White Collar Crime Exam 3

What forms does research misconduct take?

Fabrication and falsification of data, plagiarism, protection of human subjects (unethical experimentation), and conflicts of interest.

What are the 5 key elements of a typical research code of ethics?

1. Ethical treatment of human subjects and protection from harm
2. Honesty/integrity in experiments and research
3. Accurate reporting of research and results
4. Granting others access to data and methods to allow reproduction of testing
5. Proper acknowledgement of the contributions of others

About how much scholarly research is believed to contain some fraudulent parts in some important way?

Estimates range between <1% to about 14% of scholarly research is fraudulent in one or more ways.

What is plagiarism and when is it allowable in scholarly research that is a collaboration between students and teacher?

It refers to an act or instance of using or closely imitating the language and/or thoughts of another author without authorization and the representation of the author's work as his/her own. Professors may publish students' work as their own and without permission, as long as students are listed as co-authors.

What was the problem with the research linking the MMR vaccine and autism?

It was linked to the result data being falsified to fit what the hypothesis stated, but people believe that the data is actually true.

What are “pecuniary-oriented” offenses, and what forms might they take?

Embezzlement and/or mismanagement of funds. Miss-appropriate funds from an account: typically a grant. Textbook fraud: selling complimentary copies.

What does the “politicization of science” refer to? What are examples of that?

The politicization of science refers to the manipulation, suppression, or misrepresentation of scientific data and consensus by governments, businesses, or advocacy groups to serve political or ideological agendas. It happens when science is treated not as a search for objective truth, but as a tool to gain power, justify policy decisions, or cast doubt on facts that conflict with a specific, often economic or political, goal. 

What is sexual misconduct and what are the three forms it might take?

Unwelcome sexual advances, requests for sexual favors, and/or other verbal or physical conduct of a sexual nature.
1. Submission to such conduct is, explicitly or implicitly, a term of conditions for educational experience
2. Submission to or rejection of such conduct is used as the basis for educational decisions affecting individuals.
3. Such conduct is severe and persuasive enough to alter educational performance and/or experience by creating a hostile, intimidating, or offensive learning environment.

Why is it difficult to assess or estimate how often research misconduct occurs?

First, very few researchers have actually tried to measure it empirically.

Second, even among those who have, it is hard to detect because it is often hidden or goes unreported

What is "loose authorship?"

Loose authorship refers to a situation in scientific research where some individuals are included as authors on a published manuscript even though they did not substantially contribute to the work.

According to charts in Figures 7.1A and 7.1B, most research misconduct findings have been for what type of misconduct?

Based on Figures 7. 1A and 7.1B, plagiarism is the most common type of research misconduct findings in NSF projects

What are the two patterns that are common in research misconduct cases and in what ways are the patterns similar to other white-collar offenses and in what ways are they different from other forms?

Two common patterns in research misconduct cases are that individuals often commit misconduct repeatedly, and unlike many other white-collar crimes, research misconduct is frequently committed by individuals working alone.

This isolation can allow misconduct to go undetected and enable offenders to continue leveraging their research for influence.

What is ghostwriting and in what discipline is this misconduct of greatest concern?

Ghostwriting is when professors or researchers have someone else write their work, but the professor's name is on it. This is a significant concern in academic and medical fields, where external parties sometimes hire ghostwriters to produce papers that appear under the names of university professors or researchers.

What are the four categories of sexual harassment in academic settings?

Gender harrasmenet, sexual bribery, seductive behavior, coercion

What did the "Operation Varsity Blues" uncover?

Operation Varsity Blues uncovered a large-scale college admissions scheme where wealthy parents, including celebrities, paid bribes to guarantee their children's admission to top colleges.

What are the three types of behaviors of students that could be argued to be "white-collar crimes?

Offenses students commit on their jobs, such as embezzlement or fraud. Academic dishonesty, including plagiarism or cheating on exams. Internet or digital piracy, like copyright infringement or identity theft.

What were the three major financial crises that affected the U.S. since the 1980s, and what legislation did they produce?

1. The Savings and Loan (S&L) Crisis (1980s): Led to the passage of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989.

2. The Corporate Accounting/Fraud Scandals (Late 1990s/Early 2000s): Led to the Sarbanes-Oxley Act of 2002.

3. The Financial Meltdown of 2008 (Subprime Mortgage Crisis): Led to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. 

Know the three common factors associated with “false profits” in financial firms

1. Financial engineering, rather than improving products: Creating complex financial products to manipulate earnings rather than innovating or offering tangible value.

2. Gaming markets, rather than improving competitiveness: exploiting loopholes, regulatory gaps, or market structures to create artificial gains instead of competing through efficiency or performance.

