White-Collar Crime Research Paper

This babel of competing verbiage and the disparate phenomena it embraces would be a mere annoyance were it not for the fact that the term was born, as Robert Merton once observed (Merton 1957, pp. 90–2), of an effort to ‘liberate’ scholarship from ‘cognitive misbehavior’ reflected in the well-accepted but spurious correlation between poverty and crime. Concepts tell us where to look, and where we look affects what we find. Sutherland asserted that criminologists, obstructed by conceptual blinders, had been looking in the wrong places:

… [white-collar crimes] are not included in the criminal statistics nor are individual cases brought to the attention of the scholars who write the theories of criminal behavior. The sample of criminal behavior on which the theories are founded is biased as to socio-economic status, since it excludes these business and professional men. This bias is quite as certain as it would be if the scholars selected only red-haired criminals for study and reached the conclusion that redness of hair was the cause of crime (Sutherland 1949, pp. 8–9).

In other words, if scholars look only at crimes committed by the poor, it is not surprising that they conclude that poverty and its associated pathologies cause crime. For Sutherland, this selection bias is the raison d’etre of inquiry into white-collar crime. These offenses evoke that nagging sense of all that is ignored by traditional criminology and that cause us to misunderstand the nature, causes, and consequences of crime and its control.

In the ensuing years, white-collar crime has become a subject of inquiry in its own right, of course. But selection bias continues to symbolize the essence of white-collar crime scholarship, simultaneously signaling its promise and foreshadowing its vulnerability, accounting for why the work is provocative and groundbreaking, and yet so often misguided. This research paper explores this dual tension, thereby featuring a handful of the major contributions of this scholarship and the challenges that social scientists face in doing it well.

1. Removing The Blinders

We begin by considering how some of the standard topics in criminology are transformed when one looks in the unconventional places captured by the varied conceptions of white-collar crime.

1.1 The Social Organization Of Offending

Although Sutherland’s early definition explicitly referred to individuals, his empirical work (Sutherland 1949) on the offenses of the seventy largest manufacturing, mining, and mercantile corporations in the United States took organizations as the unit of analysis, a legacy reflected in the generations of scholars he spawned. Though organizations surely commit misdeeds, they cannot do so without the complicity of individuals, often countless individuals plucked from disparate branches of the corporate tree and from tiers spanning the organizational hierarchy, indeed individuals often situated outside of the organization altogether—lawyers, accountants, investment bankers, brokers, agents, consultants, advertisers, competitors, even regulators. But coordinating the activities of such a diverse collection of collaborators situated across the globe, many of them ignorant of the illicit activities to which they contribute and often engaged in concerted action spanning years or decades, is not easy. Organizations need to maintain secrecy, lest the activities be exposed. They must insure that some conspirators remain unwitting of the consequences of their actions, lest they refuse to participate or blow the whistle to regulators inside or outside the organization. They must maintain loyalty and commitment and cool out those with little taste for offending, lest disgruntled or disaffected conspirators sell out their colleagues. They must buffer those in positions of power from those carrying out their directives to shield the former from accusations of culpability or to build a paper trail that deflects responsibility away from those most complicit. They must deceive and cover up their activities from victims to insure their continued victimization and to postpone discovery. They must destroy or doctor evidence to subvert regulatory discovery and to undermine the prosecution of their misdeeds, if discovered. These are massive organizational tasks perhaps better suited to the theoretical paradigms emanating from organizational sociology than from traditional criminology and that provoke unique challenges for systems of social control (Stone 1975).

1.2 Victimization

White-collar crimes exploit impersonal trust, asymmetric relationships in which principals entrust strangers to provide specialization, intermediation, and collectivization (Shapiro 1990). Victims of white-collar crime, therefore, typically lack expertise and access to the information necessary to evaluate the conduct of trustees. Because many participate in ‘futures transactions’ such as investment and insurance where payoff is delayed or protracted, victims have no tangible data in the interim to assess the likelihood that commitments will eventually be honored. Victims of white-collar crimes, therefore, tend to be unwitting. Because victims of common crimes are readily aware that they have been robbed, burglarized, assaulted, or victims of larceny, and members of their social networks know when associates have been killed, systems of social control (and researchers as well) tend to be reactive. They wait for victims to tell them that a crime has occurred. Reactive systems of social control yield little, stale, and biased data (about more blatant misdeeds) when most victims are unwitting. The policing (and study) of white-collar crime therefore requires different methods than those characteristic of common crimes.

