When a person or company injures another entity, society deals those responsible for that injury a punishment fitting of their crime. When that crime involves high finance, however, that is often not the case. A mugger might take your wallet, but a bad banker will steal your house. Whereas one will take your finances at present, the other will rob you of your financial future. So, who then is the bigger monster? The “street crime” criminal or the “white-collar” criminal? The FBI defines white-collar crime as “generally non-violent in nature, including public corruption, mortgage fraud, securities fraud…and can destroy a company, devastate families by wiping out their life savings, or cost investors billions of dollars.” White-collar crime is often committed by those in positions demanding of trust, has been on the rise year over year since 1939, and often injures more than one individual. This is the monster of the modern day, not a Frankenstein’s monster grotesque looking creature but a product of opportunity operating in anonymity, whose lasting effects can cripple not only an individual, but also their posterity.
A white-collar crime is incorporeal until acted upon by a corporal body; it is the elusiveness of this specific type monstrosity combined with its anonymity and ability to act through anyone that makes it a threat. Jefferey Jerome Cohen’s 1996 book “Monster Theory” proposes seven theses for describing a monster. Through references to Frankenstein’s monster, Dracula, and various other creatures, Cohen analyses these monstrosities though their respective cultural lenses and defines the different forms a “monster” can take. In his second thesis, Jefferey describes a monster that “itself turns immaterial and vanishes, to reappear somewhere else… the monster’s body is corporal and incorporeal; its threat is its propensity to shift” (Cohen 2). Cohen also goes on to describe this as “the monster that always escapes” (2). It is within this definition of a monster that the modern-day beast of white-collar crime resides. Once caught the creature shifts forms, from Ponzi to Madoff, Wells Fargo to car salesmen, the white-collar criminal is not easy to stop. White-collar crime is not a monster like Frankenstein. It does not charge at its victims in full view, it rarely makes itself known until the victim’s damage is done, and it does not have a recognizable face or name.
In 1910 a man named Charles Ponzi operated what would later be coined a “Ponzi scheme.” This scam business would eventually become the first major example of white-collar crime in America. “A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk” (Ponzi). As a result of this model, a Ponzi scheme requires new investors to repay old investors or else it runs out of money. The economic boom present in early 1900’s America brought with it the opportunity for gain, and opportunity for white-collar crime. Ponzi saw this opportunity and conjured up then acted upon his new scam. Before instant messaging and the internet, letters were often sent with something called a “return postage voucher.” Vouchers such as these were sent when mailing a letter from a foreign country and were used so the recipient of mail could reply at no personal cost as the vouchers could be exchanged for a minimum postage stamp in the country where they were redeemed. Ponzi proposed that through arbitrage, he could guarantee investors a 50% return on their investments in 90 days. By reading the market and then taking advantage of the new American mindset of “stock market fever” prevalent at the time, Ponzi preyed on everyday individuals wanting to grow their savings and instead of selling them sound investments, sold them snake oil. From 1910 – 1920 Ponzi operated in lower Manhattan and defrauded Americans of 20 million 1920’s dollars, which carry the buying power equivalent of 225 million 2018 dollars. “It is estimated that Ponzi’s “investors” received only about one third of their original investment back after the scheme was brought to light” (Smithsonian).
In his second thesis, Jefferey Jerome Cohen asserts that the monster “can be dispersed temporarily, but the revenant by definition will always return” (Cohen 2). By tweaking the system of defraudation originally created by Ponzi in 1910, a Bernard L. Madoff would in 1960 go on to commit the largest dollar amount white-collar crime to date. Madoff started a limited liability securities company in 1960 and began to build his reputation within the financial world. While doing so Madoff began the process of fostering friendships with economically well-off individuals, companies, and charities. Madoff was a founding member of the National Association of Securities Deals Automated Quotations (Nasdaq) and was known by former investors as a caring, genuine, and respectable individual at the time. By nurturing relationships with individuals in key financial positions, Bernard managed to gain access to institutional money. Much in the same way Charles incentivized investors to give him their money, Madoff also offered a guaranteed return on investment, but with a very different twist. Whereas Ponzi dealt mainly with “little fish” investors, Madoff went after the “big fish” and tailored his percent return projections accordingly. By offering 1% returns month over month, Charles managed to attract and scam big banks and hedge funds. In doing this, Bernard defrauded individuals, families, nonprofits, charities, and others that never dealt with Madoff directly, but instead simply chose to keep their money at a bank that did. After defrauding investors of an estimated 65 billion dollars, Madoff pled guilty to operating the biggest Ponzi scheme in history.
