Dishing_the_Dirt_on_White_Collar_Crimes

Dishing the Dirt on White Collar Crimes A subject which is very interesting to me is white collar crimes. There are so many white collar crimes, and we will look at various cases such as larceny, forgery, computer fraud, credit card fraud, identity theft, embezzlement, welfare fraud, and extortion just name a few. Some of these crimes are very well known, while some are not though it still remains that the crime was committed. Some would say that they were not wrong for committing the crime because of their situations and feeling that they were doing what was best for them or their business. Even though people are persecuted for white collar crime it is still on the rise because sometimes the penalty is not as strong as some other crimes. White collar crime is defined as a non-violent crime that is committed by someone, typically for financial gain. Typically white-collar criminal is an office worker, business manager, fund manager, or executive. Those known to report and identify white collar crimes are Forensic accountants, auditors, and whistle blowers. Those that are known to investigate white collar crimes are the Federal Bureau of Investigation, Securities and Exchange Commission and the National Association of Securities Dealers. (Investopedia, 2011). It is said that Sutherland was the first to begin property using the term “white collar crime” in 1939. He defined this crime as one committed by a person of respectability and high social status in the course of his occupation. Larceny is a type of white collar crime. Larceny is a crime which is mostly nonviolent. It involves taking another’s personal property, with the intent to permanently deprive the owner of his or her rightful possession. Most states consider this as general theft, though some consider it larceny. The penalties for this crime also vary pending on what is stolen and the regional laws. Most legal systems distinguish petty larceny and grand larceny pending on the value of the items stolen. (WiseGEEK, 2011) A well known larceny case was the Tyco grand larceny. Tyco had operations in over 100 countries and claimed to be the largest maker and servicer of electrical and electronic components; the largest designer and designer and maker of undersea telecommunications systems; the larger maker of fire protection systems and electronic security services; the largest maker of specialty valves; and a major player in the disposable medical products, plastics, and adhesives markets. According to Tyco Fraud information Center, it was concluded that there were accounting errors, but there was no systematic fraud problem at Tyco. So what happened was the former CEO Dennis Koslowski, former CFO Mark Swartz, and former General Counsel Mark Belnick were accused of giving themselves interest-free or very low interest loans(sometimes disguised as bonuses) that were never approved by the Tyco board or repaid. Some of these “loans” were part of a “Key Employee Loan” program the company offered. They were also accused of selling their company stock without telling investors, which is a requirement under SEC rules. Koslowski, Swartz, and Belnick stole $600 million dollars from Tyco International through their unapproved bonuses, loans, and extravagant "company" spending. Rumors of a $6,000 shower curtain, $2,000 trash can, and a $2 million dollar birthday parties for Koslowski’s wife in Italy are just a few examples of the misuse of company funds. As many as 40 Tyco executives took loans that were later "forgiven" as part of Tyco's loan-forgiveness program, although it was said that many did not know they were doing anything wrong. Hush money was also paid to those the company feared would "rat out" Kozlowski. They concealed their illegal actions by keeping them out of the accounting books and away from the eyes of shareholders and board members. In 1999 the SEC began an investigation after an analyst reported questionable accounting practices. This investigation took place from 1999 to 2000 and centered on accounting practices for the company's many acquisitions, including a practice known as "spring-loading." In "spring-loading," the pre-acquisition earnings of an acquired company are underreported, giving the merged company the appearance of an earnings boost afterwards. The investigation ended with the SEC deciding to take no action. In January 2002, the accuracy of Tyco's bookkeeping and accounting again came under question after a tip drew attention to a $20 million payment made to Tyco director Frank Walsh, Jr. That payment was later explained as a finder's fee for the Tyco acquisition of CIT. In June 2002, Kozlowski was being investigated for tax evasion because he failed to pay sales tax on $13 million in artwork that he had purchased in New York with company funds. At the same time, Kozlowski resigned from Tyco "for personal reasons" and was replaced by John Fort. By September of 2002, all three (Kozlowski, Swartz, and Belnick) were gone and charges were filed against them for failure to disclose information on their multimillion dollar loans to shareholders. The SEC asked Kozlowski, Swartz, and Belnick to restore the funds that they took from Tyco in the form of undisclosed loans and compensations. Currently, Kozlowski and Swartz were found guilty in 2005 of taking bonuses worth more than $120 million without the approval of Tyco's directors, abusing an employee loan program, and misrepresenting the company's financial condition to investors to boost