Fighting White Collar Crimes, Essay Example

White Collar Crimes, which include mail fraud, briberies, embezzlements, and computer crimes, are defined as varieties of nonviolent illegal activities that individuals in business settings commit against society, according to Kubasek, Browne, et al. (2010).

The term was coined by Edwin Sutherland in 1937, while speaking to members of the American Sociological Society, where he defines it as crimes committed by persons of respectability and high social status in the course of their occupation, according to Legal Information Institute (2012).

The FBI reports that this crime was costing the United States Federal Government more than $300 million annually, occur as a result of greed, poor business ethics and little regard for corporate social responsibility on the part of business leaders that are brought before the federal courts and those in the wider society that are still engaging in the practice.

Business Ethics is principally the use of ethical principles to guide the affairs of a business establishment and is vital in cases where ethical dilemma are often challenged its leaders, while to be regarded as socially responsible, according to Kubasek, Browne, et al . (2010) imply firms and their leaders complying favorable with the expectations imposed on them by the communities in which they transact business in.

Practicing good business can help firms improve their profits, even after foregoing short term gains, which can cause significant damage to their reputations, because customers among their major stakeholders recognize their commitment and reward them by giving them their business, instead of others who are more interested in profit making.

It could be argued that the reason why companies and committees like WorldCom, Enron, Global Crossings, Lehman Brothers, The Salt Lake City Olympic Committee, Arthur Andersen, Waste Management, and the Parmatt Scandal occur was a result of corporate greed, total disregard for the rule of law, poor ethics and social irresponsibility, and such descent into shame, adverse publicity, imprisonment, loss of jobs and financial disasters, could have been prevented by the timely implementation and application of what Kubasek and Browne et al.(2010), call the WPH Framework.

The WPH Framework

The framework entails a set of ethical guidelines that require managers responsible for making decisions to consider and meet in order to ensure their organizations remain ethically sound and socially responsible in the eyes of their stakeholders.

The W in the framework involves the who or the stakeholders that will be affected by the decisions that will be made, and these according to Kubasek and Browne et al. (2010), in clued customers, owners, or investors, management, employees, communities, and future generations, while the P in the ethical structure revolve around the purpose behind the decisions will be made.

Embedded within organizations purpose will be their value system, which according to Kubasek, and Brown et al. (2010), should be efficiency, justice, security and freedom, which should provide the nucleus to attract and retain in favorable light the support of stakeholders and profitability and sustainability in the future.

The final guidelines that would ensure that these companies and corporations attain the desired status will be the H, which deal with how they intend to meet the operating standards required to ensure ethicality, and these include the making of public disclosures, universalization and following the golden rule, cites Kubasek and Brown et al. (2010), and had these companies and organizations applied the universalization test , after deciding who their stakeholders were going to be, and what kinds of values would underlie the purpose of marketing the chosen goods and service. They would no doubt come away with more ethically balanced perspectives, in that they would have considered adequately the appropriate question of whether the world would be a better place for them and their families, after the decisions had been made and the strategies were executed.

Additionally, they would also have decided and developing a mental picture of what the world would be like if all similarly placed companies replicated their actions.

The Judicial Process

In pursuit of White Collar crimes, prosecutors have to convince panels of jurors or judges at bench sittings, after the suspects have been arrested on probable cause, read their Miranda rights, and pled that they were innocent at their first appearances, that they both had the wrongful behavior or actus reus, wrongful state of mind or mens reau, as well as motives and opportunities where appropriate, to be charged with the alleged felonies described, beyond reasonable doubt.

However, these prosecutors are nor privilege to press charges against these suspects, unless other law enforcement agencies like the FBI, Department of Justice, the IRS, Bureau of Alcohol and Tobacco, and Immigration and Natural Services along with legislative acts like the Foreign Corrupt Practice Act, the Computer Fraud and Abuse Act (CFAA) of 1984, as well as the FTC, among others, uses specially designed and effective white collar crime fighting techniques or tools like the Racketeer Influential and Corrupt Organizations Act (RICO), the False Claims Act, and the Sarbanes-Oxley Act of 2002 to accumulate legally admissible evidence in the courts of law to substantiate their charges, and leave presiding judges and jurors of their guilt beyond reasonable doubts regarding the guilt of these accused, so that they can be punished according to the law.

Racketeer Influenced and Corrupt Organizations Act

This act comes into being from title 1X of the Organized Crime Control Act of 1970 to originally fight criminals engaged in racketeering operating within legitimate businesses that serves to protect and hide these activities, according to Kubasek and Browne et al. (2010).

Persons working with these organizations or are associated with them in any way under RICO, would be prohibited from participating in patterns of racketeering activities, and companies affected by the bad publicity of these transactions under the act, can sue these illicit and ethically deficient organizations for up to three time the cost of damage as well as the fees for their attorneys in civil action, according to Kubasek, and Browne et al. (2010).