Professor of Sociology at California Polytechnic James William Coleman argues that white-collar crime “causes far more injuries than any other types of crime” (Coleman) and yet the “justice system generally still treats white-collar crime more leniently than street crime” (Coleman). A prime example of this sort of slap on the wrist treatment the white-collar monster receives is the recent scandal involving Wells Fargo. This commercial bank underpaid its employees, set unrealistic sales goals, and this led 5200 Wells Fargo banking employees to defraud clients. “On Sept. 8, 2016, Wells Fargo (WFC) admitted that it had created millions of accounts in the names of its clients without their permission” (Yahoo!). Wells Fargo participated in questionable insurance sales techniques, pushing their customers onto insurance plans they did not need, repossessing their cars when payments defaulted, and did not adhere to the 6% federal interest rate max cap. As a result of this new incarnation of white-collar crime, millions of Wells Fargo customers have been charged/fined unknowingly, have had their credit virtually irreparably damaged, and now have to work hard to regain the trust of the very bank that defrauded them. “In a class action suit, Wells Fargo agreed to pay $142 million to the affected parties, which included millions of customers” (Yahoo). In 2017 Wells Fargo reported their yearly revenue at $22,000,000,000.
White-collar crime is not like Frankenstein, but it is a monster to be feared just the same. Whereas most monsters present themselves as a clear danger, white-collar creatures lurk in the shadows and strike no one is looking. This is the modern-day monster. A monster already residing within an individual’s capabilities, waiting for an opportunity for personal gain, constantly evolving and growing, only to return and wreak havoc on more individuals than is did in its previous incarnation.
Cohen, Jeffrey Jerome. Monster Theory: Reading Culture. University of Minnesota Press, 1997.
This article contained the main reference material for my paper. I plan on using this to compare the similarities between white collar crime and the more “traditional” monsters Cohen describes.
Coleman, James William. “Toward and Integrated Theory of White-Collar Crime .” Toward and Integrated Theory of White-Collar Crime , vol. 93, no. 2, 1987, pp. 1–37.
This article analyses white-collar crime under the baseline assumption that criminal behavior derives from the “confluence of appropriate motivation and opportunity.” This is going to be a good reference.
“In Ponzi We Trust.” Smithsonian.com, Smithsonian Institution, 1 Dec. 1998, www.smithsonianmag.com/history/in-ponzi-we-trust-64016168/.
This Smithsonian article goes over details about Charles Ponzi’s life and gives empirical data on the dollar amounts lost and scale of the operation. It also describes the perceptions of Ponzi investors of the day held. Use this.
Mann, Ethan Wolf. “Every Wells Fargo Consumer Scandal since 2015: A Timeline.” Yahoo! Finance, Yahoo!, 8 Aug. 2018, finance.yahoo.com/news/every-wells-fargo-consumer-scandal-since-2015-timeline-194946222.html.
This article does a brief overview of the financial scandals plaguing WFC from the years of 2015 – 2018. I plan on using this to tie Wells Fargo into the mix of white-collar criminals
“Ponzi Scheme.” Investor.gov, 2018, www.investor.gov/protect-your-investments/fraud/types-fraud/ponzi-scheme.
This article talks about the Ponzi scheme model and describes it in detail. I plan on using this government source to add credibility to my reference material as well as use it by directly quoting them in order to more accurately explain how it is structured.