Feature Articles

May 2013
Whitecollar Racketeering

      By Mike La Sorte, Professor Emeritus

Mike La Sorte is a professor emeritus (SUNY) and writes extensively on a variety of subjects.

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     What is the popular image that comes to mind when one speaks of the stereotypical racketeer? The traditional image is most likely one of people who live in the twilight: squat, swarthy men; sharpers, wearing bespoke suits with a slight bulge in the jacket, wherein resides a gat; snap brim hats, sporting pinkie rings, chins darkened by 5 o'clock shadows, part of the illegitimate economy. Their profession is that of dastardly deeds.

     A closer look at the complete phenomenon of racketeering reveals greater complexity and scope, particularly in the inclusion of persons, businesses and corporations that function in the legitimate economy yet dip into criminality if not most of the time certain when the occasion warrants. Such crimes range from opportunistic whitecollar offenses (such as abuse of office or malfeasance) to systematic business and corporate criminality (thereby triggering RICO, the racketeering statute).

     Walmart covers up millions of bribes paid to local corrupt officials in Mexico. A former Morgan Stanley executive was convicted of funneling money to officials in connection with real-estate investments. Several Hollywood studios have used bribes to crack the Chinese movie market. Is "legitimate businessman"� an oxymoron?

     When compared to organized crime, whitecollar crime is not a classic, clear-cut case of deviance. It has one foot in conventionality and one foot in unlawful activity. Whitecollar is intermingled with legitimate dealings. There is theft by manipulation of symbols rather than objects. Compared to bluecollar crime, prosecutions are expensive, and convictions and solid leads are much more problematic. Penalties do not rise to the level of street offenses; physical coercion and death less likely. The "smoking gun"� at the scene of the crime is a metaphor rarely seen. Schemes, frauds and swindles proliferate: health care, Ponzi, advance fee, telemarketing, investing; the list is extensive. The more sophisticated the economy, the more the opportunities.

     The costs to society can be substantial, but the impact on the general public is not as apparent nor seen as a mortal threat to the social fabric as is the daily violence associated with street crime. WC criminality is not as highly stigmatized; media coverage is often limited; the persons involved do not acquire what is called "criminal tendency"� profiles as do mobster racketeers or thieves or killers because they are statistically less likely to become repeat offenders. They are more likely to suffer the shame of arrest, conviction and incarceration. Given these factors plus expensive lawyers, fines are affordable, prison sentences are not long and incarceration is at a minimum security lockup.

     Yet the amount of money stolen in WC crime far exceeds that of common robberies in the United States. The increasing number of prominent fraudsters and the duration of some WC criminal activity (such as Bernie Madoff's scheme) underscore the epidemic levels of WC crime. The public tends to set aside the cost to society: it is time for the scales to fall from our eyes.

     What follows is a sampling of WC criminality taken from recent newspaper articles:

In Rochester, NY, the FBI raided a Pawn Shop that was the center of a multilayer criminal enterprise with street-level criminals. The Shop was the hub for stolen property. Investigators seized $241,000 in cash, three vehicles and more than a million dollars worth of property. Nine bank accounts held a total of $461,000.

In Center, Texas, a DA allowed drug runners and money launderers to receive light sentences if they forfeited their cash to prosecutors, who collected more than $800,000 in less than a year. The system was engineered by the Shelby County District Attorney, Lynda Kaye Russell.

Five NY police officers smuggle firearms and slot machines and pilfered hundreds of boxes of cigarettes worth more than $500,000 from tractor-trailers as part of a 12-person theft ring.

New York. To fatten year-end bonuses, a Credit Suisse executive and two employees conspired to hide the failing condition of the USA housing market in 2007 to keep values of bonds based on subprime bonds artificially high. Millions of dollars were to be received. "It is a tale of greed run amok,"� officials announced.

Dallas, Texas. A health care fraud scheme bilked Medicare and Medicaid of $375,000.Medicare was billed for home health services that were not medically necessary or not done. Others charged in the scheme included owners and employees of health care businesses.

Federal authorities charged 107 doctors, nurses and social workers in seven cities with Medicare fraud in a nationwide crackdown on scams that bilked the taxpayer-funded program of $452 million. Such fraud costs the government up to $90 billion each year.

New York. Standard Chartered Plc settled a NYS money laundering probe for $340 million. I helped Iran launder 250 million in violation of federal laws.

Ex-New Orleans mayor Ray Nagin charged with bribery, fraud. The case alleges that Nagin awarded contracts to contractors in exchange for $200,000 in kickbacks and first-class trips to Hawaii, Jamaica and Las Vegas.

Montana family accused of $70 million in bogus phone charges tacked onto customer phone bills nationwide. The money was then laundered through a religious organization to buy property and pay for the husbands legal bills. Since 2008, $40 million was returned after customer challenges.

Millions of cigarettes were seized in a NYS Cayuga tribe convenience store as well as more than $550,000 from a bank account connected to the shop. In 2012, more than $16 million was deposited in the stores bank account. The cigarettes did not include a NYS tax stamp required by law. Money laundering is alleged with the cash flow from the shop.

Detroit ex-mayor Kwame Kilpatrick was convicted of running a criminal enterprise complete with extortion, bribes and kickbacks while in office. He and friend Bobby Ferguson ran a racket out of the mayors office. He was convicted on 24 of 30 counts. Both could spend up to 20 years in prison.

The Superintendent of Atlanta Public Schools and three dozen others were indicted on charges of racketeering. There were false statements and theft in one of the nations largest test cheating scandals. Bonuses received were tied to falsified test scores.

Rita Crundwell, a leading horse breeder, embezzled more than $53 million from the town of Dixon, Illinois, which has a population of 16,000 and an annual budget of $6 to $8 million. As Dixons comptroller, she carried her scheme for twenty years until it was revealed she had a bank account and was taking city money to finance a lavish life style. Her brazen activity earned her the moniker of "Pink Collar Mafiosa"�. She is currently serving a long sentence in a West Virginia prison.

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