Crimes Relevant to Business

?Imagine working as an accountant in a public company when your manager urgently tells you to shred financial records. It might seem harmless, but under the Sarbanes-Oxley Act, destroying documents prematurely can be a crime. This paper helps you identify criminal activities, make ethical decisions, and understand whistleblowing challenges. Businesses must guard against internal, external, and self-inflicted criminal actions to ensure compliance and integrity (Lau and Johnson, 2023, p. 339).

Understanding White-Collar Crime

Important to realize that, white-collar crime, a term introduced by sociologist Edwin Sutherland in 1939, refers to offenses committed by individuals of high social status within their professional roles. These crimes typically involve deception to obtain money or property unlawfully and are historically linked to office-based positions, differentiating them from manual labor roles. High-profile cases, such as those involving Bernie Madoff, Ivan Boesky, and Michael Milken, highlight crimes like insider trading, Ponzi schemes, and accounting fraud. In today's digital era, white-collar crimes have expanded to include Nigerian scams, identity theft, insurance fraud, and tunneling, showcasing the flexibility of these non-violent yet significant offenses (Hayes, 2024).

With this in mind, violent crime captures public attention through media and entertainment, while white-collar crime, though equally impactful, often feels intangible and complex. Scholars Samuel W. Buell and Eugene Soltes explore this disparity, examining corporate misconduct. Buell focuses on organizational corruption, noting the difficulty of proving intent when actions blur legal boundaries. Indeed, Soltes investigates individual offenders, illuminating how psychological distance and routine decision-making erode moral judgment. Both argue for reforms: Buell emphasizes transparency and regulations, while Soltes advocates defensive measures like fostering accountability to address the root causes of white-collar crime (Olejarz, 2016).

Definition

??????????? With this attention, white-collar crime refers to nonviolent, financially motivated crimes committed by individuals or organizations in their professional roles. These crimes, often involving deception, contrast with street crimes like burglary or personal crimes like murder. The term originates from the attire of professionals, such as managers or executives, who were involved in these offenses. To be sure, white-collar crimes can include fraud, cybercrime, or environmental violations, and can occur in the workplace. Even successful individuals or healthy businesses may resort to criminal behavior, making vigilance essential to prevent such activities (Lau and Johnson, 2023, p. 339).

???????? In other words, white-collar crimes, though non-violent, cause significant harm, from devastating businesses and depleting life savings to costing investors billions and undermining public trust. The FBI prioritizes these offenses, conducting complex investigations often linked to organized crime on regional, national, and international levels. For example, collaborating with agencies such as the Securities and Exchange Commission, the Internal Revenue Service, and the U.S. Postal Inspection Service, the FBI leverages intelligence and regulatory expertise to combat these sophisticated crimes and protect the financial integrity of institutions and individuals alike (FBI, 2024).

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Fraud and Larceny

Insurance fraud

Insurance fraud involves intentionally deceiving an insurance company for financial gain, as outlined in Florida Statute § 817.234. This can include filing false claims, exaggerating damages or injuries, misrepresenting information when purchasing a policy, or fabricating events such as burglaries to claim compensation for imaginary losses or stolen property (Fisher, 2024).

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Financial institution fraud

Financial institution fraud targets banks and similar institutions, involving white-collar crimes where criminals use lies or misrepresentations to gain money or property. It includes activities like falsifying documents for loans, engaging in money laundering, compromising accounts, embezzling funds, and misusing funds. In fact, the IRS investigates tax and money laundering violations, while the FBI focuses on mortgage and financial institution fraud, including securities and commodities fraud. FinCEN also investigates money laundering and provides guidance to financial institutions on preventing fraud. These agencies collaborate to combat fraud and safeguard financial systems (FBI, 2024).

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Corporate espionage and misappropriation

Corporate espionage involves illegally obtaining trade secrets, proprietary information, or intellectual property from one company and giving or selling it to another to gain a competitive edge, often for financial gain. High-profile cases, such as Hilton and Chobani being accused of stealing trade secrets, highlight the severity of the issue. Must be remembered that, the Economic Espionage Act of 1996 criminalizes this practice, carrying severe legal consequences like fines and imprisonment. It also poses significant economic risks, including lost revenue and potential national security threats. The FBI, Department of Homeland Security, and Department of Justice investigate these crimes (Beattie, 202).

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Organized Crime

Repercussions

Pfizer has agreed to pay $2.3 billion to settle allegations of healthcare fraud involving kickbacks and off-label marketing. The settlement, the largest in the U.S. to date, resolves claims that Pfizer improperly promoted drugs for unapproved uses and paid healthcare professionals to prescribe them. Pfizer will pay $1 billion in civil damages to compensate Medicaid, Medicare, and federal healthcare programs. Moreover, Pfizer's subsidiary, Pharmacia & Upjohn, will plead guilty to felony charges and pay a $1.3 billion criminal fine. A Corporate Integrity Agreement will monitor Pfizer’s future practices (OAG Georgia, 2019).

