July 24, 2012 • 44 mins
White-collar crime often involves fraud and other nonviolent acts. For most people, the term "white-collar crime" conjures up images of CEOs conniving their way to fortune. But what is it, really? Listen in as Josh and Chuck break down the facts.
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Speaker 1 (00:00):
Brought to you by the reinvented two thousand twelve Camray.
It's ready. Are you welcome to you Stuff you Should
Know from House Stuff Works dot Com. Hey, and welcome
to the podcast. I'm Josh Clark. There's Charles W. Chuck Bryant,
(00:20):
uh stiffing on his laqui uh mineral water and um
this isn't even a sponsored by location. Done this like
two or three times? Yeah, I agree, call us uh.
And since you put the two of us a couple
of microphones in an ice cold can of refreshing Laquais
mineral water together, you have something called Stuff you Should Know.
(00:42):
It's a podcast. It's a podcast. I'm looking to see
who makes this actually. Oh no, I thought I was
gonna say, like Coca Cola and small let No, it's
a Sundance beverage company. Oh yeah, they're huge for Minnesota.
I think that's perfect. That is a perfect sponsor for stuff.
You know, a little guy that's producing a great product. Agreed.
(01:03):
Uh So, Chuck, I've got an intro today. Stop criticizing me. Um. So.
Very recently, a trio of Brits economists, British economists, they're
like walking saltines. Very exciting. Um. But anyway, these guys
(01:25):
did something pretty cool. They studied bank robberies, and their
study was published in a journal called Significance. It's actually
kind of a cool journal. It takes statistics and applies
it to real world stuff, so it's an interesting statistics journal.
If there is such a thing, um, And if there is,
this is it. And what these guys found was that
bank robbery is actually a really terrible way to make
(01:48):
a living. Yes, I would agree with that morally, economically
it's a terrible way to make a living too, the right. Yes,
they looked at they looked at a lot of variables,
like the number of people involved, and they found that
the bigger the gang, the more um, the bigger the
hall I guess. But it also meant that's one extra
(02:08):
mouth to divide up amongst unless you're like one of
those bankrupers that just kills everybody afterward. Yeah, you don't
want to get in bed with one of those guys
like Ben Affleck, or like in Heat, when there are
a lot of killing afterward. In Heat and in the
town ben Affleck's a recent heist movie, a lot of
killing going on. I was gonna let that one walk by,
but you brought it up twice. I enjoyed it. Um.
(02:28):
Oh really uh and okay, So anyway, Um, there's a
lot of variables involved. But what they found is, no
matter what, in the u K, you can make off
with about thirty one graham. That's not bad, per yes,
and on average that's what that's what the take was.
So in the UK it's not so bad. Um. But
at the same time, thirty one grand, what are you
(02:49):
gonna do with that? Yeah? I mean, if you want
to live the high life, you gotta rob like four
or five banks a year easy, right or right? Okay
or um. If you're in the US, you have to
rob it more than that. So the UK suffers about
a hundred and six bank robbers a year. In the
US there's twelve thousand, and of those twelve thousand, the
average take is like four grand. They only have how
(03:13):
many a year. That's they have really stiff, stiff gun laws,
and I think that probably determs bank robbery because you
kind of have a gun or a note in your
pocket and that says something. Well, these guys figured out
that the presence of a firearm increased your take um.
But anyway, so forty bucks that's not much at all now,
(03:33):
and about a third of bank robberies I guess in
both countries yield nothing zero zero. So it's a lot
of hard work, a lot of risk, for very little gain.
The real money is in white collar crime. Oh yes,
you want to make some cash quick, maybe one good heist.
(03:54):
It's gonna set you up for the rest of your
life and even if you're caught. Even if you're caught,
the chances are you will have a mild, if any
penalty leviaging against you. White collars the way to go. Yeah,
we're talking guys who um tell people that they are
financial investors and get friends and family and uh parents
(04:15):
of the little league that they coach to give them
nine hundred grand. Um. There's other guys who just have
little penny stock companies that pump up their um stock
prospects called stock touting, and um dump all of their shares. UM.
That's investor fraud. They make hundreds of thousands, if not
(04:36):
millions of dollars. It's where the real money is, and
historically speaking, it has really low risk even if you're called.
All right, so we're endorsing white collar crime. We're not
endorsing it. I was being facetious. I thought you met
up with white collar crime in no. No. As a
matter of fact, it's going down. The times are definitely changing.
(04:58):
There's a big struggle going on right now is to
figuring out the just the right amount of punishment with
white collar crime, because there's a lot of factors involved.
It's a lot different from blue collar crime e g.
Stealing a car, robbing a bank. There's a lot of
differences that differentiated. Let's separate the two, um And one
(05:18):
of those now is the the sentencing forum is probably stiffer,
which is a total reversal from how it used to
be before. And they've also closed a lot of the
club beds down that got so much press. Yes, well
they've they've changed them. They're still there, they just are changed. Well,
a lot of more shut down like period. Yeah, just
to ship them to real federal penitentiary penitentiaries. Penitentiaries. Uh.
(05:46):
That reminded me of a word that will definitely be
hearing at some point in this podcast. It's oh yeah,
because that's definitely white collar. Part of the problem with
white collar crime, Josh, as you know from reading this
is that uh um, it's hard to come up with
an exact definition of what constitutes it. So that's why
they have a hard time getting great statistics on punishment
(06:08):
and finds levied and how many of they're catching. But
I'm gonna go with non violent crime that typically involves
and you have to sit things like typically because it's
kind of all over the map. Typically involves um deceit
and fraud given by a perpetrator because of their occupation. Yeah,
(06:29):
And for that reason, a lot of times it's called
occupational um crime. Yeah. Uh. And if you look at
it through that view, which is a very broad view
of white collar crime, it's not just the exacts and
the three thousand dollar suits who are perpetrating this. It's
the guy who's stealing pencils from work, Yeah, or violent
especially somebody asked him if you did it, and he
(06:50):
says no, And it's because you are You're You're granted
this opportunity through your occupation. I would call that petty theft.
It's but I'm saying, like a very very broad definition
of white collar crime that that definitely counts. But for
the most part, when you think of white collar you
think about the CEO as you think about investor fraud, embezzlement,
(07:11):
that kind of stuff exactly. Uh, feds have been after
in the United States, uh, in earnest since nineteen seventy four,
as far as a a dedicated division the FBI. Yeah,
and that's because the NIX and I read and then uh,
despite that, about three hundred billion dollars a year. And
that's a pretty rough estimates, the two estimate. So let's
(07:33):
talk about a few ways you can commit white color crime. Yeah,
because the definition you gave us like beautiful, it's pretty good. Um,
and there are some that just like I said, investment
fraud or embezzlement or just prototypical white collar crime. Insider
trading is one that's a big one which falls under
securities fraud, right Uh yeah, I mean it's a type
of securities fraud. So basically insider trading. We've I swear
(07:57):
we've done something on this. I don't think so it
must have been in our Fenian Freddie presentation then and
then we studied a lot of this stuff. Yeah, and
I thought we'd done a podcast and I guess not.
But insider trading is essentially like, um, let's say that
you and I find out that Discovery had an awesome quarter,
and so we go and buy a bunch of Discovery
(08:18):
stock for nothing, and then it just shoots through the
roof after the stock price comes out. That's inside of trading. Sure,
that's using private knowledge about a publicly traded company for
your own game. That's a no no we to other people.
That would count as well. And then Stewart, yeah, that
they took part and then they would be UH insider
(08:40):
traders as well, exactly. And it works the opposite way
as well, Like if you find out that there's a
lot of terrible information, terrible information is going to make
your stock drop that you sell before that information becomes public,
you're in trouble, big trouble. Securities fraud, which UM insider
trading is kind of like that UM, but it is
also manipulated and cooking the book keeper that term of
(09:02):
your own company too. Maybe undervalue UM a stock before
it goes public or I mean, there's all different variations,
but it basically involves manipulating numbers in a dishonest way, right,
that pumping up scheme where it's stocked outing. There's that's
all securities fraud. UM and then there's anti trust violations
(09:23):
for another good one that this has been kind of
big lately. So, um, Google is supposedly hogging the YouTube metadata,
which is preventing Microsoft from making a decent app for it.
Yeah and um and Google's like, well, it's proprietary or whatever.
And I was like, no, you gotta kind of have
to share that. That's they're alleging an antitrust violation. Companies
(09:44):
kind of police one another with that. And then also
price fixing is a big one, which is like the
opposite of companies policing one another. It's collusion between companies
and like Apple and book publishers, um fixing the prices
of e books allegedly has been going on. Yeah, yeah, man,
it's going on all over the place. That it's it's
a dirty, dirty, dirty world bribery one of the oldest
(10:07):
tricks in the book. Um. Obviously that's involves some sort
of a payoff or a kickback in exchange for uh
whatever information. Um, I get the bid, my company gets
your bid with this government job, and I get a
little kickback or I give you a little kickback rather um,
any kind of maybe favorable decision that can influence your company. Yeah,
(10:31):
a little little grease in the palm going on. Here's
three high quality frozen steaks. Please consider it, and you
say consider granted. And within each of these steaks is
a one million dollar bill. It's not even an it
doesn't even exist. What frozen steaks with money in a
million dollar bill? Okay, we know about frozen deutsch marks.
