INTELLIGENCE ANALYSIS OF WHITE COLLAR CRIME
"If you want to know what God thinks of money, just look at the people he gave it to" (Dorothy Parker)

    When Sutherland (1940) first coined the term white collar crime, he defined it as "crime committed by a person of respectability and high social status in the course of his occupation."  Sutherland basically was pointing out that poor people are not the only ones to commit crime.  The color of the collar doesn't mean anything.  It could be blue-collar or pink-collar.  It is generally accepted wisdom in criminology that although Sutherland's definition falls short in some ways, the underlying constructs of what he meant -- deception and lack of physical force -- remain true, even while forms of this crime evolve.  The NW3C definition is considered a good 2005 update:  "white collar crimes are defined as illegal or unethical acts that violate fiduciary responsibility or public trust for personal or organizational gain," and the Edelhertz (1970) typology is the most frequently cited one in this area, including: (1) crimes against government by public officials; (2) crimes against government by private citizens; (3) crimes against businesses; (4) crimes against investors; (5) crimes against consumers; (6) crimes against employees; and (7) crimes affecting public health.  Something called the Green (1990) typology includes: (1) crimes for the benefit of one's employer; (2) crimes by government officials; (2) crimes by professionals in the course of doing business; and (4) crimes by individuals in the course of their occupation.  Some would add "technocrime" to existing typologies.

    Siegel (2004) defines white collar crime as "illegal activities of people and institutions whose acknowledged purpose is profit through illegitimate business transactions."  To make it simple, white collar crime is larceny committed by a respectable, legitimate enterprise which is not set up to go out of business like an ordinary fraud or con game.  White collar crime involves embezzlement, forgery, or fraud committed in the course of normal business practice, but is highly unethical and violates accepted accounting principles or the public trust.  Like the crime of conspiracy, deception and cover up are the hallmarks of white collar crime.  Sometimes the offender is a government official.  Criminologists who work in this area sometimes approach white collar crime as the study of business crime, corporate crime, suite crime, crime at the top, elite crime, state crime, political crime, or governmental crime.  Corporate espionage is sometimes included as a specialized area of study. 

    Unfortunately, there is no uniform white collar crime reporting system.  The FBI only tracks crime data on embezzlement and fraud, so the best estimates are that 18,000 arrests for white collar crimes occur each year.  The number of investigations far exceed that number, however.  It appears prosecutions for crimes against consumers take priority over crimes against business and government.  Offenders typically believe that whatever they've done is not wrong, and is an expected entitlement or fringe benefit of their positions of power.  Most research suggests that firms with declining profitability or budget cuts are more likely to break the law (Coleman 1994).  Other research indicates that firms in highly regulated areas and volatile markets (like pharmaceuticals or petroleum) are more likely to break the law (Albanese 1995).

    When approaching the topic of white collar crime, it is instructive to take a broad view and consider property criminals in general.  Property criminals of all kinds tend to be creatures of habit where their classic modus operandi consists of the following:

• Type of victim -- they usually specialize in a type of prey

• Type of dwelling -- they usually have a turf or place for preying

• Means of entry -- they usually use the same ploy or method

• Type of loot -- they usually are very skilled at getting one thing

• Time of operation -- they are patient no matter how long the crime takes

• Presence of partners -- some work alone; but most work with partners

• Trademarks -- some leave calling cards or signatures at the scene

    While the use of modus operandi and repeat offender profiles are important, there have been some advances in recent years identifying signature characteristics based on style and the degree of hostility expressed before, during, and/or after the crime.  Most of these advances have taken place in a discipline called forensic accounting.  For itself, the field of white collar crime in criminology has long been bogged down in conceptual and definitional debates.  However, some things stay the same.  It has been frequently remarked that the most common motives for property crime tend to fall into three categories which, in order of being the most frequent, are:

    (1) to keep the party going (money from the crime is used to purchase drugs)
    (2) to keep up appearances (money is used to buy expensive clothes, jewelry, or status items)
    (3) to keep things together (money is used for living expenses, food, shelter, or child support).

