White Collar Crime Analysis

White Collar Crime Analysis

Introduction

Crime has many different types, and the white collar crime is a subtype that is emerging these days. Usually, the white collar crime is related to business professionals or government officials who commit financial crimes. In 1939, Edwin Sutherland, the famous sociologist, first gave the definition of “white collar crime” under the criminology. In Edwin Sutherland’s definition, he also mentioned that this type of crime would often committed by “a person of respectability and high social status in the course of his occupation” and the criminals would take advantage of this social status to financially fraud (1). If we look through the whole history, the white collar crime would cover a wide range of forms including financial fraud, government bribery, the Wall Street insider trading, international money laundering, and etc.

The white collar crime has a close relationship with financial related crimes. And it is widely agreed that the white collar crime would generate far more economic cost than ordinary violent crimes. For example, a bank fraud or a computer fraud would make the victims to suffer costly financial lose compared to an ordinary crime.  And the notorious Ponzi scheme is also another extinguishing example of a white collar crime, which refers to a investment fraud operation in which the operator pays capital returns to its old investors from the new money from new investors instead of the actual profit earned from the old capital (2).

The Economic Impact of the White Collar Crime

The white collar crime potentially would generate more harm, since the crime is usually involved with persons who are respective and have higher social status. Some government reports may review the white collar crime as serious as it is. However, many white collar crime cases have indicated that they would generate tremendous negative impact on economics.

The shocking Enron Collapse: starting in 2000s, Enron was highly regarded as the energy giant leader and “the America’s Most Innovative Company” titled by Fortune with its annual revenues exceeding $100 billion. However, this “high respective” company was involved in some illegal accounting procedures conducted by its accounting firm Arthur Anderson, which was also a member of the famous “Big Five” accounting firms. The CEO and COO of Enron, Jeffrey Skilling, managed to hide billions and billions of US dollars of company debt by manipulating its company financial reports and other accounting practices. In the end, the illegal practices were revealed and the stocks plummeted. The CEO of Enron, Jeffery Skilling, was sentenced to twenty four years of sentence. And the founder of Enron, Kenneth Lay, died before his sentence was announced (3).

The Bernie Madoff Ponzi scheme: Bernie Madoff was charged with securities fraud in this Ponzi scheme. Bernie Madoff, a former life guard and chairman of NASDAQ, was able to make a multi-billion US dollar investment company taking advantage of false trading reports. In 2008, his crimes were covered and he was charged by eleven financial crimes ranging from securities fraud to stealing from employees’ benefit plan. Investors involved in this Bernie Madoff Ponzi scheme lost billions and billions of dollars and have generated long lasting economic effect to America’s economics (4).