(10:54):
Somebody sent us a dollar. By the way, I want
the dollar. We'll we'll give you fifty cents, right, I
guess it's thirty three in the third we gotta give
Jerry or cut. Don't go there, we'll talk about it later.
Embezzlement Office Space. Everyone's seen the movie Office Space, that
little program they had to like shave a sin or
something off of a transaction. That's embezzlement. They were given
(11:17):
the opportunity through trust, with books, with accounting, they basically
add access to the money and skim them off the top.
Which we have done a podcast on schemes um So
basically all of the those are all the stars. There's
(11:40):
also other ones like m espionage, industrial espionage, corporate SPI,
white collar. Remember the lady who tried to sell Pepsi's
secret to coke? Yeah, that was pretty hackney. No Coke's
secret to PEPSI because she was like, wait right here
she was, and they went and called the cops. She
didn't do a real good job, but she was surprised. UM.
(12:01):
Environmental law violations like dumping toxic waste. Yeah, covering that
up like Aaron Brockovich style. UM. One of the things
they point out in here, which is when it comes
to things like your little office space scheme that you
just touted. UM. A lot of times, it's difficult to
imagine victims. Like in office space, they think no one's
(12:24):
gonna miss a penny. Is a huge company, So you
commit these crimes without realizing that someone has hurt somewhere
down the line. If you dump your stock, your company
stock that you know is about the tank. And I'm
not saying it's understandable, but if you've like worked your
whole career investing in this company with your four own
(12:44):
k you know it's about to tank, You're like, man,
I need to sell this or else I'm done for.
My family's done for. You don't think about the people
buying the stock, they're the victims. No, It's absolutely true,
And I mean, like you are being pawned. You're pawning
your problem off on somebody else. But I think you
paint a really really excellent scenario, Like you can in
(13:08):
some cases feel bad for the white collar criminal um,
especially if it's just some average Joe who's worried about
is for a one case um or in the case
of Enron, you don't feel bad for the upper dudes.
You feel bad for everyone in that company that got defrauded, right,
But they were strictly victims. They didn't they didn't turn
around and like try to dump the stocks. But that
(13:29):
that's a very visible case of like screwing over your
own employees. But you make a good point, like even
if the even if the criminal is sympathetic, there still
is a victim, even if it's just some amorphous trader
they'll never meet, even if the victim is some like
hedge fund manager. It's really tough. There's like a really
weird spectrum here. There's like I don't know if it's
(13:51):
a Bell curve or like the UV spectrum, who knows.
But there's sympathies like placed in different spot sympathies and
anti antipathies placed along this this depending on who did
what and what they gained from it and what their
motives were agreed, because you gotta also have credit card
(14:11):
fraud and computer and mail fraud and counterfeiting and things
like that, like you know the Nigerian email scams. That's
white collar. But and they're in the same boat as
like ken Ley and Jeff Skillings exactly same scummy crooks.
Or let's say you commit a little credit card fraud
and you or bankruptcy fraud and you're dislike, does it
(14:33):
be easy way to get out of my debts? Or
I just say someone stole my credit card. It's very
easy there to not envision a a victim because it's
it's Chase Manhattan Bank, and like they're gonna notice. But
what happens is they raise the rates on you and me,
and all of a sudden, everyone across the board is
paying more money for stuff. Yes, that is that is true.
(14:58):
That is very true, and that is I think everybody
should probably. I think a good companion piece that occurred
to me is to go listen to our wide corporations
have the same rights as you. One of the fundamental
flaws of UM corporate policy is that you serve your
shareholders first. Like you need to adhere to the law,
but really, ultimately, like anything you can do to serve
(15:21):
your shareholders is your mandate as a as a corporate governor.
Um that includes keeping the profit margin as high as possible,
which you're not gonna go to your your shareholders and
be like, hey, we're making enough money. We took kind
of a hit, but we're still making a ton of profit,
so we'll just take a little hit this year. No,
(15:42):
it's where we took a hit, so we're gonna fire people.
However you reconcile that, I mean, that's your own personal beliefs,
like what what you feel about that? But that is
reality as far as business goes, Right, there's fraud, there's
adjustments to the fraud, absorbing the fraud, and it's the
corporation trying to get as lean as possible. Yeah, they're
(16:03):
not going to take the hit for that. They're not
gonna say, oh, well, a bunch of people defaulted on
their credit cards this year. I guess we'll just have
a bad year. And I know in reality that's how
it works, but it's I just find it disingenuous to
be like, well, everybody suffers, you know, like people lose
their jobs because of thought. It's like there's a there's
a point b in there that that has to be
(16:24):
held accountable to some degree. Well, which is your own
freaking ethical code of conduct? And like, how about not
doing that because it's the wrong thing to do. No,
but I'm saying, like there's an institution that's absorbing the
hit and then turn around firing this poor guy. Yeah, exactly.
It's just it's tough because I came across a word
when they were describing white collar crime giving a definition
(16:46):
of it, and they said, victims colon diffuse. You don't
meet the person that the victim passes along the hit
to other people. It's a big it's nebulous. And even
if they're raised rates by like a quarter of a
percentage point, or you're paying an extra two dollars as
a consumer a year, it's like it's still not right. Yeah,
(17:09):
you know, it's not right all over the place. So
where did this come from? Uh, Josh, it came It
sounds like it came from a cold wool delivery boy.
I want to know more about this. Was this dude
just cold or did he really steal a lot of wool?
So you're talking about the carriers. The Carrier's case of
fourteen seventy three, it's the first um white collar trial, yes,
(17:33):
um and and it resulted in the first white collar
law in fifteenth century England. And this wool transporter was
given a bunch of wool and said, hey, take this
wool to this person, and it was his job. So
he decided to instead just keep the wool for himself
for his own use. So he looked into this more. Yeah,
I thought he might have been like cold on his
(17:54):
journey and said, you know, I'm gonna keep some of
this wool. Now, he kept some of the wool. He
I think he kept all of it, but somebody gave
it to him. He's like, thanks, chump, and he was.
But the key is, and this is something that has
has woven into the history of white collar crime. What
he did was not illegal at the time. The law
that was enacted as a result of the Carrier's case
(18:17):
was they were saying, Okay, this isn't this isn't illegal,
but it's obviously there's a huge problem with this, so
we're going to create a law right that outlaws this
act so people can't do it anymore. Good point, and
basically that's what happened. Well, that's kind of what happens
with every law. I guess, someone commits it first and
then someone says, hey, maybe we shouldn't do that. Yeah, yeah,
I guess. But in this case, especially like uh, the
(18:40):
Industrial Revolution in the West, obviously you started getting these
larger corporations and all of a sudden, things like monopolies
and price fixing and employee uh safety and all these
things come into effect for the first time. So that's
sort of when it was really born, and when they
started saying, hey, we need to look at something called
(19:00):
to trust. Yeah. Again, like monopolies were not illegal, but
when a company bought up all of its competitors and said, oh,
suddenly the price for your groceries like through the roof,
where else you gonna go, it wasn't illegal. But the
the people of the world started screaming and governments finally responded,
And it was really the US that first had the
(19:21):
real first solid response in the Sherman Anti Trust Act
in like the eighteen seventies maybe I think nine, named
for John Senator John Sherman, Ohio Republican dude Chairman of
the Senate's Finance Senate to Finance Committee, which I didn't
know they even had way back then. I forgot didn't either,
but I mean it seems like a basic committee there.
(19:43):
So this is interesting. And that it was voted on.
It won by vote of in the Senate one in
the House by two forty two to zero, so there
was one dude that didn't vote for it. And then
I think twenty five years later when they came up
with the Clayton Anti Trust Actor, really put some punch
into the Sherman Act. It was two seventy seven to
(20:03):
seventy four and forty six to sixteen. So in that
twenty four years it sounds like maybe things got slightly
corrupt here and there. Well it wasn't that it was that. Well,
maybe it was, but there was also some real problems
with the Sherman Act. It was really vague. It basically
said like now from here fourth all um anti competitive
(20:24):
corporate measures are illegal, and then it left it to
the courts to decide what was what, and the courts
weren't really in the mood to enforce it, so it
went largely unenforced. Although American Tobacco Company and Standard Oil
like two of the biggest companies in the country were
dissolved under the Sherman Act, Standard Oil big time. Imagine that.
Like imagine going to a company now and saying like, hey, Apple,
(20:49):
you're just too big, so we're gonna dissolve you into
thirty one companies. We have all these federal regulators here
and they're gonna come in and look at everything, and
that dissolve you into different companies. Sorry, that's what they did. Okay,
even still it didn't have enough tea, so they came
up with the Clayton Anty Trust Act, and then that
one really spelled things out, like, um, you couldn't do
price discrimination anymore, which if you were black in America
(21:13):
during the Gym Crow era, price discrimination was mind boggling.
Oh yeah, you walk into a store if you're allowed
in there to begin with, and they'll just make up
whatever price they want. It's it was really I'm reading this,
um consumers in an America book, and it's at this
point now is really just this blemish on American history.
