WHITE-COLLAR CRIME

• Author: AMARJEET SINGH, SC
• Date: 01 December 2002
• Published date: 01 December 2002
• Citation: (2002) 14 SAcLJ 231

This paper presents a brief conceptual backdrop to white-collar crime followed by a discussion of the situation in Singapore, drawing attention to the lack of comprehensive statistical data and the dearth of documented material on such crimes. It goes on to emphasise the undiminished relevance and usefulness of the concept as a tool to show the continual shift of crime to the white-collar type amongst the educated and privileged social classes on an even larger scale than before, especially in the light of technologically-savvy perpetrators amongst these classes. It draws attention to the unmitigated consequences of such crime on the public and proposes the establishment of a White-Collar Crime Centre in Singapore — to harness expertise, collect data and case material on such crime, both of the traditional and regulatory type and to disseminate a deeper understanding of the incidence and causes of such crime with a view to educating the public and to finding solutions and effectively controlling the incidence of such crime.

Historical introduction

1 The term “white-collar crime”, strictly speaking, has no legal significance. However, it was coined and popularised by Edwin H Sutherland, an American sociologist, in his classic paper “White Collar Criminality” some sixty years ago. In the paper1 he defined this crime as one committed by a person of respectability and high social status in the course of his occupation. By such definition Sutherland hoped to point out weaknesses in the typical crime theory by bringing into sharp focus the sociological differences that existed between traditional crimes such as murder, rape and theft where the crimes were defined without reference to the social status or occupation of the offender, and other crimes such as embezzlement, fraud, antitrust violations, price-fixing by cartels, misuse of public and corporate funds, income tax evasion, abuse of political and legal processes and widespread violations of administrative regulations, all of which were nearly always, according to his studies, committed by those with power, high social status and occupation, ie the respectable citizen. Sutherland noted that those who administered justice spared the well-off and influential by postulating that many of such offences were victimless or the victims did not see themselves as victims of crime; that offenders were not really

criminals or that the offences were of a non-violent nature or that a mere implication of a person of high status in an illegal act was sufficient punishment as such person would lose his status or his professional licence or privilege. Imposition of a jail sentence was rare. He also saw in most cases typical concealment of offences within the organisational routine leading to difficulties in detecting the offences by the victims and the police. Some of the blame, he conceded, no doubt, lay in the state of the law which had until the 20th century rendered corporations immune from criminal liability.

2 Sutherland, therefore, in challenging the paradigm of traditional criminality which blamed crime on the underprivileged and the lower class who were considered dangerous elements of society, required that the general theory of crime explain white-collar crime so that the foundation for fairness and equal justice for all could result.

3 Sutherland’s definition, though, had a weakness as it was predicated on the status of the offender and not the characteristics of the offence. A rival school of sociologists2 clamoured for a new definition that could emphasize this latter aspect of the offence. This was necessary so that white-collar crime would be better understood in all its ramifications and attempts made to control it. In 1970 Edelhertz3, a sociologist, offered a redefinition of white-collar crime by not identifying it with any social class. His definition gained favour with the US Justice Department and reshaped thinking on the subject. Edelhertz’s definition emphasized on illegal acts committed by non-physical means and by concealment in order to obtain money or property or to obtain business or personal advantage. The Justice Department’s Dictionary of Criminal Justice Data Terminology adopts the definition of Edelhertz as well as retains the idea of Sutherland’s definition regarding white-collar crime as entrepreneurial, professional or semi-professional.4

4 Interest in white-collar crime received a real fillip in the 1970s, especially in the aftermath of the now all familiar Watergate burglary during the presidency of Richard Nixon which had created a political crisis of enormous proportions by implicating the presidency itself. Sociologists and even criminologists whose beat was in the traditional arena of criminal law joined the media and the Justice Department in realising anew the problem and the very harmful effect of white-collar crime on the public. Criminologists

also realised that white-collar crime had been severely neglected and lacked understanding in both criminal justice textbooks and law school curricula.

