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Corporate Crime and Abuse: Tracking the Problem

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In its 2001-2006 strategic plan, the U.S. Department of Justice explains that “precise financial losses resulting from White Collar Crime (WCC) for consumers, government, and business are unknown since no systematic data collection exists.”

In 2005, we asked the Attorney General to direct the department to produce the first comprehensive study of corporate crime in 25 years.

The FBI gathers statistics on street crime each year as part of its Uniform Crime Reports program. The FBI also measures the incidence of certain white-collar offenses -- including fraud, forgery/counterfeiting, embezzlement and a category known as "all other offenses." Since these statistics do not include all types of white-collar or corporate crime, it may be misleading for the Criminal Justice Information Services to conclude that "the arrest rates for [these offenses] are much lower than the arrest rates for property crime or total crimes in general."

The federally-funded National White Collar Crime Center is an independent non-profit that tracks certain types of white-collar crime including credit card fraud, cybercrime and embezzlement.

The Department of Justice's Bureau of Justice Statistics collects information on a number of offenses considered to be "corporate crimes," including environmental offenses, tax law violations, antitrust, food and drug, bribery, fraud, perjury and obstruction of justice. For example, the Compendium of Federal Justice Statistics (available for years 1994-2003) reports data on matters referred to U.S. Attorneys. This data is also made available to the public through an on-line database organized by statute. (1994-2003). Reports using this data have been compiled by the Transactional Records Access Clearinghouse, maintained by Syracuse University.

In addition, the U.S. Sentencing Commission compiles data each year on organizational defendants.

Unfortunately, there is some confusion when the term "corporate crime" is used. "Corporate crime" usually refers to organizational crime. But organizations are not readily identifiable in most federal criminal justice databases. (The U.S. Sentencing Commission has a separate database for organizations sentenced under Chapter 8 guidelines.)

"Corporate crime" is often confused with "white-collar crime." But "white-collar crime" has many definitions. It is usually meant to indicate crimes by individuals in prestigious positions. And sometimes corporations themselves claim to be the "victims" of white-collar crime (e.g. embezzlement). In the Enron case, for example, an investigative report to the company's board depicted the company as a victim of crimes committed primarily by the company's Chief Financial Officer against the company and its shareholders.

Even the FBI, a supposedly nonpartisan agency, has not been able to avoid political struggles over the definition of white-collar crime. During the 1980s, the Bureau defined white-collar crime as any act involving concealment or guile in which payment was avoided, money lost, or personal or business advantage was gained, without the use of force. The definition is vague enough to incorporate certain types of corporate crime as well as welfare fraud, thus persuading groups across the political spectrum that it was focused on the most important types of crime.

Rates of White-collar crime are tracked by PWC Global (e.g., see their 2005 report), which reported a rise in fraud between 2003 and 2005. The Association of Certified Fraud Examiners publishes an estimate of the cost of occupational fraud and abuse in the United States -- which they said was a staggering $600 billion in 2002, up from $400 billion in 1996. The association's estimate works out to 6 percent of employers' revenue, or $4,500 per employee. (These crimes are considered crimes against the corporation by employees, not corporate crimes against outside interests or employees).

After Enron, the Department of Justice established an inter-agency Corporate Fraud Task Force, which issued reports in 2004 and 2003, and maintains a list of significant criminal cases and charging documents for major accounting fraud and other financial crime cases. (For more on Enron and other recent scandals, see the Houston Chronicle and Citizen Works' corporate scandal sheet, and Scandal Inc. (CNN/Money Magazine), and the CRS' 2003 Report, which was updated in May 2006.

Enough evidence gleaned from different sources allows us to conclude that corporate crime causes far greater damage than violent street crimes each year, even though the latter receive far greater attention by the law enforcement community and (usually) the media.

For example, in its 2001 report the FBI estimated that the nation's total loss from robbery, burglary, larceny-theft and motor vehicle theft in 2001 was $17.2 billion -- less than a third of what Enron alone cost investors, pensioners and employees that year.

Differing studies suggest the magnitude of corporate crime is much greater:

** In 1979 the Justice Department issued “the first [and last] large-scale comprehensive investigation of corporations directly related to their violations of law.” Justice found that “approximately two-thirds of large corporations violated the law, some of them many times” over just a two year period (1975-1976). Actions that affected consumer product quality were “responded to with the least severe sanctions." (See “Illegal Corporate Behavior,” U.S. Department of Justice, Law Enforcement Assistance Administration, National Institute of Law Enforcement and Criminal Justice, October 1979.)