White-collar offenses also differ from common crimes in the recruitment, pattern, scale, and impact of victimization, and in the relationships between victims and offenders. Because some relationships of trust collectivize the interests of multiple principals—in financial institutions, mutual and pension funds, insurance pools, and the like—victimization from the abuse of trust is often massive. Moreover, because white-collar crimes tend to be delivered by organizations whose activities touch countless consumers, clients, employees, investors, and neighbors (who drink the water and breathe the air poisoned by the corporation), victimization is often extensive and its cost enormous. Research finds that the organizational complexity of an offense is ‘the single most powerful predictor of victimization’ (Weisburd et al. 1991, p. 93). Hence, the organization itself becomes the ‘weapon’ in white-collar crime. It is ‘for white-collar criminals what the gun or knife is for the common criminal—a tool to obtain money from victims’ (Wheeler and Rothman 1982, p. 1406).

1.3 Enforcement

Systems of social control can be differentiated into those which seek ‘compliance’—preventing the occurrence of law violations—or ‘deterrence’—reacting to violations that have already occurred (Reiss 1984). Because white-collar offenses portend significant victimization with respect to cost, harm, consequences, irreversibility, and numbers of victims, enforcement systems frequently opt for compliance over deterrence. Regulators would rather prevent toxic waste or abort a securities swindle than punish those responsible, especially when the unwittingness of victims often means that significant harm has been done by the time reactive deterrence systems learn of the illegality. And many find that cooperative enforcement techniques are better able to secure compliance than those structured to deliver punishments (e.g., Grabosky and Braithwaite 1986).

Compliance systems are more common in the enforcement of white-collar than common crimes as well because the former are more predictable. Because would-be organizational offenders are relatively stable and visible, as they seek to market their wares, they can be licensed, given preclearance, inspected, monitored, and subject to regulations and mandated procedures.

The policing of white-collar crime is also more diversified than that of common crime, which is undertaken largely by the state and private police (e.g., security guards). The costs and consequences of white-collar crimes, the penalties imposed, and the loss of reputation and the diminution of institutional trust (which are the lubricants of continued business) are so great, that those likely to bear these costs often undertake their own social control. Insurers, stock and commodity exchanges, professional or trade associations, and/organizations themselves undertake or mandate self-regulation or buy the regulatory services of outside auditors, inspectors, bond-rating firms, and the like.

1.4 Prosecution And Punishment

Scholars object, with good reason, to Sutherland’s classification of white-collar offenses as ‘crimes.’ Many—perhaps most—so-called white-collar ‘crimes’ are, in fact, not prosecuted as crimes at all or subject to criminal penalties. Compliance systems of social control have little use for the criminal justice system (aside from the incentive that potential criminal penalties give for undertaking self-regulation or abstinence). Criminal sanctions come too late, after the damage is done; they require standards of proof that are difficult to meet, especially with extensive obfuscation and cover-up that shield those most complicit; they do little to remedy the harm, lessen its impact, or impede future wrongdoing. Moreover, the choice between imprisonment and relatively small criminal fines offers limited options when the criminals are wealthy organizations. White-collar offenses are often dealt with by civil injunctions or administrative remedies that are better able to abort incipient or ongoing violations, contain the damage quickly, remedy the harm, provide restitution to victims, and fashion remedial solutions that will reduce opportunities for future wrongdoing without exacerbating the harm to innocent parties. Moreover, because wayward organizations or their insurers often have deep pockets, victims and the private plaintiff’s bar have strong incentives to undertake civil litigation against white-collar malefactors. Private litigation often plays a significant role in rectifying the misdeeds, securing compensation, meting out punishment, and deterring future misconduct.

