What Are Federal and White Collar Crimes?
The term white collar crime refers to non-violent crimes committed for financial gain, usually in a business setting. The crimes usually involve deception and concealment. The perpetrator commits the crime to gain or to avoid losing money, property, or services or to gain an advantage in business.
Many, although not all, white collar crimes are federal. This means they violate federal laws and regulations. Many white collar crimes are prosecuted in federal courts because they reach across state lines or encompass large regions, even the entire country. If a white collar crime remains within a state boundary or involves a state agency, it will usually remain under that state’s jurisdiction.
Because they are non-violent, many people assume that white collar crimes are victimless. They are not. These crimes harm people and businesses financially. They can completely ruin a company or individual lives with ripple effects that extend to others. According to the Federal Bureau of Investigation (FBI), white collar crimes cost more than $300 billion a year in the U.S.
Types of Federal and White Collar Crimes
There are many examples of white collar crimes, from small-time phone scams to corporate embezzlement or Ponzi schemes. With the rise of the internet, many more white collar crimes have appeared in the last two decades. These are some of the most common white collar crimes:
The FBI prioritizes corporate fraud because it is common, and it comes with major costs to the economy. This type of white collar crime includes fabricating financial information, insider trading, tax violations, market timing schemes, and attempts to conceal schemes from regulating agencies like the Securities and Exchange Commission.
This may overlap with corporate fraud, which encompasses many different crimes at the corporate level. Securities fraud involves investments. Insider trading is a common type. Another securities fraud occurs when someone misstates a company’s value or prospects, luring in more investors.
An employee who handles money or other assets may misappropriate them for their own benefit. This is known as embezzlement. It can be a small amount of money funneled to one employee’s bank account or a crime that involves millions of dollars.
This is a white collar crime that involves taking money gained illegally and making sure it doesn’t trace back to the original crime. For instance, someone who earned money from selling drugs could pass it through a legitimate business.
Named for its originator, Charles Ponzi, a Ponzi scheme is a scam that promises investors a high return. It pays those returns by using the investments of the next round of scam victims. Eventually, the scheme collapses, and those who invested last are left with nothing.
A person commits extortion when they coerce someone into giving them money. A classic example of this is protection money, a strategy once common in organized crime gangs. The criminals would extort money out of local businesses to protect them from other criminals. Blackmail is also extortion.
Taking steps to avoid paying owed taxes is a federal white collar crime. This kind of crime can range from an individual falsifying information on their return to avoid small tax payments to corporations evading millions of dollars in owed taxes.
This type of white collar crime is most often seen with public officials. Corruption is misusing a position or authority for financial gain. For example, a company may bribe an official to permit a new location or for a zoning change.
The theft and misuse of personal and identifying information rose steadily with internet access. As more personal information has been stored online, hackers and scammers have used it to commit financial fraud.
Organized crime often merges federal and white collar crimes with violent crimes, although this is not necessarily the case. When an organization exists to commit crimes, this is known as racketeering, and the organization is organized crime. The Racketeer Influence and Corrupt Organizations law is a federal law that allows prosecutors to go after these organizations and individuals within them.
Infamous Federal and White Collar Crimes
Most white collar crimes are small and go relatively unnoticed. Some are massive undertakings with billions of dollars involved and become huge new stories, like these infamous cases:
- Bernie Madoff. Madoff ran one of the largest Ponzi schemes in history. He defrauded thousands of people. His scheme ultimately lost investors tens of billions of dollars. He managed to get people to trust him because he had a front of respectability as a successful money manager. Madoff was sentenced to 150 years in prison.
- Martha Stewart. Convicted of insider trading, the famous lifestyle maven received a sentence of five months in prison and fines. Steward sold all of her shares in a company called ImClone just days before the stock fell, saving her thousands of dollars. During the trial, prosecutors proved she had nonpublic information.
- Jack Abramoff. Abramoff, a Washington lobbyist, was convicted of multiple white collar crimes, including tax evasion, conspiracy to bribe public officials, and mail fraud. He worked with Native American tribes hoping to build gambling developments on their reservations. Abramoff hugely overcharged the tribes, up to $85 million per year.
- Enron. The giant energy company fell dramatically after major financial losses, bankruptcy, and federal charges for Kenneth Lay, CEO Jeffery Skilling, and COO Andrew Fastow. They hid losses through fraudulent accounting by firm Arthur Anderson. The executives received multi-year sentences. Thousands of employees suffered due to their fraud, as did shareholders and the U.S. economy as a whole.
White collar crimes can seem harmless, especially smaller crimes, but they result in high costs. Even small scams can cause financial devastation for an individual victim. The FBI and other agencies pursue these crimes and seek significant sentences and penalties.