White Collar Crime Britain

What, briefly, are the current ways of regulating and punishing corporate and white collar crime in modern Britain? What changes or additions would you like to see?

This essay is aiming to look at various aspects of corporate crime and white collar crime in contemporary Britain. In addition to that, the essay will also look at dimensions and structure of corporate and collar crime. Crimes against social regulation and crimes against economic regulations will be one the tools to accomplish the essay question. Not only that, this essay will be mainly focusing on the legal method used to detect, to prevent and to punish corporate and white collared crimes. What laws and legislations are put forward to punish such offenders? Moreover, the deterrence and regulation that contemporary Britain uses to limit high level of victimisation of such crime, and also the estimate cost that corporate and white collar crime cause comparing to conventional crimes.

However, this essay firstly will begin to define both ‘white collar crime’ and ‘corporate crime’ to help understand better how one is related or not related to another; or a possible link may arise. According to Weisburd and Waring et al. (2001:1) argued that Edwin Sutherland coined the term “white-collar crime” in his address to the American Sociological Society in 1939, he used the concept to challenge conventional stereotypes and theories. In addition, Slapper and Tombs (1999: 3) stated that between 1940 and 1949 Sutherland developed the concept of white collar crime- ‘a crime committed by a person of respectability and high social status in course of his occupation’. Although, in contrast, Croall (2001:7) pointed out that definition of white collar crime should include all crimes committed in the course of occupations and should be redefined as ‘occupational crime’, or it should be based on an abuse of occupational trust.

Meanwhile ‘corporate crime’ according to Simpson (2002: 6) is ‘a type of white collar crime’; a subcategory of white collar crime. Corporate crime on the other hand, according to Clinard (1983: 17) cited in (Croall 1992:11) corporate crime is an “illegal corporate behaviour which is a form of collective rule breaking in order to achieve the organizational goals”.

By not specifying the kind of law proscribes and punishes, Braithwaite accepts Sutherland’s argument that illegality by corporations and their agents “differs from the criminal behaviour of the lower socio-economic class principally in the administrative procedures which are used in dealing with the offenders” Sutherland (1949) cited in Simpson (2002: 7). Thus, corporate crime not only includes acts in violation of criminal law, but civil and administrative violations as well (Simpson 2002: 7). Both corporations (as “legal persons”) and their representatives are recognized as illegal actors (ibid).

Corporate crime, on the other hand, counts many victims, among them employees, other companies, the government, the environment, and consumers; however, because the act is undertaken in the pursuit of organizational goals, the company itself is not directly victimized (Simpson, 2002:8). For corporate offenders, it has meant more criminal instead of civil or regulatory cases brought against them; a push toward sentencing parity between white-collar and street criminals; and an increase in maximum penalty levels for variety of organizational offenses (Simpson, 2002:10).

In concern about regulation is that to the extent that privatisation has swept across the industrialised and industrialising world in the past two decades, then problems of regulation raise themselves quantitatively and qualitatively (Slapper and Tombs 1999:164). In quantitative terms, privatisation simply means that there are more corporate actors to be regulated, thus raising the scale of the task for regulators and states; more regulatory activity is needed (ibid).

In qualitative terms, newly privatised industries sectors raise new problems of regulation; for example where once the state, through direct ownership, was able to exercise some control over its electricity and gas industries, or telecommunications, or rail, and so on, the passing of these operations to private corporations has opened up new regulatory problems which have seen state struggle with the intractable problems of allowing private corporations to pursue profit maximisation whilst attempting to force upon them the need to meet certain social needs- the provision of electricity to households where bills cannot be made , bus and postal services on loss making rural ‘routes’, investment in clean water technologies where these require massive upfront investments which have not immediate or short-term pay-offs for private owners, and so on (Slapper and Tombs 1999: 164).

Another aspect to the regulation of white collar crime is centralised on the law itself. How the law in contemporary Britain helps detect offenders of the white collar crimes? For example, Croall suggested that “the ambiguities of the law create space for defendants to minimize their culpability, and sentences which the law allows. The law itself, therefore, reinforces the common distinction between many white collar offences and ‘real crimes’, a distinction which for many offences mirrors a real legal distinction” (1992:129). Some laws are insufficiently precise, containing ambiguities and loopholes, and to the extent that the ambiguous criminal status of offence also restricts the impact of the law, then it also constitutes a limitation (ibid).