THE TYPICAL PROFILE

    The typical white collar criminal is a white, middle class, educated male around 29 years of age (70% of the time) with no previous criminal history and no involvement in drug or alcohol abuse (Miethe & McCorkle 1998).  Their offenses are characterized by sophisticated planning, and they have carefully considered lessons learned from the extensive histories most corporations have of regulatory violations.  Most offenders prefer to work alone, except where the cooperation of others is needed.  Almost all criminological theories (strain, learning, control, conflict, and neutralization) have been applied to white collar crime.  The economic costs of white collar crime are staggering, running well into several billions a year.  Perhaps more importantly, economic crime erodes public confidence.

    The most common breeding ground, as Vaughan (1985) points out, is the "free-wheeling, self-regulatory" work environment where the lines are blurred between acceptable and unacceptable business practices in the pursuit of profit.  High levels of both internal and external competition as well as certain kinds of office politics will also create a breeding ground for white collar crime.  As far as profiles go, the best research on the subject has been by Weisburd et. al. (2001) who studied 968 offenders over a 3 year period.  It may be worth quoting from them, as follows:

    It is difficult to estimate the amount of planning or foresight that goes on in the minds of white collar criminals.  This is so because most of them see their offending as simply an extension or exaggeration of normal operating procedures.  For decades, criminologists have maintained that NEUTRALIZATIONS play an important role in the initial stages of planning a white collar crime (Hollinger 1991).  Neutralizations are like rationalizations, except they are the kinds of things one says to them self before (not after) the crime is committed.  Some offenders, like the ones Horning (1970) describes, engage in a sort of "cognitive mapping" where certain property and certain procedures in the organization are perceived as "fair game" for criminal activity.  Other, so-called "rogue" employees sometimes claim they were just following implicit orders.  Cressey (1953) used the phrase "vocabularies of adjustment" to describe the many ways in which white collar criminals comfort or deny their guilty minds, and it has become conventional in criminology (since Cressey) to talk about whether such criminals had an unshareable "problem" or perceived some "threat."  The "problem" school of thought holds that something like the 3 B's (babes, booze, and bets) -- a problem with infidelity, alcohol or drugs, or a gambling or debt problem -- is at root of the criminality.  The "threat" school of thought holds that something in the competitive environment of the organization or in the potential offender's career path is at the root of the problem.  One will find criminologists about equally divided over this issue.  The most common neutralizations are as follows:

    1. Denial of responsibility -- It's not my fault; I didn't have a choice
    2. Denial of injury -- It's no big deal; They have too much money
    3. Denial of victim -- They had it coming; They had a bad attitude
    4. Condemnation of the condemners -- Everybody does it; Why me?
    5. Appeal to higher loyalties -- Only cowards back down; protecting

    One of the more prominent theories is that offenders possess an "unshareable financial problem", the result of living beyond their means, piling up gambling debts, etc. (the three Bs: Babes, Booze, Bets), and feel they cannot let anyone know about their situation without ruining their reputation.  Other theories stress the "culture at the top" notion, which sets the tone for the ethical climate in the organization.  The whole world of business is kept in line by what is called "economism" -- a self-regulating compliance strategy based on the deterrent effects of economic sanctions and civil penalties. This inherently places a lot of trust in the personalities of those who work in business.

    Most white collar crime cases are won on the issue of intent (or motivation).  However, offenders are probably as complex as the laws and regulations in this area.  The required mental states, for example, range from "negligently" to "recklessly" to "knowingly", depending upon what type of white collar crime you're talking about.  Prosecution, or more specifically, deciding who prosecutes, opens up a cornucopia of agencies, all with joint and/or overlapping responsibilities.  In some cases, the level of cooperation is well-known, such as between the FBI (threat of criminal charges) and FTC (civil cease & desist orders), but OSHA inspectors have only recently been equipped with police powers, and the investigative arms of many other agencies are not well known. 

    One of the most important things in investigation of white collar crime is the need for partnership and teamwork. Intelligence work in this area is often disorganized and inefficient, and a team approach can solve this.  The Treasury Dept., for example, may have the money laundering analysis expertise, and a local police department may have a proven ability to produce analytical activity charts.  The "strike force" model is one of the most common team approaches in law enforcement.  This establishes a network of agencies all working on different aspects of the problem. 

    Another thing that should not be overlooked is the corporation itself.  Businesses spend millions of dollars a year conducting internal audits.  Along these lines, one should not neglect the private security force employed by the corporation.  Their employees can be valuable sources of information.  In addition, sometimes the employees of the organization itself can be induced to "snitch" or "whistle blow" on other employees.   