(21:34):
I mean, like slavery wasn't bad enough to like have
slavery light through the Jim Crow era. It's just disgusting. Um, Okay,
so there was no price discrimination allegedly, corporate mergers were outlawed. Yeah, um.
And then interlocking boards where you have like competitive companies
(21:55):
but the same people on the board of each Right,
you can't have that. And then also elusive contracts where
it's like hey, home Depot, you can sell our um
weed whackers, but you can't tell anybody else's those contracts
are out right. They do stuff like that now though, right,
maybe not exclusively, but they carry lives. They do not
(22:17):
limited number of brands, corporate mergers, interlocking boards, exclusive contracts,
all that stuff one a way, it all got chipped away.
It's just I mean this, this, this act is like
not in forts anymore. Basically, Well, that's one things that
bugs me about like grocery or actually the big box
hardware stores. Grocery shopping. You you only have access to
(22:40):
what they who they have partnered with, right, whether it's
your potato chip that you want or your weed whacker
that you want. It's true, and most of the big
box stores also have exclusive contracts the other way. It's like, yeah,
we'll sell your weed whacker, but you can't sell it
no one else can. So it's like a real gamble,
I understand, like sign on to one of these giant corporations. Well,
(23:03):
that's one in the Walmart effect. That was one of
the things I think they used to. It's like a
tent company or an awning company, and like this mom
and pop awning company all of a sudden gets a
Walmart contract and they're like, sweet, they answered all our prayers.
They ordered like thirty thousand and these they ordered thirty thousand,
They opened up like three new buildings. Hi are all
these employees. And then the next year they come back
(23:24):
and say, we want thirty thousand more, but we're gonna
pay you about less. And you've already bought the buildings
and even you know, invested in the in the materials
and the people, and all of a sudden you're screwed.
You know one thing that I've long thought and I'm
gonna totally take flak for this, but I still think
it's worth saying, like you here, like, well, that's just business.
(23:46):
I feel that any any institution where like morally reprehensible
acts can just be you know, off handedly dismissed as
a matter of course of that institution is inherently fought.
There's an inherent problem with it. Yeah, that's not okay,
Like we don't just go, well, that's just murder, you know,
(24:09):
or well that's just stealing, you know, Welcome to earth. Human. No,
we have moral and legal guidelines that we follow, and
business and corporations have so so long stood outside of
these things that it's just it always bugs me when
it's just like, what are you gonna do? Yeah, I
don't like that. So sorry, I'm off my soap I
(24:31):
agree completely. Well, I'm off of my Tide brand soapbox.
Well said, um. So, things are kicking along here in
the industrial West. Corporations are getting larger, and all of
a sudden, these crimes start happening, and something called a
muckraker in the nineteenth than early twentieth century comes about.
(24:53):
And I didn't realize a muckraker was exclusively a journalist. Yeah,
it's for an investigative journalist. I thought it would was
anyone raking muck um. But it's specifically a journalist who
basically early on said you know what, there's bad stuff
going on see and I'm gonna expose your Oh really,
(25:13):
and he wrote the Jungle Change. Of course, I mean
the FDA basically came about because of that investigation that
he conducted. Well, muckrakers raked a lot of muck and
caused a lot of problems in these companies. And um,
one of the things that came about because of the
muckraking were, you know, things like the Clayton Act that's
exactly right, exposing all this stuff exactly and things like that,
(25:35):
the A Federal Regulations consumer protections. The muckrakers basically stirred
up public sentiment like hey, don't be idiots, like this
stuff's going on, and a lot of people said, well,
it's not illegal. And then unfortunately there were guys like
um E. A. Ross who was a criminologist and a sociologist,
and he started really kind of looking into this and said,
(25:56):
hey man, these people might not be criminal, but let's
all them criminal OIDs. Like that was the coining the
coin for people who, especially in business, carried out these
terrible acts that weren't illegal. He argued that even though
it's not illegal, they're causing ill and these people are
still responsible for him. So make a law that outlaws
at dummies. And he inspired a guy named E. H. Sutherland. Okay,
(26:20):
he came before Sutherland. Yeah, he was at the Ross
was working at the time of the muckrakers, and then
Sutherland came about twenty years later. Yeah. Southerland coined the
term actually white collar crime in nineteen thirty nine, and
he was a criminologist and sociologist, and he pretty much
he had a broader definition that basically it was the
high society and not the lower class at all committing
(26:44):
these crimes, which nowadays he can't really say that because
anyone can get a stock tip commit in. You know,
it happens all the time across all spectrums of the
class system. But Sutherland's point was, and he wrote a
book called white Collar Crime, UM. His point was that
there was a huge bias in the United States, UM
where the where law enforcement in the courts leaned heavily
(27:08):
on the working class crimes and just basically ignored the
crimes of the upper class and said this is not okay, Like, um,
if a guy is gonna steal a thousand dollars from
a cash register with no gun or anything like that,
Like there are other factors, but let's just say a
guy steals a thousand dollars from a cash register and
(27:29):
he's poor, and a guy steals a thousand dollars from
an investor and he's rich. That's they should be treated equally,
and they're not. And that's what Sutherland's point was. And
he was sup first dude to really bring this to light,
wasn't he. Yeah, well, Ross kind of started to, but
Sutherland was very well received. It was well received in
certain corners, but there were also certain flaws pointed out
(27:49):
by people over the years. Um One of the things
mentioned the articles said that he failed to distinguish illegal
crime from deviant mere deviant behavior, like apparently his his
whole premise was like you're into donkeys, you're a white
collar criminal exactly. And the other thing I mentioned too
was that he pretty much said it was anyone like
(28:11):
any upper class nonviolent crime, right, And that's definitely evolved,
and I think fairly. I think you can be working class,
you can be business class if you like. That's a big,
big part of white collar crimes definition is your opportunity
arises because of the trust that's granted to you through
your occupation. Yeah, even if you're a lower level employee,
(28:32):
you still may have access. Like the lady who wanted
to sell the Coke secret. She wasn't like a CEO. No,
she was an admin I believe, Yeah, exactly. Um, so
there's a there's one thing that that like you said,
they like to shoot a hole in Sutherland's theory that
or they say his definition is too broad because he
did include behavior that's not illegal. But it's a very
(28:54):
legitimate point to say, you kind of have to because
if not, then we wouldn't have had the Sherman an
Anti Trust Act, we wouldn't have had the Clayton next,
we wouldn't have had um, you know, the FDA, all
of these things that uh that the carrier's case, he
would have gotten off scott free, and what he did
was not illegal. So it has to evolve over time. Agreed, Okay,
(29:17):
and it has agreed. So let's talk about, um, I
guess the impacts of today's modern white color CRME. I
was like man that was suspensible all of a sudden. Um. Yeah.
We've talked about a few of these about it seemingly
not having a victim. But what happens is, um, you
rip off a huge corporation, the race of prices. There's
(29:39):
another ripple effect. You talked about cutting jobs to meet
you know, the needs of the investors if it's a
publicly traded company. Um, when there's stock fraud committed insider
scandals like Enron are going to ripple out throughout the
stock market cause, like you know, basically cause people to
be unsure and have no faith in the stock market
(29:59):
all the sudden. Yeah that's dangerous. Yeah, I think about
all the people who just lost everything. Oh my god,
I get Yeah, I get just as angry, if not
more angry at something like that than you know, something
like heinous crime. Yeah, that's an equal Yeah, they're both scumbags. Okay. Um,
(30:21):
so you said, like in seventy four the FBI first
started they that's when they've created this white color Kime division.
So apparently like yes, and it was a response like
this University of Michigan survey that they conducted between nineteen
fifty eight, I think in nineteen seventy three, they found that, um,
(30:43):
people who said that they trust the federal government went
from seventy three to thirty seven percent between nineteen fifty
eight and nineteen seventy three. Yeah, flo flopped. I could
see that over that time period. The sixties. Yeah, one
of the big ones was just like fraud and corruption
at high levels, and so the FBI created this white
(31:04):
collar crime thing. One of the other things that differentiates
white collar crime from regular working class crime is the
police's ability to police it. Right, you walk into a
room and there's some guy weighing out cocaine, he's a criminal.
You walk into a room and there's some guy on
(31:24):
a computer doing a pump and dump scheme. Who knows
that average cop isn't equipped to detect this kind of crime.
And as a matter of fact, even very very well
trained cops aren't typically equipped to detect this kind of crime.
One of the hallmarks of white collar crime is that
it's very difficult to prove. It's very difficult to uncover,
and it's also difficult to prosecute. Yeah, and there's no uh,
(31:49):
smoking gun, there's no paper trail, or there may be
a paper trail, but it's probably electronified. Sure, so it's
a little harder to follow. You gotta really, you know,
you gotta have people that know what they're doing. And
that's why the FBI created that division, And I guess
they're doing a good job, but it's kind of hard. Well,
(32:09):
the Justice Department has been going after white collar crime
lately under Obama pretty hard here there. Um, and then
the Sarbanes Oxley Act definitely step things up, and some
say too much. Yeah, I mean I've had to comply
with this at various uh when I worked in the
film as Is production, companies had to like to jump
through way more hoops of paperwork because the Sarbanes Oxley
(32:34):
do you want to talk to you want to tell them? Well,
it's it was in two thousand two, and it was
to improve corporate governance, which is basically accountability between corporation
and the stakeholders. What it amounted to was a lot
more paperwork, essentially more proving of numbers and showing numbers
and jumping through hoops. It was a direct reaction from
(32:57):
of the fallout of Enron, from the fallout of en
On and Tycho and like all the other companies around
that time. Um. But one of the other things that
did chuckers was, um A quadrupled sentences in a lot
of cases for white collar crime. So now you have
guys like Bernie made Off getting a hundred and fifty years.