the stock price, while selling $575 million in stock. Both are serving 8 1/3-to-25-year prison sentences. Belnick paid a $100,000 civil penalty for his role. (Obringer, 2005) Forgery is another type of white collar crime. Forgery is a crime when there is an illegal modification or reproduction of a instrument, document, signature, or legal tender, or any other means of recording information. An item is also considered forged if it is claimed that it was made by someone who did not make it. (investorwords, 2011) A famous case of known forgery is the Hitler diaries forger which took place in 1983 with the discovery of the Hitler diaries. The diaries were known to supposedly contain passages written by Adolf Hitler between 1932 and 1945. Gerd Heidemann, a German reporter claimed the writings were genuine and sold them. He obtained them from Konrad Kujau, a Stuttgart dealer in military memorabilia and documents. Newsweek and Paris Mach along with other media paid more than $5 million for the documents. Later experts conducted a forensic examination on the diary and found the documents to be falsified. Kujau then admitted to forging the diaries. Kujau and Heidemann were sentenced to four and a half years in a German prison. During the trial Kujau forged Hitler’s autographs for spectators at his trial. This is one of the largest known forgery schemes. (Mooney, 2009) Computer fraud is a white collar crime which has become more visible. Computer fraud is when a person intends to deceive, misrepresent, destroy, steal information, or cause harm to others by accessing information through deceptive and illegal means. There are many types of computer fraud such as using spyware to get information about people, sending hoax emails intending to scare someone, illegally using someone’s computer or act as though you are someone else on the internet, hacking into a computer to change information, like grades, work reports, etc. Also, sending computer viruses or worms with the intent to destroy or ruin someone’s computer, violating copyright laws by copying information with the intent to sell information, like DVDs, and CDs. A well known computer hacker is Robert Tappan Morris. He is the son of a former National Security Agency (NSA) scientist. Robert Tappan Morris is known for creating the Morris Worm, the first computer worm to be unleashed on the internet. He was also the first person prosecuted under the 1986 Computer Fraud and Abuse Act. He wrote the code for the worm while he was a student at Cornell. He says that he intended to use it to see how large the internet was. The worm replicated itself excessively, slowing computers down so that they were no longer usable. It is estimated that 6,000 machines were impacted by this worm. Morris was sentenced to three years probation, 400 hours of community service, and fined $10,500. Currently Morris works as a tenured professor at the MIT Computer Science and Artificial Intelligence Laboratory. (IT Security Editors, 2011) Identity theft and identity fraud is when someone wrongfully obtains and uses another person’s personal data in some way that involves fraud or deception, typically for economic gain. There are known uses of social security numbers, your bank account or credit card number, phone number and other identifying data which can be used for personal profit if the wrong hands receive them. One of the most famous cases of identity fraud was that of Frank Abagnale who was played by Leonardo DiCaprio in the movie “Catch Me if You Can.” Frank Abagnale Jr. was an American Security Consultant known for check forgery, identity fraud, and escape artist. In the 1960’s, Mr. Abagnale eluded authorities by posing as characters such as an airline pilot, doctor, assistant attorney general, and history professor, all the while racking up $4 million in bad checks. Soon after he was caught and convicted to serve 12 years, though he did elude police an when caught again he only served 5 years of his sentence. He currently runs Abagnale and Associates, a financial fraud consultancy company and is a multimillionaire. (Wikipedia) Embezzlement is also a crime this is when a person who has been entrusted with money or property appropriates it for his or her own benefit or use. The most famous embezzler we all know is Bernard Madoff, better known as “Bernie Madoff.” He was a former businessman, stockbroker, investment advisor, and financier. He’s the former non-executive chairman of the NASDAQ stock market, and the admitted of a ponzi scheme that was considered to be the largest fraud in history. A ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity. (U.S. SEC,) Madoff took his investor for $65 billion dollars over two decades. While he ran his scheme he also ran a legitimate business. Madoff was able to receive such a great number of investors because he was so well established and respected. He had many celebrity clients, individual investors, banks, and even charity investors who lost money in the scheme. The scheme was actually not even revealed until Madoff confessed. He plead guilty to the charges against him and was sentenced to 150 years in prison. This is the stiffest penalty which someone which has committed a white collar crime has received. (Ponzi schemes) Another famous embezzlement case which is a white collar crime was the ENRON scandal. Enron was an energy company in Texas, and they dealt with energy trade on an international and domestic basis. Basically what the executives of enron did was lie to employees and