (RICO) created new
categories of offenses:
• Deriving income from racketeering
• Acquiring an interest or control over an enterprise engaged in
interstate or foreign commerce
• Conspiring to make income, loans, or conducting business
through racketeering means
 Enterprise theory of investigation (ETI): model used by the FBI as
an investigative tool that focuses on the structure of the criminal
enterprise rather than on the criminal acts
Organized Crime
• The Future of Organized Crime

 Traditional crime syndicates are declining
• Age of reining family heads
• Lack of skill of younger generation
• Active enforcement policies
• Changing values in society

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Chapter 12

Enterprise Crime: White-Collar Crime,

 Crimes of the marketplace

• Edwin Sutherland coined the phrase “white collar crime” to describe

• Stings and Swindles

• Individual Exploitation of Institutional Position

• Influence Peddling and Bribery

• Embezzlement and Employee Fraud

• Corporate Crime (Organizational Crime)

• Controlling White-Collar Crime

• Is the Tide Turning?

• Involves the use of computers to illegally take possession of

• Counterfeit Access Device and Computer Fraud and Abuse Law

• Characteristics of Organized Crime

• Activities of Organized Crime

• The Concept of Organized Crime

• Controlling Organized Crime

• The Future of Organized Crime

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