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