There's a guy named Sholem Weiss who was involved in
(33:19):
like the breakup of some insurance company. He got eight
hundred and forty five years. He gets out in twenty
seven fifty four. I don't think he's gonna see that.
I don't either, But I mean a guy named rich
Harkness got a hundred years for thirty nine million dollar
ponzi scheme like these and all of this is like
post Sarbanes Oxley, except Sholm Wisse, which is really saying something.
(33:42):
But but I mean, like, so now now sentences are
like quadruple. It's like, well, wait a minute, maybe maybe
this is a little too much like just retribution on
the rich. It is, and that's kind of I think
why a lot of people are having a hard time
feeling bad. Are ridiculously wealthy people who were hucksters and frauds,
(34:05):
or people who built people out of their retirement accounts.
It's tough to feel sorry for him. But legally speaking,
it's like, well, wait a minute, um, you were worried
about the guy who stole a thousand dollars out of
it till being treated differently from the guy who stole
a thousand dollars from an investor. Now it's flip floped.
How is that any better. One of the arguments for
these kind of things is that these people are traditionally
(34:29):
and historically have been treated differently because they look like
the judges that are sentencing them, and so judges historically
like really have taken it easy on them. Um, let's
go ahead and just call them white dudes, Okay, but
they also have been Um, you can make the case
that they are usually first time offenders, they're usually family people. Um,
(34:52):
that's that's something that the judges put out there, like, well,
this is a family man, he's not much of a
flight risk, he's probably never going to do this again
of the society. Yes, he didn't use a weapon, which
is a huge, huge differentiation, and so sentences have typically
typically been light. But um, you can you can also
kind of say, well, you know where where it feels
(35:12):
like we haven't quite felt it out, Like we've traditionally
ignored white collar crime. Now we're really sticking it to him. Well,
it's that whole argument with prison. Is it like punishment
for a crime done or is it rehabilitating a person
who has a problem with crime? Well, within eight hundred
and forty five years sentence, it's making an example out
(35:32):
of that person, because since you can't police it, another
way to prevent it is to send a message through
the courts, like you do this man, you're going to
prison for a long time. Yeah. I don't know if
that's such a deterrent though for some of these people.
I don't know. I mean, I think about it. Twenty
years in a in a federal penn You say Club
fed is not around any longer, um, And I mean this,
(35:56):
this is like twenty actual years. Um. Some guy named
Thomas Peters recently got fifty years and he will spend
forty years in jail. And he's fifty two, and he
will probably die in prison. Now that's a big deal
with somebody who's like, well, maybe I shouldn't do this
insider track, Maybe I should let this fifty grands just
(36:16):
walk by because it's not really worth it. Well something
like that. I'm talking about the ones who are getting
rich by the tens of millions of dollars. What I
want to see is that these people don't get out
of prison and still have all those millions of dollars
like hidden in different foreign accounts and offshore islands and ah. Like.
(36:38):
The financial part is what really bugs me. I meant to,
I didn't get a chance. I meant to look up
and see if any of the en Ron victims and
employees where ever repaid or if they were just s
O L. I'm under the distinct impression they were s
ol because the company was in such bad shape that
even dissolving it. And I think I think they some
(36:59):
people did get money, but I don't think it was
anything approaching what they lost. Well, whoever commits these crimes
gets out of jail and they have two pennies to
rub together, then those two pennies more than they should have.
I think, Well, that's the thing. Like, so, the government
started prosecuting under the Rico Act, which is the same
thing they bust up mafia organizations with UM and they've
(37:20):
been fighting white collar crime with that. And one of
the things about the Rico Act as it allows states
and individuals who are harmed to sue for up to
three times the damages. Yeah, but even then all they
have to do is say, yeah, I don't have that money.
You kid me. Well, it's true, can't pay it. No,
it's true. But like UM in the made Off case,
the guy who's who was assigned to basically get money
(37:42):
back for investors has gotten I don't remember how much
made off fleece, but let's say it was eight billion.
The guys managed to like get like six billion back. Yeah,
he's done a really good job of getting the money back.
And that's just a that's that's an example. It's not
a figure, but it's it's something pretty significant. You're still
gonna get email. I'm looking forward to the ones. But
(38:04):
it's like, hey man, we don't listen to you for
free to hear your opinion about class. All right, let's
move on to other countries. Um, things are different all
over the world. Um. Obviously, when it comes to big
business and business dealings. Uh. Western Europe has followed right
behind the US, UH most wholeheartedly with laws to prevent corruption.
(38:27):
Eastern Europe's coming on board a little slower. Um. But
then you go into other countries like in Western Africa,
and it may be customary to Greece palms to get
a deal going, or in India where apparently, if you're
a truck driver, you're gonna have to bribe people to
keep your rig on the road. And that's just how
it is there, right, And not only is it customary.
(38:48):
It's frequently legal, yeah, Russia. Yeah, bribes all over the place.
If you want to land contract, you might have to
bribe somebody. So if you're a multinational corporation, it's tough
to do this headquarter in America. Yeah, you have like
a real problem facing you. Especially, like I said, the
UM Justice Department under Obama has been prosecuting white color
(39:09):
crimes and going big time after UM people under the
Foreign Corrupt Practices Act, which says if you're an American company,
you can't engage in bribes, even if it's legal in
that country. Yeah. But what's the point, like why hamstring
American business abroad? Exactly? UM? And to help this out, actually,
(39:32):
there has been a unified committee called the UM company
I'm sorry committee called Transparency International, and they are out
to get rid of corruption and to unify business business
ethics all over the world. Right, And that's the that's
the reason that you hamstring American business because it's basically saying, hey, uh,
we can take the hit in the hopes of pressing
(39:53):
the rest of the world into the same clean up
their act. Competitive laws we have here in the States
that work very well. It's so good luck to them. Yeah,
that's it, man, I got nothing else. No, we should
we should play this one out with um the talking
heads big business agreed. Okay, Um, so Chuck, let's see. Uh.
(40:17):
If people want to learn more about white collar crime,
I would strongly advise them to go read this article
by Jay McGrath of John And there's a Simpsons reference
in it. It's a way to go, Jane. Um. You
can type in white collar crime in the search part
how stuff works dot com, which friend oh brings up listener. Ma'am,
(40:38):
that's right, Josh, I'm gonna call this, uh hot off.
The press is good cause I'm okay, Chuck and Josh
and Jerry. I want to say thank you for all
the hours of listening. My brother Chase and I've been
listeners nearly as long because you have been making them.
There was even one New Year's Day where all we
would do was listen to your hangover podcast on UP.
(41:01):
I don't think. I don't know if that's good for hangover. Uh.
It's funny and informative, and I always feel like calling
my brother after listening to the latest episode. I'm writing
you because it's recently his birthday. He's the best brother
in the world and downright awesome human being. It would
mean a lot to me if you could tell the
stuff you should know listeners about his latest project. When
(41:21):
his friend Jim survived cancer, he told Chase that he
gained strength in the music he loved. Over two years,
two hundred, twenty six hundred tracks, two hundred tracks, that's
a weird way to put it. What would that be?
Two would that be? Wait? How many two hundred? Dred
(41:46):
would it? Or dred? No? Plus two hundred, twenty hundred
nearly two hundred artists persons insane, No, she's not. Over
two years, two hundred tracks. Nearly two hundred artists from
other countries all over the world have allowed them to
(42:07):
share that message. They are releasing their second compilation disc
Electronic Saviors colon Industrial Music to Cure cancer. So it's
these artists compilations are putting together apparently two tracks. Uh.
They're a registered US charity and all proceeds go to
(42:27):
cancer research. And if you want, if you're into electronic
music and if you want to support cancer research, you
can go to www. Dot Electronic Saviors dot com. And
that is something Chase has got going and his sister
Laura Dudley. UH is a big fan of her bro
He sounds like a swell guy. I'm all for it. Cancer.
(42:52):
We had to promote a good cause, chuckers. We try
to do that. Um. Yeah, we always want to hear
about good causes. So you can get in touch with us.
Let us know about yours. We'll try our best to
let everybody else know about it, especially if people can
support it. Agreed. Um, let's see also enjoy Little Talking Heads,
Big Business from the live album Stop Making Sense released
(43:15):
to nine eight four. We're sure it's up on iTunes,
Amazon and elsewhere. Um. You can get in touch with
us at s Y s K podcast on Twitter. Uh,
you can go to Facebook dot com slash stuff you
should Know, and you can send us a regular old
email by wrapping it up, spanking it on the bottom,
and sending it off to Stuff podcast at Discovery dot com.
