Real Problem Behind White-Collar Crime

White-collar crime is a term that has been applied to a wide variety of non-violent crimes that are often committed in offices and boardrooms rather than on the street. Crimes are committed by means of unlawful paper transactions rather than with weapons, by middle-class people rather than by career criminals (Sutherland, 1983). It includes the crime of fraud in its many variations, as well as violations of government regulations that might not even result in immediate, ascertainable harm. The term refers to crimes committed by individuals, as well as wrongs inflicted by corporate entities (which are also subject to criminal prosecution). White-collar crime is investigated and prosecuted by the federal and state governments.

For most individuals, white-collar crime is not viewed as a crime at all, because of its non-violent nature. Violent crime has an immediate and obvious impact on its victims, which raises the attention of the public, whereas white-collar crime frequently goes undetected or is viewed as a bending of the rules (Geis, 1982). White-collar crime; however, can have more of an impact than violent crimes. The victim of a violent crime can recover (most times, but not always), were as the victim of fraud can have immeasurable impact, that can devastate his/her home, family, and even life.

The real problem behind white-collar crime is not defining white-collar crime, but developing the appropriate means to correct this type of crime. One of the most popular white-collar crimes is embezzlement. Throughout the rest of this literature review, embezzlement will remain the focus of the discussion.

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Embezzlement is the most popular financial crime in the nation, and is the predominant factor in the failure of all types of businesses (Barlow, 1978). Also, embezzlement is an individual crime, not just a document or technological crime. It is often the most misunderstood and complicated crime to discover, or to investigate. The crime of embezzlement accounts for the majority of all financial institution crimes investigated by the FBI (Geis, 1982). It is often a function of an employee"s circumstances and/or attitude combined with employer naivete and carelessness and with the decreasing threat of prosecution and other detrimental consequences (Weisburd, Wheeler, Waring & Bode, 1991).

Embezzlement may occur because an employee who is in a position of trust with access to company funds is experiencing difficult, personal financial problems. The temptation becomes too great and the employee resorts to embezzlement to solve his/her financial problems. It also occurs because employee loyalty is less now than in the past years and employees often believe that they are paid too little and treated unfairly. Law enforcement agencies have less and less manpower to pursue embezzlement so the fear of prosecution is less of a deterrent to employees.

Embezzlements are generally both ego and habit crimes, and are rhythmic, predictable and cyclic (Jamieson, 1994). Embezzlers rationalize their behavior to conform to their own morals and ethics. Embezzlers realize that their actions will ultimately hurt people around them, and they just do not care. Embezzlements are secret crimes, but someone else within the institution often has knowledge of the crime. Most embezzlements are actually a series or combination of crimes, rather than a single crime. The majority of embezzlements begin as a simple misuse of the company"s funds for a short-term personal purpose (Geis, 1968). These occurrences then become a habit, requiring additional misuse to hide the original crime.

Embezzlements are generally committed by one of three methods: By trickery, deceit or misrepresentation (e.g. account holder or rightful owner impersonation, official seals of fictitious accounts); by documents (e.g. check, "authorization note", power of attorney); and by technology (e.g. on-line computer, FAX machines, ATM access)(Weisburd et al., 1991). Generally, embezzlements committed by staff personnel are more numerous, and the individual amounts taken are relatively small. Embezzlements committed by supervisors and officers are less frequent, and the amounts taken are more significant. Taking money to support a certain lifestyle or an employee"s family is the most popular motive. Revenge against the employer is the next most popular motive.

Periodic surveys and statistics gathered by law enforcement agencies indicate that losses attributed to acts of embezzlement are more significant than losses attributed to all other types of business crimes combined (Barlow, 1978). The number of embezzlements increases annually, primarily because of:

1. Inadequate pre-employment screening by employers.
2. Changing morality in all segments of society, particularly the work force.
3. Decreasing law enforcement help and emphasis.
4. Minimal punishment for offenders.

Embezzlements include both misuse and misappropriation. Misuse is defined as the abuse of privilege or position without the specific intent to steal; misappropriation is defined as the taking of funds or property with the specific intent to steal (Geis, 1982). Estimates are that less than 10% of these crimes are reported.

The true scope of the embezzlement problem may never be known for many reasons. Embezzlement is not just theft, it is also misuse. Thefts require a specific intent to steal, are relatively simple to prove and are reported more often than incidents of misuse. Acts of misuse require no specific intent to steal, and are often difficult to prove and are often categorized as "mysterious disappearances" (Jamieson, 1994).

