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white-collar crime
white-collar crime, crime committed by persons who, often
TABLE OF CONTENTS
by virtue of their occupations, exploit social, economic, or
technological power for personal or corporate gain. The term, Introduction
coined in 1939 by the American criminologist Edwin Common characteristics
Sutherland, drew attention to the typical attire of the
Cost to society
perpetrators, who were generally businesspeople, high-
ranking professionals, and politicians. Since Sutherland’s
time, however, such crimes have ceased to be the exclusive domain of these groups. Moreover,
developments in commerce and technology have broadened the scope of white-collar crime to
include cybercrime (computer crime), health-care fraud, and intellectual property crimes, in
addition to more-traditional crimes involving embezzlement, bribery, conspiracy, obstruction
of justice, perjury, money laundering, antitrust violations, tax crimes, and regulatory
violations.

Specific examples of activities that constitute white-collar crimes include price collusion
(conspiring with other corporations to fix the prices of goods or services as a means of
obtaining artificially high profits or driving a competitor out of the market), falsifying reports
of tests on pharmaceutical products to obtain manufacturing licenses, and substituting cheap,
defective materials for costlier components specified in the construction of roads or buildings
but charging the customer for the full cost of the specified materials. At times such activities
can be attributed to individual employees or executives acting on their own initiative, but it is
often the case that they represent a collective and organized effort by a corporation to increase
its profits at any cost.

White-collar crime that is part of a collective and organized effort to serve the economic
interests of a corporation is known as corporate crime. In some cases corporate crimes are
conducted by bogus entities that pose as legal corporations or partnerships. Although
corporations cannot be incarcerated, they can be criminally punished with fines and other
sanctions. Criminal liability in these cases is based on the acts or omissions of the company’s
employees and executives.

Common characteristics

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Although white-collar crimes are quite varied, most have several characteristics in common.
First, they involve the use of deceit and concealment, rather than the application of force or
violence, for the illegitimate gain of money, property, or services. A defendant convicted of
making false statements in order to obtain a government contract, for example, is considered a
white-collar criminal.

Next, white-collar crimes typically involve abuse of positions of trust and power. Public
officials who solicit and accept bribes, or corporate officers who fix prices to drive competitors
out of business, are engaging in such abuse of their positions. White-collar crime is also often
more difficult to detect than other types of crime, in part because losses may not be
immediately apparent to victims but also because the crimes can involve sophisticated
schemes and cover-ups. Many white-collar crimes require concerted criminal activity by
coconspirators. For example, a case of real-estate fraud may involve the knowing participation
of an escrow officer, a buyer, an appraiser, and a bank officer, all of whom were willing to sign
false documents to perpetrate a fraud for personal gain.

Fraud, the most common type of white-collar crime, involves obtaining money or services by
making false representations or promises. The key question in these cases is ordinarily whether
the defendant intended to deceive the victims or merely failed in an honest business venture.
One of the most common types of fraud involves telemarketing schemes that misrepresent the
value, the terms of sale, or the use of the goods or services being sold.

Perjury, obstruction of justice, false statements, and witness tampering are also considered
white-collar crimes. Although the goal is not necessarily to obtain money or services, these
crimes are illegal because they interfere with the proper functioning of the justice system.
Bribery and extortion are more general, in that they constitute illegal means of influencing
persons in power in public or private institutions. Bribery involves the giving of something of
value in exchange for an official’s exercise of power. Extortion is a threat made to obtain a
benefit from either a public official or a private individual. Money laundering is a relatively
new type of white-collar crime that is utilized by criminals wishing to conceal profits gained
through illegal activities. Drug dealers and purveyors of counterfeit goods and currencies will
create money-laundering schemes to hide the source of their earnings.

A wide variety of regulatory offenses are also considered to be white-collar crimes. These may
include violation of tax laws, avoidance of currency-reporting requirements, securities

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violations, and environmental crimes. In addition to criminal punishment, those convicted of

regulatory violations may also be subject to civil and administrative penalties. Such violations,
unlike common-law crimes, may not require any criminal intent by the defendant. Instead,
they may be seen as “strict liability” crimes for which mere failure to comply with the legal
standards is sufficient grounds to establish criminal liability.

Computer crimes represent one means by which white-collar criminals exploit technology.
Common examples cover a wide variety of criminal activity, including using a computer as a
mechanism for committing securities fraud, credit-card fraud, and identity theft. Computer
crimes also may involve illegally accessing and tampering with other users’ computer files.
Cost to society
White-collar crime represents one of the fastest-growing types of crime in the world. Nearly
every category of white-collar crime has increased in incidence in recent years. For example,
over the course of two years in the early 21st century, annual losses from fraudulent use of
identity rose by more than $300 million in the United States. (See Identity theft and invasion
of privacy.) Likewise, while the number of almost every other type of civil lawsuit in the
United States decreased around the turn of the 21st century, the number of government and
private lawsuits for white-collar crimes more than doubled during the same time period.

This represented a trend, begun in the late 20th century,

of a number of highly visible white-collar prosecutions in
the United States. They included the prosecution of
financiers Ivan Boesky (1986) and Michael Milken
(1990) for billions of dollars in securities fraud, the
Enron scandal convictions of banker Charles Keating (1992 and 1993)
Former Enron employees sitting with for having looted his own savings and loan (S&L),
their belongings after layoffs by the
ultimately touching off what became known as the “S&L
bankrupt energy-trading company.
Crisis,” and the guilty plea entered by Enron Corp.’s
chief financial officer, Andrew Fastow (2004), on charges of having manipulated off-balance-
sheet transactions (in this case, of having concealed the company’s debt obligations by
transferring them to offshore partnerships), which led to Enron’s collapse. In an associated
case, Enron’s accounting firm, Arthur Andersen LLP, was convicted of obstruction of justice
(2002; overturned in 2005), which caused the firm to go out of business.

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Similar cases have occurred throughout the world. In February 1995, Barings Bank in London
collapsed as a result of deceptions practiced over three years by one of its futures traders. In
Canada, two people pleaded guilty in 2001 to having bilked financial institutions, including
the Royal Bank, out of $92 million by creating 52 fake leases for nonexistent medical
equipment.

Although white-collar crime has traditionally been viewed as less serious than other types of
crime (largely because it does not involve physical violence), by the late 20th century there
was a growing recognition of the significant harm it causes. In a single year, for example,
nearly $500 million in restitution was awarded to victims of white-collar crimes.

The cost of corporate crime to society is many times that of organized crime or the more
common street crime. Moreover, it cannot be measured in monetary damages alone, because
corporate crimes can also pose health risks, compromise safety, cause injuries or fatalities,
bring harm to wildlife and the environment, and lead to organizational failures and associated
job losses. Owing to the concealed nature of many frauds and the fact that few are reported
even when discovered, their cost is impossible to estimate precisely, but in the United States it
is thought to be at least 10 times the combined cost of thefts, burglaries, and robberies. When
compared with crimes committed by juveniles or the poor, corporate crimes are very rarely
prosecuted in the criminal courts, and, despite many well-publicized convictions of corporate
leaders found guilty of wrongdoing, executives rarely go to jail, though some companies may
pay large fines.

Laurie L. Levenson

Citation Information
Article Title: white-collar crime
Website Name: Encyclopaedia Britannica
Publisher: Encyclopaedia Britannica, Inc.
Date Published: 09 March 2024
URL: https://www.britannica.comhttps://www.britannica.com/topic/white-collar-crime
Access Date: March 19, 2024

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