55 White Collar Crime: An Analysis of its Financial, Social and Cultural Influence

When many people think of white collar crime they imagine something similar to The Wolf of Wall Street; a film following the journey of a stockbroker in New York City during the 1980’s and 1990’s who rose to immense wealth through the means of financial crime and corruption. The film utilizes humor throughout its entirety and emphasizes the lavish lifestyle that is procured from these crimes. While productions such as this are not intentionally harmful, the romanticization of illegal and damaging nature of white collar crime often takes away from its consequences. In actuality, a white collar crime is “Crime committed by a person of respectability and high social status in the course of his occupation” [1]. In other words, white-collar crime encompasses a variety of nonviolent crimes usually committed in commercial situations for financial gain. Examples of white-collar crime include fraud, embezzlement, forgery, and bribery. (Fredericks et al., 2016, p.1). Therefore, in contemporary society, it’s important to raise awareness around white collar crime because it can be the catalyst for many social, cultural and financial misconceptions. Through understanding the mechanisms, ramifications and effects of white collar crime, people can recognize the negative effects it has on economic systems, interpersonal trust, and ethical norms.

Fundamentally, white collar crime is a financial crime committed by an individual typically of higher education and social status. This will be the working definition for this paper. The definition within itself, while providing an essential baseline, is not individually conducive towards anything. The goal is to use this definition as a reference for the analysis and interpretation of systemic and individual biases regarding white collar crime. It’s important to use this definition to look at incidents that fit into it and analyze whether they have characteristics in common that provide an understanding of one another, which will be a more effective way to recognize and understand white collar crimes.

“Violent crime: ‘Criminal behavior by persons, against persons or property that intentionally threatens, attempts, or actually inflicts physical harm’ [1]. Examples include murder, assault, arson, and kidnapping.” (Fredericks et al., 2016, p.1). Essentially, violent crime is the physical act or suggestion of physical aggression with intent to cause harm. Violent crime and white collar crime differ in the way that violent crime involves physical violence whereas white collar crime does not, and white collar crime is usually committed by individuals in offices or other professional settings. Despite the serious harm it causes to society, the criminal justice system frequently places more emphasis on the offender than the crime and its victims. Instead of going to jail, white collar criminals usually get lighter sentences like fines and community service. This leniency, however, tends to ignore the significant costs white collar crime exacts on society; which typically happens on a large scale and the criminals in these scenarios may not always be deterred by monetary fines or community service requirements alone. Due to the punishments of white collar crime being so light in comparison to violent crime, the recidivism of white collar crime is much higher.

The, generally, more lenient punishment that white collar criminals receive is oftentimes in correlation to an elevated social status or perception (Fredericks et al., 2016). Someone who commits a white collar crime usually doesn’t fit the stereotype that society frames criminals as. People who commit these crimes are clearly, explicitly and uniquely classified as “white collar criminals”, which distinguishes them from violent offenders. This labeling changes societal perspectives on traditional criminals versus white collar ones, and that influences how they’re treated.

Even outside of the realm of prosecution and legal punishments, this social bias still exists. Forensic psychiatry literature has not given much attention to white collar crime, despite the fact that it does enormous harm to society and has costs that are greater than those of traditional crime on both an economic and psychosocial level (Clarkson & Darjee, 2022). Aspects of white collar crime such as offender demographics, criminal histories, mental illnesses, personality features including psychopathy, correlations with violent crimes, and the criminal justice system’s pathway are all important and receive much less attention than they should. Research on psychopathology in particular is especially lacking, which suggests that forensic psychiatry could potentially provide important insights into comprehending this kind of crime. Furthermore, doctors and white collar criminals will often share similar socioeconomic and educational backgrounds which correlates with a feeling of mutual trust and respect. This may lead some psychiatrists to be biased. There could be a tendency to avoid diagnosing and pathologizing individuals that they can relate to.

Though awareness of these crimes has increased due to high-profile examples such as Enron, there is still a lack of knowledge, especially with relation to corporate abuse of power (Fredericks et al., 2016). Since white collar crimes are usually committed by educated people who are often well known, complication is inevitable. Additionally, despite oftentimes having many victims, the financial nature of harm typically results in the public favoring less severe punishments as compared to physical or emotional injury.

