Test Bank for Profit Without Honor White Collar Crime and the Looting of America, 7th Edition by Rosoff, Pontell, Tillman
Test Bank for Profit Without Honor White Collar Crime and the Looting of America, 7th Edition by Rosoff, Pontell, Tillman
,Test Bank for Profit Without Honor White Collar Crime and the Looting of America, 7th Edition by Rosoff,
Pontell, Tillman
CONTENTS
Chapter 1 Introduction 1
Chapter 2 Crimes against Consumers 11
Chapter 3 Unsafe Products 19
Chapter 4 Environmental Crime 27
Chapter 5 Institutional Corruption: Mass Media and Religion 38
Chapter 6 Securities Fraud 44
Chapter 7 Corporate Fraud 54
Chapter 8 Fiduciary Fraud 63
Chapter 9 Crimes by the Government 72
Chapter 10 Corruption of Public Officials 81
Chapter 11 Medical Crime 89
Chapter 12 Computer Crime 97
Chapter 13 Conclusions 105
3
,Test Bank for Profit Without Honor White Collar Crime and the Looting of America, 7th Edition by Rosoff,
Pontell, Tillman
Chapter 1
Introduction
CHAPTER SUMMARY
On April 25, 2008, a group of mostly wealthy men gathered at Greenwich Village restaurant for an
evening of food, fun and wine – lots of high quality wine. The occasion was an auction of fine and
rare wines, some of the best in the world, sold at prices that reached as high as $42,000 a bottle.
The seller of the wines was a mysterious young man named Rudy Kurniawan who lived in
California but who was thought to be from a wealthy family in Indonesia. He was a young
entrepreneur who had burst onto the wine scene in the early 2000s and quickly became a major
player in the rapidly growing market for fine wines.
Everything began to change for Kurniawan after a 2008 auction when his wines were pulled. One
of the major clues of the fraud? The adhesive used to label an 1857 bottle of French wine was
Elmer’s glue, which was first produced in 1947. The FBI raided his home and found thousands of
fake labels, hundreds of old and new corks, and rubber stamps with vintages and chateaux names of
old wines. Kurniawan was eventually convicted in a Manhattan criminal court and in 2014 he was
sentenced to 10 years in prison. Rudy was clearly a fraudster for our times and it seems as if we
live in a world of “fakes”.
This book surveys the forms, causes, and consequences of white-collar crime.
THE HISTORY OF A CONCEPT
The term “white-collar crime” was first used by Edwin Sutherland in 1939. Sutherland argued that
this type of crime differed from other crimes in the administrative procedures used in dealing with
offenders. He defined white-collar crimes as those committed by persons of respectability and high
social status in the course of their occupation. Sutherland went on to state that, because of the
political and financial power of white-collar criminals and the use of alternate response
mechanisms, information on these crimes was lacking. The data that was available suggested that
white-collar crime was far more costly than street crime.
Sutherland’s recognition of the extent of white-collar crime forced a reexamination of the common
theories for crime commission. Sutherland’s remarks came at a time when the United States had
moved from a rural, agrarian society to an urban, industrial one dominated by powerful
corporations. Journalists referred to as “muckrakers” were beginning to examine abusive corporate
practices, and Congress had legislated against monopolistic practices.
The Sherman Antitrust Act of 1890 was enacted to stop companies from fixing prices or pooling
their operations under a single administration in order to eliminate competition. The corporation
that came to symbolize the strategic use of mergers and trusts was the Standard Oil Company,
headed by John D. Rockefeller. He ruthlessly destroyed competition and created an empire that
controlled virtually the entire American petroleum industry.
4
, Test Bank for Profit Without Honor White Collar Crime and the Looting of America, 7th Edition by Rosoff,
Pontell, Tillman
The Roaring Twenties were a bonanza for white-collar crime. The feeding frenzy unleashed aby an
exploding economy attracted bold predators.
Ponzis
Charles Ponzi had been an inept petty thief in his native Italy. His parents shipped him across the
Atlantic to be rid of him and he settled in Boston in 1911. In 1919 he announced that his Financial
Exchange Company of Boston would guarantee an incredible 50 percent return to investors within
45 days. He persuaded 20,000 investors to give him nearly $10 million. The secret of Ponzi’s
smoke screen was that he paid off early investors with new investors’ money, thereby attracting
more and more investors.