3. Covering up failure and appearing profitable: Hiding operational losses or poor performance to maintain an appearance of profitability and stability, often to keep stock prices high or secure bonuses

Know the major players in economic/financial systems

The major players in the economic and financial systems include banks, investment firms, and exchange markets (securities and commodities). These institutions act as the structural environment where high-level financial crimes occur, with key actors often being corporate executives, brokers, and employees exploiting positions of trust.

What is the typical classification of crimes in the economic system?

Crimes in the economic system are most commonly classified as investment fraud and banking fraud. 

These crimes are typically non-violent, committed for financial gain, and involve a breach of trust in commercial or business settings

What are the two levels of victimization in securities frauds?

The two levels of victimization in securities fraud are:

1. Injury to individual victims: Specific investors lose their money, savings, or assets due to fraudulent activities like "pump and dump" schemes or broker embezzlement.

2. Threatens the integrity of the securities market: Securities fraud undermines public confidence in the financial system, reducing trust in the markets and potentially leading to broader economic instability. 

What are securities? Know the differences between stocks, bonds, and mutual funds.

Securities are fungible, negotiable financial instruments that represent some type of financial value, such as ownership in a corporation (stocks), a creditor relationship with a governmental body or corporation (bonds), or rights to ownership as represented by an option. They act as proof of ownership or debt. 

How are statutes designed to address securities fraud? Know the importance of statutory vagueness and prosecutorial discretion

1. The government can pursue administrative, civil, and/or criminal remedies in securities cases
2. Securities violations may be charged under other statutes (e.g. mail/wire fraud and conspiracy)
3. Boundaries and definitions of violations are intentionally vague.
Prosecutors have significant discretion to apply or not apply statues to given cases

What were the key pieces of legislation passed to address securities violations and what did each do?

The Securities Act (1933)-Requires "full disclosure" of information to potential investors

Securities Exchange Act (1934)-Regulates trading in securities markets and created the Securities and Exchange Commission (SEC)

What is insider trading, and what are its key elements?

the purchase or sale of securities based material, non-public information

key elements:

1.) Purchase of securities before a planned "extraordinary corporate transaction."
2.) purchase or sale of securities based on "yet to be released" information

Know the basic operating ideas behind Ponzi schemes

-Built on promise of high returns on investments with an investment manager
-"Dividends" or profits are paid out from investors own money or new investors
(ponzi schemes typically involve recruitment ONLY by creator

What were the key elements of Madoff’s ponzi scheme that allowed him to stay operational for nearly 17 years?

1.) Secrecy (not officially licensed as an investments manager (avoid sec)
2. Feeder funds (dont charge fees for money sent to madoffs management fund)
3. Maintained legitimate marketing to supply cover to trading activities
4. fake investment reports - mailed out rather than electronic reports

Know what “frontrunning” is.

Broker takes advantage of the special knowledge about a pending custom order and trades his or her own account before executing that order (They are the front runner of knowledge and use it for personal gain)

What does “financialization” refer to, and what are the major factors that have contributed to increases in both opportunities and motivations for financial crimes?

Financialization refers to the trend of economic accumulation where profits are generated primarily through financial channels (e.g., trading, speculation, interest) rather than through productive trade or manufacturing. It is a phase of capitalism where finance plays the dominant role over industry. 

Several major factors have expanded both the opportunities and motivations for financial crimes within this system. First, deregulation of financial markets has reduced oversight, making it easier for individuals and corporations to exploit loopholes. Second, the rise of advanced technology and digital trading platforms has increased the speed, scale, and anonymity of transactions, creating more opportunities for fraud, insider trading, and cybercrime. Third, the growing complexity of financial products (like derivatives and hedge funds) makes it harder for regulators to detect misconduct. Finally, intense pressure to maximize short-term profits and shareholder value incentivizes risky or unethical behavior, increasing the likelihood that individuals or firms will engage in financial crimes to gain competitive advantages.

Be generally familiar with the three major financial crises of the last 50 years

The three major financial crises in the U.S. over the last 50 years are the Savings and Loan Crisis (1980s), the Corporate Accounting Scandals (Early 2000s), and the Global Financial Crisis (2008). 

What are the “counter-narratives” concerning financial crimes, and what theory are they associated with?

Counter-narratives concerning financial crimes are justifications or excuses used by offenders to rationalize their illegal actions, often portraying them as "victimless" or socially beneficial. These narratives are primarily associated with Neutralization Theory(developed by Sykes and Matza), which explains how conventional individuals can commit crimes by neutralizing their moral guilt. 

What is “bid-rigging” and what are examples of this kind of crime?

Bid-rigging is an illegal antitrust conspiracy where competitors secretly coordinate their bids on contracts to control who wins, usually resulting in higher prices or lower quality for the customer. It is a form of white-collar crime, often targeting government or corporate procurement. 

Examples of Bid-Rigging Crimes:

• Bid Rotation: Contractors take turns winning contracts. For example, Company A wins the first contract, Company B wins the second, and Company C wins the third, rotating the benefits.