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Kickbacks

To demonstrate, a "kickback" refers to the illegal diversion of funds that benefits a person in power, who uses their influence to make another individual, organization, or company wealthier. Often arising from corrupt bidding schemes, kickbacks occur when some official awards a contract to a company that didn’t submit the lowest bid, with the company sharing a portion of its profits as a reward. For instance, this practice is anti-competitive and can be seen as bribery, sometimes linked to organized crime. Kickbacks have damaging consequences, affecting shareholders, employees, and patients, particularly when they influence decisions like off-label marketing, eroding trust between patients and their physicians (CLS, 2023).

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Financial Institution Fraud

The first thing to remember is that financial institution fraud is a federal crime that targets banks and credit unions, involving deceit to obtain money, assets, or property. This includes falsifying loan documents and engaging in money laundering. Types of fraud include bank fraud, mortgage fraud, and money laundering. Another key point, penalties can include fines up to $1 million, imprisonment for up to 30 years, and a career-ending conviction. Factors affecting sentencing include the defendant’s role, abuse of trust, use of minors, the state of the crime, methods used, and the value of the defrauded assets (Nuys, 2021).

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Beyond Fraud: Cybercrime

Cybercrime

??????????? Cybercrime refers to illegal activities committed virtually through computers or the internet, including hacking, identity theft, and fraud. As internet usage grows, so does cybercrime, with offenses often facilitated by social media, malware, and cloud technologies. Cybercriminals exploit human vulnerabilities, using social engineering to manipulate online behavior, leading to emotional, financial, and reputational harm. Despite awareness of these risks, preventative methods are rarely taken. Consequently, the anonymity of the internet exacerbates the issue, making enforcement challenging and reducing the deterrence of penalties. Cybercrime is becoming increasingly prevalent in our digital world (Curtis and Oxburgh, 2022).

Computer Fraud and Abuse Act

The Computer Fraud and Abuse Act (CFAA) is a federal law that criminalizes unauthorized access to computers involved in interstate commerce or communication. It imposes penalties on individuals who access computers to engage in fraudulent activities or malicious acts. Surely, designed to protect computer systems from misuse, the CFAA penalizes those who access systems without permission or exceed their authorized access. By targeting fraud, hacking, and other malicious activities, the law aims to safeguard computer networks from compromise and unauthorized intrusion (CRS, 2014).

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Environmental Crimes

Environmental law is a complex field aimed at protecting the environment, human health, and natural resources through regulations and policies. It addresses issues like air and water quality, waste management, and pollution control, with enforcement carried out by the Environmental Protection Agency (EPA). Key U.S. federal laws, such as the Clean Air Act and Clean Water Act, impose criminal penalties for violations, including illegal dumping, harming endangered species, or trafficking banned materials. To explain, these laws ensure accountability and balance development with sustainability, while promoting public participation and overseeing environmental impact through regulations and international agreements (APU, 2023).

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Bue-Collar Crime

Blue-collar crimes, also known as "street crimes," often involve offenses such as murder, manslaughter, drug crimes, arson, theft, retail fraud, sexual offenses, prostitution, and assault. These crimes are typically associated with individuals from lower socioeconomic backgrounds, driven by emotional impulses or necessity. They are usually identified through routine police work rather than complex investigations, making them easier for law enforcement and prosecutors to handle. In these cases, there are generally fewer connections to establish between the defendant and the victim, resulting in a more straightforward legal process compared to white-collar crimes (Schwartz, 2022).

Blue-collar crime refers to offenses that are not categorized as white-collar crimes, with a focus on property crimes in business. These include larceny, such as shoplifting, which is a major concern in retail. Employee theft is another significant issue for businesses. For this reason, vandalism, or unauthorized property damage, is also a threat to businesses with physical locations. While white-collar criminals are known for larceny, blue-collar crimes like theft and vandalism are widespread and pose serious risks to business operations (Lau and Johnson, 2023, p. 350).

Case Study: Worldcom Accounting Scandal

Following the fall of Enron, Worldcom's collapse was another significant scandal in corporate America, orchestrated by CEO Bernard Ebbers. To mask the company's financial struggles and declining stock price in the early 2000s, Ebbers implemented fraudulent accounting practices. These included underreporting line costs and inflating revenues, which led to an inflated balance sheet. The manipulation resulted in $3.8 billion in fraudulent reporting, ultimately culminating in Worldcom’s bankruptcy—once the largest in U.S. history. Ebbers resigned in 2002 and was later sentenced to 25 years in prison for conspiracy, securities fraud, and filing false reports (Writers, 2020).

