Archive for July, 2009


 [White Collar Crime and Criminals in America]



     The United States is experiencing one of the most severe economic recessions since the end of the Great Depression. As a result, major family dislocation and psychological uncertainty has come about as a result of escalating unemployment in both the public and private sectors. Simply put, the economy really sucks.

      Many inter-related factors are responsible for this, including: serious problems in the housing, real estate and credit markets, the decline of manufacturing in America, the global meltdown and problems of international currencies, a huge decline and loss of equity and retirement investments (stock and portfolio values, and 401Ks) on Wall Street and elsewhere during the economic decline. Practically everyone in America is impacted by the recession.

       In addition, if things weren’t bad enough, in 2008 there was the near collapse of major banks and insurance giant AIG. There has also been a huge decline, and in some cases bankruptcy, of large automobile companies like Chrysler and General Motors. Also, no longer flying under the radar making economic conditions even worse—is America’s on-going battle with white-collar crime and criminals.

      The purpose of this Blog is to discuss the importance of this last factor: white-collar crime and criminals. It’s important to know what impact white-collar crime and criminal offenders have on our economy. However, first there is a need for some background on this subject. 


      One of the areas of public concern that is impacting the economy and society is the problem of white-collar crime. For many years corporate, business, and occupational crime was buried beneath the more immediate concerns of crime in the streets. All that changed in 2001 when the Enron meltdown exploded onto the front pages of every newspaper in America. While the impact of Enron certainly had a devastating effect on Enron’s employees as well as destroying the reputation of the accounting firm Arthur Anderson, the additional impact of this high profile case was in focusing the public’s attention once again to the underlying magnitude of the problem of white-collar crime in America.

      For criminologists, white-collar crime is very diverse and complex. White-collar crime pertains to a list of criminal offenses and violations including, but not limited to, bribery, embezzlement, forgery, tax law violations, corporate malfeasance such as insider trading, political and administrative corruption, environmental pollution, and violations of job safety standards.

      There is also a plethora of specific offenses under the term fraud such as: auto-repair fraud, computer fraud, charity and land sales fraud, identity theft, and promotional and telemarketing scams.  White-collar crime in more recent history has been expanded to include crimes committed in cyberspace and on the internet. There are also anti-trust crimes and various rip-off schemes by con artists, violations of public health statutes, price-fixing and price-gouging, violation of food standards and quality, adulteration of drugs and illegal drug diversion by pharmacists, drug salesmen, and health care providers.

      Most people tend to conceive of white-collar crime as “sophisticated theft.” Few people understand that the consequences of some white-collar crime are serious injury and death. Each year thousands of people die from the long term effects of illegal toxic waste dumping. It is estimated that one-hundred thousand deaths occur each year as a result of deliberate industrial or job-related safety violations. Emphysema and lung cancer deaths also occur each year because of the long term effects of industrial and automobile pollution.

      One reason for government intervention in pollution control, and the enactment of environmental laws, is that private sector companies are willing to trash the environment all in the pursuit of the almighty dollar. In essence, they are unwilling to do the right thing because “greed is their creed.” Often the offenders hid behind the banner of Capitalism and free-enterprise, but in reality they aren’t responsible capitalists, they are “Wayward Capitalists.”

      The great irony in criminology is, despite the fact that white-collar crime results in greater death, injury and monetary loss than street crime, the political establishment, the public, and criminologists in general continue to view “crime in the streets” as a more significant social problem than “crime in the suites.” Ironic or not, there is the growing realization by a small cadre of astute criminologists that white-collar crime is a very serious, if not the most serious,  crime problem of all whose priority has yet to be set at the national level.

      The unfortunate truth is that wayward capitalists are as much, if not more, a threat to society as the thug on the street. It is clear that cases like Enron, and their association with the Arthur Anderson accounting firm, has made a true believer of everyone that lack of honesty and integrity does permeate the corporate world in America. However, Enron and Arthur Anderson turned out to be just the tip of the iceberg.


      In the last few years a number of white-collar criminals have made headlines. Their activities have received national, if not international, attention in the media. At the top of the list is Bernard Madoff. Bernard Lawrence “Bernie” Madoff is a 71 year old former American businessman and former non-executive Chairman of the NASDAQ stock exchange who was convicted of operating a PONZI scheme that has been called the largest investor fraud ever.

      Federal prosecutors estimated that client losses and fabricated gains caused by Madoff amounted to almost $65 billion. The charges leveled against Madoff included: securities fraud, investment advisor fraud, mail fraud, wire fraud, money laundering, perjury, making false filings with the SEC, and theft from an employee benefit plan. On March 12, 2009 Madoff plead guilty to an 11-count criminal complaint, admitting to defrauding thousands of investors. On June 29, 2009 this white-collar criminal was sentenced to 150 years in prison. Bernard Madoff has certainly earned the status of “Poster Boy” for White-Collar Crime in America.

      The amount of psychological harm done to victims by this one offender will never be fully measured.  However, in terms of monetary harm, there is a way to gauge the harm done by this criminal offender? Consider for a moment that President OBama’s stimulus package to help solve our economic woes is $819 Billion. Bernard Madoff ripped people off to the tune of $65 billion or an amount equal to 7.9% of the president’s stimulus package. And this is the impact of just one white-collar offender.

      Then there was Bernard Ebbers, former chief executive of WorldCom Inc., who was convicted in 2005 of security fraud and conspiracy charges after his firm misstated some $11 billion worth of accounts. Ebbers, 67, is now serving a 25-year sentence in a federal prison in Oakdale, La. He isn’t expected to be released until July 2028. Another business executive, John Rigas, the former chief executive and founder of Adelphia Communications Corp., once one of the nation’s largest cable companies, was convicted in 2004 on several charges, including securities and bank fraud.  Rigas is imprisoned at the federal facility in Butner, N.C. He is not scheduled for release until 2018. His 52-year old son, Timothy J. Rigas, was also convicted of the same charges and given a 17-year sentence in federal prison.