    The main piece of evidence that will be viewed most strongly in court is any evidence of disguise or cover-up.  This will ordinarily be presumed as evidence of intent under most legal standards.  Concealment of the violation is therefore the most vital piece of evidence to look for.  This necessarily involves unraveling the "paper trail" and pouring over a large roomful of obscure documents.  Many agencies have hired college students or recruited interns to temporarily help them with these chores.  Records analysis is something that may take years to complete, but then you have to focus on individual offenders eventually.  But with records analysis, you should look for:

• Maintenance of two sets of books or records

• Destruction of any books or records

• Payments to fictitious companies or persons

• False invoices or billings & double payments on billings

• Company loans to employees or other persons

• Large or frequent currency transactions

• Use of photocopies instead of original documents

• Presence of second or third party endorsements on checks

    Over the years, a certain number of "indicators" have tended to be a composite of the white collar criminal.  These indicators include:

• The presence of illegal income

• The presence of large cash transactions

• The presence of multiple bank accounts

• The sudden ownership of one or more businesses

• Multiple businesses at one address

• Corporations with little or no physical assets (paper corporations)

• Out-of-country bank accounts

    Beside proof of intent (via habit and character evidence) which satisfies the mens rea element of crime, and proof of destruction or cover-up (via shredded or duplicate documents) which satisfies the actus reus element of crime, AND the testimony of at least one witness (via an informant or snitch co-worker), the intelligence analyst should be prepared for the court to expect the introduction of charts diagramming the scheme or conspiracy.  Such charts require an understanding of conspiracy.  A conspiracy is difficult to prove, and may only be capable of being demonstrated using forensic science.

LIFESTYLE FACTORS AND INDICATORS

    CEOs don't travel First Class, they travel Their Class in private jets—no lines, no mingling with the peons, and their favorite toy (business expense) is the Gulfstream's G450 jet, which flies 5,000 miles nonstop, costs $33 million, and is equipped with deerskin seats, mahogany cabinets, Persian carpets, flat-screen video displays with surround-sound systems, walk-in showers, and 24K gold plated fixtures.  Arrogance, rudeness, and imperiousness characterize their relationships with others, and their lifestyles can be described as nothing other than opulent and lavish.  Once the adored "white knights" of the US economy, CEOs and their glamorous lifestyles began to fall from grace with the stock market crash in 2001 and the Enron scandal in 2002.  Juries are finding it easier and easier to return findings of guilt or fault because they simply cannot identify with the level of selfish greed involved.  What is it, however, that turns a "pillar of the community" into a corporate criminal?  There are several speculations, none of which are really well-supported by criminological research, but interesting nonetheless.

    #1: They think they can get away with it --  usually one part of the corporation is doing quite well, and profits are climbing astronomically.  The profits from this "sector" are siphoned off for personal use, but some of it is funneled back to keep the rest of the corporation from deteriorating.  It's usually only when one part of the corporation is experiencing huge losses that attention is attracted.

    #2: Pure greed, delusions of grandeur, or megalomania -- usually the executive is mixing in high-class company and wants to impress such folks as having the trappings of power.  They want to be seen as brilliant businessmen with the Midas Touch, and will do anything it takes to maintain that impression and fund their lavish lifestyle.

    #3: Psychopathic tendencies -- usually they have bullied their way to the top, learned to "top off" their salary by raiding the corporate coffers, and developed a coterie of followers and yes-people who constantly tell them how great they are.  A large portion of these offenders are discovered after a failed office romance or sexual escapade.

    #4: Creative opportunities and corruption -- usually the executive is put in charge of an overseas operation and because they want to see those operations succeed, succumb to the bribery and corruption prevalent in many foreign nations, and get caught up in a slippery slope of moral decline where they end up robbing from their own corporation.

