In December 2021, the term “white-collar crime” marked its 82nd anniversary. The study of crime and criminals traditionally focuses on predatory offenses and the so-called “common” criminals who commit these offenses. White-collar crime—fraud, corruption, bribery, organized crime, cybercrime, identity theft, money laundering and drug trafficking—receives comparatively scant attention despite strong evidence that the financial harm it causes far outweighs the harm caused by predatory crimes. Given the recent spread of outrageous financial crimes and the increased awareness of corporate cultures that condone illicit behavior, white-collar crime has entered the public consciousness and the perpetrators of these crimes are now seeing the measures of their heinous acts.
The origin of the term white-collar crime can be traced back to Edwin Sutherland, a sociologist and criminologist, who proposed the term to the American Sociological Society in 1939. Sutherland was known as one of the most influential criminologists of the 20th century. It was not until 1940, in a publication titled “White-Collar Criminality,” that the term was clearly defined as a “crime committed by a person of respectability and high social status in the course of his occupation.”1
While analyzing the concept of the term white-collar crime, it is important to note that many of the statutes that criminalized certain white-collar offenses would have yet to be enacted. According to the report “Measurement of White-Collar Crime Using Uniform Crime Reporting (UCR) Data,” most white-collar crimes laws were enacted during three time periods: Antitrust laws were passed during the Progressive Era (1920s); social welfare laws were passed during the New Deal Era (1930s); and consumer protection laws were passed during the 1960s.2
White-collar crime is further defined as “[An] illegal or unethical act that violates fiduciary responsibility of public trust, committed by an individual or organization, usually during the course of legitimate occupational activity, by persons of high or respectable social status for personal or organizational gain.”3
White-collar crime impacts society in deeper ways than violent crime. The effects of violent crime are generally localized, meaning that the victims, their families and friends, as well as the community are impacted. The effects of white-collar crime are often diffused among multiple victims and can be long-term.
According to the Federal Bureau of Investigation (FBI), a few years ago, white-collar crime was estimated to cost the U.S. more than $300 billion annually.4 However, other statistics from the FBI admit that the “true” extent and expense of white-collar crime are unknown.5
The characteristics aligned with white-collar crime are as follows:
- White-collar crime is focused on deceit and concealment rather than the application of force.
- White-collar crime tends to be nonviolent in nature.
- The primary goal of those who perpetrate white-collar crime is to gain money, property or services.
- White-collar crime typically involves positions of trust and power.
- Many white-collar crimes are challenging to detect because losses may not be immediately apparent to victims and/or they are masked by complex schemes and cover-ups.
The perpetrators of white-collar crime often rely on the general public’s lack of knowledge to further their illicit activities. With some of the most outlandish corporate frauds and scandals, it is noteworthy that most white-collar criminals today have a college education, are in a position of power and are middle-aged males.6 They also tend to demonstrate defensive behavior, as in the case of Martin Shkreli, Elizabeth Holmes, Bernie Madoff, Jho Low, the Sackler Family and countless others.
Understanding the World of White-collar Crime
Elizabeth Holmes and Theranos: Corporate Fraud
Take a look at the case of Silicon Valley unicorn, Theranos, which has been unveiled as a con that was valued at $9 billion.7 Theranos was founded by Elizabeth Holmes, a Stanford University dropout and the so-called female version of Steve Jobs, who was able to mastermind a now-defunct technology company. She was hailed as a genius for founding her startup in 2003 that specialized in blood testing. Fast forward to May 2018, when inaccuracies in the technology were exposed and the walls came tumbling down. Theranos operations were shuttered and so was Holmes.
As the elements unraveled, it was discovered that a massive fraud had occurred, and Holmes was charged by the U.S. Securities and Exchange Commission. Also, in June 2018, the U.S. Department of Justice announced that a federal grand jury charged Holmes with nine counts of wire fraud and two counts of conspiracy to commit wire fraud.8 In January 2022, Holmes was found guilty on four of the 11 federal charges, and the media scrutiny of her actions was unleashed full throttle to the American public.
HSBC: Financial Fraud
Another prominent case where white-collar crime has occurred is HSBC—a financial institution (FI) that has been in the news for being associated with money laundering for numerous individuals and groups.
HSBC, a bank based in London, was indicted by the U.S. Department of Justice multiple times since the mid-2000s for facilitating money laundering for health care fraud and drug money for known politically exposed persons (PEPs), such as leaders and relatives of corrupt foreign officials in countries such as Angola.
