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White Collar Crime Study Guide

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*corporate crime: any act committed by a corporation that is punished by the state, regardless whether it is punished under administrative, civil, or criminal law *corporate violence
* price fixing: industry leaders set inflated prices & competitors adjust their own prices accordingly *price gouging: when a seller prices items unreasonably high or unfair. *predatory pricing: the or acting of selling a product or service at a very low price, intending to drive competitors out of the market *robber barons: (Rockefeller, Carnegie) were involved in every manner of bribery, fraud, stock manipulation, price gouging, exploitation of labor, etc. *Sherman Antitrust Act: prohibits any agreement among competitors to: -Fix prices

-Rig bids
-Engage in other anticompetitive activity
*Adulterated goods: when ingredients of a good are poisonous, filthy, putrid, otherwise unsanitary or contaminated * Paper entrepreneurs: investors who are principally concerned w/ short term profit *Fracking: the process of extracting natural gas.

*Misbranded goods: use of false or misleading information, labels, packaging, or containers *Love Canal: toxic waste case. schools and residents built around the area were exposed to fumes and chemicals. It was linked to more than 5000 deaths and Hooker was forced to pay 20 million to the residents. *Federal Food, Drug and Cosmetic Act: designed to protect the health & safety of the public by prohibiting the sale of dangerous goods -Prohibits the adulteration or misbranding of any food, drug, device, or cosmetic interstate commerce. * Ford Pinto: it had defects and automobile products that contributed to accidents and fatalities despite greater attention to safety features. *Johns-Manville case: he was guilty of selling materials that contained asbestosis and fraud and conspiracy. *Anti-kickback Act: prohibits the offer, solicitation, payment, or receipt of anything which is intended to induce the ordering or prescribing of an item that falls under a federal healthcare *Horizontal price-fixing: agreements among sellers to establish maximum or minimum prices

*Vertical price-fixing: a wholesaler sets price at which retailers may sell certain products *Chargebacks: are deductions stores take to reduce their payments to suppliers b/c of defective or unwanted merchandise *Price Bullying: refusing to pay a manufacturer a fair price for goods even when cost of production increases *Trademark Infringement: “passing off”; the maker of a product uses a name, logo, or other identifying the characteristics to deceive consumers into thinking that they are buying a product of a competitor *Corner Goods: those products that a customer knows the going price for and are likely to shop for the best deal *Four Loko Case: FDA determined that caffeine as used in Four Loko was an unsafe additive, therefore the product is considered adulterated Corporate Crime Key Points

• The role of the corporation in modern society: the pursuit is the principal rationale for the corporation • The various forms of corporate violence that are directed at the public, consumers, and Workers and how it differs from conventional violence

Public: T
• The various forms of abuse of power, fraud, and economic exploitation that are directed at citizens and taxpayers, consumers, employees
Occupational Crime Key Terms
*Academic Crime
*Caveat Emptor: let the buyers beware; has traditionally regulated the relationship between buyers & sellers *Unbundling: billing for higher procedure codes than performed *Conflicts of Interest: professional role conflicts w/ own private interests as an individual *Embezzlement: act of dishonestly withholding assets for the purpose of theft of such assets by one or more individuals. *Employee Crime

*Fraud: intentional deception for personal gain or to damage another individual. *Company Property: refers to mainly basic, bulky, components, & tools *Personal Property: monogrammed clothing, wallets, jewelry, personal modified tools, etc. *Short weighing: just know that this is a type of retail crime. *Bait-and-switch: just know that this is a type of retail crime. *Property of uncertain ownership: small inexpensive items like pens, pencils, nails, bolts, drill bits, etc. *Legal Crime: lawyers engaging in criminal conduct in the course of discharging their professional duties *Medical Crime

*Intellectual Theft: stealing one’s work/ ideas & producing it as your own *Occupational Crime: crimes committed by individuals for themselves in the course of rendering a service. *Religious Crime: illegal or harmful conduct committed specifically in the context of their religious entity *Upcoding: billing for higher procedure codes than performed *Retail Crime:

* Plagiarism:
*Professional occupations: are characterized by higher education & training, technical knowledge & skills, & a high degree of autonomy *Gang visits: billing for multiple visits
* Ping-ponging: referring clients to other physicians in the same office *Family ganging: trying to get the whole family in for check-ups * Steering: directing patients to particular specialists or pharmacies *Chiseling: refers to cheating or swindling