    There's obviously more speculations that could be made, and one would be hard pressed to explain things like the finding that CEOs usually cheat at golf, but it's clear that an appetite for risk-taking is prevalent among senior business executives.  An emerging subject of study in the criminology of white collar crime is the tendency to engage in "morally reprehensible behavior" such as cheating on one's spouse.  Between 4,000 and 5,000 top CEOs are part of America's "leadership class," and this is a tight, close-knit community, driven by reputation and status-consciousness.  For this reason, many criminologists have said that something like "reintegrative shaming" or "woodshedding" might work at deterring them from criminal conduct (Braithwaite & Geis 1982).  WOODSHEDDING is a unique legal term in corporate law which takes advantage of the so-called "corporate icon" clause in (somewhat rare) cases where the corporation as a whole has been found guilty or plead guilty to a crime, but criminologists have been calling for its expanded use.  Top executives are frequently so status-conscious that if a judge is willing to consider an alternative sentence like a "shaming ritual," the theory is that it will have more of an effect than some fine or sanction imposed by an impersonal, remote legal authority.  Boards of directors are sometimes involved in these rituals, since "a director's fiduciary duties require them to ensure that an effective information and reporting system is in place" (1991 language of the Organizational Sentencing Guidelines).  Prior to 1991, corporate directors followed the Allis-Chalmers rule (from Graham v. Allis-Chalmers Mfg 188 A 2d 125, 130 Del. 1963) which simply stated: absence of some "red flag" alerting them to the likelihood that corporate misconduct was going on within the company, a corporation’s board of directors has no duty to create (or compel the creation of) a program to detect that misconduct or to insert themselves into the processes of ensuring legal compliance, or in other words, "absent cause for suspicion there is no duty upon the directors to install and operate a corporate system of espionage to ferret out wrongdoing which they have no reason to suspect exists."  Shaming rituals usually go like this:

THE PSYCHOLOGICAL AUTOPSY APPROACH

    It is often the case that when backed into a corner, the typical white collar criminal will commit suicide, or in some cases, because they are very old, will die of natural or semi-natural causes.  Sometimes, even upon learning they are under investigation, they suffer heart attacks, serious ailments, travel overseas, move or liquidate capital, and hire their own investigators as well as let loose a "dream team" of lawyers.  A certain amount of maneuvering and resistance is to be expected by people with vast resources, and it is not uncommon for the post-investigation phase to reveal more incriminating information than the pre-investigation phase.  It is therefore a common approach that after the suspect dies, an investigation still goes on.  The most common criminological technique in this case is known as a psychological autopsy.  The elements involved in a psychological autopsy are as follows:

    1. Alcohol and drug history, decedent's history of dealing with stress, medical history, family medical history, recent stressors in the victim's life, military history, employment history, educational history, sexual history, dietary history
    2. Interpersonal relationships, writings by the deceased, books and music owned by the deceased, web sites visited, phone calls made, recent conversations with friends, acquaintances, relatives, co-workers, and teachers, interests and hobbies shared with others, old and current enemies
    3. Reactions by any of the above parties to the victim's death, especially as to the degree of lethality, as well as the usual questions about early warning signs and who might have intended harm
    4. Assessment of intention about the role of the decedent in their own demise, including any sub-intentional, covert, or unconscious role, this obtained by analyzing the pattern of how the victim went about accomplishing their goals or life plans
    5. Fantasies, dreams, thoughts, premonitions, fears, or phobias of the victim, socio-emotional mood swings, mental status exam, concentration and judgment abilities, IQ
    6. Timeline of events leading up to the day of the deceased's death

    Because investigative resources are almost always limited, investigators also usually follow the standard procedures that criminal justice agencies use in prioritizing cases to investigate.  This is sometimes called the triage concept, but it is more commonly referred to as working the solvability factors.  Such factors determine which cases are investigated at the expense of others, and include but are not limited to the following: the availability of witnesses and those willing to testify, the amount and kind of loss, the evidence that can be reconstructed, related crimes, and the desires of victimized parties.  For white-collar crime, we can add the factor of traceability of stolen assets.  The most serious crimes that have the best chances of being solved are usually assigned before the less serious with little or no chance of being solved.  Put another way, the method of investigating is similar to triage at an emergency room; someone bleeding will be treated before someone with a sprain, regardless of how long the sprain has been waiting.  Police departments only investigate identity theft, for example, when there is cooperation from banks, a collateral crime is involved (e.g., forgery), and the victim has filed a complaint in a timely manner (e.g., 30 days).  It is important to know these criminal justice procedures if a successful criminal justice prosecution is the goal.  Most detective bureaus, like those in the U.S. Dept. of Treasury, follow a strict 90-day rule, which can be represented as follows:

    The science of crime reconstruction also offers some guidance in what to look for, especially in terms of making sense out of all the possible kinds of evidence collected, and how interpretation of this evidence should take place in the investigator's mind.  Remember that you are not on a "fishing expedition" to find out everything bad about a suspect.  There is also something called the "SILVER PLATTER DOCTRINE" which means that you cannot hand over incriminating evidence (possibly collected in violation of the exclusionary rule) to the local or state police if you are a private investigator or a federal one.  So, once you've decided to hand over the case to law enforcement, make sure all the evidence you've collected so far is constitutional.  However, since we have been talking about the pre-investigative (profiling) phase, for the most part, there is some court-defensible terminology you should be aware of when called upon to defend why you focused on a particular individual in the first place. 