As mentioned previously, the rise and fall of Enron did an excellent job at bringing awareness towards the significance of white collar crime and cases like this, though unfortunate, can be examined and used for preventative purposes. Enron Corporation was once a symbol of corporate innovation and success (Thomas, 2002). The company was born in 1985 and collapsed in 2001, becoming one of the most infamous financial scandals ever. Enron’s downfall can be credited to corporate misconduct, accounting fraud, and unethical practices. The company was led by executives Jeffrey Skilling and Kenneth Lay, who participated in deceptive accounting practices to conceal their continuous debts and losses. They manipulated financial statements to inflate revenues and hide liabilities, this created the illusion of profit and deceived their investors and regulators. Enron’s belligerent pursuit of profit through volatile ventures, primarily in the energy trading and derivatives markets, was ultimately unsustainable. More specifically, as the initial years of Enron’s success came to an end and the company faced increased competition in the energy-trading business, their profits quickly began to diminish. Under pressure from shareholders, company executives began to resort to shady accounting practices, including a technique known as “mark-to-market accounting”. Mark-to- market accounting allowed the company to write unrealized future gains from trading contracts into their current income statements based on current market prices, which gave the illusion of higher current profits (Wagner & Garner, 2010). Additionally, the troubled or struggling operations of the company were transferred to “special purpose entities” (SPEs), which are essentially limited partnerships created with external parties, typically used by companies to isolate financial risk. (Liu et al., 2021). While it’s not uncommon for companies to distribute assets to SPEs, Enron abused this by treating SPEs as trash can for all of its troubled assets (Thomas, 2002). Transferring those assets to SPEs meant that they were kept off Enron’s books, making the company’s losses look less severe than they actually were. When the truth about Enron’s financial state was exposed, investors and creditors lost their trust in the company which led to a rapid stock price decline and the company’s subsequent bankruptcy filing in 2001. This scandal exposed serious flaws in regulatory oversight, corporate governance and accounting standards.

The aftermath of this scandal left many people in financial ruin. Thousands of workers at Enron were let go after the bankruptcy, forced to look for employment elsewhere. Many of these people were also shareholders in Enron and as the stock in the company dropped drastically during its collapse, many of these workers and thousands of additional investors watched the money in their pensions, investment accounts and retirement funds be completely depleted. Ultimately, white collar crime as a whole creates a litany of additional and unnecessary costs, in both financial and personal contexts. Victims of white collar crime often have to deal with more than just direct financial losses (Cohen, 2013). They often also experience indirect expenses like loss of income because of the time spent dealing with the legal system or medical and mental health costs if they suffer any psychological harm. Although psychological distress is most often correlated with physically violent crimes, victims of financial crimes are also susceptible to emotional injury. In severe cases, victims do need mental health treatment and this can affect their ability to live their life normally. Even if insurance covers these expenses, society will ultimately suffer through the administrative costs.

The Enron scandal and white collar crime as a whole has had a continuous and exponentially negative effect on the public’s interpersonal trust and trust in corporations. Trust is a precursor to legitimate businesses and in correlation, also to white collar crime (Deardon, 2015). People are not going to make any kind of financial or personal commitment to an organization without trusting in it first. At a rudimentary level, white collar crime is a breach of trust. This illegal financial activity poses a risk to all consumers (Cohen, 2013). It pushes people to take precautions to protect themselves which can also be financially unbeneficial. There may be a hesitance to engage with smaller or newer but still legitimate businesses out of the fear of fraud, leading many people to pay higher fees for services from more established or bigger institutions. Additionally, some individuals may choose to not commit themselves to any institution due to concerns about falling victim to financial crime. The fear surrounding the possibility of white collar crime undermines trust in the government and economic institutions.

Beyond financial repercussions, white collar crime also creates ethical and moral complications. Privacy within the workplace is something that gets affected by this (Hasnas, 2005). The constitutional right to privacy protects people from government invasion into their personal actions and choices, while this common law safeguards against the intrusion of personal space and unwanted exposure of private matters by others, these legal measures may not fully cover the extent of privacy individuals should morally possess. When people enter employment agreements they lose a portion of their privacy rights. Employers have the right to access job-related information about their employees to ensure better output in their job performance. Additionally, they’re able to monitor employee conduct to guarantee that they’re abiding by the job requirements. However, employers should never intrude into personal aspects of employees’ lives or monitor them past things relating to their job. Unfortunately, the legality and potential risk surrounding white collar crime often compels businesses to disregard these ethical boundaries.

