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“The Practice of Politics is More Honest than the Conduct Of Business”

“If there was a Nobel Prize in criminology, Sutherland undoubtedly would have been awarded it for his work on white-collar crime.” – Karl Mannheim.

Monty Raphael QC of Peters & Peters Solicitors LLP discusses the control of economic crimes.

Monty Raphael QC

What, I wonder, would Edwin Sutherland make of it all. He coined the label “white-collar crime” in 1939, but died just over a decade later, shortly after his heavily censored treatise on the subject was first published.

Some cynics might say that the subject continues to be censored to this day. After all, is it not legitimate to ask why the delinquencies of the “overworld” appear to attract far less attention than the misbehaviour of the traditional underworld. The answer might be that the control of economic crime is even less enthusiastically pursued than that of other offences, even if the latter leaves a lot to be desired in clear-up rates.

Sutherland, in his invention of the term, stressed “that persons of the upper socio-economic class engage in much criminal behaviour… that [is] not ordinarily included within the scope of criminology.” White-collar crime, as he revealed, was “a crime committed by a person of respectability and high social status in the course of his occupation.”

We now recognise that this definition, ground-breaking as it was, was too conservative. This genre of criminality, we now know, can be, and is, committed by all social classes. Unlike the sanctioning landscape that Sutherland surveyed, offenders, when prosecuted, are treated (at least in theory) like any other offender. What Sutherland could not have foreseen was that in the decades after his death, the whole world would become fertile ground for business crime; that offenders would progress from traditional offences against property – burglary, robbery and common theft – and drug trafficking, to acquire the skills of the organised individual and corporate transnational fraudster, corrupter, tax evader and price fixer. Neither could he have foreseen that despite national and transnational efforts to confront these activities, they would prevail and challenge the ability of the most sophisticated societies to tackle them in an effective and coherent manner.

It may be argued that, just as it took a century of business abuse in the US and other developed states to provoke Sutherland’s eureka moment, so it may take at least that time – if not longer – for countries to both recognise and devote the physical and political resources needed to develop a truly efficient and responsive strategy.

We long ago recognised the social and economic harm that results from business crime. Thus one of Edwin Sutherland’s concerns, that capitalism appeared to overlook the crimes of capitalists, has been met. This delinquency is universally punishable in one way or another. What remains unclear, as I write, is whether we can claim that it is universally actually punished.

The UK, in common with all other developed economies, is still struggling to determine how this behaviour can first be detected, then investigated, and finally how it should be dealt with procedurally. How should society show its disapproval? Should it, for example, differentiate between individuals and corporations, between organised and opportunistic criminals? Should it reflect the public perception of harm which still appears to regard petty theft, antisocial behaviour and drug taking as at least equally if not more harmful?

When considering corporations there is no universal test of corporate criminal liability or even, where it exists, how it may be established.

Penal sanctions are only briefly discussed by Professor Sutherland. But nonetheless he identified the three main threads of policy that may be discerned in current government thinking. Firstly, what emphasis should be placed on punishment that is accompanied by loss of reputation in social or corporate status? Secondly, should individuals, particularly corporate executives, be more harshly treated than the corporations by which they were employed? Should the latter perhaps only be sanctioned by administrative fines and dismissal? Lastly, if asked, would the public really countenance the destruction of jobs and economic value resulting from harsh corporate sentences? Applying Sutherland’s test: is the public really so resentful of white-collar crime, or are they still more resentful of all the other criminal activities the law punishes? Without this evident resentment, no government will ever devote the necessary political capital and financial resources to tackle the behaviour that Sutherland railed about several years ago.

I have thought it useful to raise this American scholar from the dead, before taking a peek at where we are now so that we can better understand the current position I will now go on to describe.

There is a lively debate in the UK right now about how to move away from so-called “crony” capitalism to a more ethical and socially responsible market economy. This must necessarily include the question of why there has been so little penal activity arising from the revelations of misconduct which brought about the 2008 financial crisis. The odd rogue trader has been unmasked. Swiss banks have been sanctioned for encouraging tax evasion, and immunities have been traded in return for confessions and restitution. The FSA has successfully prosecuted a number of largely low-level insider dealers, whereas the US has brought several high-profile cases for the same misconduct. Yet, using the public resentment test, while there is outrage at the rewards for bankers, in a sector that has been demonised, no bank has been brought low by prosecution or regulation.

On the price-fixing front, the European and domestic regulators have been more active, but whistle-blowing, immunities and leniency remain their preferred way to go. Only the most extreme conspiracy theorist would discern either a patent or latent plan by business and law enforcement to soft-pedal the control of white-collar crime. In the absence of hard evidence from objective criminologists, the pedestrian answer may be that politicians and the public alike are preoccupied by issues of economic and political security. Only a shift in public resentment, aided by the dissemination of well-informed journalistic analysis, is likely to bring about the changes that professionals in the field would welcome.

Without these changes, there is a danger that, great as the developments have been since that 1939 lecture, Sutherland’s fundamental revelations will remain as valid and disturbing as they did more than seven decades ago.

We, who have to advise both corporations and individuals about compliance risk and crisis management, remain hobbled when predicting the interpretation of an increasing number of regulatory provisions, and when deciding how to react to the uncovering of commercial wrongdoing.

Sutherland would doubtless be impressed by the assortment of weapons in the armories of countries, intranational and international organisations, to say nothing of the intricate network of mutual-assistance facilities that nowadays exist. Yet it is clear that these opportunities to fight white-collar crime have yet to mature into a homogeneous global imperative. States remain jealous of national sovereignty; common goals are hardly discernible in action, though frequently set out in well-meaning multilateral instruments.

What Sutherland could not have foreseen was that white-collar crime would migrate from the “respectable aristocrats” of the business community to the less-than-respectable perpetrators of organised or networked international criminality. Society is presently less than sure if it should distinguish between these groups, if indeed a distinction should be made. Governments have been quick to use the draconian and often anti-libertarian measures given them to fight terrorism and the Mafia, in their efforts to confront corporate wrongdoing. While some may applaud these developments, it is doubtful that in the long run these measures will ever be wholly embraced by those upon whom we depend for the success of the market economy. In the absence of that acceptance, or a sea change in the volume of public resentment, progress towards an understanding of white-collar crime, its definition and its progressive reduction, is a long way off.

What is to be welcomed, as demonstrated by the number and expertise of those included in this directory, is that the legal profession has risen to the challenge. Corporate firms are recruiting criminal specialists in large numbers. The outcome is likely to be that agencies will also need to make qualitative improvements so that the state’s response is both more proportionate and more predictable. More perhaps in line with public expectations and their perception of harm.

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