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Issue 33

Corporate Crime vs. Street Crime

By Edward Burch

As editor of Multinational Monitor, Robert Weissman has been documenting corporate crime for more than a decade. In addition to the magazine and a weekly column called Focus on the Corporation, Weissman works with Essential Action, an organization active in monitoring the pharmaceutical industry, the tobacco industry and the World Bank and IMF.  His accounts and analyses of various corporate misdeeds have been compiled into two books, co-authored by fellow columnist Russell Mokhiber.  The latest volume, On the Rampage: Corporate Predators and the Destruction of Democracy, was published earlier this year by Common Courage Press. Despite his time-consuming schedule, Weissman found a few moments to speak with Clamor about public perceptions and government treatment of corporate crime.

When we say the word “crime,” many people immediately think of street crime. Why do you think that corporate crime doesn’t register first?

The first explanation is the media. The media do not report on corporate crime as regularly or as intensely as street crime, and while they always call street crime “crime,” they much less frequently call corporate crime “crime.”  When corporate crime is reported, it’s almost never reported as viscerally as street crime. With street crime you tend to get profiles of the victim’s families; with corporate crime it’s typically presented in a much more abstract fashion. Victims of corporate crime are rarely profiled.

Yet in spite of that disparity in news coverage, the cost of corporate crime upon society tends to be much larger that of street crime, right?

Absolutely, however you want to measure it. Street crime is a serious problem. It has serious consequences and we shouldn’t minimize that. But if you compare the economic value of corporate crime compared to street crime, the difference is an order of magnitude. Consider lives lost to homicide.  About 20,000 people a year die as a result of homicide here in the U.S.  Approximately 60,000 per year die from occupational accidents, diseases and hazards.  About 40,000 per year die from auto accidents, many of them preventable deaths.  Another 400,000 or so are killed by tobacco-related diseases. Or take a case like Vioxx.  Food and Drug Administration whistleblower Dr. David Graham estimated at least 35,000 deadly heart attacks as a result of this medication. As you go on down the line, the numbers are quite extraordinary.

So here we’re talking literally about the costs in human lives of corporate versus street crime. What do you estimate are the financial costs externalized upon society each year?

The FBI estimates that in 2003, the cost of burglary in the United States was $3.5 billion, $4.9 billion for larceny-theft, and $8.6 billion for motor vehicle theft.

Compare those numbers with just two recent measures of very particular and narrow elements of the corporate crime epidemic.  A recent study from the Taxpayers Against Fraud Education Fund reports that over $2.4 billion has been recovered from drug manufacturers engaged in fraud against the U.S. government and the 50 states.  In 2003, the federal government won or negotiated more than $1.8 billion in judgments and settlements in health care fraud matters. That is surely only a fraction of the industry’s rip-off of the public.  

American University Professor Emeritus Ralph Estes has done very useful tallies of the costs imposed by corporations on society, trying to reduce those costs to dollar terms. Some of his estimates, using 1991 dollars, are: $141.6 billion for workplace injuries and accidents; $225.9 billion for the health costs of air pollution; and $25.9 billion for defense contract overcharges.  

The Senate Judiciary Committee, I think in 1979, estimated that faulty goods, monopolistic practices, and other such violations annually cost consumers $174 to $231 billion.  You get the idea.

Are corporate criminals prosecuted as often as they should be? 

No.  Unlike street criminals, corporate criminals have the power in large part to shape the law and determine what is criminal and what is not. The first escape for the corporate criminal class is that much of their criminal activity is not considered criminal under the law.  

Then, compared to street crime, as well as the objective level of abuse, there are stunningly low levels of resources devoted to corporate crime enforcement. In recent years, New York Attorney General Eliot Spitzer has led a series of prosecutions of different elements of the financial industry. Does anyone think that these abuses would have been uncovered without the exceptional work of Spitzer? And, more importantly, is there any reason to believe comparable abuses — worse, actually — aren’t pervasive in other areas? After all, there are numerous regulatory and private sector checks built into the financial area (accountants, mandatory disclosures, an aggressive financial press) that don’t exist in other areas.  

Finally, when corporate wrongdoing is discovered, it is often not prosecuted criminally.  It is handled as a civil matter instead — something most unlikely for a burglar.  Or criminal charges are circumvented by a variety of legal maneuvers.

Are civil fines an effective deterrent to corporate crime? Should more cases be brought as criminal charges, rather than civil suits?

Civil fines can be an effective deterrent if they are big enough. Corporations are rational actors when it comes to these things, and if the fine is trivial as compared to the benefits from committing the violation and the likelihood of being caught, they will disregard the fine or chalk it up as a cost of doing business. That’s clearly the case in the realm of workplace safety, where the fine for willfully endangering an employee resulting in death is around $100,000. That’s not consequential enough to deter corporations from not maintaining a safe workplace. In contrast, large civil fines with a significant likelihood of enforcement in combination with social sanctions can have a real impact. A good example of that is the existing — and now proposed to be much-expanded — fines for indecency on television, where you actually see broadcasters getting quite scared, not because they’re going to be put in jail, but because of civil sanctions.  

However, in general, criminal sanctions have a greater deterrent effect, especially because corporations have special attributes like the ability to avoid government and social control.  They’re not susceptible to any kind of social stigma that real people are. So criminal enforcement can be very effective and is very much underutilized.

When a corporate criminal is tried and convicted, do they face the same type of hard time that a petty thief or low-level drug dealer would? 

No, even convicted corporate criminals don’t usually spend much time in prison.  Five years ago, Russell and I wrote a column called “Sixteen Years for a Snicker’s Bar.” It highlighted the case of a man who stole a Snicker’s bar, retail price: $1 — it was a King Size.  He was given a 16-year jail term. The act was a misdemeanor, but a felony charge was brought because the man had ten previous convictions — one for stealing a bag of Oreo cookies — and he lifted the Snicker’s bar while on probation.  

We contrasted this man’s prison term to the sentences handed down the same month to a group of corporate criminals. Hoffman-LaRoche pled guilty to participating in an international vitamin price-fixing conspiracy, which the Justice Department called perhaps the largest criminal antitrust conspiracy in history. The jail terms for implicated executives: four months, three-and-a-half months, three months, and three months. The same month, three cruise line employees were sentenced for the role in dumping pollution in Alaskan waters. Each was sentenced to two years unsupervised probation and a $10,000 fine.

To read the rest of this piece and other great Clamor features, please pick up a copy of the new issue, or subscribe now.

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