White-Collar Crime
SOCI 225
Instructor: John Casey
Student:
Date: April 14, 2012

Table of Contents Introduction 3 What is White-collar Crime? 3 Workplace Safety 4 Fraud 6 Sentencing 9 Conclusion 10 Endnotes 11

Introduction
Crime is such a general word, and describes a whole conundrum of activities that are seen as unlawful. The oxford dictionary defines crime as “an action of omission which constitutes an offence and is punishable by law”. There are many different types of crimes, and they are classified based on the seriousness of the crime. Minor crimes/offences, for example a traffic offence, are called misdemeanors. More serious crimes, like murder, are called felonies and are punishable by more than a year in prison. When people hear the word crime, they most often associate it with a dangerous, violent act. There are crimes that are not violent in nature, but are still considered criminal acts because of their nature and their purpose. White-collar crime is one of those types of crimes that are non-violent but have a great impact on its victims.
What is White-Collar Crime?
White-collar crime is “generally identified as non-violent crimes that public officials and business people commit predominantly for their own personal gain”. Edwin Sutherland came up with the term “white-collar crime” to explain the crimes that both middle class and upper class people committed in the course of their business activities. White-collar crime is so often neglected as crime, that many people don’t even consider it as a crime until they are the victims. People don’t understand that the effects of white-collar crime are much higher than other crimes. If we look at it from a monetary perspective, the costs of white-collar crime “are much more costly in dollar terms than street crime is”. White-collar crime includes a wide variety of activities that one may run into in the course of their job. There are basically two components of crime that white-collar crime can be divided into. If the purpose of the activity is primarily for personal purposes and is to benefit the individual(s) involved, this is referred to as occupational crime. The other component is called organizational crime, and refers to crime that is committed to benefit the organization in some way; these crimes are often “committed with the support and encouragement of a formal organization”.iii
There are many different activities that constitute white-collar crime. This type of crime includes a wide spectrum of illegal activities that include various forms of fraud, insider trading, embezzlement, tax evasion, bribery, money laundering, failure to follow workplace safety standards, and etc. The following will discuss a few of the different types of white-collar crime and briefly explain what each type of crime involves. Also an example is shown for each to demonstrate how each of these types of crime occurs in the world daily, without many of us even knowing it.
Workplace Safety
There are also numerous amounts of crimes that are related to workplace safety. Employers who neglect to provide safe working conditions as per the health and safety standards are also guilty of committing white-collar crime. Employees that die on the job due to unsafe working conditions, is one example of a white-collar crime. Employers are not punished severely enough for these types of crimes, even if there is evidence that the employer was being negligent in providing safe working conditions for the employee. Many people argue that employers should be held liable and be punished as an individual in these cases. They feel that the courts are letting employers off too easily, with merely just monetary fines. In most cases, these fines are very low in relation to the severity of the injuries caused to the workers. Although many of us are aware of these activities, what we don’t understand is why corporations are treated differently than individuals when it comes to crime. Statistics show that the number of deaths caused in the course of employment exceeds the number of deaths resulting from homicide. In the mid 1980’s one researchers found that at least one Canadian worker dies on the job every six hours.
One incidence of this type of white-collar crime that occurred in Canada is the case regarding Wal-Mart and a teenage worker. In January of 2011, a 15 year old worker died on the job at the Wal-Mart outlet in New Brunswick. The death of the young teenage worker was caused by electrical shock due to unsafe machinery. Although this specific incidence did not prove to be of intentional negligence, the company was still fined for failure to provide safe working conditions to its employees. The young teenager died from electrical shock caused by a floor polisher during his shift, while he was cleaning the floor of the store’s garage. It was found that the machinery was not approved by Wal-Mart, and therefore regular maintenance and checkups on the machinery were not done. An employee of the company bought the equipment from a yard sale, and supervisors were aware of the use of the polisher, but did not do anything to stop employees from using it. The trial judge said that the incident was not caused purposely and was an accident. There was no evidence that the employer’s intentions were to increase productivity or benefit from the incident.
