White -collar crime.
A white-collar crime can be defined as an offence done by a perpetrator of a respectable caliber and of the upper drawer (high societal class) in the line of his or her profession.
A good example of a white-collar crime perpetrator is Lou Pearlman.
Lou Pearlman’s Brief Background and Career
Lou Pearlman was born on June 19th in 1954 by a Jewish couple, Hy Pearlman and he was the only child. His aliases were:’ Big Poppa’ and ‘Incognito Johnson’. He was born and bred in Flushing; Queens.His curiosity in the music business was fueled by his cousin’s, Garfunkel’s, fame and wealth. During his teenage years, he was a manager of a music band. He had eyed instant success and when he ran out of his patience, he focused on aviation.
When he came back from Germany where Theodor Wullenkemper trained him on aircraft, he founded Airship Enterprises Ltd. That company did not have a single aircraft but it hired one to Jordache .Lou Pearlman ploughed back the profits to manufacture one but it eventually crashed. Prior to that, two companies prosecuted each other and fortunately, but seven years later, Lou Pearlman was $2.5 million for the damages that he had incurred. From a friend’s advice, he yet founded another company, Airship International. So that he could raise the $3 million that he needed to buy another aircraft, he publicized the company. He claimed that they were business partners with Theodor Wullenkempers.He hired the aircraft to McDonald’s for ads.
He then shifted his company to Orlando in 1991.Then,he hired his aircraft to MetLife and Sea World .Unfortunately ,his company suffered a fatal blow when one of the two signed up customers left. To add salt to the injury, three of the aircraft crashed.(
Lou Pearlman was enticed by the accomplishment of New Kids on the Block. It motivated him and he founded another company, Trans Continental Records. His first band was Backstreet Boys. His first group of musicians comprised of five unheard of musicians that had been the overall winners in a talent search that had cost him a whooping $3 million. He poached the manager of New Kids on the Block, John Wright, and made him the manager assisted by his wife Donna. The Backstreet Boys sold an astonishing 100 million albums all over the world. Pearlman renegated that trick with another music band, Sync and similarly sold a remarkable 56 million records all over the world. He had other bands among them:O-Town,LFO,Take 5,Natural,US5,a girls’ group(innosense).Other musicians that comprised the Trans Continental Records were: Jordan Knight, Aaron Carter,Smilez & Southstar and C-Note.Nevertheless,Lou Pearlman owned a dance studio by Disney World that was called O-Town, a mighty entertainment building in Orlando and a recoding studio. Others included being an officer at TAG Entertainment. His started brushing with the law.“ Need meets greed “, so says the sages.
Save for US5, all the performers had prosecuted in court for conning and falsification.
The performers of Backstreet Boys were the ones who were the first to prosecute Lou Pearlman because of the unfairness or the breaching of the contract because save for being the manager and the producer; he also doubled as a member of the Backstreet Boys, meaning that he could from their band member payment. The main reason why Pearlman was sued was after a member of Backstreet Boys, Brian Littrel, signed up the services of a lawyer to find out why the band got only $300,000 as their payment while Lou Pearlman and his recording company pocketed millions. Next, the band members of NSYNC had the same nightmares and they too sued Pearlman. At only a teenager of 14 years, Aaron Carter filed a complaint that accused Pearlman and his Trans Continental Records of conning him many thousand dollars and of swindling in criminal acts.Finally, the case was settled out court.
In its November copy, Vanity Fair, wrote that a good number of current and former band performers were sodomized at Pearlman’s bungalow but they were not bold enough to file charges…One of the Backstreet Boys member, Nick Carter’s mother was quoted as saying,”…certain things happened and it almost destroyed our family. I tried to warn everyone. I tried to warn all the mothers…I tried to expose him (Lou Pearlman)for what he was years ago.”
