Crime in the Business World


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Crime in the Business World

  1. 1. Crime in the Business World<br />
  2. 2. I. Costs<br />A. Crime is most often associated with the lower class<br /> (street crime) but crime in the business world is the most <br /> costly type of crime in the US.<br /> 1. Approx. $300 B lost to business crime each year <br /> compared to about $20 B for street crimes (violent<br /> and property).  <br /> 2. In 2005, nearly 17,000 people were reported<br /> murdered in the US. In contrast, corporate crime <br /> may result in at least 20 million serious injuries and<br /> 30,000 deaths.<br />
  3. 3. 3. Consumers often pay in the form of hidden costs. For example, Insurance fraud (non-health<br /> insurance) costs the average family between<br /> $400 and $700 per year, with a total cost<br /> exceeding $40 billion<br />
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  5. 5. II. Turning a Blind Eye?<br />A. Statistics on corporate crime are not collected on a <br /> regular basis by any official government<br /> agency<br />B. Prosecution is unreliable and sporadic<br />C. Since corporations cannot be prosecuted <br /> determining who is responsible can be difficult <br />
  6. 6. III. Corporate Culture Theory<br />A. Some businesses place high demands on employees<br /> while simultaneously maintaining a climate that is <br /> tolerant of employee deviance.<br /> 1. Differential Associations? (Fill in the blanks)<br /> a. <br /> b.<br /> c.<br />B. Many corporate employees violate the law with enough <br /> frequency that they could be considered habitual<br /> criminals<br />
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  8. 8. IV. Types of Business Crime<br />A. Corporate Crime <br /> 1. Definition: Illegal acts committed for the economic<br /> benefit of the company in which the offender is<br /> employed.<br /> a. Individuals benefit indirectly as the company prospers.<br /> 2. Goals of corporate crime:<br /> a. Rig the "free enterprise" system<br /> b. Make the company appear more profitable.<br />
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  10. 10. B. White Collar Crime<br /> 1. Definition: Crimes committed by employees of a <br /> company for personal gain, in the course of<br /> their work, and without the knowledge of their<br /> employers.<br /> a. Can be either against the company or <br /> against customers or clients of a company <br />
  11. 11. 2. Occurs in all aspects of the business world:<br /> a. Big business where it may be easier to cover<br /> b. Small business where only one employee may <br /> be handling the books<br /> c. Finance industry that deals with “other people's<br /> money”<br /> d. Service industry where there is no inventory to <br /> match against records<br />
  12. 12. V. Famous Examples:<br /> 1. Enron (2002)--securities fraud, insider trading, obstruction of <br /> justice, conspiracy. Wiped out the savings, pensions and jobs<br /> of thousands of former employees, and cheated California<br /> energy consumers out of millions of dollars. At least 3<br /> executive are serving prison time, including Jeff Skilling, who<br /> began his 24-year sentence in Waseca. CEO Kenneth Lay<br /> died of heart failure before he served any time.<br /> 2. ADM (1993)--Price fixing. $100 million fine<br />This American Life podcast: The Fix is In<br /> 3. Martha Stewart (2004)--insider trading. 5 mos. prison, $30,000 fine<br /> 4. Michael Milken (1989)--securities fraud. Fined $1 billion, 22 mos. in <br /> prison (Don't worry about him, he's still worth over $2 billion!)<br />
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  14. 14. Questions<br />1. Why do we tend to focus more on street crime than<br /> corporate crime? <br />2. Should we spend more money on prosecuting white <br /> collar criminals and corporate crooks? Would that be a<br /> good investment of public money?<br />3. How would you maintain high ethical standards in an<br /> environment where you have the opportunity to take<br /> money or goods you have been entrusted with?<br />