White-Collar Crime

Criminology, at the point where Sutherland intervened, explained crime by poverty, slums, broken homes, low intelligence and emotional instability. Those explanations shared a hidden premise: that the criminal is a person at the bottom of the social order. If that premise is false, the whole edifice is in trouble — not because the poor do not offend, but because the explanation is refuted by the offender it cannot see.

Sutherland's own theory was designed for exactly this. He was concerned with white-collar crime and attempted to explain why and how the upper classes turn to criminality, and to show that the same factors acted upon them as upon most other criminals. That is why differential association is a general theory: it was built to cover the case that defeats the pathology theories.

Sutherland, 1939: a crime committed by a person of respectability and high social status in the course of his occupation.

Every word does work. Crime, not merely sharp practice. Respectability and high social status, which excludes the ordinary fraudster. In the course of his occupation, which excludes the businessman who commits a burglary at the weekend.

The modern working definition is broader and looser: white-collar crime is a financially motivated, non-violent crime committed for financial gain by business and government professionals. Securities fraud, embezzlement, corporate fraud and money laundering are examples. Typical offences include fraud, bribery, Ponzi schemes, insider trading, labour racketeering, embezzlement, cybercrime, copyright infringement and money laundering.

The name comes from the types of individual who typically commit financial fraud — business managers, fund managers and executives. Individuals can face prison time and steep fines if convicted, and the government can also pursue financial damages from corporations and banks that commit white-collar crime on an institution-wide level.

Individual. Bernard Madoff was convicted in 2009 of a massive fraud that cost investors 65 billion dollars, and was sentenced to 150 years in prison. He ran an elaborate Ponzi scheme promising large returns on investments; for many years he used money from new investors to pay previous investors without actually investing the funds, and the scheme fell apart when a significant number of investors demanded their money back and he was unable to pay them.

Corporate. Corporate white-collar crime usually involves large-scale fraud perpetrated throughout the institution. Credit Suisse pleaded guilty in 2014 to helping United States citizens avoid paying taxes by hiding income from the Internal Revenue Service, and agreed to pay penalties of 2.6 billion dollars. In the same year Bank of America acknowledged that it had sold billions in mortgage-backed securities tied to properties with inflated values; those loans, which lacked proper collateral, were among the financial misdeeds that led to the crash of 2008, and the bank agreed to pay 16.65 billion dollars in damages and to admit its wrongdoing.

Enforcement. Most states have agencies investigating white-collar crimes confined to a single state, and several federal agencies investigate frauds spanning multiple states; the standard investigating bodies named are the Federal Bureau of Investigation, the Securities and Exchange Commission and the National Association of Securities Dealers. In a unique attempt to protect its citizens, the state of Utah established the first online registry for white-collar criminals in 2016, featuring photographs of individuals convicted of a fraud-related felony rated as second degree or higher; the registry was initiated because Ponzi-scheme perpetrators tend to target tight-knit cultural or religious communities.

1. It breaks the legal definition of crime. White-collar crime is usually tried under civil procedure but may be tried as crime. That is the clearest instance in the whole subject of an offence that may be tried either under the civil or the criminal law — and it therefore tests the fifth condition of the legal definition, that an act must be classed legally as an injury to the state and not merely as a private injury.

2. It breaks the social definition too, but in the opposite direction. The white-collar crimes of businessmen are made punishable as crimes at law, and yet those who indulge in false advertising or gain monopoly advantages over others usually do not lose status in their social groups. Contrast fornication, traditionally an immoral act, punishable as crime in only about half the American states and actually punished in a very small percentage of cases. From the societal viewpoint the seriousness of acts is defined by their effect upon social status; and once one discovers the seriousness of some non-criminal acts, one becomes less ready to generalise that all criminals are our most dangerous citizens.