(43:57):
For more on this and thousands of other topics, does
it how stuff works dot com. H brought to you
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you
Brought to you by the reinvented two thousand twelve Camray.
It's ready. Are you welcome to you Stuff you Should
Know from House Stuff Works dot Com. Hey, and welcome
to the podcast. I'm Josh Clark. There's Charles W. Chuck Bryant,
(00:20):
uh stiffing on his laqui uh mineral water and um
this isn't even a sponsored by location. Done this like
two or three times? Yeah, I agree, call us uh.
And since you put the two of us a couple
of microphones in an ice cold can of refreshing Laquais
mineral water together, you have something called Stuff you Should Know.
(00:42):
It's a podcast. It's a podcast. I'm looking to see
who makes this actually. Oh no, I thought I was
gonna say, like Coca Cola and small let No, it's
a Sundance beverage company. Oh yeah, they're huge for Minnesota.
I think that's perfect. That is a perfect sponsor for stuff.
You know, a little guy that's producing a great product. Agreed.
(01:03):
Uh So, Chuck, I've got an intro today. Stop criticizing me. Um. So.
Very recently, a trio of Brits economists, British economists, they're
like walking saltines. Very exciting. Um. But anyway, these guys
(01:25):
did something pretty cool. They studied bank robberies, and their
study was published in a journal called Significance. It's actually
kind of a cool journal. It takes statistics and applies
it to real world stuff, so it's an interesting statistics journal.
If there is such a thing, um, And if there is,
this is it. And what these guys found was that
bank robbery is actually a really terrible way to make
(01:48):
a living. Yes, I would agree with that morally, economically
it's a terrible way to make a living too, the right. Yes,
they looked at they looked at a lot of variables,
like the number of people involved, and they found that
the bigger the gang, the more um, the bigger the
hall I guess. But it also meant that's one extra
(02:08):
mouth to divide up amongst unless you're like one of
those bankrupers that just kills everybody afterward. Yeah, you don't
want to get in bed with one of those guys
like Ben Affleck, or like in Heat, when there are
a lot of killing afterward. In Heat and in the
town ben Affleck's a recent heist movie, a lot of
killing going on. I was gonna let that one walk by,
but you brought it up twice. I enjoyed it. Um.
(02:28):
Oh really uh and okay, So anyway, Um, there's a
lot of variables involved. But what they found is, no
matter what, in the u K, you can make off
with about thirty one graham. That's not bad, per yes,
and on average that's what that's what the take was.
So in the UK it's not so bad. Um. But
at the same time, thirty one grand, what are you
(02:49):
gonna do with that? Yeah? I mean, if you want
to live the high life, you gotta rob like four
or five banks a year easy, right or right? Okay
or um. If you're in the US, you have to
rob it more than that. So the UK suffers about
a hundred and six bank robbers a year. In the
US there's twelve thousand, and of those twelve thousand, the
average take is like four grand. They only have how
(03:13):
many a year. That's they have really stiff, stiff gun laws,
and I think that probably determs bank robbery because you
kind of have a gun or a note in your
pocket and that says something. Well, these guys figured out
that the presence of a firearm increased your take um.
But anyway, so forty bucks that's not much at all now,
(03:33):
and about a third of bank robberies I guess in
both countries yield nothing zero zero. So it's a lot
of hard work, a lot of risk, for very little gain.
The real money is in white collar crime. Oh yes,
you want to make some cash quick, maybe one good heist.
(03:54):
It's gonna set you up for the rest of your
life and even if you're caught. Even if you're caught,
the chances are you will have a mild, if any
penalty leviaging against you. White collars the way to go. Yeah,
we're talking guys who um tell people that they are
financial investors and get friends and family and uh parents
(04:15):
of the little league that they coach to give them
nine hundred grand. Um. There's other guys who just have
little penny stock companies that pump up their um stock
prospects called stock touting, and um dump all of their shares. UM.
That's investor fraud. They make hundreds of thousands, if not
(04:36):
millions of dollars. It's where the real money is, and
historically speaking, it has really low risk even if you're called.
All right, so we're endorsing white collar crime. We're not
endorsing it. I was being facetious. I thought you met
up with white collar crime in no. No. As a
matter of fact, it's going down. The times are definitely changing.
(04:58):
There's a big struggle going on right now is to
figuring out the just the right amount of punishment with
white collar crime, because there's a lot of factors involved.
It's a lot different from blue collar crime e g.
Stealing a car, robbing a bank. There's a lot of
differences that differentiated. Let's separate the two, um And one
(05:18):
of those now is the the sentencing forum is probably stiffer,
which is a total reversal from how it used to
be before. And they've also closed a lot of the
club beds down that got so much press. Yes, well
they've they've changed them. They're still there, they just are changed. Well,
a lot of more shut down like period. Yeah, just
to ship them to real federal penitentiary penitentiaries. Penitentiaries. Uh.
(05:46):
That reminded me of a word that will definitely be
hearing at some point in this podcast. It's oh yeah,
because that's definitely white collar. Part of the problem with
white collar crime, Josh, as you know from reading this
is that uh um, it's hard to come up with
an exact definition of what constitutes it. So that's why
they have a hard time getting great statistics on punishment
(06:08):
and finds levied and how many of they're catching. But
I'm gonna go with non violent crime that typically involves
and you have to sit things like typically because it's
kind of all over the map. Typically involves um deceit
and fraud given by a perpetrator because of their occupation. Yeah,
(06:29):
And for that reason, a lot of times it's called
occupational um crime. Yeah. Uh. And if you look at
it through that view, which is a very broad view
of white collar crime, it's not just the exacts and
the three thousand dollar suits who are perpetrating this. It's
the guy who's stealing pencils from work, Yeah, or violent
especially somebody asked him if you did it, and he
(06:50):
says no, And it's because you are You're You're granted
this opportunity through your occupation. I would call that petty theft.
It's but I'm saying, like a very very broad definition
of white collar crime that that definitely counts. But for
the most part, when you think of white collar you
think about the CEO as you think about investor fraud, embezzlement,
(07:11):
that kind of stuff exactly. Uh, feds have been after
in the United States, uh, in earnest since nineteen seventy four,
as far as a a dedicated division the FBI. Yeah,
and that's because the NIX and I read and then uh,
despite that, about three hundred billion dollars a year. And
that's a pretty rough estimates, the two estimate. So let's
(07:33):
talk about a few ways you can commit white color crime. Yeah,
because the definition you gave us like beautiful, it's pretty good. Um,
and there are some that just like I said, investment
fraud or embezzlement or just prototypical white collar crime. Insider
trading is one that's a big one which falls under
securities fraud, right Uh yeah, I mean it's a type
of securities fraud. So basically insider trading. We've I swear
(07:57):
we've done something on this. I don't think so it
must have been in our Fenian Freddie presentation then and
then we studied a lot of this stuff. Yeah, and
I thought we'd done a podcast and I guess not.
But insider trading is essentially like, um, let's say that
you and I find out that Discovery had an awesome quarter,
and so we go and buy a bunch of Discovery
(08:18):
stock for nothing, and then it just shoots through the
roof after the stock price comes out. That's inside of trading. Sure,
that's using private knowledge about a publicly traded company for
your own game. That's a no no we to other people.
That would count as well. And then Stewart, yeah, that
they took part and then they would be UH insider
(08:40):
traders as well, exactly. And it works the opposite way
as well, Like if you find out that there's a
lot of terrible information, terrible information is going to make
your stock drop that you sell before that information becomes public,
you're in trouble, big trouble. Securities fraud, which UM insider
trading is kind of like that UM, but it is
also manipulated and cooking the book keeper that term of
(09:02):
your own company too. Maybe undervalue UM a stock before
it goes public or I mean, there's all different variations,
but it basically involves manipulating numbers in a dishonest way, right,
that pumping up scheme where it's stocked outing. There's that's
all securities fraud. UM and then there's anti trust violations
(09:23):
for another good one that this has been kind of
big lately. So, um, Google is supposedly hogging the YouTube metadata,
which is preventing Microsoft from making a decent app for it.
Yeah and um and Google's like, well, it's proprietary or whatever.
And I was like, no, you gotta kind of have
to share that. That's they're alleging an antitrust violation. Companies
(09:44):
kind of police one another with that. And then also
price fixing is a big one, which is like the
opposite of companies policing one another. It's collusion between companies
and like Apple and book publishers, um fixing the prices
of e books allegedly has been going on. Yeah, yeah, man,
it's going on all over the place. That it's it's
a dirty, dirty, dirty world bribery one of the oldest
(10:07):
tricks in the book. Um. Obviously that's involves some sort
of a payoff or a kickback in exchange for uh
whatever information. Um, I get the bid, my company gets
your bid with this government job, and I get a
little kickback or I give you a little kickback rather um,
any kind of maybe favorable decision that can influence your company. Yeah,
(10:31):
a little little grease in the palm going on. Here's
three high quality frozen steaks. Please consider it, and you
say consider granted. And within each of these steaks is
a one million dollar bill. It's not even an it
doesn't even exist. What frozen steaks with money in a
million dollar bill? Okay, we know about frozen deutsch marks.
