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Plain Truth Magazine
July 1971
Volume: Vol XXXVI, No.7
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Gerald R Flurry

It is crimes of violence — murder, armed robbery, burglary that people most fear. But the crime of the respected white-collar criminal goes practically unrecorded in news headlines. This is the crime that reveals how national character has broken down.

   PEOPLE commit crimes within the range of their opportunity. Bankers rarely rob banks. But bankers have embezzled bank funds.
   An armed robber would steal from a bank by violence. A banker or accountant would do it by intrigue.
   But one is as much a crime as the other. And escalating white-collar crime reveals social corrosion even more than crimes of violence. It is a yardstick of personal integrity — a thermometer of national moral fiber.

The Disaster of White-Collar Crime

   White-collar crime is a massive problem — morally and monetarily.
   The cost of white-collar crime — embezzlement, stock manipulation, bribery, tax frauds, theft from business, consumer fraud, and the like — dwarfs all crimes of violence.
   White-collar workers steal twice as much from their employers as professional criminals steal.
   The common thief usually steals a person's money and leaves. An embezzler may reach into a family and destroy their equity, bankrupt a whole firm or render valueless the stock of a corporation.
   White-collar criminals are often college educated, supposedly adhering to better values than the majority. Their jobs are usually higher paying, and their opportunities for crime are greater. They are given greater responsibility than the average citizen and are more trusted. They form a large segment of our leadership, and as the leadership goes, so goes the nation.
   For most white-collar criminals, their illegal actions are merely part of the day's activities.
   In one day a white-collar criminal may bribe a policeman, entertain his wife at the company's expense, receive a TV in a business kickback, bribe a building inspector, cheat on his income tax, print a misleading ad, steal an office desk for his personal use, juggle the company's books for personal gain and tell his wife to forget the maid's social security tax.
   If prosecuted, he could get 33 years in jail and be fined $26,000 dollars. Yet he may be a profoundly respected and admired pillar in his community! To be accused of being a criminal would fill him with righteous indignation! Because to this man it's just "good business" and "everybody does it" — which all too often is painfully true.

"Executive" Crime and Bankruptcy

   Thieves in white collars steal more than $5,000,000 in cash and merchandise every working day. This causes an estimated 30 percent of all business failures!
   More than 50 U. S. banks each decade are closed because of embezzlement. It cost banks $17 million in 1969, almost TWICE as much as the losses from robbers and burglars!
   Company after company is experiencing a serious drain of profits. According to authorities more than 60 percent is attributed to the Supervisory and executive personnel.
   Five billion was stolen from U. S. businesses last year. Many businesses are literally stolen out of existence. Forty percent of all inventory shortages was due to employee dishonesty.
   While a shoplifter steals an average $17 a year from stores, an internal thief steals an average of $1500. According to a National Crime Commission Report: "Between $25 billion and $40 billion of taxable income is not reported to the government annually...."
   Frequently directors of corporations use inside information to make profits at the expense of the stockholders, whose interests they are supposed to serve. Speculating manufacturers often lift the price of their stocks by postponing legitimate operating expenses so that their net earnings appear high. Insiders can then sell their stock advantageously.
   White-collar crime can do even more than damage or bankrupt one business. In some cases it may financially wreck a whole community.

Bankrupting a Town

   Edward Morton (name is changed, but the story is true) was born and reared in a small community of about 5,000 people, located only a few miles from New York City. His father was a banker, who carefully trained his son in the same profession.
   His hometown needed more business to make it thrive, and Ed adopted an unusually liberal credit policy — for businesses and citizens. Rarely were people pressured even when they failed to meet their financial obligations. As a result, most of the community did business with him instead of the more conservative competitor bank.
   Friendly Ed was a popular man in town. A common expression of townspeople was: "If you need money, see Ed Morton." Few people were ever turned down for loans. Many small businessmen admitted they would have gone bankrupt except for Ed's financial help.
   He became a community leader and headed many of the town's organizations.
   When people couldn't pay their bills he would just tell them to pay when they could. Most of them did.
   Two creditors, however, defaulted. And this was friendly Ed's smashing downfall. But not only his downfall- virtually the whole town came tumbling down with him!
   The two disastrous loans cost the bank about one million dollars.
   Many of the citizens came to his aid and contributed over $200,000 to save the bank (and of course, their own money).
   But as the bank records were examined more closely, authorities discovered that while friendly Ed was trying to underwrite nearly a whole community, he had run through almost 1 1/2 million dollars of the bank's money. The bank was closed.
   Quite a stunning blow to a little community of 5000!

