CRIME IN THE BUSINESS WORLD

I. Costs

A. Crime is most often associated with the lower class (street crime) but crime in the business world is the most costly type of crime in the US.

1. Approx. $300 B lost to business crime each year compared to about $20 B for street crimes (violent

and property). 

2. In 2005, nearly 17,000 people were reportedmurdered in the US. In contrast, corporate crime may result in at least 20 million serious injuries and30,000 deaths.

3. Consumers often pay in the form of hidden costs. For example, Insurance fraud (non-health

insurance) costs the average family between

$400 and $700 per year, with a total cost

exceeding $40 billion

II. Turning a Blind Eye?

A. Statistics on corporate crime are not collected on a

regular basis by any official government agencyB. Prosecution is unreliable and sporadicC. Since corporations cannot be

prosecuted determining who is responsible can be difficult

III. Corporate Culture TheoryA. Some businesses place high demands on

employees while simultaneously maintaining a climate that is

tolerant of employee deviance.1. Differential Associations? (Fill in the blanks)

a.b.c.

B. Many corporate employees violate the law with enough frequency that they could be considered habitualcriminals

IV. Types of Business Crime

A. Corporate Crime 1. Definition: Illegal acts committed for the

economicbenefit of the company in which the offender

is employed.

a. Individuals benefit indirectly as the company prospers.

2. Goals of corporate crime:a. Rig the "free enterprise" systemb. Make the company appear more profitable.

B. White Collar Crime1. Definition: Crimes committed by employees of a

company for personal gain, in the course oftheir work, and without the knowledge of

theiremployers.a. Can be either against the company or against customers or clients of a

company

2. Occurs in all aspects of the business world: a. Big business where it may be easier to cover b. Small business where only one employee may

be handling the books c. Finance industry that deals with “other people's

money” d. Service industry where there is no inventory to

match against records

V. Famous Examples:1. Enron (2002)--securities fraud, insider trading, obstruction of

justice, conspiracy. Wiped out the savings, pensions and jobsof thousands of former employees, and cheated Californiaenergy consumers out of millions of dollars. At least 3executive are serving prison time, including Jeff Skilling, whobegan his 24-year sentence in Waseca. CEO Kenneth Laydied of heart failure before he served any time.

2. ADM (1993)--Price fixing. $100 million fineThis American Life podcast: The Fix is In

3. Martha Stewart (2004)--insider trading. 5 mos. prison, $30,000 fine

4. Michael Milken (1989)--securities fraud. Fined $1 billion, 22 mos. in

prison (Don't worry about him, he's still worth over $2 billion!)

Questions

1. Why do we tend to focus more on street crime than

corporate crime?

2. Should we spend more money on prosecuting white

collar criminals and corporate crooks? Would that be a

good investment of public money?

3. How would you maintain high ethical standards in an

environment where you have the opportunity to take

money or goods you have been entrusted with?