RICO, however require the work of surveillance and monitoring by federal agents and other law enforcement personnel, as the US courts require that patterns of behavioral activities be established, in order to substantiate the evidence presented by prosecutors, and in the case of white collar cries, acts of violence, fraud , bribery, security fraud and the provision of illegal goods and services, according to Kubasek and Browne (2010), are numbered among the activities that will require these kinds of work from these legal personnel in the field.

A famous case falling under the auspices of RICO was the case of Microsoft and Best Buy being accused of racketeering in a court of law in 2000, being reinstated in the 9^TH us Courts of Appeal in San Francisco in 2007, according to Fontana (2007).

The petitioners that racketeering charges brought against these two corporate giant, allege that their MSN accounts had been activated with charges by the defendants without their knowledge , after they had bought new PC’S, according to Fontana (2007), and this brought into question the business ethics and sense corporate social responsibility of these two companies, because it was under similar white collar crimes mobster John Gotti and Junk bond king Michael Milken were previously convicted.

The case was classified as ongoing and not isolated, according to Fontana (20070, and showed the effectiveness of RICO as a tool to fight white collar crimes, in that it was reopened after a five year period and the severity of the accusations, caused judicial statement to be issued to the effect that if the plaintiffs allege facts are proven with sufficient evidence that both companies functioned with common purpose to increase their volumes of MSN subscribers, then the means they have used could be described as fraudulent.

Businesses that are brought before the courts under RICO Act, according to Kubasek and Browne et al. (2010), are likely to be found not only civilly responsible, but also to be subjected to criminal penalties on conviction, to fine of $25,000 and or 20 years per violation. In the case of Microsoft and Best Buy, these companies will most likely be subjected to the fines, rather than imprisonments, since companies cannot be imprisoned like human beings, but these fines amount to millions of dollars, if a class action case materializes.

Finklea (2010), in her Congressional Research Service work, went further to expound the effectiveness of RICO as a crime fighting tool against individuals engaged in poor ethical practices, when she remark that the Organized Crime Control Act of 1970 actually strengthened the ability of the federal government, through the use of Grand Juries to produce reports outlining public corruption and organized crime conditions in respective districts, through immunity given to witness as well as the Witness Protection Program, for those whose lives are threatened as a result of their testimonies, and by the extension of the statutory limit to 10 years for criminal charges to be brought against those persons suspected of being involved in white collar crimes against the state and individuals.

The False Claim Act

The False Claim Act came into existence in the United States as a tool to fight white collar crime, and is centered on employees of companies suing their employers for fraudulent actions against the government on behalf of the government, according to Kubasek and Browne et al. (2010).

Critics and supporters of this strategy argue that argue differently, but one of the major advantage, according to Kubasek, Browne, et al. (2010), was the fact that employees should their cases be successful and the government chose not to intervene, are likely to be rewarded with 30 % of the amount of money recovered, while if the federal government move to ensure the cases are successfully prosecuted, these employees become qualified for 25% of the principal recovered.

A significant downside employees pursuing this unpopular course of action against their employers, is that they can be isolated, threatened, ridiculed, harassed, demoted, insulted, stripped of benefits and eventually fired from the company, but should their cases be successfully prosecuted, these employers would be law be mandated to pay them twice the amount of back pay they were denied as well as other special charges, according to Kubasek, Browne, et al. (20101).

Critics who observe the large payouts argue that under the False Claim Act fight against white collar crimes, employees are receiving monies that rightfully belong to the federal government, and many are exploiting this option in breach of trust gained by their privilege positions within companies, as well as means to get easy monies. They also went on to say that some of the cases are frivolous, and tarnishes the image of companies as well as demoralize the remainder of staff that had been working with these companies during the time these cases are being tried.

Those who support the use and effectiveness of the False Claim Act according to Kubasek, Browne, et al. (20100, infers that in cases that fraud was indentified and reported, millions of dollars were involved, these cases may not have come to light without the help of these employees offering evidence, and because they will most likely not able to gain employment in similar industries for the rest of their lives, it was important that be adequately financially remunerated.

A recent report in Inside Higher Ed (20102), cited the US Justice Department announcing that it would join former employees in a lawsuit against American College Inc, which have allegedly falsely assert that it was complying with the federal government requirement that it derive at least 10% of its revenue from other sources than from student aids. For the federal government to decide to join in the prosecution of this case, it signifies the effectiveness of the False Claim Act in the fight against white collar crimes.

Inside Higher Ed (2012) confirm the importance of the case and the decision, when it further wrote that the case was one of many False Claims lawsuit that the federal government had opted to join, in its effort to force these educational institutions, according to Tony West, the attorney general of the justice department civil division, which receive federal funds to be honest with the government and follow the law.

The WPH framework could have greatly assisted the leadership of American College Inc., to change a more acceptable business ethics and socially responsible status, but their unethical actions have most likely destroyed their reputation as well as that of the institution, all at the expense of short term gains.

The attorney showed his confidence and belief in the effectiveness of the False Claim Act as a tool to defeat the incidence of white collar crimes in the country, when he remark that his division will use thus tool as well as all others to protect students as well as tax payers from for profit institutions that are failing to measure up to the required ethical standard society expects them from them (Inside Higher Ed, 2012).