Business Infested With Criminals

   If this example were only an isolated case, the moral and economic impact on our society would be slight. But, unfortunately, such conduct is widespread.
   Most rationalize that they are only "borrowing" money until the crime becomes a deeply ingrained habit.
   Department store salesgirls have become accustomed to the post-holiday ritual of executives' families loading up with gifts that they don't personally pay for. It is common for executives to purchase $10,000 worth of gift certificates at a department store for client and customer gifts. This is charged off as business expense. However, about half of the gifts often go to the executives' families and friends.
   The United States Treasury Department reported that half of 3,000 doctors who received $25,000 from the government in Medicare or Medicaid payments in 1968 failed to report a "substantial" amount of income on their tax returns.
   In the lower echelons of white-collar crime, it is more often than not a gang activity. Several people work together to steal from the company. In one case a control clerk became troubled by his own petty thefts. He spent several sleepless nights and he finally approached his superior, the credit manager. The clerk then blurted out the details of his malpractices and resigned himself to a jail sentence. But then a shocking scenario occurred.
   "The credit manager carefully closed the door for privacy and said calmly, 'I'm not going to turn you in. Forget this conversation. And don't discuss it with anyone else. You see, this department just can't afford a scandal — I've been embezzling for years myself. We're in this thing together.''' (The Thief In The White Collar, by Norman Jaspan, p. 33.)
   Like termites, business criminals are hidden in the woodwork — eating away at the business structure. And tragically as business worsens, crime increases.

Recession Increases Crime

   The recent business slump has caused white-collar crimes to rise alarmingly. Management consultants, insurance investigators and industrial security specialists, who closely watch these trends, are concerned. Shrinking paychecks, stock market losses and career setbacks have tempted many to steal from their companies to compensate for the economic crunch.
   One top division executive for a rapidly growing U. S. West Coast company borrowed $75,000 to take advantage of stock options in 1969. Shortly afterwards the stock dropped to less than half the price he paid for it. The banks began applying pressure for repayment of the loans which he had hoped to pay with stocks and gains. The executive, in hopes of paying off the loan, started demanding and receiving payoffs and kickbacks from suppliers and subcontractors with whom he did business. He stole roughly $200,000 before he was caught and forced to restore the money.
   No punishment was exacted.'
   Security specialists have told of numerous examples similar to this one.
   In spite of the rampant increase in this type of crime, it is still met with massive indifference (the criminal's greatest ally). Many people don't care. Others simply don't understand how it affects them personally. But it is, after all, the individual — indifferent though he may be — who pays for crime of whatever type it is.
   Stealing and payola cost business so much, said one authority, Norman Jaspan, "that if they could be eliminated the general price level of goods could be cut by 15 PERCENT!"
   For the worker, this would mean increased earnings.
   Industry is fighting back in some cases, and the cost is high. The demand for undercover services has more than tripled in the last few years. Jerry Neilson, president of the San Francisco based security consultant and investigative firm, Neilson and Green, said in 1966, "Theft prevention is big business. If a firm with a $50 million sales volume can reduce its losses by only one-half a percentage point, it would get the same profit result as if sales were increased by an additional $13 million!"
   Sadly, this type of crime is growing worse at a time when American business is finding it harder and harder to compete with imports and in world markets.
   Economically it poses a dangerous problem. But there is still a greater consideration. Executive crime encourages all kinds of crime by those not in such positions.

