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White-Collar Crime

Healthcare Fraud, Government Fraud, Financial Institution Fraud, Frank W. Abagnale, Telemarketing Fraud

Sociologist Edwin Sutherland (1883–1950) first coined the term "white-collar crime" around 1939 and used it for the title of a book published in 1949. White-collar crime is difficult to define because it can be committed by anyone with money and apply to many different activities. White-collar crime is illegal activity carried on within normally legal business transactions. For example, white-collar crime comes from within legal businesses such as banking, stock trading, or insurance claims. It does not include drug trafficking or smuggling, since both activities are illegal. White-collar crime is also nonviolent.

The motive of white-collar crime is personal gain. Individuals or groups may use and abuse their positions within a company to hide or steal money. White-collar crime can be committed by one individual like a car repairman charging for unnecessary work on a vehicle. Or it can involve a number of individuals in a large corporation who deceive investors (those who own stock in the company) while fattening their own bank accounts by millions of dollars.

A common term associated with white-collar crime is fraud. Fraud is the intentional deception of a person, business, The motive of white-collar crime is personal gain. Individuals or groups may use and abuse their positions within a company to hide or steal money. (© Ed Bock/Corbis) or government agency for the purpose of stealing property or money, or causing financial injury in other ways. This chapter defines and describes many types of white-collar fraud, including healthcare, government, bank, telemarketing, insurance, bankruptcy, securities (stock and bonds), and corporate fraud.

Victims of white-collar crime can be an individual; a group of individuals such as customers of a stock brokerage firm; a local organization whose treasurer secretly spends its money for his own benefit (embezzling); a company like a bank whose officers use its funds for their own gain; the government cheated by the companies who win its contracts; or a large corporation whose officials purposely falsify its financial records.

White-collar crime can be prosecuted by states or by the federal government. Federal law covers a much wider range of criminal misconduct. The federal criminal justice system is better suited to deal with white-collar crimes on a large scale, cases where the crimes often have an interstate, nationwide, or international scope. The Federal Bureau of Investigation (FBI), Department of Justice, U.S. attorney general, and other federal agencies have extensive investigative and prosecuting powers to bring white-collar criminals to justice.

Loan fraud

Check fraud is the most common form of bank fraud but the largest loss of money comes from fraudulent loans. Both banks and individuals can be victims of loan fraud. Individuals are victimized by criminals who pretend to be lenders; they often claim to be a person's only chance for obtaining a loan. These loans are written with unusually high interest rates. Interest is a charge by the lender for borrowing money, usually based on a certain percentage of the amount borrowed. If the individual is purchasing property, a lender with criminal intent may include empty blanks in the loan documents that he or she will fill in later after the victim has already signed. The cost or terms of the loan may be much higher than the victim had agreed to and sometimes a lender may offer to arrange for home repairs at inflated prices.

Loan fraud schemes often involve groups of people working together. On March 29, 2004, the FBI field office in Los Angeles, California, reported the arrest of three individuals and the hunt for a fourth who had supposedly masterminded an eight-year loan fraud scheme by using multiple stolen identities. The individuals netted more than $30 million, which they then used to continue the scheme while living extravagant lifestyles.

Those arrested in the Los Angeles fraud case had stolen the identities of real estate agents, mortgage brokers, and deceased individuals. With these identities they applied for loans using fake paycheck stubs, bank statements, income tax forms, and so forth. Once they obtained a loan they "flipped" the Businessman pointing to a fake check on a computer screen. Counterfeiting is easily accomplished using computers, copiers, scanners, and laser printers. (AP/Wide World Photos) property, selling it at an inflated price to yet another stolen identity to obtain another loan. The criminals also took out additional loans to cash out the value of the home. Eventually, the property would fall into foreclosure (when a lender takes back property or goods after nonpayment) at a large loss to the banks who made the loans.

For More Information


Frank, Nancy, and Michael Lynch. Corporate Crime, Corporate Violence. Albany, NY: Harrow and Heston, 1992.

Siegel, Larry J. Criminology: The Core. Belmont, CA: Wadsworth/Thomson Learning, 2002.

Sutherland, Edwin. White-Collar Crime: The Uncut Version. New Haven, CT: Yale University Press, 1983.

Web Sites

American Collectors Association International. http://acainternational.org (accessed on August 20, 2004).

"Counterfeit Division." United States Secret Service. http://www.secretservice.gov/counterfeit.shtml (accessed on August 20, 2004).

"Don't Be a Victim of Loan Fraud." U.S. Department of Housing and Urban Development. http://www.hud.gov/offices/hsg/sfh/buying/loanfraud.cfm (accessed on August 20, 2004).

Federal Bureau of Investigation. http://www.fbi.gov (accessed on August 20, 2004).

International Association of Financial Crimes Investigators. http://www.iafci.org (accessed on August 20, 2004).

International Association of Insurance Fraud Agencies, Inc. http://www.iaifa.org (accessed on August 20, 2004).

National Association of Securities Dealers. http://www.nasd.com (accessed on August 20, 2004).

National Check Fraud Center. http://www.ckfraud.org (accessed on August 20, 2004).

North American Securities Administrators Association. http://www.nasaa.org (accessed on August 20, 2004).

"Telemarketing Fraud: Ditch the Pitch." Federal Trade Commission. http://www.ftc.gov/bcp/conline/edcams/telemarketing (accessed on August 20, 2004).

U.S. Department of Justice. http://www.usdoj.gov (accessed on August 20, 2004).

U.S. Securities and Exchange Commission. http://www.sec.gov (accessed on August 20, 2004).

Additional topics

Law Library - American Law and Legal InformationCrime and Criminal Law