Laws against fraud, for example, are formulated not just to deal with fraud but ‘to provide a regulatory framework within which commerce can function (Croall 1992: 131). The argument so far has been that, because of the grave dangers posed when a company is allowed to conduct its business in a dangerous or criminogenic manner, the law should be able to intervene at a point before, rather than after harm occurs (Gobert and Punch, 2003: 129). Therefore, Carson (1979) argued that distinguish between ‘acceptable’ and other violations and industrialists came to see the law as less of a threat (Croall, 2001: 105).

Enforcers argued that strict liability was necessary to obtain convictions, but accepted that prosecutions would be selective (Croall, 2001: 105). Regulation is understood through reference to the dynamics of macro-political economy, within which the micro-dynamics of regulation negotiations can be more adequately interpreted (Slapper and Tombs 1999: 165). Regulation, then, raises an enormous range of complex issues which go right to the heart of debates about the nature and role of corporations, about economic activity, and about the very nature of contemporary economies, states and societies (ibid.:165).

To establish corporate liability, the law has relied on attributing a ‘personality’ to the corporation by identifying its ‘controlling mind’, a test that requires that directors who can be prosecuted are identified, who can be shown to have been in a position to act as the controlling mind as opposed to being servants or agents of the company (Ross 1999; Slapper and Tombs 1999) cited in Croall (2001:106). This considerably demonstrates a failure in a successful prosecution, when the mens rea is in concern.

Box has argued, the nature of the capitalist mode of production forces corporation to attempt to exert as much control as possible over their operating environments, which pushes them into violating those regulations that seek to prevent individual corporations from using their corporate power to exert certain forms of control over consumers, workers, governments, other corporations, and so on (Box 1983) cited in (Pearce and Tombs 1998: 233). Some social liberals wish to retain the ideological notion that self-regulation a concept which goes hand in hand with notions of the soulful corporation is likely to prove an effective regulatory strategy (ibid).

The main cause of regulatory violations by corporations is explained by Kagan and Scholz which they believe corporations can be seen as an amoral calculator, as a political citizen, or as organisationally incompetent (1984:67-8). “Amoral calculators are motivated ‘entirely by profit-seeking’, and carefully competently assess opportunities and risks. They disobey the law when the anticipated fine and probability of being caught are small in relation to the profits to be harnessed through disobedience. Non-compliance stems from economic calculation” cited in (Slapper and Tombs 1999:170).

Business and particularly corporations are not, as many would have it, typically ‘amoral calculators’ but rather ‘political citizens’ who may indeed sometimes err but more because of ‘organisational incompetence’ than liberate wrongdoing (Slapper and Tombs 1999:168). Thus they need advice rather than chastisement: regulatory agencies should act as consultants rather than policemen (Kegan and Scholz 1984: 68). Regulatory agencies tend to try and achieve ‘compliance’ through persuasion rather than a ‘policing ‘strategy which uses legal sanctions against businesses and executives found to be in breach of the law (Slapper and Tombs 1999:168-69).

To accept the view that corporations is essentially an amoral calculator, then is to accept that the most appropriate regulatory response to such corporations is ‘strict enforcement of uniform and high specific standards, backed by severe penalties’, with regulatory officials acting quite literally as ‘policemen’ (Kagan and Scholz 1984: 72). Another way of regulation “is to look at the outcomes of corporate activities and to seek to understand the extent to which these outcomes were the result of amorally calculative decisions” (Slapper and Tombs 1999:171). As to put some amendments on this regulatory issue, Croall (2001:107) argued that in UK many agencies (such as SFO, CPS, Inland Revenue etc…) are also less concerned with prosecution than with prevention or achieving compliance. Compliance strategies are also related to the range of powers possessed by agencies, many of which are seen as more effective, and on occasion more Draconian, than prosecution (ibid.: 109).

Any effective regulatory strategy must include a range of regulatory tools and techniques (Pearce and Tombs 1998: 297). But the fact that corporations do not always function as the rational systems of control that they represent themselves to be, the fact that these instances deterrence would prove inadequate, is not a reason to abandon arguments for and strategies of deterrence: indeed it actually strengthens the potential of such argument and strategy (Pearce and Tombs 1998: 300).

