White collar crime

1
White collar crime

• Lecture 12 Policing and Regulating White Collar
  Crime

2
State and Federal Enforcement Agencies

• Role of state agencies is limited.
• Federal agencies make the most substantial
  response
• U.S. Department of Justice when criminal
  prosecution warranted.

3

• FBI corporate scandals (e.g., Enron)
• Some resources shifted to the war on terrorism.
• Inspectors General conduct audits and
  investigations of companies to which they are
  attached.

4

• U.S. Postal Inspection Service frauds involving
  a postal element (e.g., mail fraud)
• U.S. Secret Service, U.S. Customs, U.S. Marshals
  counterfeiting or forgery of U.S. currency
  money laundering pursuit of white collar
  criminals
• IRS Criminal Investigative Division tax frauds

5
Regulation

• Any attempt by the government to control the
  behavior of citizens, corporations, or
  subgovernments.
• Allows for more flexible responses.

6
Economic Regulation

• Addresses market relations (e.g., securities,
  antitrust matters, interstate commerce) and the
  attempts to ensure stability.

7
Social Regulation

• Addresses harmful consequences to workers,
  consumers, and citizens.
• Less likely to serve business interests.
• Usually a government response to public pressure.
• Typically arises following a crisis, tragedy, or
  panic over some industrial condition or practice.

8
Selected Regulatory Agencies

• FDA regulates, inspects, monitors, tests, and
  develops guidelines for a wide range of foods,
  drugs, cosmetics, and medical devices.
• FTC primary weapon against monopolistic trusts
  (e.g., Standard Oil), also contends with unfair
  and deceptive business practices.

9

• SEC regulates and polices the securities
  markets.
• EPA sets standards and monitors practices
  relating to air quality, water quality, and the
  disposal of various forms of hazardous wastes.
• OSHA develops and enforces procedures and
  standards for workplace health and safety.

10
Evolution Of A Regulatory Agency The SEC

• Between 1929 and 1941 the people of the United
  States suffered through the Great Depression, the
  deepest and most prolonged economic crisis in
  American history.
• Although many factors contributed to the economic
  depression, the crash of the stock market in
  October 1929 marked its beginning. Investors in
  securities, stocks, and bonds lost everything in
  the unregulated market.

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• Following the leadership of President Franklin D.
  Roosevelt, Congress passed new legislation known
  as the New Deal, designed to protect citizens
  from economic fluctuations.
• Two of these legislative remedies were the
  Securities Act of 1933 and the Securities
  Exchange Act of 1934. Both laws restored investor
  confidence in the market by providing more
  structure and government regulation.

12

• The 1933 Securities Act required both businesses
  who desired to sell their stock and stockbrokers
  who sold stock to provide full information about
  stocks to potential investors.
• The Securities Exchange Act of 1934 prohibited
  certain activities in stock market trading and
  set penalties for violations. It also established
  the Securities and Exchange Commission (SEC) to
  oversee stock market trading.

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• These laws were based on two ideas
• First, companies offering stock on the market had
  to tell the public the truth about their
  businesses and the risks involved in investing in
  them.
• Second, stockbrokers were to put the interests of
  investors above any other consideration and deal
  with them fairly and honestly.

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• The two 1930s acts remain the foundation of
  securities regulation.
• The SEC continues to be the top regulatory
  agency. The SEC oversees all key participants in
  the securities market including the stock
  exchanges, stock brokerage firms, the actions of
  individual stockbrokers, investment advisors, and
  mutual funds (groups of stocks in which people
  may invest).
• It is the overseer to protect investors against
  deceptive or illegal activities such as security
  fraud.