15. Crimes of the Powerful

15.3 Corporate Crime

Michael Brandt, MA

Corporate crime is when an individual uses their position within an organisation to illegally benefit corporate interests, including boosting profits or market share (Hoffman, Brown, & Siegel, 2022, p. 272). Although corporate criminals act on behalf of their organisations, if the individual owns shares or other financial interests in the business (e.g., performance-related bonuses), they also stand to benefit personally. The financial losses corporate crime causes far exceed the losses associated with street crimes, like theft or robbery. Consider that the average robber gets away with $2,119 (FBI, 2019) while a single corporate crime can result in losses in the hundreds of thousands of dollars. Note that much corporate crime is performed in “accordance with the normative goals, standard operating procedures, and/or cultural norms of the organization” (Pearce & Tombs, 1998, pp. 107-110, as cited by Bittle, 2012, p. 45). In other words, it is just the way things are done at corporations to remain profitable in a capitalist society.

Corporate Theft

One of the biggest corporate criminal cases of all time—involving the loss of $74 billion in shareholder money—was orchestrated by senior managers at the U.S. corporation Enron (Segal, 2021). Named “America’s Most Innovative Company” six times, Enron filed for bankruptcy in 2001 after an elaborate accounting fraud was discovered (Segal, 2021). Enron executives falsified profits by building assets, such as power plants, and then entering the future profits they were projected to make from the asset onto its accounting ledgers before any actual money had been made. If it turned out the asset made less money than projected, or even lost money, Enron would camouflage this by using clever accounting procedures, such as labelling such assets as “special purpose entities,” allowing them to remain hidden and unreported (Hayes, 2020, para. 4). When it became obvious inside Enron that the company was headed for financial disaster (the news was not public at this point), executives, such as CEO Ken Lay, continued to encourage employees to hold onto their Enron stock. However, knowing Enron was about to implode financially, Lay rushed to sell off as much of his Enron stock as possible before it became virtually worthless. He made off with millions of dollars in profits. Average Enron employees lost their life savings. Several large corporations have committed similarly massive accounting frauds, including Global Crossing, Qwest Communications, Tyco, Adelphia, and Halliburton. In 2002, the telecommunications titan, Worldcom, committed accounting frauds estimated at $11 billion (Rosoff et al., 2020, pp. 281-295).

Corporate Tax Evasion

Corporate tax evasion when corporations do not pay the taxes they legally owe to the government is a crime that results in the loss of about $10 billion dollars to the Canadian government every year (Beauchesne, 2019). This makes corporate tax evasion likely the single largest re-occurring crime in Canada. While tax evasion is illegal, a significant amount of tax revenue is lost as a result of tax laws that permit Canadian corporations to pay significantly lower taxes by setting up corporate subsidiaries in countries with lower tax rates (e.g., Bermuda, the Cayman Islands). These subsidiaries often exist on paper only, and may have no buildings or employees. In these cases, they are called “shell companies,” (or “paper companies”) and the countries they are created in are known as “tax havens.” Corporate giants, like Apple, have managed to reduce their tax liability by billions of dollars by using tax havens (Institute on Taxation and Economic Policy, 2017).  The heavy lobbying of government by corporations has resulted in laws that make the use of tax havens legal in some cases. Unfortunately, given the lack of transparency surrounding the use of tax havens, it is difficult to separate the legal use of tax havens from their illegal use. This is a significant problem for governments because when a corporation employs techniques to evade its true tax liabilities, it is essentially stealing money from the government that is used to fund public services and infrastructure (e.g., roads, hospitals, waste collection, and social services).

Corporate Violence

While reports about murderers attract attention and outrage from the general public, breaches of safety regulations are responsible for much more injury and death than criminal homicide (Bittle, 2012; Reiman & Leighton, 2013). In 2018, 651 people were killed as a result of criminal homicide in Canada (Juristat, 2019) compared to 1027 killed on the job (Wier, 2020). One especially grievous example of workplace injury and death concerns the Johns Manville Corporation and the manufacture of asbestos. Company executives had known for decades that asbestos caused deadly illnesses such as mesothelioma and asbestosis, but conspired to keep this information hidden from employees who were routinely exposed to asbestos in their work. In 1949, when a Johns Mansville physician discovered X-rays showing asbestos was damaging the lungs of employees, the employees were not told, even when their health grew worse (Mauney, n.d., paras. 5, 9).

The Westray Mine disaster in Nova Scotia is another tragic example of needless death caused by disregard for employee safety. On May 9, 1992, sparks from a machine in the mine ignited methane gas causing a catastrophic explosion, killing 26 miners instantly. McMullan (2001, p. 135) reports that “[t]he explosion was so strong that it blew the top off the mine entrance, more than a mile above the blast centre.”  Despite receiving “more than fifty warnings about workplace health and safety violations” of the Occupational Health and Safety Act, the owners of the Westray Mine, more concerned with maximising profits than the safety of their employees, ignored them (Bittle, 2012, p. 5). Here is the key point: While those found guilty of homicide go to prison, sometimes for life, those responsible for workplace deaths, even those completely “foreseeable and preventable,” typically do not (McMullan, 2001, p. 136).

The Ford Pinto is yet another such example. Lee Iacocca was the president of the Ford Motor Company at the time the infamous Ford Pinto automobile was manufactured. Ford executives learned that the Pinto had a serious design flaw that caused it to explode and burst into flames when hit even at low speeds. However, rather than recalling and repairing the vehicles, executives conducted a cost/benefit analysis. First, they calculated the costs of paying out the lawsuits they predicted would arise from the injuries and deaths ($49.5 million) and then they calculated the costs to repair the car ($121 million) (Law Offices of Mitchell J. Alter, 2012). Given the predicted cost savings of leaving the Pinto unfixed, Ford executives decided against making the necessary repairs. As a result, hundreds of motorists were killed or seriously injured (Dowie, 1977). Ford was eventually charged with reckless homicide; however, “after mounting a million-dollar defence based on the scary defence that the Pinto was no more dangerous than other comparably sized cars of its time,” the company was acquitted (Rosoff et al., 2020, p. 97). One angry citizen responded: “One wonders how long the Ford Motor Company would continue to market lethal cars were [chairman] Henry Ford II and [president] Lee Iacocca serving 20-year terms” in prison (Rosoff et al., 2020, p. 97).

Ford was still manufacturing and selling dangerous vehicles in 2000 and had to pay millions of dollars in civil liability claims after “dozens of personal injury and wrongful death lawsuits” were filed related to “concealing a dangerous design flaw” that made their cars stall in traffic (Rosoff et al., 2020, p. 97). No one at the Ford Motor Company went to prison. Similar known design flaws in automobiles manufactured by General Motors (GM) have caused the deaths of more than a hundred people. No one at GM went to prison (Nader, 2015).



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Introduction to Criminology Copyright © 2023 by Michael Brandt, MA is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.

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