• Bid Suppression: Competitors agree not to submit a bid, or withdraw a submitted bid, so a specifically chosen competitor wins the contract.

• Complimentary Bidding: Competitors submit intentionally high or unacceptable bids (the "compliments") to make one competitor’s bid appear artificially competitive and superior, ensuring they win.

• Market Allocation: Competitors agree to divide customers, territories, or products among themselves so they do not compete against each other for specific jobs.

• Subcontracting as Payoff: A winner of a rigged bid agrees to subcontract part of the work to the competitors who agreed to lose, as compensation for their cooperation.

What is money laundering, and what is it a response to?

Money laundering is the illegal process of making large amounts of money generated by criminal activity (such as drug trafficking, corruption, or fraud) appear to have come from a legitimate source. It is the core mechanism used in white-collar crime to conceal the "dirty" origins of funds so they can be used without attracting law enforcement attention.

Money laundering is a response to law enforcement efforts to seize illegal assetsand regulatory reporting requirements (such as bank reporting of large cash transactions).

Know the three themes that emerge out of research concerning an
organizational culture conducive to financial crimes.

The three key themes that emerge concerning an organizational culture conducive to financial crimes are: 

1. Social Darwinism (IBGYBG): A cultural attitude often summarized as "I'll be gone, you'll be gone" (IBGYBG) or "take what you can now." This mentality focuses on short-term gains, where individuals take what they want and do not worry about the long-term consequences.

2. Financial Crime is "Fun": The culture creates an atmosphere where breaking rules or engaging in unethical, high-stakes financial manipulation is viewed as a game or a party, rather than as serious criminal activity.

3. Moral Indifference: Research suggests a high level of apathy towards unethical behavior, with studies indicating a significant portion of workers in the financial industry would cheat for a high-value reward ($10 million) if they were sure they wouldn't get caught. 

Why are computer crimes particularly challenging to researchers and to law enforcement

Computer crimes are particularly challenging to researchers and law enforcement because they are difficult to detect, rapidly evolve faster than laws can be updated, operate across international borders, and require specialized technical skills that many local law enforcement agencies lack.

What was Mark Zuckerberg’s first alleged white-collar crime when he started Facebook?

Zuckerberg was accused by former Harvard colleagues of copyright infringement, as they alleged he stole their source code to start Facebook.

What is the difference between securities fraud and commodities fraud?

Securities fraud involves fraudulent activities related to stocks, bonds, and mutual funds. Commodities fraud involves the fraudulent sale of investments in raw materials such as natural gas, oil, gold, and agricultural products.

In market manipulation schemes, what are pinging and spoofing?

Pinging involves making several small electronic orders of financial instruments and canceling them to create the impression of activity and potentially influence prices. Spoofing involves placing orders with the intent to cancel them before execution, aiming to create a false sense of market supply or demand to mislead other traders

What does the trend line look like for suspected cases of insider trading according to FINCEN?

Between 2014 and 2019, there has been a significant increase in suspected cases of insider trading reported to the Financial Crimes Enforcement Network (FINCEN). This suggests heightened vigilance, increased reporting, or a rise in actual incidents.

What is futures trading and what kinds of fraud are reflected in futures trading fraud? And who is it that is most likely to benefit from the fraudulent actions?

Futures trading involves agreements to buy or sell a commodity at a specified price on a future date. Common types of futures trading fraud include prearranged trading, where brokers collude to set prices; front running, where brokers use knowledge of a customer order to trade for their own account before executing the customer's order; and bucketing, where a floor trader takes a position opposite that of a customer. In these fraudulent situations, brokers unjustly profit from their actions.

What is the key difference between pyramid and Ponzi schemes?

The key difference between Ponzi and pyramid schemes lies in how participants primarily make money. In pyramid schemes, participants profit mainly by recruiting new members, who then recruit more members, creating a hierarchical structure. In contrast, Ponzi schemes do not require participants to recruit new investors; instead, they pay returns to earlier investors using capital from newer investors. While both schemes rely on new participants' money, pyramid schemes typically involve direct recruitment by participants, whereas in Ponzi schemes, investors often interact only with the scheme's operator.

What are some of the “red flag” warnings for potential Ponzi schemes?

Some red flags for potential Ponzi schemes include promises of high returns with little risk, overly consistent returns, unregistered investments, unlicensed sellers, secretive strategies, payment irregularities, withdrawal delays, difficulty receiving payments, and unusual customer statements. These signs can help investors identify and avoid fraudulent schemes.

How do students engage in student loan fraud?

Students can engage in student loan fraud by misrepresenting their intent to enroll in classes, taking loans with no intention of repaying them, falsifying qualifications or income, participating in schemes to fraudulently enroll in college, committing identity fraud to enhance their loan qualifications, or engaging in schemes targeting students with fee-based financial aid seminars.