Three-Minute Legal Talks: All About White-Collar Crime
Often misperceived as victimless offences, white-collar crimes can ruin the financial standings of unsuspecting investors and upend the public’s trust in legitimate business operations. Coined by sociologist Edwin Sutherland in 1939, the term refers to the occupational status of its most common offenders, and encompasses a wide range of illegal acts, including money laundering, fraud and bribery.
Most white-collar crimes tend to be non-violent in nature and can be difficult to detect, especially for long periods of time. These misdeeds, however, can cause long-lasting ripple effects in the economy, and have brought about some of the most sweeping legislation pertaining to the financial industry.
In three minutes, Jeannine Lemker, director of UW Law’s Entrepreneurial Law Clinic, explains what white collar crime is, the motivations behind it, and what harms it can cause.
Read the Transcript
Jeannine Lemker: Hi, I'm Jeannine Lemker. I’m an acting assistant professor and the director of the Entrepreneurial Law Clinic at UW Law.
UW Law: What is white-collar crime?
Lemker: White-collar crime generally refers to offenses designed to produce financial gain that can be committed by both entities — businesses — or individuals and tend to be nonviolent in nature. Examples would include various types of fraud, public corruption, bribery, insider trading and money laundering.
UW Law: Can you provide some examples of white-collar crime cases that people might be familiar with?
Lemker: A good example is Theranos and Elizabeth Holmes. For many of you who've read Bad Blood, it describes a fraud that Elizabeth Holmes and her coconspirators committed by taking money from potential investors into a company called Theranos that was designed to provide an automatic device for blood therapeutics that ultimately didn't work and had no value. Ultimately, as a result, she was convicted of conspiracy to commit wire fraud and nine counts of wire fraud and found guilty in 2022.
Another example would be New York City Mayor Eric Adams, who was recently indicted by the Southern District of New York for using his position as mayor, and in prominent positions in government, to obtain illegal campaign contributions and luxury travel from both U.S. and foreign nationals. As a consequence, the government charged him in September with bribery, campaign finance and conspiracy offenses.
UW Law: What leads people to commit white-collar crimes?
Lemker: There are quite a few reasons, I think, out there that people consider. I'll give you three. The first is that they have a hard time connecting public harm to their actions. They see them as small decisions that are instead actually in the aggregate making more money for the company.
The second is that in a world where executives are asked to be innovative and creative, they often get as close to the line as possible to make decisions and work often in the gray, but every time that happens that line moves a bit more to the point where ultimately you go from legal to illegal.
The third is the idea that if this was so wrong, someone would have told them.
UW Law: Why do white-collar crimes tend to go undetected for long periods of time?
Lemker: They tend to start quite subtle and working in the gray area. So, it's not very clear that a crime has been committed right off the bat. Instead, it's the aggregate of decisions or a structure of a transaction that ultimately pushes it over the line into something that's not gray, and in fact, black and white to be a fraud or a crime.
They're often complex as well, and by their very nature, hidden in a massive amount of legitimate business within a company. And so, they can be really hard to find quickly and easily, particularly without the help of insiders, whistleblowers or other investigative tools.
UW Law: How can white-collar crime affect the economy?
Lemker: Well, in a number of different ways, but I'll give you two really important ones. The first is that they have driven some of the most consequential economic legislation we've seen in the last 25 years, imagining laws like Sarbanes Oxley and Dodd Frank were born out of very significant corporate scandals that rocked the economy, frankly, in the wake of the 2008 financial crisis. Or, in 2002, when Enron and Arthur Anderson went down.
The second is really the backbone of our economy, which is capitalism and free markets. So, if you imagine a world where we didn't punish a company for being in a monopoly, or we allowed companies to report whatever they wanted in terms of earnings or valuation, it would undermine the sense of transparency and fairness that's inherent to that capitalistic economy and investing decisions we all get to make every day.
It would also hinder, you know, small businesses and new businesses in having a fair shot in joining the economy and promoting different capitalist ideals and products and services, and it may even destabilize the U.S. Dollar as a consequence.