HSBC was accused by the Senate Panel on Investigations of having weak anti-money laundering procedures a few years ago. They knowingly did business with other FIs around the world in the more than 80 countries that have been specifically flagged by authorities for involvement in terrorism financing, corruption, drug trafficking, tax evasion or health care fraud.9
HSBC then allowed large transactions to occur between their banks and foreign institutions, with the result being that HSBC directly and likely knowingly facilitated the exchange of “dirty money” between people, institutions and organizations that should have been blacklisted.
With some of the most outlandish corporate frauds and scandals, it is noteworthy that most white-collar criminals today have a college education, are in a position of power and are middle-aged males
Fast forward to 2022, when the institution has made headlines again. A former member of the monitoring team was quoted as saying, “HSBC never voluntarily disclosed money laundering. They waited to be asked about it.”10 HSBC was profiting from an international criminal scheme even while on probation for having served murderous drug cartels and organized crime groups. The bank had admitted in 2012 that it had helped dirty money flow through its branches around the world, including at least $881 million controlled by the notorious Sinaloa cartel and other Mexican drug gangs.
The Financial Crimes Enforcement Network went on to expose how banks like HSBC defied money laundering crackdowns. This was another important chapter in the history of white-collar crime.11
In a controversial decision, federal prosecutors declined to seek an indictment of the bank but instead allowed it to pay a $1.92 billion settlement and serve five years of probation, during which its efforts would be monitored by a court-appointed watchdog.12
SBA PPP Loans (COVID-19 Fraud and Financial Fraud)
In March of 2020, the Coronavirus Aid, Relief, and Economic Security Act was put in place to assist with emergency financial assistance to millions of Americans suffering from the economic downturn of the pandemic. One of the programs established under the act was the Paycheck Protection Program (PPP), which provided funding to businesses through PPP loans for rent and utilities, employee payroll costs, etc.13 The PPP loans have been dubbed by prosecutors as the biggest fraud in a generation. Experts declare that this new wave of fraud has grossed well over $80 billion in theft.14
Also during the height of the pandemic, the inception of the Small Business Administration (SBA) PPP loan allowed small business borrowers to submit an application that included “good faith” certifications. This led to the perpetration of fraud because proper guidance was not provided to lenders.15
The organizational structure was not clearly defined, nor was a fraud risk framework properly established. This led to a recipe for disaster—not just for the SBA Office of Inspector General, but for the other federal law enforcement (LE) agencies that have the responsibility of investigating PPP loan fraud. In one example, Maurice Fayne, also known as Arkansas Mo of the television program “Love [&] Hip Hop Atlanta,” submitted a PPP application for $3.7 million and claimed to have had 107 employees for his trucking business. The approval of the loan led to him spending the approved amount on leasing a Rolls-Royce, paying child support, purchasing jewelry, starting another company and other frivolous luxuries.
In September 2021, Fayne was sentenced to more than 17 years and six months in federal prison for conspiracy and wire fraud related to a Ponzi scheme and bank fraud for the fraudulent use of the PPP loan application. Also, Fayne has been ordered to pay the amount of nearly $4.5 million in restitution to his victims.16
Per his charges, the “Love [&] Hip Hop” reality star also led a multistate Ponzi scheme and scammed people into investing in his defunct trucking business.
Ponzi schemes occur when the schemer promises returns that are above the legal rate. The “red flag” is that the returns are simply too good to be true. Ponzi schemes have two classifications that are primarily used in their promotions—pure endless cash chain schemes and product fronts (financial instruments, speculations and multi-level marketing).
The duration of a Ponzi scheme depends on a few factors. The first is the promised return rate. The higher the return rate, the shorter the duration of the Ponzi scheme. The second is the redemption rate. It should be noted that most Ponzi schemes begin as legitimate investments; however, in the end, they all go belly up. The return rate never comes to fruition.17
In today’s society, white-collar crimes affect more Americans than all other forms of crime combined;18 as such, it has a devastating ripple effect that impacts businesses, jobs, families and everyone’s financial future. White-collar crime looks to capitalize on our needs and desires by creating an illusion of legitimacy and offering something more appealing. Therefore, LE and consumers have a responsibility to understand the associated risks and security measures of current white-collar crime trends.19
White-collar crime leaves an indelible impression on society. Its impact is vast because of the high-dollar value usually attached to it. It also exposes weaknesses in the legal system, FIs, investments, and other areas where people who know those systems can exploit openings. The perpetrators of such criminality can abuse the system because it is large, complex and cumbersome. As a society, we must remain vigilant and relentless in our appeals to expose those who attempt to capitalize on the average citizens’ emotions by creating a façade for their own financial success.