(10:54):
Somebody sent us a dollar. By the way, I want
the dollar. We'll we'll give you fifty cents, right, I
guess it's thirty three in the third we gotta give
Jerry or cut. Don't go there, we'll talk about it later.
Embezzlement Office Space. Everyone's seen the movie Office Space, that
little program they had to like shave a sin or
something off of a transaction. That's embezzlement. They were given
(11:17):
the opportunity through trust, with books, with accounting, they basically
add access to the money and skim them off the top.
Which we have done a podcast on schemes um So
basically all of the those are all the stars. There's
(11:40):
also other ones like m espionage, industrial espionage, corporate SPI,
white collar. Remember the lady who tried to sell Pepsi's
secret to coke? Yeah, that was pretty hackney. No Coke's
secret to PEPSI because she was like, wait right here
she was, and they went and called the cops. She
didn't do a real good job, but she was surprised. UM.
(12:01):
Environmental law violations like dumping toxic waste. Yeah, covering that
up like Aaron Brockovich style. UM. One of the things
they point out in here, which is when it comes
to things like your little office space scheme that you
just touted. UM. A lot of times, it's difficult to
imagine victims. Like in office space, they think no one's
(12:24):
gonna miss a penny. Is a huge company, So you
commit these crimes without realizing that someone has hurt somewhere
down the line. If you dump your stock, your company
stock that you know is about the tank. And I'm
not saying it's understandable, but if you've like worked your
whole career investing in this company with your four own
(12:44):
k you know it's about to tank, You're like, man,
I need to sell this or else I'm done for.
My family's done for. You don't think about the people
buying the stock, they're the victims. No, It's absolutely true,
And I mean, like you are being pawned. You're pawning
your problem off on somebody else. But I think you
paint a really really excellent scenario, Like you can in
(13:08):
some cases feel bad for the white collar criminal um,
especially if it's just some average Joe who's worried about
is for a one case um or in the case
of Enron, you don't feel bad for the upper dudes.
You feel bad for everyone in that company that got defrauded, right,
But they were strictly victims. They didn't they didn't turn
around and like try to dump the stocks. But that
(13:29):
that's a very visible case of like screwing over your
own employees. But you make a good point, like even
if the even if the criminal is sympathetic, there still
is a victim, even if it's just some amorphous trader
they'll never meet, even if the victim is some like
hedge fund manager. It's really tough. There's like a really
weird spectrum here. There's like I don't know if it's
(13:51):
a Bell curve or like the UV spectrum, who knows.
But there's sympathies like placed in different spot sympathies and
anti antipathies placed along this this depending on who did
what and what they gained from it and what their
motives were agreed, because you gotta also have credit card
(14:11):
fraud and computer and mail fraud and counterfeiting and things
like that, like you know the Nigerian email scams. That's
white collar. But and they're in the same boat as
like ken Ley and Jeff Skillings exactly same scummy crooks.
Or let's say you commit a little credit card fraud
and you or bankruptcy fraud and you're dislike, does it
(14:33):
be easy way to get out of my debts? Or
I just say someone stole my credit card. It's very
easy there to not envision a a victim because it's
it's Chase Manhattan Bank, and like they're gonna notice. But
what happens is they raise the rates on you and me,
and all of a sudden, everyone across the board is
paying more money for stuff. Yes, that is that is true.
(14:58):
That is very true, and that is I think everybody
should probably. I think a good companion piece that occurred
to me is to go listen to our wide corporations
have the same rights as you. One of the fundamental
flaws of UM corporate policy is that you serve your
shareholders first. Like you need to adhere to the law,
but really, ultimately, like anything you can do to serve
(15:21):
your shareholders is your mandate as a as a corporate governor.
Um that includes keeping the profit margin as high as possible,
which you're not gonna go to your your shareholders and
be like, hey, we're making enough money. We took kind
of a hit, but we're still making a ton of profit,
so we'll just take a little hit this year. No,
(15:42):
it's where we took a hit, so we're gonna fire people.
However you reconcile that, I mean, that's your own personal beliefs,
like what what you feel about that? But that is
reality as far as business goes, Right, there's fraud, there's
adjustments to the fraud, absorbing the fraud, and it's the
corporation trying to get as lean as possible. Yeah, they're
(16:03):
not going to take the hit for that. They're not
gonna say, oh, well, a bunch of people defaulted on
their credit cards this year. I guess we'll just have
a bad year. And I know in reality that's how
it works, but it's I just find it disingenuous to
be like, well, everybody suffers, you know, like people lose
their jobs because of thought. It's like there's a there's
a point b in there that that has to be
(16:24):
held accountable to some degree. Well, which is your own
freaking ethical code of conduct? And like, how about not
doing that because it's the wrong thing to do. No,
but I'm saying, like there's an institution that's absorbing the
hit and then turn around firing this poor guy. Yeah, exactly.
It's just it's tough because I came across a word
when they were describing white collar crime giving a definition
(16:46):
of it, and they said, victims colon diffuse. You don't
meet the person that the victim passes along the hit
to other people. It's a big it's nebulous. And even
if they're raised rates by like a quarter of a
percentage point, or you're paying an extra two dollars as
a consumer a year, it's like it's still not right. Yeah,
(17:09):
you know, it's not right all over the place. So
where did this come from? Uh, Josh, it came It
sounds like it came from a cold wool delivery boy.
I want to know more about this. Was this dude
just cold or did he really steal a lot of wool?
So you're talking about the carriers. The Carrier's case of
fourteen seventy three, it's the first um white collar trial, yes,
(17:33):
um and and it resulted in the first white collar
law in fifteenth century England. And this wool transporter was
given a bunch of wool and said, hey, take this
wool to this person, and it was his job. So
he decided to instead just keep the wool for himself
for his own use. So he looked into this more. Yeah,
I thought he might have been like cold on his
(17:54):
journey and said, you know, I'm gonna keep some of
this wool. Now, he kept some of the wool. He
I think he kept all of it, but somebody gave
it to him. He's like, thanks, chump, and he was.
But the key is, and this is something that has
has woven into the history of white collar crime. What
he did was not illegal at the time. The law
that was enacted as a result of the Carrier's case
(18:17):
was they were saying, Okay, this isn't this isn't illegal,
but it's obviously there's a huge problem with this, so
we're going to create a law right that outlaws this
act so people can't do it anymore. Good point, and
basically that's what happened. Well, that's kind of what happens
with every law. I guess, someone commits it first and
then someone says, hey, maybe we shouldn't do that. Yeah, yeah,
I guess. But in this case, especially like uh, the
(18:40):
Industrial Revolution in the West, obviously you started getting these
larger corporations and all of a sudden, things like monopolies
and price fixing and employee uh safety and all these
things come into effect for the first time. So that's
sort of when it was really born, and when they
started saying, hey, we need to look at something called
(19:00):
to trust. Yeah. Again, like monopolies were not illegal, but
when a company bought up all of its competitors and said, oh,
suddenly the price for your groceries like through the roof,
where else you gonna go, it wasn't illegal. But the
the people of the world started screaming and governments finally responded,
And it was really the US that first had the
(19:21):
real first solid response in the Sherman Anti Trust Act
in like the eighteen seventies maybe I think nine, named
for John Senator John Sherman, Ohio Republican dude Chairman of
the Senate's Finance Senate to Finance Committee, which I didn't
know they even had way back then. I forgot didn't either,
but I mean it seems like a basic committee there.
(19:43):
So this is interesting. And that it was voted on.
It won by vote of in the Senate one in
the House by two forty two to zero, so there
was one dude that didn't vote for it. And then
I think twenty five years later when they came up
with the Clayton Anti Trust Actor, really put some punch
into the Sherman Act. It was two seventy seven to
(20:03):
seventy four and forty six to sixteen. So in that
twenty four years it sounds like maybe things got slightly
corrupt here and there. Well it wasn't that it was that. Well,
maybe it was, but there was also some real problems
with the Sherman Act. It was really vague. It basically
said like now from here fourth all um anti competitive
(20:24):
corporate measures are illegal, and then it left it to
the courts to decide what was what, and the courts
weren't really in the mood to enforce it, so it
went largely unenforced. Although American Tobacco Company and Standard Oil
like two of the biggest companies in the country were
dissolved under the Sherman Act, Standard Oil big time. Imagine that.
Like imagine going to a company now and saying like, hey, Apple,
(20:49):
you're just too big, so we're gonna dissolve you into
thirty one companies. We have all these federal regulators here
and they're gonna come in and look at everything, and
that dissolve you into different companies. Sorry, that's what they did. Okay,
even still it didn't have enough tea, so they came
up with the Clayton Anty Trust Act, and then that
one really spelled things out, like, um, you couldn't do
price discrimination anymore, which if you were black in America
(21:13):
during the Gym Crow era, price discrimination was mind boggling.
Oh yeah, you walk into a store if you're allowed
in there to begin with, and they'll just make up
whatever price they want. It's it was really I'm reading this,
um consumers in an America book, and it's at this
point now is really just this blemish on American history.
