Many white-collar crimes are financial crimes. These refer to “large scale illegality that occurs in the world of finance and financial institutions,” such as banks and insurance companies, and because of the vast amount of money involved and the risk these crimes pose to the integrity of the economic system, they are placed in a separate category (Friedrichs, 2017, p. 153). These crimes include banking frauds, price-fixing, illegal monopolies, insider trading and a variety of unscrupulous behaviours that led to the financial crash of 2008.

Banking Frauds

In California, a person convicted of three or more crimes is subject to “three-strikes laws,” which can result in a life sentence (California courts, n.d.). In contrast, consider the response to three-time offender, the Wells Fargo Bank in California. In 2016, the Wells Fargo Bank was found guilty of opening bank accounts in clients’ names without their knowledge and charging them fees (Taub, 2020, xi). In 2017, the bank was caught overcharging for car loans and then illegally repossessing customers’ cars. In 2018, Wells Fargo was found guilty of charging customers for insurance they did not need (Taub, 2020, xix). Rather than anyone at Wells Fargo receiving a life sentence, the bank was ordered to pay $3 billion to “resolve all ‘potential’ criminal and civil liability with the DOJ [Department of Justice] and several other federal agencies”—a dollar amount “just short of the bank’s quarterly profits” (Taub, 2020, p. xx). Despite the enormous amounts of money defrauded by Wells Fargo, no one involved in these offences ever went to prison. Numerous banks have engaged in repeated unethical and fraudulent practices resulting in huge economic losses for customers, including virtually all the top financial institutions: AIG, Barclays, Bear Stearns, HSBC, JPMorgan, Merrill Lynch, Lehman Brothers, UBS, Goldman Sachs, and Wachovia. In virtually all cases, fines were levied and offenders avoided prison time (Rosoff et al., 2020, pp. 334-341; Werle, 2019).

Price-Fixing

Price-fixing occurs when two or more companies that are supposed to be competitors conspire to set prices at a certain level to avoid direct competition when selling the same products. Price-fixing helps explain why many products, such as gasoline for our automobiles, are typically priced at the same level regardless of where they are purchased in a city. However, “[m]uch of fixing prices does not involve a specific conspiracy but rather takes the form of parallel pricing, wherein industry ‘leaders’ set inflated prices and supposed competitors adjust their own prices accordingly” (Friedrichs, 2007, p. 74, emphasis in original). Price-fixing scandals have involved many industries and consumer products including oil, natural gas, pharmaceuticals, bread, vitamins, shoes, toys, video games, and infant formula (Rosoff et al., 2020, p. 61).  In fact, “price-fixing conspiracies have been uncovered for virtually every imaginable product or service” and have been described as “a standard operating procedure” by some business executives (Friedrichs, 2007, pp. 74-75). One of the largest price-fixing cases involved eight pharmaceutical companies: Hoffmann-La Roche, BASF, Aventis SA, Solvay Pharmaceuticals, Merck, Daiichi Pharmaceutical, Esai and Takeda Chemical Industries. These companies conspired to increase and fix vitamin prices worldwide, meaning virtually every vitamin consumer on the planet likely paid more than they should have (Guardian News and Media, 2001). While price-fixing is widespread and results in people losing money without knowing it, discovering price-fixing is extremely difficult. Indeed, it is believed that most price-fixing cartels go undetected and that this practice is virtually built into our economic system. Adam Smith (1977) acknowledged in his classic treatise, An Inquiry into the Nature and Causes of the Wealth of Nations, that:

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices” (p. 183).

Illegal Monopolies

Illegal monopolies occur when a company gains exclusive control over the consumer market for a particular good or service through illicit conduct. John D. Rockefeller (July 8, 1839–May 23, 1937), one of the richest men of his era, famously remarked that “competition is a sin!” (Eschner, 2017, para 7) and set out to do everything in his power to eliminate it. Rockefeller’s tactic was to use the enormous profits his company (Standard Oil) was making in the oil extraction business to buy out his competitors; however, if the company refused to be bought, Rockefeller employed other tactics: He also used his wealth to purchase all the products needed to produce oil and refused to sell them to his competitors. He used his wealth to bribe railroad companies to limit the number of trains available to transport competitors’ oil (Beattie, 2019). In 1892, the U.S. government finally broke up the monopoly Rockefeller had built and his mammoth oil empire was “carved up into smaller, but still sizeable chunks” (Beattie, 2019, para. 11).