Similar to privacy, confidentiality within corporations and businesses is also negatively impacted by white collar crime (Hasnas, 2005). Organizations have an ethical obligation to respect the privacy of internal communications concerning their employees. To promote and facilitate the flow of information within their company, they’ll often tell employees that any information they share will remain confidential. This encourages lower level employees to give insights and opinions on their colleagues’ and superiors’ job performance and fulfillment of requirements, which might otherwise stay unspoken. Additionally, organizations motivate employees to share information with corporate counsel which is protected by attorney-client privilege. This means that employees can talk to the company’s attorneys without the fear of this information being disclosed to external parties, with the exception of the specific circumstances specifically outlined as exceptions to this privilege. This helps organizations collect information to defend themselves against future legal action and ensure obedience with laws. The legality surrounding white collar crime presents a contradictory situation regarding organizational responsibilities. Companies are held stringently liable for their employees’ actions and therefore are encouraged to cooperate with government investigations to mitigate or offset penalties that might incur on the company. But, this cooperation often requires them to share all relevant information and this can potentially include information that was promised to be kept undisclosed. Due to all of this, corporate managers face an ethical dilemma. They are required to promise confidentiality to obtain information needed for maintaining an ethical and productive work environment and making sure employees comply with the law. However, they must break this promise to ensure the organization doesn’t face any potential legal charges and fines. Additionally, the issue cannot be solved with companies promising to maintain information confidential unless it becomes a necessity for the organization to use in collaboration with the government. This would be inefficient because it’s essentially suggesting that confidentiality will only be respected when it’s in alignment with the company’s interests; confidentiality won’t be maintained at all. Ultimately, companies need to ensure that their employees aren’t a financial risk to the organization. However, this need for reassurance creates ethical implications with trust and confidentiality.

White collar crime being treated less harshly is not a universal practice. This is evident with government agencies like Økokrim (Gottschalk, 2024). The national authority Økokrim was founded several decades ago with the goal of becoming a leading center for policing excellence in investigation and prosecution of economic and environmental crimes in Norway, specifically focusing on corporate and white collar crime. Following their success with several crime cases, Økokrim experienced a setback when they lost a court case in which they were accusing the Swiss company Transocean and its advisors of tax fraud. This led to an investigation by the attorney general in Norway. Deficiencies in Økokrim’s management and a lack of competency among the detectives and lawyers in their policing unit was uncovered. Økokrim would employ several strategies that were not not beneficial towards the prosecution of white collar offenders but instead would aim to deter these criminals through the investigation itself. One of the ways this is done is through “impression management”. Impression management is the deliberate or unconscious attempts made by individuals and organizations to regulate and manage information during social interactions with the goal of influencing how others view a particular person, object, or situation. Økokrim would accomplish this primarily through targeted press releases.

Additionally, As a specialized authority, Økokrim is in a unique position that allows them the freedom to choose the cases they want to work on and to work on them for as long as they want. So in situations where they must prove guilt beyond any reasonable doubt, they may take a case but they will choose not pursue it in court. Due to this potential offenders will remain under investigation for several years, whereas typically the process would take a few months. During this time, they will likely be exposed and condemned in the media, terminated from their job, and consequently abandoned by many of their friends and family. This can be far worse than spending a few months or years in prison. Moreover, because Økokrim is managed by lawyers as opposed to investigators, there is unfortunately very little opportunity for suspects to defend themselves. Furthermore, convictions of corporate crimes in Norway are typically very modest compared to the United States. The average prison sentence for white collar crime is two years and the longest sentence for this kind of crime in the history of Norwegian court was only nine years. But, the majority of offenders who are targeted by Økokrim usually go to jail for 5-7 years. So even if a suspect’s time being investigated by Økokrim is expedited, they will essentially have to endure the same punishment via an uncharacteristically long time in prison.

Generally speaking, white collar crime doesn’t receive enough recognition for how negatively impactful it is and white collar offenders will often not be treated with the same level of severity as violent criminals. That being said, Økokrim is an example of taking punishment to an extreme. Their tactics of public humiliation, psychological torment and unconventionally long prison sentences as a means of deterrence are representative of taking measures too far. It’s important to raise awareness towards the dangers of white collar crime and recognize the adverse influence it has but it should be handled fairly and without bias in any facet.

It’s important to be informed about white collar crime. Not only because of the fear that it inflicts on the world in social, cultural and economic contexts but also in order to protect ourselves against it. As mentioned previously, white collar crime is a widespread issue and the ramifications are often devastating. By understanding the processes, punishments and biases surrounding white collar crime, people can better realize how it impairs individual financial stability, communal trust, and ethics within corporations. This paper illustrates issues that currently exist and also demonstrates that this topic needs to be further studied. The question for future research is what will be done about these problems?

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