Delena D. Spann, U.S. Federal Law Enforcement Agency, Chicago, IL, USA email@example.com
- Edwin H. Sutherland, “White Collar Criminality,” American Sociological Review, 1940, https://psycnet.apa.org/record/1940-04704-001
- “Training Course: White Collar Crime,” NW3C, https://www.nw3c.org/
- “White-collar crime,” Cornell Legal Institute, https://www.law.cornell.edu/wex/white-collar_crime
- Cynthia Barnett, “Measurement of White-Collar Crime Using Uniform Crime Reporting (UCR) Data,” U.S. Department of Justice, Federal Bureau of Investigation, 2000, https://www.ojp.gov/ncjrs/virtual-library/abstracts/measurement-white-collar-crime-using-uniform-crime-reporting-ucr
- Eugene Soltes, Why They Do It: Inside the Mind of the White-Collar Criminal, Public Affairs, 2016, https://www.hbs.edu/faculty/Pages/item.aspx?num=51488
- Roomy Khan, “Theranos› $9 Billion Evaporated: Stanford Expert Whose Questions Ignited the Unicorn’s Trouble,” Forbes, February 17, 2017, https://www.forbes.com/sites/roomykhan/2017/02/17/theranos-9-billion-evaporatedstanford-expert-whose-questions-ignited-the-unicorn-trouble/?sh=3448d5ae6be8
- “Theranos Founder and Former Chief Operating Officer Charged In Alleged Wire Fraud Schemes,” U.S. Department of Justice, June 15, 2018, https://www.justice.gov/usao-ndca/pr/theranos-founder-and-former-chief-operating-officer-charged-alleged-wire-fraud-schemes
- “HSBC Exposed U.S. Financial System to Money Laundering, Drug, Terrorist Financing Risks,” Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations, July 16, 2012, https://www.hsgac.senate.gov/subcommittees/investigations/media/hsbc-exposed-us-finacial-system-to-money-laundering-drug-terrorist-financing-risks
- Franz Wild and Ben Stockton, “Money-Laundering Ring Pushed $4 Billion Through HSBC,” The Bureau of Investigative Journalism, July 28, 2021, https://www.thebureauinvestigates.com/stories/2021-07-28/money-laundering-ring-pushed-4.2bn-through-hsbc
- Spencer Woodman, “HSBC moved vast sums of dirty money after paying record laundering fine,” International Consortium of Investigative Journalists, September 21, 2020, https://www.icij.org/investigations/fincen-files/hsbc-moved-vast-sums-of-dirty-money-after-paying-record-laundering-fine/
- “HSBC Holdings Plc. and HSBC Bank USA N.A. Admit to Anti-Money Laundering and Sanctions Violations, Forfeit $1.256 Billion in Deferred Prosecution Agreement,” U.S. Department of Justice, December 11, 2012, https://www.justice.gov/opa/pr/hsbc-holdings-plc-and-hsbc-bank-usa-na-admit-anti-money-laundering-and-sanctions-violations
- “Coronavirus Response,” U.S. Department of Justice, https://www.justice.gov/coronavirus
- Ken Dilanian and Laura Strickler, “’Biggest fraud in a generation’: The looting of the Covid relief plan known as PPP,” NBC News, March 28, 2022, https://www.nbcnews.com/politics/justice-department/biggest-fraud-generation-looting-covid-relief-program-known-ppp-n1279664
- “SBA’S Handling of Potentially Fraudulent Paycheck Protection Program Loans,” U.S. Small Business Administration Office of Inspector General, May 26, 2022, https://www.sba.gov/sites/default/files/2022-05/SBA%20OIG%20Report%2022-13.pdf
- “Reality TV star sentenced for PPP fraud and for operating a multimillion-dollar Ponzi scheme,” U.S. Department of Justice, September 15, 2021, https://www.justice.gov/usao-ndga/pr/reality-tv-star-sentenced-ppp-fraud-and-operating-multimillion-dollar-ponzi-scheme
- Delena D. Spann, “Wherefore Thou Art Ponzi Schemes: A 2015 Review,” KYC360, June 23, 2016, https://kyc360.riskscreen.com/article/wherefore-thou-art-ponzi-schemes-a-2015-review
- Stephen M. Rosoff, Henry N. Pontell and Robert Tillman, Profit Without Honor: White Collar Crime and the Looting of America, 7th edition, Pearson, June 11, 2021, https://www.pearson.com/en-us/subject-catalog/p/profit-without-honor-white-collar-crime-and-the-looting-of-america/P200000001757/9780137563111
- James Helmkamp, Richard Ball and Kitty Townsend, “Definitional Dilemma: Can and Should There Be a Universal Definition of White Collar Crime?” National White Collar Crime Center, 1996, https://www.ojp.gov/pdffiles1/Digitization/166244NCJRS.pdf