Bill Gates, co-founder of Microsoft, may be the closest we have to a modern-day Rockefeller, both in terms of the vast wealth he has accumulated, and in the tactics used to accumulate it. In 1998, Former Microsoft executive Rob Glaser testified in front of a Senate Judiciary Committee that, under the direction of Bill Gates, Microsoft intentionally sabotaged a rival company, RealNetworks, by installing a “bug” in the version of the Windows operating system they were using causing it to malfunction (Rosoff et al., 2020, p. 64). Internal Microsoft documents show Gates “was willing to use every tool at [his] disposal, including threats and financial inducements, to force other companies to drop any planned or existing alliances with its competitor Netscape” (Brinkley & Lohr, 1998, as cited by Rosoff et al., 2020, p. 65). In one email entered as evidence, Gates is quoted as saying to a company executive, “How much do we need to pay you to screw Netscape” (Rosoff et al., 2020, p. 65). The plan required computer manufacturers using Windows 95 to install Microsoft’s Internet Explorer, rather than other browsers, like Netscape. Customers were forced into using Microsoft’s web browser, and prevented from using a competitor’s browser. Microsoft was eventually found guilty of engaging in illegal monopolistic practices. As part of the settlement, the court ordered Microsoft to submit to independent oversight to ensure it did not engage in this behaviour again, but on an appeal to a higher court, this requirement was overturned and replaced by a watered-down order that permitted Microsoft to monitor itself with an internal compliance committee (Rosoff et al., 2020). Google, Amazon, and Facebook have all been accused of establishing monopolies (Romm et al., 2020).

Insider Trading, Front Running, and Pump and Dump

Insider trading refers to “the buying or selling of a publicly-traded company’s stock by someone who has non-public, material information about that stock” that will likely affect its value (Ganti, 2022, para. 1). Because such “insider information” can lead to unfair advantages, companies are required to issue public press releases about events that affect their operations and stock prices. If an employee at Company A learns that their company is planning to purchase Company B, this is significant investor information because  the price of stocks in Company A will likely increase after the purchase to reflect the added value of Company B. The employee who has insider information about the future of a company is   at a distinct advantage over the average investor who does not have such information.

“Front running” is a variation of insider trading where stock brokers take advantage of information about imminent transactions that are likely to affect the value of stocks to enrich themselves. Let us suppose that a stock broker receives an order from a client to purchase a large number of shares in Company X. This purchase will likely push the price of stocks in Company X up. Knowing this, the stock broker delays the stock purchase for the client just long enough to buy stocks for themselves in Company X. Then, the broker purchases the stocks for the client and immediately sells their own shares (at the higher share price), reaping an instant profit.

Another type of investment fraud is called “pump and dump.” This is a scheme designed to boost the price of a stock through “false, misleading, or greatly exaggerated statements” (Dhir, 2021, para. 1). The perpetrator convinces others to purchase the stock, which pushes the stock price up (the “pump”) and then sells their stocks at an elevated price (the “dump”). The movie, The Wolf of Wall Street (Scorsese, 2013) is based on the life of Jordan Belfort, a stock broker found guilty of a massive fraud involving such a “pump and dump” scheme.

The 2008 Financial Meltdown

One of the most catastrophic economic crashes since the Great Depression was the 2007–2008 financial “meltdown,” which is explored in the documentary, Inside Job (Ferguson, 2010). This massive fraud implicated a long list of U.S. banking and financial insiders, and resulted in the loss of billions of dollars (Bondarenko, n.d.; Merle, 2018). Unscrupulous practices included encouraging clients to take out mortgages at low “teaser” rates and not informing them the mortgage rates would eventually escalate, as well as selling “subprime” mortgages. Subprime mortgages are mortgages sold to clients who are not qualified to pay them are were likely to default on them. Banks were willing to sell loans to customers they knew would likely default because they took out insurance policies on them. The technical name for these insurance policies is “credit default swaps” (Simon, 2012, p. 4). As a result of this tactic, the number of people borrowing money to finance new homes increased significantly, rapidly pushing up housing prices. When large numbers of homeowners later defaulted on their bank loans, the “housing bubble” crashed, house prices plummeted, and homeowners ended up paying mortgages that were more than the actual value of their home. Millions of people lost their homes and life savings. The only bank ever charged with a criminal fraud related to these practices was Abacus—a relatively small bank owned by the Chinese-American Sung family. The documentary Abacus: Small Enough to Jail  (James, 2017) explores the case. The biggest banks (e.g., JP Morgan and Goldman Sachs) were bailed out with taxpayer money to the tune of over $700 billion dollars (Simon, 2012). These banks, because of their huge size, political influence, and the number of people they employed, to borrow the title of an article about these crimes, were deemed both “too big to fail” and “too powerful to jail” (Pontell et al., 2014, p. 1). As for investigating the role of fraud, “not surprisingly, with its overwhelming emphasis on crimes of the relatively powerless, criminology generally failed the challenge of the Great Economic Meltdown” (Pontell et al., 2014, p. 2).