Corporate crime is a form of fraud that is closely related to “white-collar crime,” which takes place in business organizations and other corporate institutions such as banks, manufacturing industries, and non-governmental organizations. Unlike organized crime which may involve illegal street activities such as kidnappings and cross-border operations like drug trafficking, corporate crime involves “clean jobs” like manipulation of accounting records by finance officers, insider trading, misappropriation of funds, tax evasion, etc. However, both forms of crime require some degree of financial, social or political influence to be successfully carried out. This is because although organized crime is not exclusive to a specific race, profession or class, “many studies have shown that those with power, influence, and respectability in local, regional, national, or international society have tended to organize crime more successfully and securely than those without” (Woodwiss, 2001, p. 3). Further, as Edwin Sutherland (1939) once observed, corporate crime is a large-scale version of white collar crime, because it involves people of high-class society, committed in the course of their occupation. Thus, the two forms of crime (white-collar and corporate) overlap each other because they all happen within similar environments, in which the incentives are high for an individual or group of individuals to engage in bribery, money laundering, insider trading, forgery, and embezzlement. As in organized crime, the market is similar in both cases, since “the same market forces and factors that apply to legitimate (corporate) business markets are also mirrored in crime markets” (Dean, et al., 2010, p. 144). This paper discusses the similarities and differences between corporate and organized crime.
Perhaps the common denominator in both corporate and organized crime is the influence of money as the ultimate goal. As Jeffrey Sachs, Professor of Economics at Columbia University notes in The Global Economy’s Corporate Crime Wave, money talks, and it is the vice that corrupts politics and markets around the world. In the world’s big economies where mega-scandals thrive, such as in the U.S., “Every Wall Street firm has paid significant fines during the past decade for phony accounting, insider trading, securities fraud, Ponzi schemes, or outright embezzlement by CEOs” (Sachs, 2011, p. 1). It is corporate crime involving insider trading and manipulation of financial records that is presently shaking Wall Street, beginning with ENRON’s concealing of a staggering$50 billion debt in 2001. Similarly, it was the same kind of fraud that, in 2007, saw a number of supermarkets and dairy companies in the UK get fined $116 million for price fixing so as to artificially keep milk and cheese prices and profits high amidst a collapsing economy (Browne, 2011, p. 225). In this regard, the pursuit of financial gains through illegal means is what essentially ties corporate and organized crime together. Organized crime, such as mafias, engages in illegal activities such as drug and human trafficking for the sole purpose of making money. Likewise, companies engage in fraud in situations when keeping to the book rules will minimize profits, or lead to losses and, eventually, bankruptcy. Without money, the incentive of taking the risk will be absent, thereby eliminating the need for undertaking a venture that, if caught, is punishable by the law.
Both corporate and organized crime operates at a global level, thereby making it difficult for governments to adequately deal with their illegal activities. Big companies operate as multinationals, which allows them to carry out their activities in several countries. Consequently, it is not easy to monitor each of every financial transaction that is conducted by a multinational company. In a similar situation, organized crime can operate across international borders, making it equally difficult to track their activities. For instance, the trafficking of drugs from Mexico and Colombia into the U.S. has been a persistent problem despite efforts by the U.S. authorities to curb it. In addition, their financial muscle affords corporate and organized crimes legal protections against state authorities. More often, they both have access to unlimited financial resources, which help them to hire the best legal services to challenge any charges against them. Moreover, corporate and organized crime thrive because they sometimes buy political connections by funding election campaigns of favorite candidates. In some cases, politicians hold shares in companies that later get involved in scandals, and their power connections shield them from prosecution. Thus, the close connections that exist between wealth and power on the one hand, and the law on the other, make it impossible for state authorities to rein in corporate and organized crime.
Another point of similarity between corporate and organized crime is on the source of capital for some corporate organizations. In certain circumstances, whereby perpetrators of organized crime may need to “clean” ill-gotten wealth, such as drug trafficking money, they may set up legitimate corporations for the purpose of money laundering. Therefore, corporate crime may relate with organized crime in that sometimes the former benefits financially from the latter (such as using mafia money as business capital), while corporate activities are used as a front to legitimize illegal wealth through money laundering.
Organized crime involves an association of individuals with close social ties, who cooperate in carrying out illegal activities for the purpose of achieving power and financial gains. Generally, organized crime involve “the illegal activities carried out by structured groups of three or more persons existing for a prolonged period of time and having the aim of committing serious crimes through concerted action by using intimidation, violence, corruption or other means in order to obtain, directly or indirectly, a financial or other material benefit” (Council of Europe, 2002, p. 6). The purpose of organized crime is to exploit illegal markets for monetary gains at the expense of society. In this regard, organized crime is similar to corporate crime in that no specific individuals are singled out as victims. However, organized crime is so dynamic that it can involve almost any illegal undertaking from street drug peddling, to murders and kidnappings for ransom. Consequently, corporate crime requires may require exceptional planning and organizational skills as well as extensive networks of participants, and this is what enables organized crime mobs to be versatile and dynamic in their activities (Kirby & Penna, 2010, p. 195)
Additionally, informal hierarchies exist in organized crime, whereby members, usually family members, occupy ranks that determine their duties. Mafias, such as the Sicilian Nosa Costra in Italy are the perfect example of organized crime. The common consensus is that
Organized crime functions as a continuing enterprise that rationally works to make a profit through illicit activities, and that it insures its existence through the use of threats or force and through corruption of public officials to maintain a degree of immunity from law enforcement, and more often than not, specialize in profitable yet illegal goods (Albanese, 2000, p. 411).