Deterrence poses an ideological and subsequent material, challenge to corporations, corporate executives, and the owners of corporations (Pearce and Tombs 1998: 300). Corporate executives usually portray their corporations as rational systems that can be controlled effectively, and indeed this is crucial to demands by corporations that they left to self-regulated (ibid). If such claims are to be taken at face value, deterrence should be effective, as employers would rationally respond, making utilitarian calculations regarding the certainty of detection and likelihood and nature of punishment (ibid). However, deterrence will not be effective in all instances (Pearce and Tombs 1998: 299).

In which concern the punishment of corporate and white collar crime is to say primarily that most offenders in this type of criminal activities are well positioned in society which can highly affect the sentence and likely to escape imprisonment; for example Slapper and Tombs put forward that “some individuals white-collar offenders avoid criminal prosecution because of the class bias of the courts, although businessmen could often be charged as accessories to such crimes as bribery, unlike politicians they usually escape prosecution but more generally they are aided by the power of their class to influence the implementation and administration of the law” (1999: 3). However, when the issue of punishment arises, the important question lies on “whom to charge (employees, supervisory personnel, directors, corporate officers and/or the company itself), for what crimes to charge (regulatory or substantive offences) and in what court to file charges (Magistrates’ Court or Crown Court) will require the prosecution to think seriously in advance about penalties that will follow conviction” (Gobert and Punch 2003:214).

But not only that, “punishment is necessary to preserve and protect society, but it will operate effectively only within the context of a ‘reasonable’ system of justice, that is, a system that is fair and not subject to abuse” (Bentham, 1948) cited in (Benson and Simpson 2009:185). Therefore, “the only criminal penalty that can be imposed on a company in English Law is a fine and/or compensation order. A Company is a creature of the law with no physical existence. Accordingly, it cannot be tried for murder or treason as the only punishments available to the court on conviction are life imprisonment or death” (Pearce and Tombs 1998: 198).

Education and Denunciation often accorded lesser weight in discussion of punishment may have greater salience in corporate context (Gobert and Punch 2003:220). A heavy fine of a company for its health and safety violations will serve to impress on the offender and other companies, as well as the public, the importance which the law attaches to safety (ibid). Denunciatory function of sentencing is achieved by the ‘naming and shaming’ of the particular corporate offender (ibid: .220).

“Courts have also considered that fines, particularly in respect of health and safety, may be too low to be effective. After the Health and safety commission in 1991 criticized the then average fine of £732, the maximum fine following summary prosecution was raised to £20,000 and by 1997-8 it had increased to £6223 in magistrates’ courts in England and Wales and to £17,768 in crown courts, where fines are unlimited” (Croall and Ross 1999) cited in (Croall 2001: 126).

According to Schlegel ‘from just-desert perspective, the punishment or harsh treatment itself reflects the condemnation merited by criminal act. Assessing cardinal limits on the basis of the unpleasantness incurred by the wealthiest offenders will result in gross overstatements of censure implied by the fine when the corporation involved is less wealthy’ (1999:153). During the 1980s an increasing number of fraudsters received prison sentences (Levi 1987a, 1989a) cited in (Croall 1992: 110). Between 1979 and 1987 the numbers of male fraudsters imprisoned rose from 1300 to 2100, representing between 48 and 51 per cent of those convicted. This increase is, according to Levi, more likely to be a result of the increased numbers of conviction and introduction of partially suspended sentences, than of toughening judicial attitudes (ibid).

Other current ways of punishment in which corporate can be found criminal liability in Britain is by ‘Vicarious Liability’ this according to Slapper and Tombs (1999: 197) argued that a corporation becomes responsible to exactly the same extent as an individual employer for the acts of its employee. In addition to that, English criminal law developed the fiction of corporate personality- the idea that a company is a legal person- which can sue and can be sued in its own name (Slapper and Tombs 1999: 197-1998). However, it is notoriously difficult to succeed in proceedings in personal injury claims against corporations (ibid). Corporations often have the resources to stretch proceedings, and the delays (many take five years to come to trail in the high court), uncertainties and the possibility of having to pay the other side’s costs, are frequently enough to persuade plaintiffs to settle out of court for a compensation sum much lower than they would get if they went through with the case and won it (Harris 1984) cited in (Slapper and Toms 1999: 199-200).