5 As a result of the legacy left by Sutherland, governments in many jurisdictions, common law and otherwise, have better equipped themselves with legislation, engaged in trans-border collaboration and are employing new enforcement techniques through specialised training of investigators and prosecutors to more effectively deal with white-collar crime which has become a rapid growth industry today. The problem as law enforcement officers see it, is not in the definition of white-collar crime but always having the right mechanism to cope with it.

Categories of the crime

6 Today, white-collar crime is regarded much more as a broad umbrella that denotes ‘business crime’, ‘commercial crime’ or ‘economic crime’, all terms that have gained great currency and usage at both the national and international level. Nevertheless, whatever the descriptive terms that are used, the overriding concepts common to these offences are fraud, cheating, dishonesty and corruption committed by businessmen, conmen, political or public officials by both sophisticated and crass methods.

7 For convenience of discussion, white-collar crime described by its other names has been broadly divided into two categories by the sociologists Appelbaum and Chambliss,5 namely:

1. (a) occupational crime

2. (b) corporate or organisational crime.

8 Occupational crime is more of an ‘ad hoc’ nature and is committed by an offender in his occupation or taking advantage of his occupation to promote his private, selfish interests. In such a crime, the offender seldom has to face his victim and the typical offence would cover acts of insider trading, corruption, altering of accounts by accountants, overcharging by professional men, cheating on taxes, committing credit card frauds and abuse of trust by those who have custody over others’ properties. The insider trading scandal in the late 1980s in the United States brought indictments that ended in guilty pleas of well known brokerage executives, traders and financiers, the best known of whom was Michael Milken — the junk bond king — who brought down with him, Drexel Burnham Lambert, a financial powerhouse.

9 Corporate or organisational crime is committed by corporate personnel to benefit their company rather than themselves and covers a plethora of illegal acts and wrongdoings such as price fixing, violating antitrust laws, producing shoddy or inferior goods, endangering the environment through pollution and non-observance of regulatory industry standards, engaging in false and misleading descriptions and the stating of false weights. This category of crime has been described by Edelhertz as the “most troublesome” of all categories. These types of crime are nearly always contested. An example is the recent Microsoft tussle over, amongst other alleged antitrust activities, the Windows Operating Systems, in proceedings brought against Microsoft by the Department of Justice in the United States. Again, the bull market in the 1990s in the United States has added new categories of crime to the above with the currently ongoing disclosures of large scale deception practices by brokerage stock analysts and investment bankers.

10 Finally, there may be added a category of white-collar crime that stands all by itself, that is conducted as a business by a full-time conman or a group of conmen covering all types of scams and swindles.

The cost

11 Sutherland, in his day, estimated the cost of white-collar crime in the United States as being much greater in terms of dollar loss than all the other types of crimes and ten times greater than street crime. In 2001, the FBI was investigating 26,000 cases of white-collar crime and corporate fraud alone that cost companies in the United States some $400 billion annually or 6% of annual sales. In Asia, the percentage of white-collar crime and corporate fraud similarly being investigated by investigators for that year was approximately at 10% of annual sales, the percentage having increased since the Asian crisis.6

12 Corporate executives who commit illegal acts forget all too soon that investors and markets indeed have long memories if they should commit illegal acts. The evil they do is very likely to follow them. Their stock is punished by association. As an example, I would like to call attention to a brief conversation that took place in 1992 between Carlo de Benedetti, Chairman of Olivetti and one of his executives in Olivetti. Carlo de Bendetti’s influence amongst Italian corporations was profound and his wealth large. In a telephone call one day from his refuge in Switzerland,

he asked an executive in Olivetti as to how Olivetti’s shares were doing that day. When told they had gone down, he asked if it was because of a general downturn in the market. The terse reply from the executive was:

“No, it is because you have just been sentenced to six years imprisonment for...