Ponzi Scheme
It was named after Charles Ponzi. He was a white-collar crime perpetrator in the 20th Century. The term Ponzi is used to refer to swindling investors upon which there is not any material possession acquired and the trustees are paid by the even much higher capital swindled from new trustees. Those types of scams goes by another term, pyramid shemes,and it only hits a rock bottom when all the investors are exhausted and no more can be found to pay the existing ones.
The Ponzi scheme was what caused Lou Pearlman his brilliant career in business go into downward spirals. Prior to the investigations conducted in 2006, Lou Pearlman was found to be responsible for administrating a very successful Ponzi scheme that had milked out $300 million from the investors (Gottschalk, 2010)..For two decades, Lou Pearlman had lured persons and banks alike to invest in Trans Continental Airlines Travel Services Inc. and Trans Continental Airlines Inc. of which were ghost companies. To win the investors’ self-assurance, he had used fake FDIC,AIG and Lloyd’s of London papers in his ,”Employee Investment Savings Account”(E.I.S.A).As if that not enough, he had taken bank loans by using unreal financial statements created by a ghost accounting firm called Cohen and Siegel. In the year that Florida regulator aired that Lou Pearlman’s Trans Continental Savings Program had been a gigantic fraud, much of the $95 million which he had assembled from the investors whom had entrusted him their cash had vanished in the thin air.
Come February in 2007, regulators from Florida stated that the company owned by Lou Pearlman was a gargantuan swindle and the state possessed the company. He exiled to Indonesia and he was finally arrested in Bali, Indonesia after being seen by a touring couple of German origin. Back in the U.S soil, he was prosecuted by a federal grand board of judges on June 2007.The three accounts were: three cases of fraud namely; bank swindle, wire and mail.
He beseeched guilty to counts of swindling, money laundering and issuing ghost declarations on a bankruptcy progress. He was convicted and sentenced by U.S. District Judge G.Kendall Sharp a jail term of 25 whooping years behind the fortified walls of prison. He was offered a chance of subtracting one month per a million dollars that he refunded to the trustees that he had swindled. Nevertheless, Judge G. Kendall Sharp commanded that every investor to be awarded and the assets of Lou Pearlman be distributed among them. Lou Pearlman is cooling his heels at FCI Texarkana and if he serves his sentence to the maximum, he will be released on 24th March in 2029.Lou Pearlman served a whooping 25 years in jail mostly for the many crimes that he had committed: ghost companies, sexually molesting the band members of his music groups,(bank fraud) taking loans from banks with false documents,(wire fraud) cheating on the investors’ by telling them to save their hard-earned cash on his phony account, “Employee Investment Savings Account”(E.S.I.A.).Last and not the least, he was involved in fraud mail where he pioneered the services and investments that had no foundation according to his claims.
The Root causes of White-Collar Crime
White-collar crimes occur because the openings to commit crimes such as; swindle buying-off and paying-off (what is commonly referred to as appreciation), misappropriation, cyber crimes, plagiarism, counterfeiting and cash laundering are very easily accessible to employees of white-collar jobs.
It is evident that there was a break down on the internal controls system because it is very amazing that Lou Pearlman was busted after almost two decades of milking and swindling from his trustee investors who mostly comprised of the elderly who had trusted him with their life-long savings. It is very amazing that the lawyers or the insurance agents who recommended Lou Pearlman were never brought to book. It raises a curious blow how the companies that were used by Lou Pearlman as the insurance; FDIC, AIG and Lloyd’s of London never busted Pearlman’s cartel. It is very touching that the companies that were regarded with high esteem by the investors could not be protected by that very company against the greed of one person…”If they had not said it was FDIC,I would not have put a penny in there…I still have that piece of paper that they gave me,” it was said by Bruno Baumanis of St.Pete,85,who had invested his lifelong savings worth $ 150,000.So as to win the trust of his investors,Lou Pearlman used phony documents and it is evident that there were cohorts(people who worked with him in those scams) and they too would have been brought to book. Even though Lou Pearlman was the mastermind of that Ponzi scheme, he was not the only one to be blamed.
