Chapter 9 Corporate Crime and Wrongdoing

Learning Objectives

• Understand the substantial harm caused by the crimes of powerful individuals and corporations to people, the economy, and the planet.

• Differentiate between corporate crime and white-collar crime, with specific examples highlighting their distinctions.

• Explore the main causes of corporate crime and wrongdoing, including structural and systemic factors.

• Develop critical thinking regarding how criminal activities intertwine with elite society, global economic systems, and regulatory frameworks.

• Examine the challenges faced in prosecuting elite and corporate crimes, including legal loopholes and enforcement issues.

Introduction

Historically, discussions surrounding crimes perpetrated by powerful individuals have been largely absent from criminological theories, which have often emphasized “street crimes” and marginalized communities. This neglect has resulted in a simplistic understanding of crime, overlooking complex interactions between wealth, power, and criminality, particularly among high-status individuals.

Types of Corporate and White-Collar Crime

Notable Examples

• Bernie Madoff (2008): Orchestrated one of the largest Ponzi schemes in history, deceiving thousands of investors and causing estimated losses exceeding $65 billion. His case highlights the potential scale and impact of white-collar crime.

• 2019 Hollywood Tuition Scandal: Prominent celebrities and college coaches were implicated in a scheme to bribe university officials for preferential admissions, which illustrates the misuse of social and financial influence to undermine educational integrity.

• Medical Malpractice: This includes cases of negligence in surgeries, such as leaving medical instruments inside patients or unethical practices pertaining to patient care, which raise significant ethical concerns in the healthcare profession.

Scope and Impact of Corporate Crime

Corporate crime encompasses a multitude of illegal activities that can inflict substantial harm on society. Often perpetrated under the guise of legitimate business operations, these crimes frequently escape the scrutiny that street crimes receive. Critical criminologists argue that corporate crimes lead to greater loss of life, destruction of environmental resources, and social injustice on a global scale compared to traditional crimes. For instance, the harmful practices of certain corporations can result in environmental degradation that affects entire communities and ecosystems.

Definition and Characteristics

• Corporate Crime: This involves organized criminal activities conducted by business corporations. Common areas include:

  • Violation of Labor Laws: Exploitation of workers through unpaid overtime, unsafe working conditions, and failure to provide rightful benefits.

  • Environmental Harm: Actions that breach environmental regulations, resulting in pollution and ecological destruction.

  • Manipulation of Business Norms: Engaging in practices that contravene ethical standards for financial gain.

• White-Collar Crime: These crimes are committed by individuals in high-status professional roles and typically involve deceit and financial manipulation, such as:

  • Fraudulent Investment Schemes: Ponzi and pyramid schemes that mislead investors.

  • Money Laundering: Procedures to make illegally obtained funds appear legitimate.

  • Professional Misconduct: Actions by individuals such as doctors and lawyers that violate ethical and legal standards, often with severe consequences for clients or patients.

Case Studies of Corporate Wrongdoing

Examples

• Volkswagen Dieselgate: The scandal revolved around the installation of “defeat devices” in vehicles to manipulate emissions tests, resulting in significant environmental and financial repercussions, including fines in the billions.

• Boeing 737 Max Crashes: Systemic negligence in safety protocols and concealment of technical issues led to two fatal crashes, raising questions about corporate accountability and regulatory oversight.

• Deepwater Horizon Oil Spill (2010): This disaster, rooted in corporate negligence, resulted in vast ecological damage and highlighted the need for stringent safety regulations in the oil industry.

Economic and Financial Crime

Economic crimes manifest in various forms, including:

• Financial Reporting Fraud: Misrepresentation of financial statements to deceive stakeholders, exemplified by the Enron Scandal, which involved severe misrepresentation of assets, ultimately leading to bankruptcy and legal reform in corporate governance.

• Price Fixing: Instances of collusion among corporations to fix prices, resulting in inflated costs for consumers and undermining fair market competition.

Financial Sector Crimes

The financial crises of recent decades have uncovered a disturbing trend of reckless behavior in the financial sector:

• The 2008 Financial Crisis was precipitated by unethical lending practices, misleading financial products, and a lack of oversight and regulation, resulting in widespread economic devastation.

Tax Evasion and Money Laundering

High-profile cases reveal systematic evasion of taxes facilitated by intricate financial structures, such as:

• The Panama Papers leak, which exposed a network of offshore accounts used to avoid taxes and legal scrutiny across many industries and governments, highlighting the need for greater transparency and regulation.

Bribery and Corruption

Corporations often resort to bribery to gain advantageous contracts or bolster business operations at the expense of fair competition:

• The Foreign Corrupt Practices Act addresses bribery of foreign officials and speaks to the larger need for regulatory measures to ensure ethical conduct in international business dealings.

Crimes Against Consumers

Corporations may engage in deceptive practices that compromise consumer safety, such as:

• Marketing unsafe products or misleading advertising, compromising consumer trust and welfare. Recent laws aim to improve consumer protection, but violations continue to occur, as seen in the General Motors Recall, where known safety issues were unaddressed, leading to preventable fatalities.

Crimes Against Workers

These crimes adversely affect employee rights and safety:

• Union-Busting: Employers may take hostile actions to discourage union membership and collective bargaining, undermining workers’ rights.

• Occupational Safety Violations: Businesses that neglect workplace safety standards expose workers to hazardous conditions, leading to injuries and fatalities.

Environmental Crimes

Corporate negligence often causes significant ecological harm, leading to legal and social movements demanding accountability:

• Growing media and public awareness has spurred legal recognition of environmental rights in recent years, acknowledging the disproportionate environmental impact on marginalized communities, termed Environmental Racism.

Causes of Corporate Crime

The structure of markets can contribute to corporate crime; inherent pressures encourage illegal actions often justified as necessary for profit maximization. Collaboratively:

• The competitive landscape may incentivize unethical behaviors, while pressures for growth can lead to harming practices that compromise safety and ethical standards.

Conclusion: Controlling Corporate Crime

While regulatory bodies aim to mitigate corporate crime, enforcing laws and ensuring public accountability remain significant challenges. Proposed solutions include:

• Improved regulatory frameworks,

• Enhanced corporate social responsibility initiatives,

• Increased public awareness and engagement to combat corporate wrongdoing, ensuring a healthier economic system for all stakeholders.