1.5 Criminological Theory

As even these few selected features of white-collar crime scholarship make clear, Sutherland’s raison d’etre for drawing attention to these offenses was prescient. By broadening the expanse of crime and its control from those patterns and institutions evoked by the stuff of traditional crime statistics to those insinuated in organizational offending and abuse of trust, the limitations of criminological theory are readily exposed. The challenge of incorporating into criminological theory the phenomena observed once the conceptual blinders were removed has been less successful.

Over the years, there have been sporadic attempts to develop a general theory of crime that accounts for both white-collar and common crimes. Sutherland’s theory of differential association—that the techniques and motivations for criminal behavior are learned through contact with others—represents the earliest attempt (Sutherland 1949, p. 234). Some scholars have extended Merton’s anomie theory of deviance or variants of strain theory, proposing that, like ordinary deviance, white-collar crimes arise when legitimate means to achieve material success or to attain organizational goals are blocked or unavailable. And other theories of white-collar law-breaking have drawn on opportunity, neutralization, and conflict theories originally developed to account for traditional crimes. A more recent effort is seen in Gottfredson and Hirschi’s (1990) general theory of crime, which asserts that white-collar crime, like all crime and deviance, is impulsive, arising from the self-interested pursuit of pleasure and the tendency to seek short-term, immediate gratification, coupled with low self-control. Ironically, their erroneous conclusion that there are no differences between those who offend in the streets and those in the suites (Hirschi and Gottfredson 1987, pp. 970–1), brings us full circle, as it results from the same selection bias—reliance on conventional Uniform Crime Report arrest statistics— that Sutherland exposed a half-century earlier.

These varied theoretical paradigms have been subject to extensive and justifiable criticism for imprecision, tautological reasoning, inability to account for compliance and law-abiding behavior, confusing correlation and cause, or lack of empirical support. Most white-collar crime scholars eschew such grand theories, developing explanations for specific misdeeds or those that account for variation within particular datasets.

2. Methodological Pitfalls

The empirical challenges to the study of white-collar crime far outweigh the theoretical ones. First, because of victim unwittingness, relationships of impersonal trust, the protection of crime in the suites by institutions of privacy, complex cover-up schemes, the commission of crime with organizational weapons rather than physical ones, and the ability to buffer misdeeds in long-latent futures transactions, the dark figure of undetected white-collar crime probably exceeds that of all other crimes combined. And even where law enforcement officials have discovered white-collar offenses, they are often unable to ascertain or pin the blame on those most responsible. The most common sources of data on traditional crimes—arrest records and crime statistics, victimization surveys, and observation studies—therefore yield little and very biased data on white-collar crime.

With limited access to data, researchers often rely on materials in the public domain—typically, sentencing data, reports of administrative agencies, journalistic accounts, hearings, and official inquiries. But selection bias is the price of easy access. Journalists produce what sells—the egregious, scandalous, shock-ing, clever, costly, and devastating offenses committed by notorious or colorful characters, where those in high stations fell from grace, where safety nets failed, where victims should have known better, where offenders received excessively lenient treatment— many of the same features of offenses that incite public hearings and legislative inquiry. Hardly the mundane stuff of white-collar crime day in and day out. In selecting research subjects from the news media and political tribunals, scholars replicate Sutherland’s red-haired crime fallacy. We come to believe that these crimes are committed (with impunity) by the rich and powerful, when a less biased data source would reveal that they are typically carried out by members of the middle class, and that, contrary to expectation, the severity of punishment of white-collar criminals appears to increase with social standing (Weisburd et al. 1991).

Turning to public records of convicted criminals incurs other selection biases. Convictions represent a very small and unrepresentative tip of the iceberg. Research on the US Securities and Exchange Com-mission, for example, indicates that not even five of every 100 parties found after investigation to have violated the securities laws are convicted of a crime (Shapiro 1984, pp. 155–61). Criminal courts are less likely to process the misdeeds of organizations (than of individuals), that were uncovered by compliance (rather than deterrence) systems of social control, and that were committed by those atop corporate hierarchies who were able to conceal their responsibility or inculpate others in exchange for immunity from criminal prosecution. When offenses are ongoing, victimization is extensive, and the impact is significant, law enforcers opt for compliance—halting the misdeeds, forestalling, and remedying the harm, minimizing the likelihood of recurrence, and doing so with more immediacy, less litigation, and lower standards of proof—over criminal proceedings. Therefore, although serious significant offenses can certainly be found at the tip of the iceberg, so can some of the most trivial for which no remedy other than criminal prosecution is available. Researchers concentrate on the tip of the iceberg at their peril.