There were wheels within wheels in that situation. There the likes of Robert Fishetti and Michael Crudele (and their companies) who were his associates.Still,one wonders how Pearlman could maintain his savings scheme for a whooping two decades and why the regulators took so long to take legal actions(Gottschalk, 2010)..There was still another breakdown in the internal control systems in seeing that the company that prepared the phony audited financial statements and that was located in Germany could not be taken any legal action against.
Solutions to the White Collar Crime
In pursuit to curb white collar crime, it requires a lot of good will to deal with such cases. This is because of the complexity of such case. Being that the white collar crime is committed by a respected person and of high social status in the course of duty makes it challenging t handle.
This crime entails corporate crime creating chances for fraud, computer crime, money laundering, embezzlement, bribery among other crimes. As a result of control deficiencies in companies it makes it hard to quickly detect white collar. The complexity of detecting this crime is enhanced by various factors. The ones involved in this crime are also very competent, they as well have detailed and the inner information concerning an organization. Those involved can as well manipulate internal control and management auditing which in itself makes it hard to detect or even get the one involved. Incase of raising an alarm, it may work against the one passing the information. The receiver of the message may also be involved in the crime. Being that such crimes are more sophisticated makes the investigations more complex. It is also clear that greater imbalance between trust in white collar employees and control of white collar employees causes increased complexity in crime investigation (Gottschalk, 2010).
Despite this fact there are still available measures that can be taken to curb such crime. One of the measures to be used can be self-regulation. It is however quiet true that self regulation in the form of corporate governance alone cannot be used to do away with white collar crime. Other measures will also have to be incorporated. These other measures include:
This being a crime being done by professionals it calls for good will of the employees. There should be voluntary change in both corporate attitudes and structure. Employees should be held accountable to the decision they make, this helps to avoid blame game making everyone doing the right thing at all time. The social impact for such criminals should be clearly felt. The result of such crimes should not only be dealt with legally but also socially. The social consequences should be seen, there are cases where such criminals have continued to enjoy their social identity. Their social identity becomes institutionalized in the social strata they occupy. It will be more beneficial to the company to have formal sanctions to such criminals.
This makes such criminals be expelled from their professional community. As this, is effected formal punishment should follow. It is very unfortunate that those involve in other crimes receive longer terms than those who commit this crime. White collar criminals receive lesser prison sentences, if this is changed those involved may think twice before engaging in such crime.
It will also be of benefit if there is political will to change the situation. There should be a very strong intervention of the political state to force changes in corporate structure (Gottschalk, 2010). If the changes are effected in the corporate structure definitely a change would be seen in the crime rate. This will come with a great benefit in reducing if not totally curbing the white collar crime.
Policing financial crime can be implemented. This is associated with raising concern and detection. The use of deterrents can also be applied; the basic assumption of this idea is that the criminal of such kind will critically think before committing such crimes. The outcome of such action are clearly thought of, the consequences critically observed making the person contemplating of making such offense to draw back and avoid it completely. This is definitely in regard to the fear of swift and severe punishment expected as well as the penalties for the crime.
It is also important for internal and external control authorities to focus more on persons in vulnerable position and than on routines and regulations. Police dealing with such cases should as well increase their competences in handling such manner of crimes. There are areas which have been clearly noted where such cases can be quickly reported to. There are various agencies and organization that are working hard in combating the vice. Some of these agencies are the Federal Trade Commission, the Federal Bureau of Investigation, and National White Collar Crime Center among others.
Magnitude of the white collar crime
The magnitude of this crime is very high and costly; this is because of the impediment involved in detecting it. It is very hard to detect such crime because of various reasons. The crime is mostly found in the details a fact that makes it difficult for forensic evidence to be identified and presented. This crime at times cause damage to systems and organizations different from other crimes where the damage caused mostly affects and cause damage to the individuals. Despite of the fact that the forensic evidence may be found in details like invoices, bank accounts among other transactions, it is still hard to detect.
