Sucheta Dalal :Counting Corporate Crooks
Sucheta Dalal

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Counting Corporate Crooks  

July 18, 2005

We need to keep track of white collar crime in exactly the same way we keep track of murder, says this article from The New York Times.


July 16, 2005

Counting Corporate Crooks



This week, Bernard Ebbers, the former chairman and founder of WorldCom, was sentenced to 25 years in prison for his role in an $11 billion fraud that bankrupted his telecommunications company. Meanwhile, Kenneth Lay, the founder of Enron, awaits trial on fraud and conspiracy, and Dennis Kozlowski, the former chief executive of Tyco, is soon to be sentenced after being convicted, along with his chief financial officer, of stealing $150 million from the company and reaping $430 million more by selling company shares while inflating the stock value.


These numbers are shocking, but what's more shocking is that we don't know how many more Bernard Ebberses are out there. We have no idea if white collar crime is going up or down.


In contrast, police departments across the country must report annually to the Federal Bureau of Investigation every murder and non-negligent manslaughter in their jurisdiction - not to mention every rape, robbery, aggravated assault, burglary, larceny-theft and car theft. The bureau incorporates this information, along with arrest statistics, into a crime reporting program, which is published in a report called "Crime in the United States." As a result, we know, for instance, that the murder rate in New York City is going down.


But we don't know how many white collar crimes have been committed or how many arrests have been made in connection with those crimes. If you call the state attorney general's office, the F.B.I. or the Securities and Exchange Commission, no one will be able to tell you how many white collar crimes were committed in any year, or provide any arrest statistics. The investigators there could be doing a great job, but they might also be concentrating on a few, select cases for years, letting countless others go by.


Granted, the S.E.C. publishes the number of cases it is working on in its annual report, but this number is meaningless without knowing the total number of crimes committed. What good would it do to know that the New York Police Department arrested 50 murderers, if you don't know the total number of murders?


No one is auditing the agencies charged with investigating white collar crime the way the Department of Justice and the F.B.I. audit the police. And because the bodies of white collar crime victims are not piling up at the morgue, there is little public pressure to do so.


This should change. As devastating as murder is for the victims and their loved ones, it's a contained crime. Significant time, money and manpower are spent tracking down murderers, even though statistically, they are not likely to kill again. But the effects of corporate crime are felt worldwide, sending ripples throughout the economy in the form of decreased investment and product development. Such fraud can send innocent hard-working people, like Enron's 21,000 employees, into poverty or financial distress.


We need to have the same fix on white collar crime that we have on murder. The F.B.I. recently began trying to incorporate white collar crime into its crime reporting program, but it does not include itself among the agencies required to provide information about the crimes it investigates. Nonetheless, this is a good place to start.


In order for such a reporting system to work, however, every state and federal agency investigating white collar crime needs to submit information about these crimes. And of course, we would need to establish what exactly constitutes a white collar crime. Congress enacted the National Hate Crimes Statistics Act in 1990 requiring the Justice Department to gather information on crimes based on race, religion, sexual orientation or ethnicity; perhaps a similar mandate could be passed for white collar crime.


Sure, there are obstacles. The line between what is criminal and what is unethical can be blurry: certain accounting tactics might be dubious but not illegal, and prosecutors must demonstrate criminal intent. Murder is always murder, but accounting rules change. And without a dead body, it's harder to tell how many people are getting away with your retirement account. That said, to a conscientious and curious investigator or accountant, where there's significant fraud, there's often a big bold chalk outline in the financial statements. Perhaps the Sarbanes-Oxley Act, which outlines accounting information that must be provided to the S.E.C., which then makes it available on its Web site, could help.


Don't get me wrong, murder is horrifying, and it's right to hold murderers and the police departments investigating them accountable. But unlike many murderers sitting in prison for life, these gentleman bandits, these intelligent, educated men and women who slowly and methodically plan the crimes that wreck the future of untold numbers of people, know exactly what they are doing and who will be hurt. Their crimes of cold, selfish greed reflect, in their own way, even more indifference to life than murder.


In terms of the number of lives affected, ruined or lessened, and the cost to society as a whole, when it comes to crime in the United States, the more pervasive and devastating problem might be white collar crime. Or it might not. That's the issue: we have no way of knowing.


Stacy Horn is the author, most recently, of "The Restless Sleep: Inside New York City's Cold Case Squad."



-- Sucheta Dalal