3. It defeats the cost calculations. Estimates of the cost of crime in the United States some years before 1964 ran as high as 18 billion dollars a year. There is little value in guessing at the figure, since the most serious costs cannot be measured in dollars and cents; and if such an effort were to include an assessment of the cost of white-collar crime and of exploitation not defined as crime but similar in nature, the figure would be enormously increased.

The theory of differential association is at its strongest here. It would seem absurd that a hitherto law-abiding individual arrives in a corporation and suddenly, for no reason, begins committing crimes. Far more likely is that the individual slowly learns the realities of business, one of which may be that certain laws can be broken for the wellbeing of the firm; and promotion procedures may reinforce such learning by rewarding those who internalise those realities. Many businessmen may learn to, and be willing to, commit crimes to enhance the company where they would never consider other forms of criminality.

The reinforcement side of the account explains why deterrence is weak here. There is little deterrent for such behaviour when neither the individual's peer group nor the wider society is likely to condemn it, or even to hear of it or of similar activities. Negative reinforcers such as arrest, loss of liberty and fear of ostracism are blunted when such crimes are rarely reported; and where there are media reports, the stress is often on attacking the State for making it more difficult for legitimate businesses to function — the headlines following the E. coli outbreaks in Lanarkshire in 1997, which had resulted in deaths, warned that butchers could go bust in a food safety clampdown and that butchers faced closedown under new rules.

There is also a comparative moral reasoning effect that runs the other way, from the top of the social order downwards: people may excuse their own lapses if they are aware of more heinous acts by others which have not been punished, or not severely punished, and may see white-collar criminals go very lightly punished for stealing large amounts of money and therefore consider the small amounts they have taken unimportant.

Merton confined strain to the lower classes, and there is no compelling reason why it should be so confined. Each corporate body has a goal, usually financial: high and ever-increasing profit. In times of recession those goals are more difficult to achieve and the pressure to use unacceptable and criminal means is much stronger. The more the company, the firm or its executives are pressurised by the recession, the more compelling the temptation to offend by such things as tax evasion, VAT fraud, and cost-cutting in relation to health and safety.

Messner and Rosenfeld's version supports the same conclusion from the culture side: where the culture and the institutions centre on money and set values that support the free market, people are encouraged to use the most efficient means available to them, and for some the most efficient means may be criminal — a range running from crude street crime such as armed robbery to more innovative forms such as insider dealing to defraud the stock market.

• The concealment problem. The largest areas of hidden crime are white-collar and corporate crimes, so any inference drawn from recorded crime statistics about the class distribution of offending is unsafe.
• The definitional problem. The modern usage has drifted a long way from Sutherland's: it now takes in offences committed by persons who are neither of high social status nor acting in the course of a respectable occupation, which makes the class less useful as a test of criminological theory.
• The enforcement problem. Where the same conduct may be pursued civilly or criminally, the decision which route to take is an exercise of discretion outside the criminal law's own doctrine, and it determines whether an offender ever appears in the statistics at all.
• The theory problem. Differential association explains how a person in an organisation comes to accept its practices, but it does not by itself explain why the organisation's practices became criminal, or why the law moved to cover them. That question belongs to criminalization.

- On the classification of criminals, give Sutherland's definition in its exact words and take each element in turn; then give the modern broader usage and say that it has loosened. - On the definition of crime, use white-collar crime as the standing counter-example to both the legal and the social definitions, and use the status point to show that legal seriousness and social seriousness come apart. - On differential association, this is the theory's home ground, and the realities of business argument is the cleanest illustration available. - On penology, note the sentencing consequence: where the offender is respectable, of good antecedents and unlikely to be a menace to society, the mitigating factors that ordinarily reduce a sentence all point one way — which is precisely what makes the comparative-moral-reasoning objection bite. - On social and economic offences generally, the class sits alongside the organised crimes named in the syllabus — cyber crime, trafficking, the narcotic trade and money laundering — and shares with them the features that make enforcement hard: low visibility, low reporting, high technical complexity, and an offender who is not socially marked as a criminal. </content>