*Pilfering: refers to petit theft
*Fraud: is theft through misrepresentation
*Embezzlement: refers to the destruction or fraudulent appropriations of another’s money which has been entrusted to one’s care Occupational Crime Key Points
• The different occupational crimes committed by small businesses
*Fraudulent advertising
*illegal pricing practices
*sale of fraudulently represented merchandise
*purchase and resale of stolen goods
• The different occupational crimes committed by employees
*theft of ideas, designs, and formulas.
*employees may commit sabotage meaning they conceal their own errors, to gain time off, to express their contempt and anger with their work and employer. • The different occupational crimes committed by professionals in
the: -medical

*taking or offering kickbacks
*false and fraudulent billing
*unnecessary procedures
*discharging their professional duties (covering up things) -academic
*false claims about credentials
*phony research
*Intellectual theft
*using offerings or donations for corrupt purposes.
*may generate bottomless well of trust among gullible believers.
*Ex. Jim and Faye Bakker of PTF Ministries in the 80s and Benny Hann in the 2000s

• Know the findings from David Caplowitz’s research on abuses of the poor -Being overcharged
-Sold inferior goods
-People victimized by:
*deceptive credit practices
*Complicated contracts
*lawsuits threatening wage garnishment
• Know the costs associated with unnecessary automobile repairs (Millions? Billions? Trillions?)

-BILLIONS are spent on unnecessary repairs annually
• Know the findings from research on employee theft:
-more likely to be young unmarried males
-more likely to steal from large organizations than small ones -Employees dissatisfaction=higher rates of employee theft -Opportunity is a major determinant of employee theft
*Those with greater access to things worth stealing are the most likely to do so Finance Crime Key Terms
*Securities: a financial instrument from which an investor expects to gain financial benefit *Derivatives: allow risk related to the price of the underlying asset to the transferred from one party to another *Hedging: Making an investment to reduce the risk of an unfavorable price movement for an asset. *Hedge Fund: an investment fund that can take on a wider range of investment and trading activities, but which is only open to certain investors specified by regulators * Savings and Loan Fraud:

* Insider trading: The illegal practice of trading on the stock exchange to one’s own advantage through having access to confidential information. * Sam Waksal: arrested on insider trading charges for charges for informing friends & family to sell their stock, & attempting to sell his own *ImClone Case: stock prices dramatically after drug was not approved by the FDA *Martha Stewart: sold about $230,000 in ImClone shares just a day before the announcement of FDA decision; found guilty & sentenced to 5mths in prison, 5mths home confined, & 2yrs probation. NOT FOR INSIDER TRADING , but for lying about a stock sale, conspiracy, & obstruction of justice *Raj Rajaratnam: Former hedge fund manager and founder of Galleon Group in NY, arrested on allegations of insider trading and was found guilty. *Investors: buy securities in order to gain the interest involved in loaning their money; can be individuals, or companies like AIG, school districts, etc *Incentives:

*S&L Crisis:
*Commercial bank: take deposits; lend money; sales & brokerage of financial products; cash management *Investment bank: DO NOT take deposits from customers; oversees the issuance of securities *Glass-Steagall Act: limited commercial bank securities activities & affiliations b/tween commercial banks & securities firms *Gramm-Leach-Bliley Act: cited as an important cause of the financial crisis. under president clinton and it appealed the restrictions of the glass steagall act. *Thrift: a financial institution that accepts savings deposits and makes mortgage, car, and other personal loans to individual members. *The 1982 Garn-St. Germain Act: this deregulated the savings and loans associations and allowed banks to provide adjustable-rate mortgage loans. *Parking: sale of a security that are purchased to be purchased by the seller at a later time. This manipulates supply and demand. *Churning: stock broker sells stocks in order to make money off of client. *Raghuram Rajan: Former President of the American Finance Association (AFA), and was previously the chief economist of the International Monetary Fund (IMF). *Smurfing: Breaking large sums of money into many smaller units so as to not have to report it to the Treasury Department.