“Ponzi” or pyramid schemes emerged. These schemes involved the payment of early investors with
money from later investors. Ponzi schemes are still alive and well in the 21st century as evidenced
by the proliferation of spam offerings on the Internet. The case study of R. Allen Stanford presents
a modern example of the Ponzi scheme. Stanford was the founder of the Antigua-based Stanford
International Bank, which in a relatively short period of time had sold over $8 billion in CDs to
investors from all over the world. Stanford was a Texas native, owned a cricket team in Antigua,
sponsored an international cricket tournament with a grand prize of $20 million, and was made a
knight by Queen Elizabeth for all of his good deeds. Then federal agents raided his Houston home
in February 2009 and sealed it off as a crime scene. The same day, the SEC filed suit against him
alleging that he had “executed a massive Ponzi scheme” that resulted in losses of $7 billion to
clients. Stanford was convicted on criminal charges. In June 2012 he was sentenced to 110 years in
prison and his victims claimed the disgraced banker was guilty of “financial terrorism.”
In October 2011, Nicholas Cosmo, of Long Island, New York, was sentenced to 25 years in prison
for operating his firm, Agape Inc., as a Ponzi scheme. Prosecutors claimed he stole over $400
million from investors from all over the world who believed his promises of double-digit returns on
their investments
The Great Depression
The Great Depression and its populist antiauthoritarian sentiment gave way to two decades of
conformity and public confidence in the guidance of corporate America. The faith in corporate
America was misplaced. Events in the late 1960s and early 1970s would make Americans
suspicious and skeptical of private and governmental organizations. Scholarly focus on white-collar
crime also increased.
The 1980s spawned white-collar crimes of epic proportions. The case study of Barry Minkow, a
16-year old Los Angeles high school student who came to be known as “The $80 Million Kid,”
describes the poster child of the greed decade. Minkow used a variety of criminal techniques to
create a false impression of a successful company called ZZZZ Best. Shortly after his 21st birthday,
Minkow met with Drexel Burnham Lambert, a Wall Street firm that agreed to promote an $80
million junk bond sale. Fortunately for investors, not long after that a Los Angeles Times article
exposed Minkow. He was found guilty on 57 counts of criminal wrongdoing and sentenced to 25
years in federal prison.
5
Test Bank for Profit Without Honor White Collar Crime and the Looting of America, 7th Edition by Rosoff, Pontell, Tillman
,Test Bank for Profit Without Honor White Collar Crime and the Looting of America, 7th Edition by Rosoff,
Pontell, Tillman
CONTENTS
Chapter 1 Introduction 1
Chapter 2 Crimes against Consumers 11
Chapter 3 Unsafe Products 19
Chapter 4 Environmental Crime 27
Chapter 5 Institutional Corruption: Mass Media and Religion 38
Chapter 6 Securities Fraud 44
Chapter 7 Corporate Fraud 54
Chapter 8 Fiduciary Fraud 63
Chapter 9 Crimes by the Government 72
Chapter 10 Corruption of Public Officials 81
Chapter 11 Medical Crime 89
Chapter 12 Computer Crime 97
Chapter 13 Conclusions 105
3
,Test Bank for Profit Without Honor White Collar Crime and the Looting of America, 7th Edition by Rosoff,
Pontell, Tillman
Chapter 1
Introduction
CHAPTER SUMMARY
On April 25, 2008, a group of mostly wealthy men gathered at Greenwich Village restaurant for an
evening of food, fun and wine – lots of high quality wine. The occasion was an auction of fine and
rare wines, some of the best in the world, sold at prices that reached as high as $42,000 a bottle.
The seller of the wines was a mysterious young man named Rudy Kurniawan who lived in
California but who was thought to be from a wealthy family in Indonesia. He was a young
entrepreneur who had burst onto the wine scene in the early 2000s and quickly became a major
player in the rapidly growing market for fine wines.
Everything began to change for Kurniawan after a 2008 auction when his wines were pulled. One
of the major clues of the fraud? The adhesive used to label an 1857 bottle of French wine was
Elmer’s glue, which was first produced in 1947. The FBI raided his home and found thousands of
fake labels, hundreds of old and new corks, and rubber stamps with vintages and chateaux names of
old wines. Kurniawan was eventually convicted in a Manhattan criminal court and in 2014 he was
sentenced to 10 years in prison. Rudy was clearly a fraudster for our times and it seems as if we
live in a world of “fakes”.
