White-collar crime is a phrase that’s been used since 1939. It was originally used to define a crime committed by a “person of respectability” and significant social status in the course of his or her occupation.
Today, the debate continues about which crimes qualify as white-collar crimes. However, generally speaking, white-collar crime includes a range of non-violent crimes that the offender typically commits to attaining financial gains.
Overview of White-Collar Crime
White-collar criminal offenses may include:
- Healthcare fraud
- Insider trading (securities fraud)
- Antitrust violations
- Credit card fraud
- Computer/internet fraud
- Bankruptcy fraud
- Tax evasion
- Public corruption
- Economic espionage/trade secret theft
- Environmental law violations
- Financial institution fraud
- Insurance fraud
- Mail fraud
- Phone/telemarketer fraud
- Government fraud
- Intellectual property theft or piracy
- Money laundering
As you can see, the range of white-collar crimes may be challenging to prosecute. Quite often, offenders employ sophisticated technologies or processes to conceal activities. Complex transactions, or a series of these transactions, may be used to obfuscate the activities.
Whistleblowers sometimes alert law enforcement to these activities. It may be difficult or impossible to identify these activities from outside of the organization or company. For example:
- The Securities & Exchange Commission (SEC) received almost 4,000 tips (2015) that involved a variety of white-collar crimes, including corruption and bribes.
- The Federal Bureau of Investigation (FBI) says that white-collar crimes cost the U.S. government more than $300 billion each year. Government authorities usually seek to charge individuals for their white-collar crimes but, in some cases, it may proceed to sanction corporate entities for these offenses.
- If convicted of a white-collar crime, the offender faces restitution, fines, paying for costs related to prosecution, home detention, forfeitures, supervised release, community confinement, or imprisonment.
- Offenders face a longer prison sentence in Texas when a victim suffers significant financial harm. If the defendant assumes responsibilities for his or her crime and helps authorities to investigate, he or she may face reduced sanctions in some cases.
Both Texas and U.S. legislation list activities that are typically considered white-collar crimes:
- The U.S. Constitution’s Commerce Clause authorizes federal authorities to regular white-collar crimes. Multiple federal agencies, including the Environmental Protection Agency (EPA), SEC, FBI, U.S. Customs, Department of Labor (DOL), U.S. Postal Service (USPS), Internal Revenue Service (IRS), and others enforce legislation relating to white-collar crimes.
- Texas’ Criminal Justice Division enforces white-collar crimes at the state level.
Examples of White-Collar Crimes
A large percentage of white-collar offenses involve fraud. In general, fraud involves the offender’s deceit of someone else for his or her financial gain. For instance:
- Securities fraud is an umbrella term that includes many different types of crime. A common type of securities fraud is insider trading. This happens when an individual with “inside information” about a public company’s activities or reports trades using this information. For example, if Joe knows that ABC has received a buyout offer from DEF, and he knows that the board of directors plans to announce the acceptance tomorrow, his decision to buy shares of ABC today violates the law. If Joe buys ABC and sells on the announcement, this is specifically considered insider trading.
A well-known case involving Martha Stewart’s insider trading is an example of this type of securities fraud.
- Another form of securities fraud involves the misstatement of corporate finances, prospects, or viability:
1. For instance, if ABC wants Warren Buffett to make a major investment in their company but provides him with misleading information, ABC is guilty of securities fraud. In this example, the individuals charged with speaking for the business must knowingly make false statements or should minimally reasonably assume the statements are false to be convicted of a crime.
2. Enron, a securities firm, misled many investors and trading partners about its financial health. Its CPA firm assisted in perpetrating securities fraud.
3. Bernard Madoff orchestrated a complex Ponzi scheme that caused devastating financial harm to most of his firm’s clients. In part, he executed the scheme by providing clients with false information about account performance.
- Mortgage fraud or insurance fraud is another common type of white-collar crime:
1. If Joe says his home is broken into and he says many valuables in his home were stolen in order to collect the insurance money, that’s an example of insurance fraud.
2. If Jill lies about her health on a life insurance application about a serious illness, she could be guilty of insurance fraud.