The discovery of embezzlement requires the institution to file a criminal report and a criminal referral form, which removes the control of an investigation from the institution. It is often believed to be more "convenient" to allow an embezzler to terminate employment and voluntarily repay the loss than to file a crime report and become involved with the criminal justice process (Weisburd et al., 1991). Embezzlement is also a secret or closet crime and is often discussed in the same "whispered tones" as crimes of child or adult sexual assault are. Denial of the act, a sense of violation and feeling shame for allowing it to happen are responses reported by victims of both assaults and embezzlements. These victims are then reluctant to report the crime, fearing public exposure and humiliation.

Some people purposely embezzle (steal) while others simply misuse (borrow or use) the institution"s assets (service, equipment, supplies and facilities) without intending to steal. Both actions create losses to the institution. The disastrous effects suffered by the nation"s financial institutions and related industries, and the loss of public trust in those industries, have primarily resulted from acts of embezzlement or from self-serving transactions by key employees working within all levels of the institution (Geis, 1982).

The misuse and misappropriation of assets significantly contributed to the crippling or failure of many industries such as: Financial institutions (e.g. savings and loan industry); defense contractors (e.g. overcharges, failed product design, diversion of funds); securities brokerage firms (e.g. junk bonds and diversion of funds) and insurance companies (e.g. investment in prohibited ventures and diversion of funds) (Weisburd et al., 1991). The very people who work within and manage these industries are disabling them. Their leaders have been the subjects of unfavorable from-page news stories. Their crimes and lack of corporate morals overshadow, and contribute to, similar behavior of their employees. In other words, creating an embezzlement environment starts at the top of the organization.

It"s less expensive to prevent embezzlement than it is to investigate one. Estimates are that for each $1.00 lost to any crime, the institution loses and additional $4.00. These calculations are conservative, and don"t take into account the other losses the institution will ultimately suffer (Jamieson, 1994). Embezzlements are emotional as well as financial crimes. Victims of embezzlement display the same progression and range of symptoms displayed by victims of sexual assault or catastrophic disasters: shock, disbelief, denial, rage, grief and recovery (Geis, 1982). This cycle generally peaks within six months of the crime, and it may take up to three years for the institution to recover fully.

While the actual monetary loss from an embezzlement may be significant, it will be relatively insignificant compared to the losses caused by these other factors that will become evident after an embezzlement has been discovered:

1. lowered employee morals due to increased security measures, and aggravated by distrust of other employees;
2. employees" disorientation and their accompanying mistakes, resulting in poor customer service;
3. a reduction in actual tasks performed by employees, because of their pre-occupation with events related to the embezzlement;
4. adverse publicity due to management's likely inability to control the flow of information to the media;
5. and the necessary interaction with the criminal justice system (law enforcement, courts and corrections) (Weisburd et al., 1991).

Mistakes often appear to be embezzlements. The results of poor training and supervision often appear as clerical errors, as mis-coded or miscounted items, and as misapplied transactions. Appropriate training, supervision and the application of effective loss prevention techniques are necessary to protect the institution and its employees from both mistakes and embezzlements (Jamieson, 1994). Honest employees must be protected from suspicion of dishonesty, and embezzlers must be removed.

A successful defense begins with a single action demonstrated by one concerned person. Someone must take a stand against the problem, and then become knowledgeable and concerned enough about the problem to persuade others to take a stand. You will likely find both supporters and detractors within every level of the institution. Embezzlers will continue to be successful until industry leaders acknowledge the magnitude and pervasiveness of the problem; until industry leaders believe that this activity is intolerable; and until industry leaders take an active role in embezzlement prevention and education (Weisburd et al., 1991). To truly understand the scope of embezzlement individuals must research and understand new policy techniques and educate themselves on the crime of embezzlement in order to combat this up and coming crime.

Embezzlers violate all commonly accepted business and personal values, morals and ethics. Embezzlers are rarely prosecuted criminally, rarely receive jail sentences upon conviction, and rarely repay the victims or court costs. As we learn more about the criminal act of embezzlement, and more about the people who commit these crimes, the better prepared we are to identify behaviors commonly displayed by both the institution and the employee who embezzles.

Corporations and business owners need to establish a code of conduct with their employees. This method would provide an excellent way to communicate with employees and describe acceptable standards of behavior within the company. Also, this method gives the employee a list of employee's rights and obligations to follow. Employees who believe that they are treated fairly, and equally with every other employees, are less likely to become discontented and commit an embezzlement crime. If corporations follow the simple but effective methods mentioned above they should have more success in removing embezzlement from the business world.

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