Above the Law


Crime fills the newspapers and occupies the television airwaves every single day and night.  A close look at this reveals something very important and often overlooked: there are two kinds of crimes and two kinds of criminals.  The kind we see and read about every day is typically a black or Latino male, who more often than not is pictured with his shirt off, lying on the ground, being handcuffed.  Their crimes are usually minor in nature---a petty theft, possession of “illegal” drugs, or just standing around in the wrong place at the wrong time.  True, they commit a lot of what we normally think of as “serious” crime---murders, robberies, assault with a deadly weapon, grand theft, and rape.  These crimes are pursued relentlessly by often supercharged and overeager prosecutors trying to make a name for themselves.  One result is that we have more than 2 million people in jails or prisons and the overwhelming majority are racial minorities.

These “traditional” crimes cost the country about $10 to $13.5 billion each year. There are roughly 20,000 murders and 850,000 assaults each year.  Here is, however, another type of crime and another type of criminal.  The perpetrators are white males occupying the highest seats of power in the country and they represent a legal fiction known as the corporation.  We call this corporate crime and the costs range (depending upon the estimate and the source of the data) from around $150 to $500 billion each year.

The Enron case was merely the proverbial “tip of the iceberg” since, according to Business Week, the total costs of the various scandals involving "re-statements" of corporate earnings and admissions that books had been “cooked” in order to boost the bottom line came to $170 billion in direct losses from just eight separate cases.

Just recently the Securities and Exchange Commission announced a $1.4 billion settlement with the nation's top ten investment and securities firms. Yet the settlement amount was small potatoes to these corporate conglomerates. One of the offenders, Citigroup, paid $400 million in fines, but made $4 billion from underwriting fees alone in 2000 and 2001.  In another recent SEC case, four former employees of Halliburton came forward with evidence of fraud between 1998 and 2001.  The company settled the case, paying $7.5 million.

The lives lost are often incalculable, as they include annual deaths from work-related death at 100,000, with deaths from job-related diseases ranging from a low of 136,800 to a high of 390,000.  Work-related accidents kill an estimated 10,700 and 1.8 million disabling injuries each year.  One researcher estimates that the overall work-related death rate is around 115 per 100,000, compared to a homicide rate of around 8 per 100,000. Further, defective merchandise results in about 30,000 deaths and 20 million injuries.

            Corporate crime can be defined as violations of the law committed by corporations or by their employees on behalf of the corporation.  This type of crime often gets confused with the closely related term “white collar crime.” This refers to crimes committed by individuals occupying positions of power and/or authority or those who handle large amounts of money and/or merchandise.  Their crimes range from small amounts embezzled from their employer to widespread frauds within various industries (auto repair, health care, insurance, finance, etc.).

            Most corporations are the classic “recidivists” in the jargon of criminology.  Given this fact, it is interesting to note that there is a bill pending in California, called the “Corporate Three Strikes Act” (SB 335), which will deny corporate repeat offenders the right to do business in California.

            A perfect example of a corporate recidivist is Tenet Health Care. In 1994 the company pled guilty to federal conspiracy charges for paying kickbacks and bribes to doctors, and related medical professionals.  The plan was to induce them to direct patients to Tenet's psychiatric hospitals. According to a recent report, in some case “patients were committed without ever having seen a doctor and were typically held at the hospitals, often against their will, until their insurance benefits expired.”  To settle the charge, Tenet paid $375 million in fines and penalties, which at the time was the largest ever paid in a health care fraud case. Just the year before, Tenet had paid $200 million to settle an identical case, and then in 1997 settled more patient lawsuits another $100 million. Yet such fines did not act as a deterrent, for in 2002 the company was once again under investigation for Medicare fraud.  In this case data collected by the California Office of Statewide Health Planning and Development showed that the company’s charges for hospital stays was 63% higher than the rest of the state, and their pharmaceutical markup for patients is twice the national average.  In February, 2003 Tenet paid $4.2 million to settle similar claims in a Florida case.

The federal government recently announced that several major oil companies had ripped off taxpayers to the tune of $440 million by under-paying royalties for crude old that was produced on federal (i.e., taxpayer) property.  A recent study found that General Electric has committed fraud against the government 16 times since 1990 – another example of a “career criminal” whose crimes dwarf the vast majority of those in prison today.  A “three-strikes” law would disqualify many big names from getting government contacts, such as: Boeing (a 4-time recidivist), Grumman (a 5-time loser), Honeywell (3 cases), Hughes Aircraft (an incredible 9-time recidivist), Martin Marietta (5 offenses), McDonnell Douglas, Northrop, Raytheon, and Rockwell (all 4-time recidivists), plus Teledyne (5 times), and Texas Instruments and United Technologies (3 times each).  

These figures come from Kevin Danaher of Global Exchange and an article called “Corporate Crime: Three Strikes, You're Out.”  According to FBI figures, in 1995 the costs of all burglaries and robberies came to about $4 billion. Danaher quotes estimates from Professor W. Steve Albrecht of Brigham Young University that “white-collar fraud (usually committed by lawyers, doctors, accountants and businessmen) costs 50 times as much - about $200 billion per year. And this is just dollar cost; it says nothing about consumers hurt by faulty products, cancer caused by illegal environmental pollution, and the corrupting influence on our society when members of the professional elite make cheating a way of life.”

For the most part, these corporate offenders are above the law and even in cases where the law is enforced and arrests are made and a CEO or other corporate executive is sent to prison and fined, it is the exception rather than the rule.  Moreover, unlike the typical offender being processed through the criminal courts, corporate offenders always seem to be able to get off with a fine, perhaps a light sentence on rare occasion and, what I find most amusing, not have to admit wrongdoing!  In the Citigroup case mentioned above, the Chairman, Sandy Weill had an income of $44 million last year and $518 million during the previous five years.  The company was involved in “routinely and systematically strong-armed poor people into taking out high-interest loans,” according to a recent report.  The Federal Reserve levied a fine of $70 million against the company for its “predatory practices.”  The company admitted no wrongdoing. 

Imagine a career burglar being fined and set free, while admitting no wrongdoing, and returns to ply his trade the next day.  Well, Citigroup had been in court before, back in 2002 for gouging customers with overpriced mortgages and credit insurance. The company was fined $215 million, which is chump change to them and about like a parking violation for common folks.

An industry analyst noted, with amazing candor, that Citigroup will “survive the penalty just fine.”  At least he was honest.

In one of my books, Criminal Justice in America: A Critical View, we came up with some startling figures on the estimated costs of both corporate and white collar crime.  Based upon several sources, we estimated that the total costs range from $9.5 billion to $1.5 trillion per year. Apparently such crimes are not “sexy” enough and are not committed by black males with their shirts off, so they do not appear on so-called “reality TV” crime shows.


© 2004 by Randall G. Shelden. No part of this may be reproduced without permission from the author.