3. If Jim lies about his assets to get a mortgage, and he pays someone to add him to an account to demonstrate his assets to the mortgage provider, he could be guilty of mortgage fraud.
- Embezzlement involves taking money from a person or business:
1. For instance, if a corporate chief financial officer embezzles funds from his employer by directing money to his personal account, that’s embezzlement.
2. Embezzlement also happens when a lawyer improperly accesses clients’ funds.
3. An investment adviser may embezzle funds when he or she accesses clients’ money for personal gain.
- Tax evasion occurs when an offender tries to avoid paying taxes he or she owes:
1. It may occur when the individual provides false information on tax forms.
2. It may result from an individual’s illegal transfer of property to avoid paying taxes.
3. Both individuals, corporations, and other organizations may be found guilty of tax evasion.
- Money laundering describes the act of “transforming” illegally-gotten money into “clean,” or legitimate, funds:
1. The money is often deposited in a broker-dealer account or at a bank.
2. The funds are separated from the origin through a series of complex transactions that make it more challenging to trace where the money came from.
3. The money is next integrated. Newly laundered funds are added to legally-obtained funds, such as money obtained through the purchase or sale of property or securities.
Federal White-Collar Crime Laws
The FBI reports that white-collar crimes are quite common. About one in four individuals in the U.S. is affected by some form of white-collar crime in the U.S. each year.
Federal Laws under 18 U.S.C. describe:
- § 371 (Conspiracy)
- § 1341 (Mail fraud)
- § 1341 (Wire fraud)
- § 1344 (Bank fraud)
- § 1347 (Health care fraud)
- § 1956 (Money laundering)
- § 3553 (Sentencing)
- § 201 (Bribery)
- § 704(b)(c)(d) (Fraud: military medals)
- §§ 641 – 670 (Embezzlement, theft)
- §§ 470 – 514 (Counterfeiting, forgery)
- §§ 1001 – 1036 (Fraud, false statements)
- §§ 1501 – 1521 (Obstruction of Justice)
- §§ 1831 – 1839 (Economic espionage)
- §§ 1961 – 1968 (Racketeering, RICO)
- §§ 2325 – 2327 (Telemarketing fraud)
Federal Laws under 26 U.S.C. describe:
- §§ 7201 – 7217 (Tax crimes)
The Securities Act of 1933 and the Securities Exchange Act of 1934 describe:
- Securities fraud, insider trading, etc.
White-Collar Crime Laws in Texas
Texas Penal Code § 32.21
Texas Penal Code § 32.21 describes the act of forgery in Texas. If an individual alters, completes, makes, authenticates, or executes with the intent to harm or defraud another individual or business:
- An act of forgery is punishable as a:
1. Class A misdemeanor
2. State jail felony
3. Third-degree felony
Texas Penal Code § 32.31
Texas Penal Code S 32.31 describes the act of credit card fraud in Texas. If an individual presents a debit card or credit card with the intention to obtain a benefit (when the actor knows the card doesn’t belong to him or her, and without the cardholder’s permission). A person may be charged with credit card fraud if he or she:
- Uses a fake card or fake account number with the intention to derive benefits, or presents a card knowing it was canceled, expired, or revoked
- Receives financial or other benefits from fraudulent activity
- Steals debit or credit card information with the intention of using, giving, or selling the information to other people (not the owner)
- Uses a card to gain personal benefit when the legal cardholder can’t pay
- Uses a card when he or she isn’t an authorized user and doesn’t have the owner’s consent
Credit card theft is punishable as a:
- State jail felony
- Third-degree felony
An example of widespread credit card fraud occurred in Kemp, Texas. The City Council realized that white-collar skimming crime was rampant in their neighborhood two months ago. Skimming occurs when a thief steals debit or credit card details from cardholders.
Kemp officials realized that the technology used was quite sophisticated. It’s also a challenge for law enforcement to identify it.
In this scam, the thief posed as a repairman for a local gas station. After opening the pump, it was rigged with a tiny device that captures credit or debit card numbers and PIN codes. Once the technology is installed, it’s not necessary for the thief to return to retrieve the information. It’s remotely accessible.