** In 1996, the Government Accounting Office (GAO) estimated the cost of healthcare fraud to be between 3 and 10 percent of all health care expenditures -- as much as $100 billion each year. Malcolm Sparrow of the Kennedy School of Government at Harvard estimates that the figure could be as high as 30 to 40 percent of total health care expenditures.

** In his pioneering 1949 study, White Collar Crime, Edwin Sutherland found that the 70 large corporations that he surveyed had an average of approximately four convictions each. In many states persons with four convictions are defined by statute to be “habitual criminals.” The frequency of criminal convictions of large corporations, Sutherland suggested, demonstrated the “fallacy of conventional theories that crime was due to poverty or to the personal and social pathologies connected with poverty.” Sutherland was particularly harsh in his characterization of corporate war profiteering (“profits are more important to large corporations than patriotism”), fraud, and evasion of taxes, characterizing white-collar crime as a form of organized crime.

** Using conservative numbers issued by the U.S. Chamber of Commerce, criminologist Jeffrey Reimer estimates in his book, The Rich Get Richer and the Poor Get Prison that the total cost of white-collar crime in 1997 was $338 billion, more than 80 times the total amount stolen in all thefts reported by the FBI that year.

** Another estimate suggests that the annual costs of antitrust and/or trade violations are at least $250 billion. (See F.T. Cullen et al., Corporate Crime Under Attack: The Ford Pinto Case and Beyond, Cincinnati: Anderson, 1987.)

** The latest "Death on the Job" report by the AFL-CIO estimates that the annual cost of occupational injury and illness is "between $150 billion and $300 billion ... But these estimates understate the true extent of occupational injuries and illnesses and their associated costs."

** While major publications like Forbes and Fortune put out a list of the biggest and best businesses of the year, Multinational Monitor issues an annual list of the 10 worst corporations of the year. See the lists for 2004, 2005 and previous years. The lists invariably represent a variety of corporate illegalities. The Corporate Crime Reporter also compiled a list of the 100 Worst Corporate Criminals of the 1990s.

** No one gathers statistics on corporate crime on a global level. Transparency International publishes annual reports on global corruption, however. E.g. In 2004, TI estimated that the amount lost due to bribery in government procurement is at least US$ 400 billion per year worldwide.

Corporations also cause more violence and death than street criminals. The U.S. national murder rate reported by the FBI is about 16,000 each year.

Compare that to the number of people who die from corporate-related causes each year:

** Over 5,000 workers are killed on the job each year, according to the Bureau of Labor Statistics. Millions more become sick or injured each year. A group of occupational health and safety investigators estimates that in 1992 alone there were 66,971 total job-related injury and occupational disease deaths. (See J. Paul Leigh, Ph. D., et al., Costs of Occupational Injuries and Illnesses. Ann Arbor: University of Michigan Press, 2000.)

** Another study estimates that 70,000 Americans die annually from product-related accidents, and millions more suffer disabling injuries at a cost of over $100 billion in property damage, lost wages, insurance, litigation, and medical expenses. (Brobeck and Averyt, The Product Safety Book, New York: Dutton, 1983, reported in David O. Friedrichs, Trusted Criminals: White Collar Crime in Contemporary Society, Belmont, CA: Wadsworth Publishing, 1996.) Despite improved regulations, the Consumer Product Safety Commission estimates that "there remain 27,100 deaths and 33.1 million injuries each year" related to consumer products under its jurisdiction.

** These numbers do not include the thousands of annual deaths caused by cancer and other diseases linked to corporate pollution, defective products, tainted food and addictive substances such as tobacco, and other causes. An estimated 553,400 people in the U.S. died from cancer in 2001. (See J. NCI:93:10, ‘Stat Bite” May 6, 2001). Using conservative estimates put forth by those who dismiss environmental causes of cancer as negligible (i.e. 2 percent of the total incidence of cancer deaths), author Sandra Steingraber calculates that at least 11,098 people died from cancers due to environmental causes (i.e. industrial pollution) in 2001. (Living Downstream: An Ecologist Looks at Cancer and the Environment, New York: Addison-Wesley, 1997, pp. 268-9.)

Suggested Improvements for Tracking Corporate Crime:

Create a Data Base of Corporate Rap Sheets. A publicly-accessible on-line corporate crime database would assist prosecutors, legislators, judges and journalists in their efforts to expose and control corporate crime and identify criminogenic corporations and recidivist lawbreakers.