(21:34):
I mean, like slavery wasn't bad enough to like have
slavery light through the Jim Crow era. It's just disgusting. Um, Okay,
so there was no price discrimination allegedly, corporate mergers were outlawed. Yeah, um.
And then interlocking boards where you have like competitive companies
(21:55):
but the same people on the board of each Right,
you can't have that. And then also elusive contracts where
it's like hey, home Depot, you can sell our um
weed whackers, but you can't tell anybody else's those contracts
are out right. They do stuff like that now though, right,
maybe not exclusively, but they carry lives. They do not
(22:17):
limited number of brands, corporate mergers, interlocking boards, exclusive contracts,
all that stuff one a way, it all got chipped away.
It's just I mean this, this, this act is like
not in forts anymore. Basically, Well, that's one things that
bugs me about like grocery or actually the big box
hardware stores. Grocery shopping. You you only have access to
(22:40):
what they who they have partnered with, right, whether it's
your potato chip that you want or your weed whacker
that you want. It's true, and most of the big
box stores also have exclusive contracts the other way. It's like, yeah,
we'll sell your weed whacker, but you can't sell it
no one else can. So it's like a real gamble,
I understand, like sign on to one of these giant corporations. Well,
(23:03):
that's one in the Walmart effect. That was one of
the things I think they used to. It's like a
tent company or an awning company, and like this mom
and pop awning company all of a sudden gets a
Walmart contract and they're like, sweet, they answered all our prayers.
They ordered like thirty thousand and these they ordered thirty thousand,
They opened up like three new buildings. Hi are all
these employees. And then the next year they come back
(23:24):
and say, we want thirty thousand more, but we're gonna
pay you about less. And you've already bought the buildings
and even you know, invested in the in the materials
and the people, and all of a sudden you're screwed.
You know one thing that I've long thought and I'm
gonna totally take flak for this, but I still think
it's worth saying, like you here, like, well, that's just business.
(23:46):
I feel that any any institution where like morally reprehensible
acts can just be you know, off handedly dismissed as
a matter of course of that institution is inherently fought.
There's an inherent problem with it. Yeah, that's not okay,
Like we don't just go, well, that's just murder, you know,
(24:09):
or well that's just stealing, you know, Welcome to earth. Human. No,
we have moral and legal guidelines that we follow, and
business and corporations have so so long stood outside of
these things that it's just it always bugs me when
it's just like, what are you gonna do? Yeah, I
don't like that. So sorry, I'm off my soap I
(24:31):
agree completely. Well, I'm off of my Tide brand soapbox.
Well said, um. So, things are kicking along here in
the industrial West. Corporations are getting larger, and all of
a sudden, these crimes start happening, and something called a
muckraker in the nineteenth than early twentieth century comes about.
(24:53):
And I didn't realize a muckraker was exclusively a journalist. Yeah,
it's for an investigative journalist. I thought it would was
anyone raking muck um. But it's specifically a journalist who
basically early on said you know what, there's bad stuff
going on see and I'm gonna expose your Oh really,
(25:13):
and he wrote the Jungle Change. Of course, I mean
the FDA basically came about because of that investigation that
he conducted. Well, muckrakers raked a lot of muck and
caused a lot of problems in these companies. And um,
one of the things that came about because of the
muckraking were, you know, things like the Clayton Act that's
exactly right, exposing all this stuff exactly and things like that,
(25:35):
the A Federal Regulations consumer protections. The muckrakers basically stirred
up public sentiment like hey, don't be idiots, like this
stuff's going on, and a lot of people said, well,
it's not illegal. And then unfortunately there were guys like
um E. A. Ross who was a criminologist and a sociologist,
and he started really kind of looking into this and said,
(25:56):
hey man, these people might not be criminal, but let's
all them criminal OIDs. Like that was the coining the
coin for people who, especially in business, carried out these
terrible acts that weren't illegal. He argued that even though
it's not illegal, they're causing ill and these people are
still responsible for him. So make a law that outlaws
at dummies. And he inspired a guy named E. H. Sutherland. Okay,
(26:20):
he came before Sutherland. Yeah, he was at the Ross
was working at the time of the muckrakers, and then
Sutherland came about twenty years later. Yeah. Southerland coined the
term actually white collar crime in nineteen thirty nine, and
he was a criminologist and sociologist, and he pretty much
he had a broader definition that basically it was the
high society and not the lower class at all committing
(26:44):
these crimes, which nowadays he can't really say that because
anyone can get a stock tip commit in. You know,
it happens all the time across all spectrums of the
class system. But Sutherland's point was, and he wrote a
book called white Collar Crime, UM. His point was that
there was a huge bias in the United States, UM
where the where law enforcement in the courts leaned heavily
(27:08):
on the working class crimes and just basically ignored the
crimes of the upper class and said this is not okay, Like, um,
if a guy is gonna steal a thousand dollars from
a cash register with no gun or anything like that,
Like there are other factors, but let's just say a
guy steals a thousand dollars from a cash register and
(27:29):
he's poor, and a guy steals a thousand dollars from
an investor and he's rich. That's they should be treated equally,
and they're not. And that's what Sutherland's point was. And
he was sup first dude to really bring this to light,
wasn't he. Yeah, well, Ross kind of started to, but
Sutherland was very well received. It was well received in
certain corners, but there were also certain flaws pointed out
(27:49):
by people over the years. Um One of the things
mentioned the articles said that he failed to distinguish illegal
crime from deviant mere deviant behavior, like apparently his his
whole premise was like you're into donkeys, you're a white
collar criminal exactly. And the other thing I mentioned too
was that he pretty much said it was anyone like
(28:11):
any upper class nonviolent crime, right, And that's definitely evolved,
and I think fairly. I think you can be working class,
you can be business class if you like. That's a big,
big part of white collar crimes definition is your opportunity
arises because of the trust that's granted to you through
your occupation. Yeah, even if you're a lower level employee,
(28:32):
you still may have access. Like the lady who wanted
to sell the Coke secret. She wasn't like a CEO. No,
she was an admin I believe, Yeah, exactly. Um, so
there's a there's one thing that that like you said,
they like to shoot a hole in Sutherland's theory that
or they say his definition is too broad because he
did include behavior that's not illegal. But it's a very
(28:54):
legitimate point to say, you kind of have to because
if not, then we wouldn't have had the Sherman an
Anti Trust Act, we wouldn't have had the Clayton next,
we wouldn't have had um, you know, the FDA, all
of these things that uh that the carrier's case, he
would have gotten off scott free, and what he did
was not illegal. So it has to evolve over time. Agreed, Okay,
(29:17):
and it has agreed. So let's talk about, um, I
guess the impacts of today's modern white color CRME. I
was like man that was suspensible all of a sudden. Um. Yeah.
We've talked about a few of these about it seemingly
not having a victim. But what happens is, um, you
rip off a huge corporation, the race of prices. There's
(29:39):
another ripple effect. You talked about cutting jobs to meet
you know, the needs of the investors if it's a
publicly traded company. Um, when there's stock fraud committed insider
scandals like Enron are going to ripple out throughout the
stock market cause, like you know, basically cause people to
be unsure and have no faith in the stock market
(29:59):
all the sudden. Yeah that's dangerous. Yeah, I think about
all the people who just lost everything. Oh my god,
I get Yeah, I get just as angry, if not
more angry at something like that than you know, something
like heinous crime. Yeah, that's an equal Yeah, they're both scumbags. Okay. Um,
(30:21):
so you said, like in seventy four the FBI first
started they that's when they've created this white color Kime division.
So apparently like yes, and it was a response like
this University of Michigan survey that they conducted between nineteen
fifty eight, I think in nineteen seventy three, they found that, um,
(30:43):
people who said that they trust the federal government went
from seventy three to thirty seven percent between nineteen fifty
eight and nineteen seventy three. Yeah, flo flopped. I could
see that over that time period. The sixties. Yeah, one
of the big ones was just like fraud and corruption
at high levels, and so the FBI created this white
(31:04):
collar crime thing. One of the other things that differentiates
white collar crime from regular working class crime is the
police's ability to police it. Right, you walk into a
room and there's some guy weighing out cocaine, he's a criminal.
You walk into a room and there's some guy on
(31:24):
a computer doing a pump and dump scheme. Who knows
that average cop isn't equipped to detect this kind of crime.
And as a matter of fact, even very very well
trained cops aren't typically equipped to detect this kind of crime.
One of the hallmarks of white collar crime is that
it's very difficult to prove. It's very difficult to uncover,
and it's also difficult to prosecute. Yeah, and there's no uh,
(31:49):
smoking gun, there's no paper trail, or there may be
a paper trail, but it's probably electronified. Sure, so it's
a little harder to follow. You gotta really, you know,
you gotta have people that know what they're doing. And
that's why the FBI created that division, And I guess
they're doing a good job, but it's kind of hard. Well,
(32:09):
the Justice Department has been going after white collar crime
lately under Obama pretty hard here there. Um, and then
the Sarbanes Oxley Act definitely step things up, and some
say too much. Yeah, I mean I've had to comply
with this at various uh when I worked in the
film as Is production, companies had to like to jump
through way more hoops of paperwork because the Sarbanes Oxley
(32:34):
do you want to talk to you want to tell them? Well,
it's it was in two thousand two, and it was
to improve corporate governance, which is basically accountability between corporation
and the stakeholders. What it amounted to was a lot
more paperwork, essentially more proving of numbers and showing numbers
and jumping through hoops. It was a direct reaction from
(32:57):
of the fallout of Enron, from the fallout of en
On and Tycho and like all the other companies around
that time. Um. But one of the other things that
did chuckers was, um A quadrupled sentences in a lot
of cases for white collar crime. So now you have
guys like Bernie made Off getting a hundred and fifty years.