     There is also the late Kenneth Lay, CEO of Enron Corporation, who died of a heart attack at 64, before he could have his day in court. However, his ex-chief executive Jeffrey Skilling, was originally charged in 2004 with 35 counts of fraud, insider-trading and other crimes after the Houston-based energy firm collapsed. In total, he was found guilty of 19 felonies. In 2006, he was sentenced to 24 years at a Littleton, Colorado federal facility.  


Title: An Act to improve enforcement of mortgage fraud, securities and commodities fraud, financial institution fraud, and other frauds related to Federal assistance and relief programs, for the recovery of funds lost to these frauds, and for other purposes.
Sponsor: Sen Leahy, Patrick J. [VT] (introduced 2/5/2009)      Cosponsors (27)
Related Bills: H.R.1748H.R.1793S.378
Latest Major Action: Became Public Law No: 111-21 [GPO: Text, PDF]
Senate Reports: 111-10

5/20/2009–Public Law.    (There are 4 other summaries)

Fraud Enforcement and Recovery Act of 2009 or FERA – (Sec. 2) Amends the federal criminal code to include within the definition of “financial institution” a mortgage lending business or any person or entity that makes, in whole or in part, a federally related mortgage loan. Defines “mortgage lending business” as an organization that finances or refinances any debt secured by an interest in real estate, including private mortgage companies and their subsidiaries, and whose activities affect interstate or foreign commerce.

Extends the prohibition against making false statements in a mortgage application to employees and agents of a mortgage lending business.

Applies the prohibition against defrauding the federal government to fraudulent activities involving the Troubled Asset Relief Program (TARP) or a federal economic stimulus, recovery, or rescue plan.

Expands securities fraud provisions to cover fraud involving options and futures in commodities.

Expands the concept of monetary proceeds, for purposes of enforcing prohibitions against money laundering, to include gross receipts.

Expresses the sense of Congress with respect to the prosecution of money laundering crimes in combination with other closely-connected offenses. Requires the Attorney General to report to the House and Senate Judiciary Committees on such prosecutions.

(Sec. 3) Authorizes appropriations to the Attorney General for FY2010-FY2011 for investigations, prosecutions, and civil and administrative proceedings involving federal assistance programs and financial institutions. Allocates such funds among various departments of the Department of Justice (DOJ). Requires that an appropriate percentage of such funds be used to investigate mortgage fraud.

Authorizes additional appropriations to the U.S. Postal Service, the Inspector General for the Department of Housing and Urban Development (HUD), the U.S. Secret Service, and the Securities and Exchange Commission (SEC), including the Office of Inspector General, in FY2010-FY2011 for similar investigations.

Requires the Attorney General, in consultation with the U.S. Postal Inspection Service, the Inspector General for HUD, the Secretary of Homeland Security, and the SEC Commissioner [sic], to submit a report to Congress identifying: (1) amounts spent for investigations, with a certification of compliance that funds have been spent in accordance with this Act; and (2) amounts recovered from criminal or civil restitution, fines, penalties, and other monetary recoveries.

(Sec. 4) Amends the False Claims Act to: (1) expand liability under such Act for making false or fraudulent claims to the federal government; and (2) apply liability under such Act for presenting a false or fraudulent claim for payment or approval (currently limited to such a claim presented to an officer or employee of the federal government). Requires persons who violate such Act to reimburse the federal government for the costs of a civil action to recover penalties or damages.

Modifies and expands provisions of the False Claims Act relating to intervention by the federal government in civil actions for false claims, sharing of information by the Attorney General with a claimant, retaliatory relief, and service upon state or local authorities in sealed cases.

(Sec. 5) Establishes in the legislative branch the Financial Crisis Inquiry Commission to examine the causes of the current U.S. financial and economic crisis, taking into account fraud and abuse in the financial sector and other specified factors.

Requires the Commission to submit a final report on its findings to the President and Congress on December 15, 2010. Requires the Commission chairperson to appear before the House Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs within 120 days after the submission of such report. Terminates the Commission 60 days after the submission of such report.

Authorizes appropriations.


      If you watch the financial networks these days, one can detect a whole slew of apologists for the free-enterprise capitalist system. The really greedy, corrupt, and criminal element on Wall Street are either ignored or rationalized away. And the government is always criticized by the media for wanting to gain control over wayward capitalists or eliminate greedy, shady practices on Wall Street. Economic journalists like Melissa Francis and Larry Kudlow are constantly defending capitalism at all costs against any kind of government intervention or federal legislation in the business environment. It’s as if they view white-collar crime as not existing.  And their tacit belief is that Capitalism, as an economic system, is some sort of sacred cow or shrine to be worshipped at. Such biased, value-tainted TV reporting naively obfuscates the real world of corruption and white-collar crime. It is once again a failure of media types to bring valuable realistic information to the public.

      It is often said that there is too much government intervention in the lives of American citizens. However, every once in awhile American business does something so egregious as to, without question, completely justify and warrant government oversight, intervention, and control. When the egregious behavior spills over into the area of criminal behavior there is absolutely no question that government ought to be involved in prosecuting suspected offenders.

      In order to expose, prosecute, and punish these types of offenders, legislation in the early 21st Century may need to become more, rather than less, intrusive in the lives of American citizens and American business. The free enterprise system will hardly remain free and valuable to all of us if white-collar crime is swept under the rug. Society cannot allow itself in the name of free enterprise to tolerate sophisticated theft, death, disease and severe injury perpetrated by white-collar criminals.

Read Full Post »