COMMENTS: Crime and the Culture of Business
Hausknecht, Murray
Earlier this year the morality of American business again became a hot public issue as one scandal after another hit the headlines. "Old-line manufacturers exposed cheating the Pentagon....
...They all take into account the probabilities of being caught and the severity of punishment relative to gains...
...They are deliberate and have "a relatively consistent unity" that exemplifies "the special culture of the business world...
...in the presence of their once and future colleagues...
...Once respected businessmen and former government officials indicted —and jailed—for insider trading and fraud...
...THE CALCULATION OF RISK IS, of course, not limited to business organizations, since it is also a hallmark of professional criminals...
...They competently used the firm's resources to meet its policy objectives, and they were able to spot, and take advantage of, the deficiencies in the banking system...
...In response to this pressure, the managers evolved a check-kiting scheme that enabled them to overdraw bank accounts and cover the checks only after the withdrawn funds were used for overnight investments—in effect, as an interest-free loan...
...Just as the focus on street crime distracts attention and resources from the more far-reaching consequences of organized crime and white-collar crime itself, so concentrating on insider trading fails to protect us from the corporate depredations of General Electric, General Dynamics, and E. E Hutton...
...that is, the core of the problem contains institutionalized racism, the negative beliefs, attitudes, and behavior embedded in the culture of the society...
...New York Times, June 9, 1985...
...That is, Hutton is a highly rationalized economic organization staffed by trained people whose actions are systematically ordered and coordinated...
...From their perspective . . . force is the inevitable outcome of 390 the victim's failure to accede to the seemingly selfevident social calculus of the situation" ("The Management of Mugging," Urban Life, July 1977...
...Cutting ethical corners and overstepping the bounds of legality, then, become institutionalized practices in the defense industries because the metaphorical cop on the corner is predisposed to view businessmen as benign, upright citizens...
...Like business, its actions are rationally coordinated, its personnel is supervised, and its markets are allocated...
...Consider the case of Paul Thayer, formerly the second highest Defense Department official, who as head of a major Pentagon supplier gave his girlfriend and his broker inside information enabling them to clear tidy sums on the stock exchange...
...On the other hand, going after street crime, whether in the form of mugging or insider trading, gives everyone a comforting sense that "something is being done...
...Racial discrimination is not the result of prejudice alone...
...Here, at least, institutionalized greed and street crime overlap...
...As in any good capitalist enterprise its objective is maximum profits, and local branch managers were urged to be "creative" in the use of the cash on hand at the end of each business day...
...The favorable definition of business pervades the entire society, and it results in a military procurement system that permits large, legal profits...
...Blaming the victim," evidently, is not limited to the subculture of muggers...
...Neither organized crime nor legal businesses can afford to stuff the gains into a mattress...
...Rationality, however, can be adversely affected by nonrational elements...
...the greatest opportunities lie in organized crime...
...The sin of greed is irrelevant here, since the imperative of a business culture— Thou Shalt Maximize Profits—pushed the company and individual managers toward criminal behavior...
...Similarly, the greed we must attend to is not the individual's sin of greed but the institutionalized greed of a capitalist economy...
...This type of crime benefits from "the increased rationality" of the modern corporate structure...
...Caspar Weinberger said of contractors accused of overcharging the Pentagon, "I don't think a few bad apples should cause you to judge the whole barrel...
...He called white-collar crimes "the crimes of corporations," which are not "inadvertent violations of technical regulations...
...Muggers, Robert Lejeune reports, often use force after a victim does not succumb to their threats of violence...
...Nor will many military procurement officers heed the warning if given, since a common second career for them is a job in the defense industries...
...To be sure, greed is at work, but it is useful to see it as analogous to racial prejudice...
...Conventional criminal enterprises frequently benefit from incompetent or corrupt law enforcement...
...Venerable banks caught laundering money...
...Lester Crown, a major stockholder and director of General Dynamics, interviewed by the Times, "was insistent that the company was a victim of an imperfect procurement system" (June 16, 1985...
...E. E Hutton was late capitalism's reincarnation of Willie Sutton: both knew that banks are where the money is, but the independent, skilled artisan has long since given way to the highly rationalized and technologically advanced latecapitalist enterprise...
...Most high-level positions in the Defense Department are held by businessmen who will be returning to positions in business, and they are not likely to cry caveat emptor...
...rather, in Edwin Sutherland's classic definition, it is "a crime committed by a person of respectability and high social status in the course of his occupation...
...The latter is a persistent evil in the everyday life of citizens, and insider trading is the street crime of the financial district...
...More than pedantry is involved here, since the major law-enforcement emphasis of the Reagan-dominated SEC is precisely on insider trading for probably the same reasons cops must be concerned with street crime...
...In the military-industrial complex, business benefits from lax enforcement...
...In the case of organized crime that requires laundering, and the sheer amount of cash involved makes it a profitable opportunity for banks...
...This is not a "corporate crime" arising from "the special culture of the business world...
...The structure of the system is also used to justify misconduct...
...In Boston the banks laundered about $1.3 billion...
...Large defense contractors like General Electric and General Dynamics are run by businessmen who see "Washington" and "the bureaucracy" not only as incompetent but as fundamentally hostile to business...
...On the floor of the stock exchange, information is power—those with inside information increase the risks of others in an already highly uncertain situation...
...both must use profits to generate more profits...
...Some believed it was symptomatic of a "breakdown in morals throughout society...
...Such attitudes undermine prudent conduct and are further bolstered these days by the Reaganite zeitgeist that defines the interests of businessmen as the lodestar for public policy...
...The obverse side of the bad-apple theory was contributed by the head of the Securities and Exchange Commission's law enforcement division, who maintained (as the Times reported, June 9, 1985) that there is "little difference in the motivations of white-collar criminals and street thugs .. . people guilty of insider trading 'are motivated by greed and the belief they aren't going to get caught.' " The term "white-collar crime" first appeared among professional sociologists, but a significant dimension of meaning was lost in the translation to the vocabulary of popular culture...
...E. E Hutton is a case in point...
...And even if someone is caught, the penalties imposed—if prosecution takes place—do not function as serious deterrents...
...It has more in common with a mugging than with anything else...
...The scheme depended on some fine timing in the writing of checks and of making deposits that was made possible by the coordination built into the structure of modern business organizations...
...The amount is important, since the risks of dealing with criminals and violating the law must be calculated relative to anticipated returns: the higher the anticipated profit, the greater the likelihood that a bank will avoid defining a client as a criminal...
...To focus on greed plain and simple as a motive 389 for white-collar crime is misleading...
...Even in the world of professional crime the Willie Suttons are a dying breed...
...The favorite tie of Attorney-General Edwin Meese has the name of Adam Smith prominently displayed in its design, the same Adam Smith who 200 years ago warned, "People of the same trade seldom meet together, even for merriment or diversion, but the conversation ends in a conspiracy against the public...
...It does not simply mean crime committed by middle-class people...
...contempt for the victim, for example, can affect objectivity...
...Greed is one of the seven deadly sins, a result of man's fallen nature, and so white-collar crime is seen as representing the moral failings of individuals...
...White Collar Crime, New York: Dryden, 1949...
...In short, the sources of white-collar crime lie in the culture of capitalist business as an institution—a point obscured in popular usage...
...A securities firm found fraudulently kiting checks...
...For explanations, the usual suspects were rounded up...
Vol. 32 • September 1985 • No. 4
