When it comes to white collar crime, Bernie Madoff is the king.
Federal investigators estimated his Ponzi scheme garnered him and his associates in excess of $64 billion. Recently, prosecutors in the case increased charges against four Madoff employees and now allege that the fraud began in the early 1970s.
It was in the mid-1970s that Clarence Kelley, then the director of the FBI, made white collar crime a priority for his agency. According to the FBI, 15 percent of its agents were investigating white collar cases, which ramped up the following decade with “agent-intensive, high-dollar and high-impact financial fraud investigations.”
That included the savings and loan crisis of the early 1980s followed by insider trading scandals; health care and telemarketing fraud in the early 1990s, with the conviction of municipal finance banker Mark Ferber in 1996; and accounting gimmicks that led to the implosion of Enron in 2001 as well as subsequent investigations of other major corporate fraud such as WorldCom.
The FBI”™s investigations of white collar crime include: asset forfeiture and money laundering; bankruptcy fraud; corporate fraud; financial institution fraud and failures; health care fraud; hedge fund fraud; insurance fraud; Internet fraud; mass marketing fraud; mortgage fraud; piracy and intellectual property theft; public corruption and government fraud; and securities and commodities fraud.
The FBI stresses that just because no one is physically assaulted in white collar crimes, does not mean it is a victimless crime.
One prime example and not often thought of as white collar crime is the Love Canal disaster where the Hooker Chemical Co. buried tons of toxic waste on land near Buffalo, N.Y., and later sold it. A residential neighborhood was developed and numerous health problems arose from cancers to miscarriages. After years of hearings, protests and court battles, the residents were relocated. Congress eventually passed the Comprehensive Environmental Response, Compensation and Liability Act, commonly known today as the Superfund Act. Hooker Chemical, which became Occidental Petroleum, was held liable for the clean up of the former neighborhood and after being sued by the U.S. Environmental Protection Agency, agreed to pay $129 million in restitution.
White collar crime can even show up on the Great White Way.
Taking a page from Mel Brooks”™ “The Producers” in which two producers look to get rich by overselling interests in a play that they think will flop, Long Island businessman Mark Hotton thought he could do the same with a Broadway show titled, “Rebecca, The Musical.”
Manhattan-based U.S. Attorney Preet Bharara said Hotton went to great lengths to perpetrate his fraud.
“Hotton faked lives, faked companies and even staged a fake death, pretending that one imaginary investor had suddenly died from malaria,” Bharara said in a statement.
Hotton was accused of defrauding the producers “by fabricating the prospect of $4.5 million in financing commitments and the possibility of a $1.1 million loan, so that they would pay him and entities he controlled more than $60,000 in fees and commissions. Hotton is also charged with a second fraudulent scheme in which he tricked a Connecticut-based real estate company into paying him and entities he controlled $750,000.”
Bernie Madoff
Ran what was considered to be the largest financial fraud in U.S. history estimated at $65 billion. Madoff pleaded guilty in March 2009 to securities fraud, investment adviser fraud, mail fraud, wire fraud, three counts of money laundering, false statements, perjury, false filings with the U.S. Securities and Exchange Commission and theft from an employee benefit plan.
Enron
Top officials at the Houston-based energy trading company stole from investors by overvaluing assets to boost cash flow and earnings statements, making the company very appealing to investors. When Enron declared bankruptcy in December 2001, investors lost millions. The FBI seized $164 million, of which about $90 million has been used to help compensate victims. It is estimated shareholders lost $45 billion as a result of the fraud.
WorldCom
Bernie Ebbers was charged with conspiracy and securities fraud in a scheme to artificially inflate the price of the telecommunications company”™s stock by hiding its declining operating performance and financial results. The fraud was estimated at $11 billion.
Tyco International
Dennis Kozlowski is best known as being the CEO, paying $8,000 for a shower curtain and for throwing lavish multimillion-dollar parties. He was accused of stealing millions of dollars from the company he helped build up. He was sentenced to prison and ordered to pay $134 million in restitution.
Galleon Group
Hedge-fund magnate Raj Rajaratnam was accused of making $50 million by acting on insider trading tips. For his crimes he received the longest-ever prison sentence for insider trading.
Adelphia Communications
John Rigas, founder of the cable TV company, and his son and former CFO Timothy J. Rigas, were convicted of charges, including securities and bank fraud. Theft was estimated at $100 million.