In reinforcing the effectiveness of this modality, the US government, according to Kubasek, Browne et al. (2010), settled a case brought by 4 whistle blowers against Serons for participating in a marketing scheme in which physicians illegally prescribe over $11.5 million worth of a drug paid for by Medicaid. The government recovered $706 million and paid the four whistle blowers and their attorneys a total of 151million dollars for bring the suit to the courts.

Critics on the basis of this recovery and the ;possibility that more cases may be in the pipeline, may have to think about opposing the use of the False Claim Act to pursue white collar criminals in the future, unless they have ulterior motives or hidden agendas.

The Sarbanes-Oxley Act

This act, unlike RICO and the False Claim, came into being legislatively in 2002, to specifically curb white collar crimes and consist in part of several new rules, but according to Kubasek, Browne, et al. (2010), section 201 makes it illegal for registered public accounting firms to provide non-accounting firms they are auditing with bookkeeping or other services relating to accounting records, financial information systems designs and implementation advices, internal audit outsourcing services, human resource or management functions, actuarial services, broker or investment advice, investment banking services, consultation services or opinions on fairness, appraisal and evaluation services, or any other services their Boards deemed unacceptable or illegal,

In addition to these incriminating rules, companies or individuals can also be punished by the federal government for up to 10 years in prison if they, (a) fail to maintain proper accounting records for a minimum of five years, and a total of up to 20 years, should they, (b) be found guilty of destroying documents important to bankruptcy investigations, according to Kubasek, Browne et al. (20101). Penalties of up to 25 years in prison have also been included for fraudulent security breaches.

The Government has like in the case of the False Claim Act, (a) extended the statute of limitations under the Sarbanes-Oxley Act for fraudulent activities by two years, to make it a total of five years during which prosecutions can be legally brought to the courts, and (b) has set in motion protection for whistleblowers who are potential witnesses as well as providers of vital evidence to white collar crimes, according to Kubasek, Browne, et al. (2010).

In a Philadelphia Business Journal (2007), Steven Garfinkel, a former CFO of the now defunct DVI Inc., a health care company, pleaded guilty of mail fraud and violation of the Sarbanes-Oxley Law of 2002, after prosecutors found that financing was provided for diagnostic medical equipment shipped to health care providers. The accused on conviction was sentenced to 30 months in prison and ordered to pay $51 million in restitution, according to the Philadelphia Business Journal (2007), and the case went down in history as the third Sarbanes-Oxley criminal case in the United States.

The effectiveness of this fighting tool against white collar crimes was without doubt, when the amount of money recovered and the severity of the convictions so far are jointly taken into consideration, as well as the effect on prospective criminals.

Conclusions

The practicing of sound business ethics and the achievement and maintenance of the socially responsible status by business leaders and their organizations that uses the WPH ethical framework, seems the most appropriate strategy to avoid the commission of white collar crimes. Despite the fact that the rules as they relate to the activities prosecutable under the RICO, False Claim and Sarbanes-Oxley Acts, white collar crimes are still costing the government approximately $300 million dollars annually, according to the FBI, hence government may have to introduce other behavioral interventions strategy as well impose more stringent penalties, greater involvement of the media, education of the public, and even using those who have been convicted to serve out their punishment dissuading others as part of the general strategy to deter these criminal activities that are depriving the government of much needed revenues.

Finally, the fact that all three tools are in operation simultaneously, and can be used to prosecute all criminal activities across the country, gives the federal government and all other law enforcement agencies a distinct advantage, to which Tony West the attorney general in the American College Inc. case made reference, to overtime reduce the level of white collar crimes affecting society, through the use of the latest technology to provide more than one sources of information on the state of minds, intents, and behavioral patterns of criminals over different timelines to help prosecutors to more effectively and efficiently achieved convictions.

References

Kubasek, N., Browne, M.N., Herron, D.J., Giampetro-Mayer, A. & Barkacs, L.L. (2010). Dynamics Business Law: The Essentials McGraw-Hill Higher Education Boston MA

Legal Information Institute (2012). White Collar Crimes. Cornell University Law School www.law.cornell.edu/wex/white_collar_crime , 04/13/12

Fontana, J. (2007). Racketeering Case against Microsoft, Best Buy Revived. Network World www.pcworld.com/article/13169i/racketeering_case_against_microsoft_best-buy_revived.html , 04/13/12

Finklea, K. M. (2010). Organized Crime in the United States: Trends and Issues for Congress. Congressional Research Services www.fas.org/sgp/cr/misc/R40525.pdf , 04/13/12

Inside Higher Ed, (2012). US Joins False Claims Lawsuit against Texas Career College. www.insidehighered.com/quicktakes/20102?02/29/US-joins-false-claims-lawsuit-against-texas-career-college, 04/13/12

Philadelphia Business Journal (2007). Former Philadelphia Area CFO Gets 30 Months in Sarbanes-Oxley Case. www.bizjournals.com/philadelphia/stories/2007/03/26/daily32.html, 04/13/12,