The functioning of organized crime differs from corporate crime in the secretive manner in which they carry out their activities. While corporations are usually legitimate and publicly known businesses engaging in legal activities, organized crime, on the other hand, include secret groups whose members remain strive to remain anonymous. Their activities and members are secretive in nature because their success entirely depends on the ability to evade detection by law enforcers. In contrast, corporate crime such as price fixing may be committed openly in the guise of a legitimate activity, using fraud and deception (Bologna & Shaw, 1997, p. 93).
While financial gain is the end result in both corporate and organized crime, they both often use different means to achieve their goals. Organized crime aims to establish a monopoly and market control of a given industry or territory. Thus, rivalry and competition may emerge between different mobs fighting for territorial or industry control. For instance, a gang may intend to control the drug market, or a given town. On its part, corporate crime almost always involve “inside job,” in which employees or investors make decisions or take actions that influence the stock value in desired ways. Additionally, the term “organized crime” does not necessarily imply the existence of rigid structures of command and responsibility as in corporate enterprises, but refers to a loose coalition of individuals who operate on mutual understanding and explicit rules, often enforced by sanctions and death threats (Abadinsky, 1990, p. 6).
There are a number of feature that make organized crime distinctly different from corporate crime. Organized crime is uniquely hierarchical, whereby decisions are made by mafia bosses, commonly referred to as “godfathers,” and executed by the ground soldiers, the individuals who operate at the street level. A notable similarity between corporate and organized crime is what Edwin Sutherland identified as the desire to avoid making one’s hand dirty. Organized crime achieves this by employing several go-betweens so as to distance the top leadership from a criminal activity. For example, mafias often use unsuspecting individuals to transport drugs, or “henchmen” to carry out a murder. The foot soldiers know little or nothing at all about the organization’s activities, hence little risk of exposing the inner circle in case of arrests or betrayals
Secondly, organized crimes rarely have political goals or connections. This is because they are illegal from the very beginning, and usually make efforts to avoid recognition. In contrast, business companies do not specialize in illegal activities as their core activities, but break the law occasionally when the need arises. For example, a company may tamper with financial records once in a while so as to evade paying tax. As such, business companies may seek political connections as a lobbying tool and business strategy, especially in securing lucrative government contracts. Moreover, some political leaders are former executives who retire to seek political office, but maintain their former business contacts. These ties help business companies to engage in fraudulent activities with impunity, with the knowledge that legal prosecution is an unlikely eventuality.
Membership in corporate crime is exclusive and limited. Accordingly, one does not get into organized crime on the basis of merit as in corporate occupation, but rather on the basis of kinship or friendship (Abadinsky, 2010). This is because as a venture that engages in long term illegal activities, organized crime depends on the trust and loyalty of its members to survive. As a result, most organized crimes are run by families or close relatives, who can be relied upon to keep important secrets. As a further precaution, organized crime maintains underground networks that help in performing activities.
Perhaps the most remarkable distinction between corporate and organized crime is the prevalence for violence and intimidation in the latter. Sometimes, organized crimes earn impunity by corrupting/buying out government officials, threatening and instilling fear in potential informants and law enforcers. This may be in the form of death threats targeting individuals, close family members, or attack on one’s financial assets as revenge for betraying or compromising the organization’s illegal activities.
Gilbert Kelland observes that one of the challenges in dealing with organized crime is recognizing its existence, given that secrecy is a vital feature of most underground, illegal ventures. He states that “While the majority of crimes are poorly planned, frequently violent and generally not enormously financially rewarding, organized crime, committed by rational and intelligent individuals, is well planned and always aimed at an immense financial gain” (Kelland 1987, 356). The same characteristic is also common in corporate crime, where activities like insider trading and manipulation of financial records are carried out quietly and discreetly, and taking utmost care not to alert the relevant authorities.
In this respect, the Rational Choice and Routine Activity theories apply to both corporate and organized crime in terms of their motivations. The rational choice theory posits that individuals weigh the risks and rewards of a criminal offense before carrying it out. As noted before, corporate crime overlaps with white-collar crime as it involves individuals who commit offences in the course of their duties. As rational beings, the people involved make judgments regarding the nature of the risk involved and the gains to be made (Briggs, 2009, p. 177). Thus, even with the knowledge that insider trading or tax evasion is illegal and punishable, the associated financial gains overshadow such considerations. Moreover, corporate crime may take place after the company’s executives had determined that any fines to be paid are just a tiny fraction of the proceeds to be gained from a fraudulent activity. Similarly, organized crime such as mafia activities are often motivated by the knowledge that part of the accrued profits can be used either in hiring legal services or bribing law enforcers to subvert the course of justice.
The Routine Activity Theory argues that favorable conditions must exist to compel individuals into committing a criminal offense. Chief among them include the opportunity to commit an offence and absence of deterrents, such as law enforcers (Felson, 2009). Corporate and organized crime take place largely because perpetrators are presented with the opportunities to jump the law. For instance, a porous international border can encourage drug trafficking, while the safety and privacy of work place environments, such as personal offices, makes it possible for employees to secretly carry out corporate crimes without attracting suspicion.
In conclusion, both corporate and organized crime is motivated by financial gains. They are perpetrated by people with influence, either through their occupational positions or class in society. Similar motivational and environmental factors such as absence of law enforcers and rewards also play a role in influencing corporate and organized crime. Nevertheless, the two forms of crime differ in terms of the nature of activities the means employed to achieve their goals. While corporate crime takes place within a legitimate context and employs treachery, organized crime is secretive and “underground-based,” in addition to relying on violence, threats and bribery to evade the law.
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