Sure, They Broke the Law
But White-Collar Crooks Weren't Always Thought of as Real Criminals

By Cynthia Crossen
Staff Reporter of The Wall Street Journal

Before Edwin Sutherland, most criminologists believed that theft was a pathological reaction to poverty.

But in 1939, Mr. Sutherland, a widely respected sociology professor at Indiana University, coined a new term: white-collar crime.

People of "respectability and high social status," Mr. Sutherland asserted, broke laws as often as members of the lower classes, but the government, media and public didn't think of them as criminals. Until scholars accepted that affluent and reputable people also steal, Mr. Sutherland argued, they would never truly understand the criminal mind.

'The Upper World'

Mr. Sutherland had begun his study of the "criminals of the upper world" by counting the adverse legal decisions against 70 of America's largest corporations since their founding.

Not a single one had an unblemished record. Two-Armour & Co. and Swift & Co.-had 50 violations each for offenses such as financial fraud, restraint of trade and false advertising. The average was 14.

The pervasiveness of law-breaking in corporate America convinced Mr. Sutherland that the conventional wisdom about economic crime was wrong. If poverty was the primary risk factor, why were so many successful professionals doing it? Furthermore, he discarded the notion that white-collar criminals were "rotten apples," isolated cases of individuals born with a predisposition to steal. White-collar crime is learned behavior, Mr. Sutherland argued, a consequence of corporate cultures where government regulation is regarded as harassment, and profit is the measure of the man.

Quoting the 19th-century white-collar scoundrel Daniel Drew, Mr. Sutherland wrote: "A prickly conscience would be like a white silk apron for a blacksmith. Sometimes you've got to get your hands dirty, but that doesn't mean the money you make is also dirty. Black hens can lay white eggs."

Until the 20th century, a person who bilked the public without using force was rarely prosecuted. "Caveat emptor"-buyer beware-was the prevailing ethic. Or as one early-20th-century judge said, "We are not to indict one man for making a fool of another." The so-called robber barons of the 19th century, such as Mr. Drew, who literally invented the term "watered stock," didn't even get a slap on the wrist.

Then came the Sherman Antitrust Act (1890), the Federal Trade Commission (1914), the Securities and Exchange Commission (1934), and a host of other laws and regulations that attempted to set limits on what people can do in the name of profit. Yet, while white-collar infractions were deemed illegal, they still weren't necessarily criminal.

"Most of the defendants in antitrust cases aren't criminals in the usual sense," wrote Wendell Berge, an assistant U.S. attorney general, in 1940. "There is no reason why antitrust enforcement requires branding them as such."

It wasn't until 1961 that any business executives convicted of violating the Sherman Act actually went to prison.

In the decades since Mr. Sutherland classified white-collar crime, criminologists have argued fervently about his work. Some believe that only cases heard by criminal courts are crimes. Others look at the victims and say there's an obvious difference between staring down a gun barrel and losing some retirement savings. White-collar crime has "diffuse victimization," as it's described: There are usually many victims over a long period of time. The thief and victim almost never come face to face. The crimes are complex and difficult even for other business executives to understand.

That helps explain why, in a single day recounted by Christopher Stone in his 1975 book, "Where the Law Ends," two cases being decided in a Georgia court ended so differently. In one case, an embezzler had stolen $4.6 million from a bank. In the other, three men had robbed a bank of about $14,000. The embezzler was sentenced to 10 years in jail; the bank robbers received 16 years each.

'Success at Any Price'

However they're punished, white-collar criminals are clearly different from other criminals because they usually have good salaries and hefty bank balances. The question of why a rich person steals has also been the subject of lively debate. One psychiatrist theorizes that such people have a "fantasy of omnipotence," and are guided by the "common business ideal of success at any price." Another sociologist has suggested that because many business people are ambitious, competitive and aggressive, they experience a feeling of tension that must be relieved somehow, sometimes by stealing.

Still another holds that businesspeople face contradictory expectations: As a citizen, they're supposed to obey the law, but as an executive, they're supposed to resist the law whenever possible. C. Wright Mills blamed white-collar crime on "structured immorality," an impersonal corporate culture and a lack of personal responsibility among executives.

Mr. Sutherland never pinpointed the reason why some business executives steal, and others don't. But he did lament the costs of such crimes, and not just the economic ones. "White-collar crimes," he wrote, "violate trust and thus create distrust, and this lowers social morale and produces social disorganization on a large scale."