White-collar crime is quite an incredible industry – millions of dollars disappear each year to offshore bank accounts, hookers, drugs, and yachts because rich executives (generally rich white guys) aren’t satisfied with their Porsches. White-collar crime finally got some serious attention when corruption single-handedly destroyed the lives of four thousand Enron employees at the start of the economy’s downturn.
These days, criminology theories often blame the economy for the rise in these types of crimes. White-collar workers are losing money in the stock market and finding themselves unemployed. They want to maintain their same standard of living, which leads to Office Space style scenarios.
It generally consists of lying, cheating, and stealing. It’s normally a non-violent crime, but can wipe out the savings of entire families. (See scams such as the one in the movie Boiler Room.)
So what are the biggest all-time white-collar crimes in America, and does the criminology behind it change from case to case?
Top 5 Infamous White-Color Criminals and Their Crimes
5) Insider Trading: Ivan Boesky and Michael Milken
Pilfered: $200 million
In the 1980s, some of the big guys on Wall Street made millions through inside trading. The law was already in effect when Ivan Boesky was sold out by Dennis Levine for large-scale insider trading. Boesky in turn implicated Michael Milken. Milken and Boesky were the face of the largest corporate fraud scandal for a decade. Now insider trading is more commonly associated with our pal Martha Stewart.
Dennis Levine purchased a large amount of Nabisco stock just before a merger, then immediately sold them for a large profit. This got the SEC’s attention, and Levine turned in Boesky, who then turned in Milken.
4) Enron Corporation (Kenneth Lay and Jeffrey Skilling)
Pilfered: Over $1 billion
What appeared to be an incredibly successful company in a short period of time was in fact an incredibly complex scam. For fifteen years, executives of Enron fudged reports, used accounting loopholes, bribed foreign governments for contracts, and hid failed deals and projects. All in all, they were able to hide billions of dollars in debt from their investors, while manipulating and damaging the California energy market, and the Texas power market.
Victims: California energy was one of the big victims, but some 4,000 employees went from a cushy salary to unemployment when the company was swiftly brought down.
The Enron stock was trading at 55 times its earnings; analysts and investors did not know how it was making its income, and Bethany McLean shone light on this situation in her article, Is Enron Overpriced? She found strange transactions, erratic cash flow, and huge debt when she viewed the company’s 10-K report. When Enron reported $638 million third-quarter loss that October, the SEC began an inquiry to the company’s accounts, and it was all downhill from there.
3) WorldCom and Bernard Ebbers
Pilfered: $3.8 billion (Some sources state up to $11 billion in fraud took place.)
The second-largest long-distance telecommunications company in the U.S. didn’t get there with honest hard work. Though Bernard Ebbers began growing the company with well-timed acquisitions, a major one left them struggling, and caused their stock to suffer. Ebbers artificially inflated stock prices and cooked the books to hide the losses. He also “borrowed” $400 million from WorldCom to finance his other businesses.
Victims: Investors, and WorldCom, which filed for bankruptcy immediately
A team of internal auditors uncovered the original $3.8 billion fraud, and then discovered billions of losses concealed through false accounting practices. Some of the funds were siphoned off for personal use. They filed bankruptcy in 2002, and it was the largest filing at the time.
2) Adelphia Communications and John Rigas
Pilfered: $60 billion
In the 1950s, Adelphia Communications was founded, and in just a few decades became the fifth largest cable company in the country. It was a rags-to-riches-to- prison story that landed Rigas and his son behind bars. The head honchos hid $2.3 million in liabilities from investors, and failed to record $3.1 million in loans. He inflated Adephia’s subscriber growth and lied about their bottom line. He used company money for personal use, including investing in a golf course, and building luxury condominiums.
Victims: Investors and employees
The SEC actually caught Adelphia after taking a good look at the company’s financial statements and finding a loan for millions of dollars to John Rigas. As soon as the news hit Wall Street, the stock dropped from its peak of $66 a share, to 15 cents a share. Rigas was indicted for securities, bank, and wire fraud in 2002; he and his sons were also charged with tax evasion. John Rigas is currently serving the remainder of his 15-year sentence.
1) Bernard Madoff
Pilfered: $65 billion
Probably the biggest corporate con in history, Madoff created a huge Ponzi scheme by encouraging huge investments from individuals and corporations around the world. Their payoff came from future investments, not legitimate returns on investments, while he kept the payoff.
Victims: Mostly wealthy New York Jewish businessmen were targeted, though he also took advantage of charity circuits and country clubs.
Similar to the cause of the Great Depression, when the recession came around about a decade ago, investors tried to pull out around $7 billion from the fund. Obviously that money was no longer available, and Madoff’s scheme was uncovered. The person to finally turn him in? His son.
It seems that the criminology behind these crimes are pretty much the same. Too much power and responsibility, not enough good sense.