The Greatest Damage

   The U. S. National Crime Commission reported, "Aside from its dollar cost, white-collar crime damages the nation's social and economic institutions and affects the moral climate of our society.
   "When corporations and their managers — often leaders in their communities — break the law, they set an example. Their example tends to erode the moral base of the law and gives other kinds of offenders an opportunity to rationalize their crimes."
   It is the most corrosive of all crimes. It wrecks our moral fiber as no other crime does. The loyal become disloyal. The advantaged become lying cheats.
   The higher in society the criminal, the greater the impact. A small-time criminal usually only affects a few people. A national political figure or a big corporation executive can literally affect millions!
   Robert M. Morgenthau, United States Attorney for the Southern District of New York, warned in 1969 that if the affluent flagrantly violate the law, then the poor and deprived will follow that leadership.
   We had our "robber barons" in the latter part of the nineteenth century, but never in our history has white-collar crime been so common and widespread. In the past, people were shocked by it. Today it's so common it virtually goes unnoticed.

The Big Change

   Since World 'War II we have gotten away from holding people strictly accountable for their crimes. U. S. laws have been bending more and more to favor the criminal.
   During the American colonial period some thieves even had a letter "T" sewed on their clothing. The "T" stood for "thief." In those days and in most of the nation's history the whole society zealously sought out violators of our nation's laws. The same was true of Great Britain. People were so enraged that politicians had to enact and enforce laws against the transgressors. Unless the people fervently supported laws and fought against crime, very little if anything was ever done.
   But where is the public outrage against white-collar crime today? Is this type of crime no longer a disgrace? And where is the concern of businessmen and other leaders of the community?
   White-collar crime flourishes in direct proportion to immorality in any nation. The atmosphere has to be right. The soil has to be fertile. Just as fish must have water in which to swim, so the white-collar criminal can function effectively only in an immoral climate.
   If the people and leaders were deeply offended, they simply would not tolerate such crime. Instead of being offended, more and more Americans are manifesting an open respect for such criminals — unless the crime directly victimizes them.
   Anthropologist Ruth Benedict observed two and one-half decades ago that we were changing from a "guilt culture," where our consciences restrained us, to a "shame culture," which the fear of getting caught is all that deters us.
   "Getting caught" is still feared, but our laws aren't very successful in controlling white-collar crime. We don't have to look far to understand why.
   Businessmen help to mold, shape, influence and even control the very laws that are to police them. It is common for laws to be instituted that conceal and ignore criminal behavior.
   One cynical businessman said this about the law: "Law is like a cobweb; it's made for flies and the smaller kinds of insects, so to speak, but lets the big bumblebees break through. When technicalities of the law stood in my way, I have always been able to brush them aside as easy as anything!"
   A rather obscene and contemptuous view of the law.
   But lying and cheating is all considered part of the business game. A survey taken a few years ago asked 103 businessmen if a man could move up through the ranks of management solely by honest, decent methods. ONLY TWO EXECUTIVES ANSWERED "YES" and one of those said he knew he was being naive.
   "PEOPLE WHO DON'T GET DIRTY DON'T MAKE IT," said one of the executives. "I'm not defending the practice, I'm simply stating a fact."

A Fatal Disease

   This kind of attitude toward crime is the deadliest of diseases. And if a deadly disease is not checked, death results — in this case, the death of a nation. This same sickness contributed to the death of the Roman Empire.
   White-collar corruption was rampant. The whole of Roman society was infected with the same spirit! "Everyone stole. In the army, the clerks stole the pay.... The postal administration exploited travelers. Public servants... took bribes for judicial audiences" (The End of the Ancient World and the Beginnings of the Middle Ages, by Ferdinand Lot, p. 176).
   Today it's no different. Bribery, corruption, extortion, kickbacks, split fees, and payola are almost standard procedure in big-city politics and business — and in little sleepy-eyed towns too. Every local area has its sporadic reports of corruption and unethical practices — but usually only the tip of the iceberg comes to light.
   Can we learn the lesson? Can we change our direction — cure our national sickness before it's too late? The old adage that "republics live by virtue" is very true.
   Modern nations must change their moral, ethical and spiritual way of life before white-collar crime can be stopped. But will they? The chances are slim and none.

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Plain Truth MagazineJuly 1971Vol XXXVI, No.7
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