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Recommendations for Businesses to Mitigate Crimes

In sum, to prevent fraud, theft, and unethical behavior, organizations must implement a comprehensive approach that includes strong internal controls, an ethical culture, and effective loss prevention. Internal controls, categorized as preventive, detective, and corrective, help protect assets and ensure legal compliance. Preventive measures, like segregation of duties, stop fraud before it occurs, while detective controls, such as inventory checks, identify fraud early. In conclusion, corrective actions address issues post-discovery. Promoting transparency, a zero-tolerance policy, and prioritizing cybersecurity and staff training strengthens fraud prevention efforts and ensures a secure environment for both assets and personnel (Bwerinofa, 2023).

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References:

APU. “What Is Environmental Law - and Why Does It Matter | American Public University.”?Www.apu.apus.edu, 1 June 2023, www.apu.apus.edu/area-of-study/security-and-global-studies/resources/what-is-environmental-law/. Accessed 18 Jan. 2025.

Beattie, Andrew. “Corporate Espionage: Fact and Fiction.”?Investopedia, 12 July 2022, www.investopedia.com/financial-edge/0310/corporate-espionage-fact-and-fiction.aspx. Accessed 18 Jan. 2025.

Bwerinofa, Rumbi. “Preventing Fraud with Internal Controls: A Refresher.”?Journal of Accountancy, 1 Aug. 2023, www.journalofaccountancy.com/issues/2023/aug/preventing-fraud-with-internal-controls-a-refresher.html. Accessed 18 Jan. 2025.

CRS. “Cybercrime: An Overview of the Federal Computer Fraud and Abuse Statute and Related Federal Criminal Laws.”?Congressional Research Service, 15 Oct. 2014, crsreports.congress.gov/product/pdf/RL/97-1025. Accessed 18 Jan. 2025.

Curtis, Joanna, and Gavin Oxburgh. “Understanding Cybercrime in “Real World” Policing and Law Enforcement.”?The Police Journal: Theory, Practice and Principles, vol. 96, no. 4, 16 June 2022, pp. 573–592, journals.sagepub.com/doi/full/10.1177/0032258X221107584, https://doi.org/10.1177/0032258x221107584. Accessed 18 Jan. 2025.

FBI. “White-Collar Crime.”?Federal Bureau of Investigation, 2024, www.fbi.gov/investigate/white-collar-crime. Accessed 18 Jan. 2025.

Fisher, Jody. “What Is Insurance Fraud?”?Law Office of Jody L. Fisher, 13 Sept. 2023, www.attorney-fisher.com/blog/2023/september/what-is-insurance-fraud-/. Accessed 18 Jan. 2025.

Hayes, Adam. “White-Collar Crime .”?Investopedia, 15 Feb. 2024, www.investopedia.com/terms/w/white-collar-crime.asp. Accessed 18 Jan. 2025.

Lau, T. and Johnson, L. (2023).?The Legal and Ethical Environment of Business. (5th ed.). FlatWorld.

LCS. “Kickbacks.”?LII / Legal Information Institute, June 2023, www.law.cornell.edu/wex/kickbacks. Accessed 18 Jan. 2025.

Nuys, Van. “Federal Bank Fraud Defense Lawyer | 18 U.S.C. § 1344.”?Egattorneys.com, 2021, www.egattorneys.com/federal-bank-fraud. Accessed 18 Jan. 2025.

Office of the Attorney General. “Pfizer to Pay $2.3 Billion to Settle Allegations of Kickbacks in Off-Label Marketing Campaign.”?Office of the Attorney General, 2019, law.georgia.gov/press-releases/2009-09-02/pfizer-pay-23-billion-settle-allegations-kickbacks-label-marketing. Accessed 18 Jan. 2025.

Olejarz, J. M. “Understanding White-Collar Crime.”?Harvard Business Review, Nov. 2016, hbr.org/2016/11/understanding-white-collar-crime. Accessed 18 Jan. 2025.

Schwartz, Andrew L. “Differences between White Collar and Blue Collar Crimes.”?Andrew L. Schwartz, P.C., 4 Apr. 2022, www.andrewschwartzlaw.com/white-collar-and-blue-collar-crimes/. Accessed 18 Jan. 2025.

Writers, Staff. “10 White Collar Crime Cases That Made Headlines.”?CriminalJustice.com, 29 May 2020, www.criminaljustice.com/10-white-collar-crime-cases-that-made-headlines/. Accessed 18 Jan. 2025.

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