    Detective science is mostly about induction, which is the process of reasoning where experience, skill, and observation are applied to the particulars of a case and a conclusion or generalization is drawn.  Deduction is the process of reasoning that starts with a generalization or premise and then considers the logical consequences of any particulars that follow.  Abduction is the process of cycling through both inductive and deductive reasoning by adding known facts until one is able to reject or retain a hypothesis.  Typology (aka classification or taxonomy) is the process of arranging known facts into mutually exclusive categories.  Synthesis is the process of combining separate parts or elements.  Analysis is the process of starting with the whole and breaking it down into its separate parts.  A hypothesis is a tentative assertion subject to verification or falsification.  A theory is a somewhat verified hypothesis.  Serendipity is the factor of chance or luck.  Some of these terms, and others, are used in different ways by detectives: 

INTERNET RESOURCES
Financial Crimes
Financial Crimes Enforcement Network
Financial Scandals Site
Lecture on Property Crime Investigation
National White Collar Crime Center
NW3C 2005 National Public Survey on White Collar Crime (pdf)
OJP Report on Financial Crimes
Preventing Crime at Places
Repeat Offender Programs
Reintegrative Shaming in Corporate Sentencing
Sourcebook of CJ Statistics on Property Crime 
The Corporate Crime Wave
Uniform Crime Reports
USSC Symposium on Corporate Crime in America
Why I Will Never Be Caught (by white collar criminal)

PRINTED RESOURCES
Albanese, J. (1995) White collar crime in America. Englewood Cliffs: Prentice Hall.
Braithwaite, J. & Geis, G. (1982). "Theory and action for corporate crime control," 28 Crime & Delinquency 292: 301-04.
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Clinard, M. & P. Yeager. (1980). Corporate crime. NY: Macmillan.
Coleman, J. (2002). The criminal elite, 5e. NY: Worth Publishing.
Cressey, D. (1953). Other people's money. Glencoe, IL: Free Press.
Edelhertz, H. (1970). The nature, impact, and prosecution of white collar crime. Washington: GPO.
Freidrichs, D. (2004). Trusted criminals. NY: Thomson Learning.
Geis, G. & R. Meier. (1977). White collar crime. NY: Free Press.
Green, G. (1990). Occupational crime. Chicago: Nelson Hall.
Hollinger, R. (1991). "Neutralizing in the workplace." Deviant Behavior 12: 169-202.
Internal Revenue Service. (1999). Financial investigations. Washington: GPO.
Miethe, T. & R. McCorkle. (1998). Crime profiles. Los Angeles: Roxbury.
Osterburg, J. & Ward, R. (2000). Criminal investigation. Cincinnati: Anderson.
Rhodes, W. & C. Conley. (1981). "Crime and mobility." Pp. 161-78 in Brantingham & Brantingham (eds.) Environmental criminology. Beverly Hills: Sage.
Richards, James. (1999). Transnational criminal organizations. Boca Raton: CRC Press.
Rosoff, S. et. al. (2002). Profit without honor. NJ: Prentice Hall.
Siegel, L. (2004). Criminology. Belmont, CA: Wadsworth/Thomson Learning.
Simon, D. & F. Hagan. (1999). White collar deviance. Boston: Allyn & Bacon.
Sutherland, E. (1940). "White-collar criminality." American Sociological Review 5: 2-10.
Vaughen, D. (1985). Controlling unlawful organizational behavior. Chicago: Univ. of Chicago Press.
Weisburd, D., Wheeler, S., Waring, E. & Bode, N. (1991). Crimes of the middle classes. New Haven, CT: Yale Univ. Press.
Weisburd, D., Waring, E. & Chayet, E. (2001). White collar crime and criminal careers. NY: Cambridge Univ. Press.

Last updated: Oct. 25, 2009
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