This is a crime that is done by competent and influential people in an organization, a fact that makes it hard for others to detect or even if they detect they find it hard to openly report the case. Being that such criminals are people in high position as well as position of influence makes them easily influence those who work under them as well as other employees to make decision and perform duties that favor them. This can be done inform of a threat to other employees of losing a job for failure to abide by the executive scheme (Gottschalk, 2010). It is clear that individuals may give in to orders that are in conflict with their personal values and beliefs when they are under pressure to obey someone in authority. This act makes the individual to go against what one prefers and sees fit to do according to the conscience. It may result to making the individual feeling guilty in what is done but in the reality remains that the action taken was to favor another person.
Through out the years in America it has been noted that this crime increases year after year. It is according to the National Fraud Center’s statistics that shows that in 1970 the white collar crimes accounted for $ 5 billion while the figure increase tremendously in 1990 to a loss of over $ 100 billion. This shown that the rate at which the crime is increasing at is very high. The crimes seen to be increasing highly were telemarketing fraud and identity theft.
This crime is known for causing huge financial losses not only to federal, state and local governments but also private organization and individuals. This is clearly seen from the case of Pearlman, Pearlman had perpetrated a long running Ponzi scheme that defrauded investors out of $ 300 million. The public confidence is basically put at risk; people no longer trust some organization due to such crime. In the case of Pearlman it is noted that he used falsified documents to win investors’ confidence. The crime undermines the public confidence in the securities markets since the consequences of the crime bring a very negative impact to the society as well as the individual. It is as well clear that some organization may collapse because of this crime. In early 1990s it was reported that the savings and loan industry collapsed. The cause of this was attributed to the executives of the institution. The executives of the institution engaged in wide scale fraudulent practices making the company to run at a loss to the extent of being bankrupt and finally collapsing. In this case it organization did not only become affected but it as well affected the individuals, the individuals lost their life savings.
This crime not only impacts the organization and the individual but is come with a collective impact to the society. It easily contribute to the rise in cost to the nation, there is increase in economic hardship for an average consumer and citizen. The normally consumer and citizen will be affected by the impact of this crime. It is as a result of this crime that the price of doing business increases making the price of commodity to increase as well and cause a decrease in service. All these affect the normally customer or citizen who usually was not involved in any way in committing the crime. According to a report by the federal Bureau of Investigation indicates that this crime has been costing the United State government more than 300 billion dollars annually. The impact goes further and affects the health care sector. The increase in Health care insurance fraud result to the increase in medical cost. This makes the businesses and consumers to not only loose financially but also loose their savings, put their health in danger and cost of goods also goes up. As a result of this act the honest people are making losses while others loose their jobs.
According to a government report under the government accountability office it shows that about ten percent of the finances allocated for the for domestic programs will be lost through processes associated to public corruption. With the increase of technology ways have been formed to access credit card numbers, usernames, passwords and other information that enable the criminal commit computer fraud via the internet. A report from the Federal Trade Commission indicated that fourteen percent of the consumer fraud is committed via the internet.
White collar crime is a crime that greatly affects the country as a whole. It has both individual and collective impact to the society. It is from these effects that the society should work hard to greatly reduce and finally do away with such crimes. Various measures have been put in place to help curb the vice. These measures should be clearly affected in order to realize the worthy course.

References
Gottschalk P. (2010) White Collar Crime: Detection, Prevention and Strategy in Business Enterprise. Florida Universal Publishers.
Simpson S. &Benson L. (2009) White Collar Crime: An opportunity Perspective. Rout Ledge, New York
Ferguson J. & Marzili A. (2010), White-Collar Crime. InfoBase Publishing, New York
Emsley D (2005) Restructuring Management on Management Account Research
Emsley D (2006)Discipline of Accounting & Business, University of Sydney NSW,Australia