There's a guy named Sholem Weiss who was involved in
(33:19):
like the breakup of some insurance company. He got eight
hundred and forty five years. He gets out in twenty
seven fifty four. I don't think he's gonna see that.
I don't either, But I mean a guy named rich
Harkness got a hundred years for thirty nine million dollar
ponzi scheme like these and all of this is like
post Sarbanes Oxley, except Sholm Wisse, which is really saying something.
(33:42):
But but I mean, like, so now now sentences are
like quadruple. It's like, well, wait a minute, maybe maybe
this is a little too much like just retribution on
the rich. It is, and that's kind of I think
why a lot of people are having a hard time
feeling bad. Are ridiculously wealthy people who were hucksters and frauds,
(34:05):
or people who built people out of their retirement accounts.
It's tough to feel sorry for him. But legally speaking,
it's like, well, wait a minute, um, you were worried
about the guy who stole a thousand dollars out of
it till being treated differently from the guy who stole
a thousand dollars from an investor. Now it's flip floped.
How is that any better. One of the arguments for
these kind of things is that these people are traditionally
(34:29):
and historically have been treated differently because they look like
the judges that are sentencing them, and so judges historically
like really have taken it easy on them. Um, let's
go ahead and just call them white dudes, Okay, but
they also have been Um, you can make the case
that they are usually first time offenders, they're usually family people. Um,
(34:52):
that's that's something that the judges put out there, like, well,
this is a family man, he's not much of a
flight risk, he's probably never going to do this again
of the society. Yes, he didn't use a weapon, which
is a huge, huge differentiation, and so sentences have typically
typically been light. But um, you can you can also
kind of say, well, you know where where it feels
(35:12):
like we haven't quite felt it out, Like we've traditionally
ignored white collar crime. Now we're really sticking it to him. Well,
it's that whole argument with prison. Is it like punishment
for a crime done or is it rehabilitating a person
who has a problem with crime? Well, within eight hundred
and forty five years sentence, it's making an example out
(35:32):
of that person, because since you can't police it, another
way to prevent it is to send a message through
the courts, like you do this man, you're going to
prison for a long time. Yeah. I don't know if
that's such a deterrent though for some of these people.
I don't know. I mean, I think about it. Twenty
years in a in a federal penn You say Club
fed is not around any longer, um, And I mean this,
(35:56):
this is like twenty actual years. Um. Some guy named
Thomas Peters recently got fifty years and he will spend
forty years in jail. And he's fifty two, and he
will probably die in prison. Now that's a big deal
with somebody who's like, well, maybe I shouldn't do this
insider track, Maybe I should let this fifty grands just
(36:16):
walk by because it's not really worth it. Well something
like that. I'm talking about the ones who are getting
rich by the tens of millions of dollars. What I
want to see is that these people don't get out
of prison and still have all those millions of dollars
like hidden in different foreign accounts and offshore islands and ah. Like.
(36:38):
The financial part is what really bugs me. I meant to,
I didn't get a chance. I meant to look up
and see if any of the en Ron victims and
employees where ever repaid or if they were just s
O L. I'm under the distinct impression they were s
ol because the company was in such bad shape that
even dissolving it. And I think I think they some
(36:59):
people did get money, but I don't think it was
anything approaching what they lost. Well, whoever commits these crimes
gets out of jail and they have two pennies to
rub together, then those two pennies more than they should have.
I think, Well, that's the thing. Like, so, the government
started prosecuting under the Rico Act, which is the same
thing they bust up mafia organizations with UM and they've
(37:20):
been fighting white collar crime with that. And one of
the things about the Rico Act as it allows states
and individuals who are harmed to sue for up to
three times the damages. Yeah, but even then all they
have to do is say, yeah, I don't have that money.
You kid me. Well, it's true, can't pay it. No,
it's true. But like UM in the made Off case,
the guy who's who was assigned to basically get money
(37:42):
back for investors has gotten I don't remember how much
made off fleece, but let's say it was eight billion.
The guys managed to like get like six billion back. Yeah,
he's done a really good job of getting the money back.
And that's just a that's that's an example. It's not
a figure, but it's it's something pretty significant. You're still
gonna get email. I'm looking forward to the ones. But
(38:04):
it's like, hey man, we don't listen to you for
free to hear your opinion about class. All right, let's
move on to other countries. Um, things are different all
over the world. Um. Obviously, when it comes to big
business and business dealings. Uh. Western Europe has followed right
behind the US, UH most wholeheartedly with laws to prevent corruption.
(38:27):
Eastern Europe's coming on board a little slower. Um. But
then you go into other countries like in Western Africa,
and it may be customary to Greece palms to get
a deal going, or in India where apparently, if you're
a truck driver, you're gonna have to bribe people to
keep your rig on the road. And that's just how
it is there, right, And not only is it customary.
(38:48):
It's frequently legal, yeah, Russia. Yeah, bribes all over the place.
If you want to land contract, you might have to
bribe somebody. So if you're a multinational corporation, it's tough
to do this headquarter in America. Yeah, you have like
a real problem facing you. Especially, like I said, the
UM Justice Department under Obama has been prosecuting white color
(39:09):
crimes and going big time after UM people under the
Foreign Corrupt Practices Act, which says if you're an American company,
you can't engage in bribes, even if it's legal in
that country. Yeah. But what's the point, like why hamstring
American business abroad? Exactly? UM? And to help this out, actually,
(39:32):
there has been a unified committee called the UM company
I'm sorry committee called Transparency International, and they are out
to get rid of corruption and to unify business business
ethics all over the world. Right, And that's the that's
the reason that you hamstring American business because it's basically saying, hey, uh,
we can take the hit in the hopes of pressing
(39:53):
the rest of the world into the same clean up
their act. Competitive laws we have here in the States
that work very well. It's so good luck to them. Yeah,
that's it, man, I got nothing else. No, we should
we should play this one out with um the talking
heads big business agreed. Okay, Um, so Chuck, let's see. Uh.
(40:17):
If people want to learn more about white collar crime,
I would strongly advise them to go read this article
by Jay McGrath of John And there's a Simpsons reference
in it. It's a way to go, Jane. Um. You
can type in white collar crime in the search part
how stuff works dot com, which friend oh brings up listener. Ma'am,
(40:38):
that's right, Josh, I'm gonna call this, uh hot off.
The press is good cause I'm okay, Chuck and Josh
and Jerry. I want to say thank you for all
the hours of listening. My brother Chase and I've been
listeners nearly as long because you have been making them.
There was even one New Year's Day where all we
would do was listen to your hangover podcast on UP.
(41:01):
I don't think. I don't know if that's good for hangover. Uh.
It's funny and informative, and I always feel like calling
my brother after listening to the latest episode. I'm writing
you because it's recently his birthday. He's the best brother
in the world and downright awesome human being. It would
mean a lot to me if you could tell the
stuff you should know listeners about his latest project. When
(41:21):
his friend Jim survived cancer, he told Chase that he
gained strength in the music he loved. Over two years,
two hundred, twenty six hundred tracks, two hundred tracks, that's
a weird way to put it. What would that be?
Two would that be? Wait? How many two hundred? Dred
(41:46):
would it? Or dred? No? Plus two hundred, twenty hundred
nearly two hundred artists persons insane, No, she's not. Over
two years, two hundred tracks. Nearly two hundred artists from
other countries all over the world have allowed them to
(42:07):
share that message. They are releasing their second compilation disc
Electronic Saviors colon Industrial Music to Cure cancer. So it's
these artists compilations are putting together apparently two tracks. Uh.
They're a registered US charity and all proceeds go to
(42:27):
cancer research. And if you want, if you're into electronic
music and if you want to support cancer research, you
can go to www. Dot Electronic Saviors dot com. And
that is something Chase has got going and his sister
Laura Dudley. UH is a big fan of her bro
He sounds like a swell guy. I'm all for it. Cancer.
(42:52):
We had to promote a good cause, chuckers. We try
to do that. Um. Yeah, we always want to hear
about good causes. So you can get in touch with us.
Let us know about yours. We'll try our best to
let everybody else know about it, especially if people can
support it. Agreed. Um, let's see also enjoy Little Talking Heads,
Big Business from the live album Stop Making Sense released
(43:15):
to nine eight four. We're sure it's up on iTunes,
Amazon and elsewhere. Um. You can get in touch with
us at s Y s K podcast on Twitter. Uh,
you can go to Facebook dot com slash stuff you
should Know, and you can send us a regular old
email by wrapping it up, spanking it on the bottom,
and sending it off to Stuff podcast at Discovery dot com.
(43:57):
For more on this and thousands of other topics, does
it how stuff works dot com. H brought to you
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