An example where a company was convicted of criminal negligence in the cause of death of one of its employees is the Quebec paving-stone company, Transpavé Inc. In this particular incident, the health and safety board of Quebec investigated the matter to find the cause of death of the 23 year old employee. The employee at the paving-stone company “was fatally injured after being crushed by heavy machinery”. Although the machinery had safety devices in place to prevent these types of injuries, investigators found that at the time of injury, the machine’s safety device had been switched to neutral and therefore did not prevent the injury. Investigators also found that the employee who was injured “was not properly trained to operate the machinery”.vi The courts had ruled that the employee’s death was indeed caused by the employer’s negligent behaviour.
Fraud
The legal dictionary defines fraud as “the intentional use of deceit, a trick or some dishonest means to deprive another of his/her/its money, property or a legal right”. There are many different types of fraud and unfortunately, many innocent people are often victims of fraud. In order for fraud to be proven, there are five elements that must be shown. The first is to show that a false statement of material fact was made. The second element is that the defendant was aware that the statement he/she was making was untrue. The third element of fraud is to show that the defendant had intent to deceive the victim. The fourth element is to be able to justifiably show that the victim’s statement is true. The fifth, and last, element is to show that the victim suffered injury as a result of the fraud. Fraud includes many different activities that are often used by the individual to get some sort of financial gain. Some of the more serious fraudulent offences we see in the news include embezzlement, securities fraud and identity theft.
According to the legal dictionary embezzlement is “the fraudulent conversion of another's property by a person who is in a position of trust”. Embezzlement is not only a financial loss but also a breach in trust. Embezzlement is not easy to prove, in order to be charged for embezzlement one must prove beyond a reasonable doubt in the court of law. Embezzlement has 4 elements, which are: the property must belong to a person other than the accused . . .; the property must be converted subsequent to the defendant's original and lawful possession of it . . .; the defendant must be in a position of trust, so that the property is held by him or her pursuant to some fiduciary duty; and . . . the defendant must have an intent to defraud the owner at the time of the conversion”.viii
Some common types of embezzlement are: a bookkeeper stealing from her employer while writing herself checks, an individual stealing money from the elderly seniors that he/she was taking care of, an employee stealing merchandise and cash from his/her workplace, and employees exaggerating the hours they work in order to be paid for longer hours.
These fraudulent activities are occurring on a daily basis; a theater clerk in Minneapolis “was convicted of embezzling more than $300,000 from a theater” which she used for gambling, and “was sentenced to 30 months in federal prison”. One of the biggest incidents of embezzlement to be reported was the property tax embezzlement in Washington, D.C. that totaled for more than $48million. In Washington, D.C. the properly assessed value of commercial properties were increasing from $18.73billion in 1999 to $ 40.4 billion in 2006. Harriette Walter worked in the DC office of Tax and Revenue, where she “quickly discovered that it was relatively easy to prepare improper property tax refunds because of the weaknesses in the review and approval process for tax refund vouchers”. Walters had involved many people that she knew in here embezzlement schemes; Within 18 years she was able to prepare over 200 improper property tax refunds, which resulted in the embezzlement of over $48million in total.