Because of these biases embedded in the social construction of white-collar offenses as ‘crimes,’ many scholars choose not to concentrate solely on criminal cases. Some study offenses that carry criminal penalties, even if they have been resolved instead by private settlements, warnings, injunctions, civil or administrative proceedings, lawsuits, or other remedies. But a slippery slope looms below the tip of the iceberg. As the labels shift from ‘crimes,’ to ‘violations,’ ‘offenses,’ ‘misconduct,’ ‘harms,’ ‘wrongs,’ ‘deviance,’ ‘violence,’ and so on, the literature becomes cluttered with studies of torts, liability, malpractice, accidents, mistakes, or inadvertence committed by corporations or those in high-status occupations. We dilute white-collar crimes with all manner of misfortune. To include these harms among crimes in the suites is like including fender benders in an ice storm among crimes in the streets.

Sadly, the ideological passions that animated Sutherland’s work and that of many of his intellectual progeny, which cause us to be suspicious of corporations and individuals of wealth, status, and power, also cause us to get sloppy. They permit us to confuse mistake or accident with intentional noncompliance. They lead us to believe what comports with our assumptions, relying on the thin anecdotal data that are readily available rather than probing deeper, using published reports and secondary data rather than collecting primary materials and triangulating data sources. They blind us from questioning and making problematic what seems intuitively true. As a result, we are destined to learn that some of the classic and repeatedly cited ‘landmark narratives’ of corporate crime—for example, the Ford Pinto affair and the Challenger disaster—actually got the story wrong, confusing misconduct with mistake, and venality and amoral calculation with banal normalized organizational routines (Lee and Ermann 1999, Vaughan 1996).

We are also learning what it takes to get the story of long-running technologically, financially, and/organizationally complex potential white-collar crimes right. In the case of the Challenger disaster, it took 10 years of persistent, painstaking, methodical research which probed the entire decade that preceded the shuttle explosion that cold January morning; systematic analysis of more than 122,000 pages of documents, 2,500 pages of hearing transcripts, and 9,000 pages of depositions; dozens of new interviews and site visits; the commitment to learn technical science and engineering; and the willingness of a publisher to print an affordable 600-page scholarly book with almost 100 pages of technical charts, diagrams, memos, and thousands of footnotes to transform a seductive but erroneous account of organizational misconduct into a creditable one of the normalization of deviance and the sociology of mistake (Vaughan 1996). Vaughan’s chronicle, with the conventional (erroneous) account in boldface type juxtaposed against the fuller complex documentary and ethnographic narrative, starkly demonstrates what is at stake in the social construction of white-collar crime scholarship and what is required of future scholars.

3. White-Collar Crime And The New Social Science

… societies have been undergoing an organizational revolution. Just as the forests and fields of the physical environment are being replaced by streets and skyscrapers, the primordial institutions around which societies have developed are being replaced by purposively constructed social organization (Coleman 1990, p. xv).

Perhaps nowhere has James S. Coleman’s influential call for a new social science attuned to the trans-formation of social life occasioned by the displacement of natural persons by ‘purposive corporate actors’ been better realized than in the study of white-collar crime. White-collar crime scholarship does not hold a monopoly on the study of organizational offending, of course. Even traditional criminology (which concentrates on the natural persons who populate the primordial social organization which Coleman argues is ‘withering’ away) has produced the occasional study of gangs, organized crime, terrorism, the distribution of illicit goods (e.g., drugs, gambling) and services (e.g., prostitution, fencing), and the like. But white-collar crime scholarship more than any other area of criminological inquiry has made problematic the difficulties of regulating organizational life and insuring norm compliance within organizational con-texts, areas of investigation which will become ever more important in the new century. White-collar crime offers a bridge to the new social science and a compelling window onto the changing structure of social life. As we gaze through the window, we realize the myopia our blinders have imposed.

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