Other way of punishing corporations and white collar crime, according to (Gobert and Punsh 2003: 221) suggests that Fines have become the sanction of default for convicted companies due to the impossibility of putting a company in jail and the fact that fine is relatively cost-free sanction to administer. However, now that English judges have recognised that companies can be guilty of manslaughter and the government has proposed an offence of corporate killing, the question that must be addressed is whether a fine is an appropriate punishment for a company that has caused death or serious injury (ibid).

In addition to that, Croall (2001: 133) argued that deterrence is more effective for white collar offenders than for conventional offenders because their offences are so often assumed to be rationally motivated. Croall (1992: 160) argued that publicizing offences of white collar offenders can be a major deterrent and can also act as catalyst by raising public consciousness. Shaming the offenders is also one of the strategy for example Croall points out that publicity is a central shaming strategy and have more profound stake in conformity they are more deterrable by publicity. However, if they face prison, white collar offenders continue to enjoy favourable treatment, more often being sent to open prisons on the assumption that they present smaller security risk (Croall 1992: 157).

Changes and additions I would like to see in relation to regulation and punishment of corporations and white collar offenders is the imposition of heavy fines due to the fact that the offenders are in some ways difficult to be caught or conduct an arrest especially in relation to prosecute corporation. Slapper and Tombs (1999: 205) also emphasise by arguing that ‘there is some evidence that punishing one corporation with an appropriately serious sanctions for an offence has a chastening effect upon others. That means deterrence would be accomplished in relation to punishment. Not only that, but apart from heavy fines Corporate Probation which has been used in the USA since 1987, has the merit that it is an organization specific sanction, and helps strengthen the legal foundation of corporate liability (Slapper and Tombs 1999: 225). Another option is to create Community Service Orders, which would require the company to undertake a specific project in the community; it would be entered against the company itself and not against designated individuals (Gobert and Punsh 2003:233). For a regulation offence the fines seemed to be the most appropriate.

To conclude this assignment is to highlight the fact that corporate and white collar crimes are very difficult to prove ‘because is based in deception’ (Benson and Simpson 2009:203). The difficulties of establishing mens rea, and, in offences of strict liability, the absence of a need to prove intent, enable defendants to deny (Croall 2001: 127). For example Croall suggested that considerable difficulties surround establishing intent (mens rea) along with recklessness or gross negligence, where companies rather than individuals are involved because corporations are legal abstractions and have no ‘soul’ or ‘mind’ capable of forming criminal intent (2001:106). Also the difficult is, that white collar offenders use their occupational positions to take advantage of these legitimate activities in illegal ways (Benson and Simpson 2009:209). These arguments reflect concerns that sentences have a little deterrent value (Croall 1992: 113). Conversely, a conviction can stigmise a company and cause consumers to boycott its product (Gobert and Punsh 2003:216). Subsequently in relation to white collar offenders, however, the prosecution of individuals may be inappropriate as it ignores the corporate pressures that might have been placed upon them by corporate structure (Slapper and Tombs 1999: 222).

Biography

Benson, M, L and Simpson, S, S (2009) White-Collar Crime: An Opportunity Perspective: Rutledge- New York and London.

Croall, H. (2001) Understanding Corporate Crime. Open University Press. Philadelphia

Croall, H. (1992) White Collar Crime. Open University Press. Philadelphia

Gobert, J. and Punch, M. (2003) Rethinking Corporate Crime: Butherworhs

Kagan, R. And Scholz, J. (1984) “The Criminology of the Corporation and Regulatory Enforcement Strategies” in Slapper, G. And Tombs, S. (1999) Corporate Crime. Longman

Pearce, F. And Tombs, S. (1998) Toxic Capitalism: Corporate Crime and the Chemical Industry. Ashgate. Dartmouth. England

Schlegel, K. (1990) Just Deserts for Corporate Criminals: Northeastern University Press

Slapper, G. And Tombs, S. (1999) Corporate Crime. Longman

Simpson, S. S. (2002) Corporate Crime, Law and Social Control. Cambridge University Press

Weisburd, D. Waring, E. and Chayet, E. (2001) White-Collar Crime & Criminal Careers : Cambridge University Press