Finance Crime Key Points
• Have a basic idea about how derivatives are used
• The various financial crimes: Money Laundering, Securities Fraud, Insider Trading, and Savings and Loans Crisis. • The insider trading cases involving ImClone and Galleon Hedge Funds: ImClone: Samuel Waksal was convicted for giving information to family and friends to sell their stocks before FDA released information stating that drug was not approved. Marth aStewart arrested because she lied about stock sale and lied (conspiracy and obstruction of justice.) Galleon Hedge Fund: Raj Rajaratnum (founder of the hedge fund) was sent to jail for securities fraud, believed to have obtained inside information from various companies. Sentenced to 11 years in prison with 92.8 million dollar fine. • The various tactics that banks use to maximize their profits and cheat customers out of interest or charge excessive fees

Overdraft fees,
• Be familiar with the basics of the S&L crisis of the 1980s this was dubbed as the biggest bank robbery ever. it was the failure of about 747 out 3234 savings and loan associations of the US • Be familiar with Rajan’s argument about the structure of incentives for traders/managers managers compensation should be sensitive to investment returns, however that is often not the case. the rewards for executives for good transactions far outweigh the negatives for bad ones. less punishments and more reward for investment returns gives managers the incentive to take more risk. the differential association theory explains this. • Know the issues surrounding credit ratings

Fraud and Cyber Crime Key Terms
* Fraud: stealing by deception
* Identity theft:
*Phishing *”Boiler Room” Scams: a room where salesmen work using unfair, dishonest, sales tactics * Computer viruses:
* Worm: a more malicious stand alone piece of code which does not change computer files and can reproduce itself and transfer from computer to computer. *Trojan horses: refers to unauthorized program contained within a legitimate program that performs functions unknown by the user. * 4 phases of a virus: dormant phase. propagation phase. triggering phase. and execution phase. * hacking: one who gains unauthorized access to a computer system file or network by using their specialized knowledge of computers. *white-hat hackers: “ethical” hacker, one who exploits the weakness of a computer system to point n out vulnerabilities but not for personal gain *black-hat hackers: seek out vulnerabilities & exploit them for malicious purposes such as personal gain, or to steal or destroy data

* Kevin Mitnick: one of the most wanted computer criminals in the US convicted of various computer related crimes. gained unauthorized access to dozens of computer networks such as the FBI, IBM, Motorola, and Nokia. *dumpster diving: rummaging through the victims trash or trash of businesses to “mine” personal data *4 Environments of a virus: file virus, boot viruses, macro viruses, and network viruses. *Backdoor Sub Seven Trojan: once installed allows a remote attack virtual control over the infected machine. *Identity Theft

*Nigerian “419” Fraud: spam emails, and monetary compensation for personal information. *Shill Bidding:fake bidding done by seller to inflate the prices. *Click Fraud: advertisers pay for each click on their ads. Competitors may be deliberately driving their advertising costs up by fraudulently clicking on their advertisements. *CFAA: designed to proscribed classified information contained in government computers. Expanded in 1986 to 1996 to cover most fraudulent business practices which one conducted over the internet. *Social Engineering: the act of manipulating people into performing actions or divulging confidential information rather than by breaking in or using technical cracking techniques. *Computer Crime: refers to crimes in which the perpetrator uses special knowledge about computer technology. *Fraud: as it relates to computer crimes, fraud represents any use or trickery, deception, or falsification involving computers to obtain money, services, or property. *Ponzi or Pyramid Schemes: Pyramid schemes involve a product while ponzi schemes just shuffles money around. *Cybercrime: refers to crimes in which the perpetrator uses special knowledge of cyberspace. *Data Diddling: a procedure used by insiders to place false information into a computer as in placing a false name on a payroll or paying a fradulent bill. *Phreaking: telephone hacking

*Hitman Scams: an emailer claims to have been sent an assassinate a victim, but the victim would be spared if he/she wires money overseas *Job site scam: victims are persuaded to provide personal information or copies of payroll checks only to find their bank account drained. *Pigeon drop

Fraud and Cybercrime Key Points
• The various types of cyber crime: this is a variety of crimes using the computer such as child pronography, hate crimes, telemarketing, and internet fraud. • The common types of viruses and malicious code:

Trojan Horses, Worms, File Viruses, Macro viruses, Network Viruses, and Boot Viruses. • The different types of hackers: White hat-hackers and Black hat-hackers • Be familiar with common fraud schemes including Ponzi and Pyramid Schemes Bernie Madoff- Ponzi Scheme

Mona Vie Acai Berry Juice- Pyramid Scheme
• Pay close attention to the wide array of schemes described in your reading o Pages 160-170; 173-180; 185-187; 268-276

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