Securities fraud involves a variety of different activities. One of the more common types of securities fraud that we see is that of insider trading. There are two types of insider trading, one is legal and the other is illegal. Legal insider trading takes place when employees of a company sell and purchase stocks based on publicly available information. Illegal insider trading occurs when an individual has access to non-public/confidential information and uses this information to trade stocks on the stock exchange for personal gain. A very well known case of insider trading is the involvement of Martha Stewart and the ImClone System stock. Martha Stewart was accused of insider trading when she had sold all of her ImClone System stocks the day before the company made a huge announcement that consequently resulted in stock prices plummeting. Stewart was accused of having insider information about the company’s cancer drug rejection which would cause stock prices to fall. She was in on the information prior to the public announcement and had sold her shares the day before the company had publicly announced it. She found out about this information from her broker, who told her that ImClone’s CEO was also trying to get rid of his shares. Stewart saved about $45000 from the sale of her stocks prior to the decline in the stock price of ImClone Systems. Identity theft is seen more often than many other forms of fraud. In Canada, statistics show that Canadian citizens file over 1800 identity theft complaints in a month. Identity theft occurs when someone takes possession of another person’s personal information with the intention of using the information to take illegal advantage of the person’s identity. The most common way that identity thieves gather personal information is from incoming mail. From this they can learn a lot about an individual, for example, their bank balances, their address, the payments they often make from their bank accounts, etc. A couple in British Columbia was victim to identity theft, by none other than their roommate. The victim claims that he can prove who stole his identity, but police are unwilling to do anything. The victim’s roommate stole the victim’s personal information and used it to obtain credit cards on his behalf and had been transferring money from the victim’s bank account through online banking, a feature that the victim never set up. The victim says that he left his information lying around and the roommate must have taken it since he had access to it often and the victim never thought that his roommate would do such a thing. The victim also had evidence on tape, where their roommate had confessed to the crime and told him that “[he was] going to wish [he] never met [his roommate]”. Many people leave personal information around carelessly without knowing the impact that identity theft can have on them if the wrong person was to get a hold of their personal information. Although there are many new security features to help prevent identity theft, it is still possible and still currently occurring daily all around the world.
Sentencing
The legal consequences for white-collar crime vary in terms of fines and jail time. Most often, courts will look at the severity of the crime and the costs associated with the crime. Previously, Canada has been looked down on for how it dealt with white-collar criminals. Recently, the country has been emphasizing stiffer penalties for white-collar crime. In 2009 when the CEO of Ex-Norbourg, “pleaded guilty to almost 200 criminal counts”, got only 13 years in Canadian prison, whereas “Bernard Madoff was sentenced to 150 years in jail for fraud in the U.S..” Many Canadians feel that Canada’s penalties for white-collar crime are too “lax” and need to be more severe, while others argue that stiffer punishments won’t deter criminals from committing white-collar crime. Ottawa in particular has “proposed tough new measures to deal with white-collar criminals, including two-year minimum sentences in fraud involving more than $1 million”.
In the case of Wal-Mart and death of the young teenage worker, the company faced fines of $120000, of which $100000 was the fine and $20000 was the victim fine surcharge. Because of the supervisor’s lack of responsibility to address the issue when he was aware of the machinery being used without being checked, he was fined $880 and $176 victim fine surcharge.v
In the case of the death of the paving-stone company employee, the company paid total fines of $350,750, of which $5000 was a fine and $750 was a victim fine surcharge.vi The other $345,000 was a fine in the form of a payment to the engineering faculty at the U of A to support their safety and risk management program. Mary Beth Currie, of Bennett Jones LLP, “believes that the relatively small fine may dissuade Crown prosecutors from using the Criminal Code to prosecute OHS crimes”.vi
In the case of Martha Stewart and insider trading, “she received a lenient sentence within the federal guidelines: 5 months in prison, 5 months of home confinement, two years of supervised probation, and a $30,000 fine”. And in the case of identity theft, unfortunately, the victim had to pay for everything that the thief charged to the fake credit cards under the victim’s name. Although the victim had enough evidence to prove that his roommate was guilty, it did not go to trial because the couple did not have sufficient income to pay the high costs of filing a civil action lawsuit.
Conclusion
Many people are concerned with the leniency on white collar criminals. The United States has increased fines and prison terms for white collar criminals, but many people feel that Canada is still too lenient and needs to start punishing white collar criminals more severely. A lot of people who have not yet been victims of white collar crime, such as investment fraud, have had many attempts against them; whether it be mysterious phone calls, letters or emails asking for the potential victim to provide bank information or invest money in to a fake organization many of us have faced being potential victims. People are becoming more aware of what white collar crime is and how it can affect them, which is also helping them to not become victimized.

Endnotes