One of the affected residents said he received a call from Life Lock, an identity theft security firm to report suspicious activity. The thieves generated money orders from his account at a Houston supermarket in addition to charging $300 in gasoline sales at area gas stations.
After the individual disputed the activity, his card issuer refunded the money. He proceeded to press charges against the thief or thieves.
Texas Penal Code § 35.02
Texas Penal Code § 35.02 describes insurance fraud. When an individual presents a claim to an insurer with the intention to deceive or defraud, he or she may be guilty a crime of insurance fraud.
Insurance fraud is punishable as a Class C misdemeanor up to first-degree felony in Texas, usually depending on how much money was involved.
Texas Penal Code § 32.51
Texas Penal Code § 32.51 describes identity theft. When a person obtains, possesses, uses, or transfers information concerning an individual with the intention to defraud of harm him, he or she may be guilty of an identity theft crime. Guilt may be proven if the offender:
- Uses personal identification information belonging to another party without consent
- Uses personal identification data belonging to a deceased individual
- Uses personal identification information belonging to a person less than 18 years old
Identity theft is punishable as a:
- State jail felony
- Third-degree felony
- Second-degree felony
- First-degree felony
Texas Penal Code § 34.02
Texas Penal Code § 34.02 describes money laundering. This crime may be proven if the offender knowingly:
- Acquires or maintains interest in, transfers, transports, conceals or possesses proceeds derived from criminal activity
- Conducts, facilitates, or supervises a fraudulent transaction involving “proceeds of criminal activity”
- Invests, receives, offers to invest, expenses or receives proceeds derived from criminal activity (or funds the individual believes are proceeds of such)
- Finances, invests, or intends to finance/invest money he or she believes will be used to further criminal activity
The crime of money laundering is punishable as a:
- State jail felony
- Third-degree felony
- Second-degree felony
- First-degree felony
White-Collar Crime Punishments in Texas
The Texas Penal Code defines penalties and punishments for white-collar crimes. In some instances, the convicted offender may face harsher punishments: if he or she has a prior criminal history, if he or she defrauded an older person, if he or she harmed many people, or if he or she defrauded or stole a large amount of money, it’s possible to face higher than statutory penalties.
If convicted of:
- A Class C misdemeanor, the individual faces a maximum $500 fine.
- A Class B misdemeanor, he or she faces a maximum 180-day jail term plus a maximum fine of $2,000.
- A Class A misdemeanor, the offender faces a maximum 12-month jail sentence plus a maximum fine of $4,000.
- A state jail felony, he or she faces a minimum jail term of 180 days up to a maximum jail term of two years, plus a maximum fine of $10,000.
- A third-degree felony, he or she faces a prison term of two years up to 10 years, plus a maximum $10,000 fine.
- A second-degree felony, the offender faces a minimum prison term of two years to a maximum prison term of 20 years, plus a maximum fine of $10,000.
- A first-degree felony, he or she faces a minimum five-year prison sentence up to a maximum 99-years to life prison sentence, plus a maximum fine of $10,000.
If you have been charged with a federal white-collar crime, consult a knowledgeable criminal defense attorney about possible punishments. This is a legal emergency. You need a criminal defense lawyer now.
Defenses Against White-Collar Crimes
An individual accused of a white-collar crime may have a range of defenses. An experienced criminal defense attorney evaluates each case to arrive at a defense based on the facts, including:
- Entrapment: An agent of the state or federal government convinces the individual to commit a white-collar crime that he or she wouldn’t have committed under normal circumstances. It’s quite common for law enforcement to use the services of undercover agents to get information about white-collar crimes.
- Duress: Someone else forced you to commit the white-collar crime.
- Incapacity: You were unable to commit the crime due to physical or mental reasons.
- Intoxication: You were using drugs or drinking alcohol at the time the offense was committed.
- Insanity: You may be suffering from severe mental illness.
White-collar crime is a common occurrence in Texas and throughout the United States. If you’ve been charged with a crime, you need experienced legal representation now. Contact The Law Office of Matthew D. Sharp if you or someone you love has been charged with a white-collar crime in Houston, Harris County, or throughout Texas.