Edwin Sutherland and his definition of white collar crime

Prepare a written summary drawing on Edwin Sutherland’s definition of white-collar crime’s two distinct elements. Identify and describe the two distinct elements. Apply the definition to the following categories of white-collar crime: consumer fraud, environmental crime, religious fraud, and corporate fraud, including one specific case example for each of the four categories. Include a discussion of the costs associated with your examples

White Collar crime has a significant and often adverse impacts on society. Although it occurs throughout the world, it is particularly prevalent in developed economies with sophisticated economic systems dealing with financial and asset allocations. White collar crime is particularly damaging as it first infiltrates areas in which the general public is expected to have confidence in the overall operations of the industry. For example, the financial services industry is predicated on integrity and consumer confidence within the system to function properly. When the consumers or users of the system no longer have confidence in its merit, the overall system crumbles. This was seen in the great depression on 1929 when millions of Americans rushed to the banks to withdraw their funds as they believed the system would collapse. Eventually, due to this lack of faith in the banking system and other variables, the system did collapse resulting in the worst economic depression the United States has even seen. In this instance’s unemployment reached 25%, millions of Americans were in poverty, and the overall economy was in dire straits. In response, the Securities and Exchange Commission, and eventually the Financial Deposit Insurance Corporate were formed to instill consumer confidence. The SEC was designed to oversee the capital the markets in hopes of mitigating the impacts of white-collar crime on the financial services industry and the economy overall. The FDIC was created to provide confidence to consumers related to money they have deposited in the bank. Notice, that even in the great depression, white collar crime didn’t just impact the individual, but society at large. When left to its own device, white collar crime can devastate an economy and millions of individuals who were not involved in the crime at all. Societies have realized this concept with many crimes such Bernie Madoff to the great recession of 2008. Although with each instance, society imposes rules to help regulate these occurrences, individuals within society will still find innovative method to commit crimes. Even now, white collar crime continual to mitigate and erode the integrity of the capital markets (Tappan, 1947).

Likewise, society has been impacted by white collar crimes in the pharmaceuticals industry as well. This is particularly pertinent as healthcare costs account for nearly 18% of GDP within the United States. Here executives would use bribes and other kickbacks to incentivize distribution of their drugs. In other instances, corporations would purchase companies that manufactured lifesaving drugs and then raise the price by over 200%. Even if consumers couldn’t afford it, pharmaceuticals would raise the prices knowing consumers would find a way to pay for their life saving drugs. A company called Valeant was a heavy abuser of this crime, as these drugs were needed to save the lives of patients and were therefore needed to save lives. Valeant realizing consumers needed these drugs to service, raised the prices by double and tripling without seeing a decline in volume. As these drugs were the only alternative for their healthcare, individuals were forced to pay them. Valeant would eventually go to court for these unlawful and unethical practices with many members of the executive suite leaving the company. The company share price also declined by over 90%. The share price decline resulting in the company eventually changing its name and rebranding itself.

Although this is great outcome for society, this precipitous decline of Valeant and other white-collar criminals involved impacted a very large and unsuspecting swath of individuals. For one, due to globalization, economies, business, and consumers are now more interconnected than ever. Although the benefits of globalization are very apparent which includes lower prices, increased transparency, and more availability of products, the negatives are also very apparent. As it relates the white-collar crime the primary negative attribute is that even when it is the criminal is caught, the rippling effects on other unsuspecting individuals around the scam can be disastrous. Society has realized this in 2008 with the mortgage crisis, realized it with Valeant with its drug pricing scam, and will realize it in the future with other innovative crimes. With Valeant in particular, its pension funds were heavily invested in Valeant stock. The stock price rocketed for nearly a decade as the company charged ever increasing drug prices. Although the price increase was small at first, the company kept increasing prices to keep with lofty wall-street expectations. Once the crime became mainstream and stock price began to plummet, many unsuspecting workers lost their retirement savings overnight. Many other international investors saw the values of their stock holdings decline by over 90%. International investors, and small retail investor all felt the brunt of activities that they had nothing do with. This ripple effect, is what makes white collar crimes so much more dangerous relative to over more blatant crimes such as theft. Although much is being done to help alleviate the concern of white-collar crime on society, much more needs to be done to secure the developed world (Sutherland, 1940).

To begin, which collar crime is defined as a crime of deceit motivated by financial gain. It's committed by a person of high social status and respectability. It doesn't involve physical violence, but the aftermath of its greed can be utterly devastating. Examples of white-collar crime include fraud, embezzlement and money laundering. Edwin Sutherland used a very similar definition as it relates to white collar crime. Here the two elements are respectability and high social status. The introduction described the two elements but to summarize respectability is defined as a state or quality being proper, correct and socially acceptable. Industries such as healthcare, financial services and law each quality and meet the respectability definition. High social status is very difficult to define as it can vary from person to person. Generally speaking, high social status is defined as the ability to own, control and influence assets. Asset in turn can be defined as financial assets, human capital, or other items. High social status also is derived from prestige related to the group you associate with or the power you hold. This can include being a mayor of highly populated city or CEO of a corporation.

As it relates to application of white-collar crimes in various industry, we have discussed consumer fraud as it relates to great depression and the financial services industry. We also reviewed corporate fraud as it relates to drug prices. We have not discussed elements related to environmental crime and religious fraud.

Environmental crime is similar to the other two elements presented. Currently, both consumers and other stakeholders are becoming much more environmentally conscious. Elements such as global warming, carbon emission, renewable energy, and more are now becoming mainstream elements for investing. A fairly common case revolves around Walmart and its violation of the clean water act. Here, the company pleaded guilty to violating the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) by failing to properly handle pesticides that had been returned by customers at its stores across the country. Walmart did not have a program in place and failed to train its employees on proper hazardous waste management and disposal practices at the store level. As a result, hazardous wastes were either discarded improperly at the store level or they were improperly transported without proper safety documentation. This much like the others have repercussion for society as hazardous material can cause serve consequence to individual consumers. Walmart eventually paid an $81 million fine (Sutherland,, 1949).