their investors an had them buy more enron stock when they knew that the company was going under. Many of the investors which had their life savings in enron stocks all bought all the stock they could. While the executives all sold their stock just before the stock price crashed. Because the executives sold their stock when the price was up all made billions. Though after they collected there billions all the other investors lost all their money that they had invested. The Enron scandal consisted of the executives pocketing the investment funds from unsuspecting investors. They were stealing from the company, which resulted in bankruptcy of the company. Investor’s loss was over $70 billion, while trustees and employees lost $2 billion. This was due to misappropriated investments, pension funds, stock options, and savings plans as a result of government regulation and limited liability status of Enron only a small amount of money was ever returned. (Easy guide to,2011) Welfare fraud is another white collar crime we don’t hear too much about. Welfare fraud is when one engages in an act or acts to obtain benefits such as public assistance, food stamps, or Medicaid from the state or federal government. A known case of welfare fraud is a mother in Albany by the name of Angela Lopez mother of five, whom still claims she did nothing wrong intentionally. Ms Lopez stated that she did not know that she needed to report the children’s bank accounts; she also did not report her unaccounted for monies because of her husband not working at the time, and felt that she would be under the income levels for food stamps and Medicaid. Ms. Lopez allegedly reaped about $95,000 in welfare benefits to support an upscale lifestyle admittedly failed to report more than $50,000 in four of her children’s bank accounts, or the monthly $2,226 she earned off the books, which was shown by court papers. Ms. Lopez swindled approximately $65,000 from Department of Social Services after she applied for Medicaid and food stamps without disclosing her full income. She also scammed the SSA of approximately $29,000 after failing to report income earned and property owned when she applied for supplemental security income benefits. She pushed the envelope by defrauding herself in a letter she’d written to a federal agent for the SSA telling them that her family struggles never having extra money. That all monies went to bills, and she stated that they were way below income to be eligible for Medicaid. (Gavin, 2011) Extortion occurs when one person illegally obtains property from another by actual or threatened force, fear, or violence, or under cover of official right. There have been various cases of extortion over the century though one of the most famous extortion cases is the Natalee Holloway case. Natalee Holloway had graduated from high school in Alabama in 2005 and took a trip to Aruba. There she met a man by the name of Joran van der Sloot. After a night of drinking, she left a bar with van der Sloot and was never seen again. Natalee Holloway was scheduled to fly home on May 30th, and when she did not appear for the flight home authorities were contacted. The island and all area were searched but she was not found. In June 2010 Joran Van der Sloot was charged with extortion and wire fraud. He promised he would give information on the whereabouts of Natalee Holloway for exchange of $250,000. Van der sloot had been the main suspect in the disappearance in Aruba for five years. Van der Sloot has never been charged with the murder of Natalee Holloway due to lack of evidence. (Wikipedia, 2011) As we can see there are many white collar crimes. We took a look at larceny, forgery, computer fraud, credit card fraud, identity theft, embezzlement, welfare fraud, and extortion along with cases which were associated to each. White collar crime will continue to rise because people ultimately feel as though these crimes are not what they seem, and that they are just doing what is right financially for the business. Though a crime no matter how big or small is still a crime and penalties should be stiffer References White collar crime. In (2011). Investopedia Investopedia ULC. Retrieved from http://www.investopedia.com/terms/w/white-collar-crime.asp What is larceny'. In (2011). WiseGEEK Conjecture Corporation. Retrieved from http://www.wisegeek.com/what-is-larceny.htm Obringer, Lee Ann. "How Cooking the Books Works" 16 August 2005. HowStuffWorks.com. http://money.howstuffworks.com/cooking-books.htm. What is forgery'. In (2011). Investor Words.com Web Finance. Retrieved from http://www.investorwords.com/2047/forgery.html Mooney, P. (2009). Konrad kujau and the forgery of the hitler diaries. Unpublished raw data, English, UCSB, Retrieved from http://www.uweb.ucsb.edu/~patrickmooney/presentations/f09/kujau.pdf IT Security Editors. “Top 10 most famous hackers of all time”. (2011). Retrieved from http://www.focus.com/fyi/top-10-most-famous-hackers-all-time/ Frank abagnale. In Wikipedia Retrieved from http://en.wikipedia.org/wiki/Frank_Abagnale Ponzi schemes . (n.d.). Retrieved from http://www.sec.gov/answers/ponzi.htm Easy guide to understanding enron scandal summary. (2011). Retrieved from Easy Guide to Understanding ENRON Scandal Summary Gavin, R. (2011, March 01). Welfare paid for upscale lifestyle. timesunion.com. Retrieved from http://www.timesunion.com/local/article/Welfare-paid-for-upscale-lifestyle-1035105.php Natalee holloway. (2011). Retrieved from http://en.wikipedia.org/wiki/Natalee_Holloway