This book surveys the forms, causes, and consequences of white-collar crime.
THE HISTORY OF A CONCEPT
The term “white-collar crime” was first used by Edwin Sutherland in 1939. Sutherland argued that
this type of crime differed from other crimes in the administrative procedures used in dealing with
offenders. He defined white-collar crimes as those committed by persons of respectability and high
social status in the course of their occupation. Sutherland went on to state that, because of the
political and financial power of white-collar criminals and the use of alternate response
mechanisms, information on these crimes was lacking. The data that was available suggested that
white-collar crime was far more costly than street crime.
Sutherland’s recognition of the extent of white-collar crime forced a reexamination of the common
theories for crime commission. Sutherland’s remarks came at a time when the United States had
moved from a rural, agrarian society to an urban, industrial one dominated by powerful
corporations. Journalists referred to as “muckrakers” were beginning to examine abusive corporate
practices, and Congress had legislated against monopolistic practices.
The Sherman Antitrust Act of 1890 was enacted to stop companies from fixing prices or pooling
their operations under a single administration in order to eliminate competition. The corporation
that came to symbolize the strategic use of mergers and trusts was the Standard Oil Company,
headed by John D. Rockefeller. He ruthlessly destroyed competition and created an empire that
controlled virtually the entire American petroleum industry.
4
, Test Bank for Profit Without Honor White Collar Crime and the Looting of America, 7th Edition by Rosoff,
Pontell, Tillman
The Roaring Twenties were a bonanza for white-collar crime. The feeding frenzy unleashed aby an
exploding economy attracted bold predators.
Ponzis
Charles Ponzi had been an inept petty thief in his native Italy. His parents shipped him across the
Atlantic to be rid of him and he settled in Boston in 1911. In 1919 he announced that his Financial
Exchange Company of Boston would guarantee an incredible 50 percent return to investors within
45 days. He persuaded 20,000 investors to give him nearly $10 million. The secret of Ponzi’s
smoke screen was that he paid off early investors with new investors’ money, thereby attracting
more and more investors.
“Ponzi” or pyramid schemes emerged. These schemes involved the payment of early investors with
money from later investors. Ponzi schemes are still alive and well in the 21st century as evidenced
by the proliferation of spam offerings on the Internet. The case study of R. Allen Stanford presents
a modern example of the Ponzi scheme. Stanford was the founder of the Antigua-based Stanford
International Bank, which in a relatively short period of time had sold over $8 billion in CDs to
investors from all over the world. Stanford was a Texas native, owned a cricket team in Antigua,
sponsored an international cricket tournament with a grand prize of $20 million, and was made a
knight by Queen Elizabeth for all of his good deeds. Then federal agents raided his Houston home
in February 2009 and sealed it off as a crime scene. The same day, the SEC filed suit against him
alleging that he had “executed a massive Ponzi scheme” that resulted in losses of $7 billion to
clients. Stanford was convicted on criminal charges. In June 2012 he was sentenced to 110 years in
prison and his victims claimed the disgraced banker was guilty of “financial terrorism.”
In October 2011, Nicholas Cosmo, of Long Island, New York, was sentenced to 25 years in prison
for operating his firm, Agape Inc., as a Ponzi scheme. Prosecutors claimed he stole over $400
million from investors from all over the world who believed his promises of double-digit returns on
their investments
The Great Depression
The Great Depression and its populist antiauthoritarian sentiment gave way to two decades of
conformity and public confidence in the guidance of corporate America. The faith in corporate
America was misplaced. Events in the late 1960s and early 1970s would make Americans
suspicious and skeptical of private and governmental organizations. Scholarly focus on white-collar
crime also increased.
The 1980s spawned white-collar crimes of epic proportions. The case study of Barry Minkow, a
16-year old Los Angeles high school student who came to be known as “The $80 Million Kid,”
describes the poster child of the greed decade. Minkow used a variety of criminal techniques to
create a false impression of a successful company called ZZZZ Best. Shortly after his 21st birthday,
Minkow met with Drexel Burnham Lambert, a Wall Street firm that agreed to promote an $80
million junk bond sale. Fortunately for investors, not long after that a Los Angeles Times article
exposed Minkow. He was found guilty on 57 counts of criminal wrongdoing and sentenced to 25
years in federal prison.
5