Produce an Annual Corporate Crime Report. The Justice Department (DOJ) should collect data from all federal and state agencies (just as it collects data through the UCR program from local police) and produce an annual corporate crime report as an analogue to its Crime in America reports, which focus on street crime only. To learn more, see our letter to the Attorney General.

Congress could direct the Attorney General to produce such a report, just as it requires the Attorney General to maintain a centralized source of information on “crimes that manifest evidence of prejudice based on race, religion, sexual orientation, or ethnicity” under the 1990 Hate Crime Statistics Act.

In 2004, The Senate Appropriations Committee directed (see page 38) the FBI "to provide the Committee with information about the resources that it would take to produce a comprehensive report that includes all criminal, civil and administrative actions brought against a company, including resolution of the case. The report should also examine the trends and the number of civil cases referred by the [SEC] and other agencies to U.S. Attorneys for criminal prosecution. Of these cases, the report should consider how many of those referrals were disposed, how many defendants were actually prosecuted, how many found guilty and how many were sent to jail." (sic)

The General Services Administration could also collect related enforcement date from all federal and state agencies, particularly as it relates to the enforcement of government contracting rules (such as the Federal Acquisition Regulation) that instruct contracting agencies and procurement officers to contract with "responsible" contractors. (A similar proposal was introduced in the 2006 DoD appropriations bill by Senator Lautenberg, D-CT, and passed unanimously in the Senate before it was removed.) Contractor performance data would help contracting officers protect taxpayers from waste, fraud and other abuses. For background, see this GAO report see go to our government contracts page.

Another approach would be to require issuers (companies listed on U.S. exchanges) to report to shareholders and the SEC all relevant convictions, settlements, grievances, etc. For example, this could be a requirement of corporate legal counsel under Sarbanes-Oxley. Practically speaking, the impetus for expanded disclosure would have to come from shareholder activists. Groups working to expand different corporate reporting requirements (esp. for human rights and environmental abuses) include the Corporate Sunshine Working Group, CERES, and the Center for Political Accountability (working to force disclosure of political donations).

More corporate and white-collar crime links:

Databases, Statistics and General Information:
Transaction Records Access Clearinghouse
Collaborative Research on Corporations (Crocodyl)
Royal Canadian Mounted Police Reporting Economic Crime On-line database
"The Missing Rap Sheet" by Jim Donahue (MM, 12/92)
"The Measurement of White Collar Crime Using Uniform Crime Reporting (UCR) Data"(PDF) by Cynthia Jones, USDoJ FBI Criminal Justice Information Services Division
U.S. Sentencing Commission Organizational Sentencing Practices page

Employment, Labor and Occupational Safety/Health:
Confined Space (Occupational Crimes and Other Workplace-related Issues)
Government Accountability Project (help for whistleblowers)
"When Workers Die" by David Barstow (Pulitzer-winning series in NYTimes, December 2003)
Center for Economic and Policy Research: Analysis of Illegal Firings During Union Election Campaigns (1/2007) by John Schmitt and Ben Zipperer
Worker Deaths around the World CCA (UK) page.

U.S. EPA's ECHO Compliance History Database
Right to Know Network Environmental Databases

Federal Contracts:
Federal Contractor Misconduct Database (POGO)
"Adjudicated Violations of Certain Laws by Federal Contractors" (GAO, 11/2002)

Financial Crimes:
DOJ's Corporate Fraud Task Force
Citizen Works: Corporate Reform Weekly and list of Enron-related links and corporate scandal sheet.
"Limited Options" by Prof. John C. Coffee Jr. of Columbia University, Legal Affairs Nov./Dec. 2003 (a good short recap of the corporate crime wave and its causes).
Forbes' Wall Street Fine Tracker
CCP Corporate Bribery Page

Corporate Crime News and Commentary:
Corporate Crime Reporter
Multinational Monitor
White Collar Crime Prof Blog

: Dirt Diggers' Cumulative List of Information Sources
Centre for Corporate Accountability
Litigation Stock Report (database on civil lawsuits against publicly traded companies)
Regulatory Data Corp
AutotrackXP (ChoicePoint's public records database including federal infractions)
Research Guide to International and U.S. Laws on White-Collar Crime and Corruption
"Uncovering the Corporate Rap Sheet" a tip sheet by the Corporate Research Project

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