the legal environment and white collar crime

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  • TheLegalEnvironmentand

    WhiteCollarCrime

    By

    JohnD.Gill,J.D.,CFE

    and

    MarkScott,J.D.

    Presentedto

    TheInstituteforFraudPrevention

    December4,2008

  • 1

    TheLegalEnvironmentandWhiteCollarCrime

    ByJohnD.Gill,J.D.,CFEandMarkScott,J.D.1

    PartI.Introduction

    Whitecollarcrimeisaphraseusedtorefertoandencompassacomplicatedwebofnumerousinterrelatedandoverlappingareasofthelaw,includingsecuritieslaw,misappropriation,bankruptcyfraud,bribery,corruption,cybercrime,contractandprocurementfraud,financialfrauds,healthcarefraud,insurancefraud,moneylaundering,taxfraud,governmentfraudthelistisalmostendless.Moreover,whitecollarcrimelawnotonlyinvolvesaspectsofU.S.federalandstatelaw,italsoinvolvesinternationallawsandjurisdictions.Afurthercomplicationisthatwhitecollarcrimeisnotanautonomousdisciplineinstead,whitecollarcrimeismostassuredlyinterdisciplinary combiningindividualsfrommultipledisciplinesandprofessions,suchasaccountants,auditors,attorneys,investigators,andlawenforcement.

    Likemostareasoflaw,whitecollarcrimecontainsneworrapidlyevolvingissues,whichhaveledtomajorshiftsinwhitecollarcrimelegal scholarship.Forinstance,thecollapseofEnronandtheothercorporatescandalsof2001and2002ledtoalargebodyoflegalscholarshiponsecuritiesfraud,financialstatementfraud,andcorporategovernance.Also,sincetheeventsofSeptember11,2001,therehasbeenamarkedincreaseinlegal literatureonthecorrelationbetweenwhitecollarcrimeandterroristactivities.Thefinancialcrisisof2008hasledtomorearticlesonfinancialregulation.

    Withsuchdevelopmentsinmind,thispaperoffersareviewofrecentlegalscholarshipconcerningwhitecollarcrime.Basedonourresearch,thisisthefirstoneofitskind.PartIIofthispaperexplainsthemethodologyofthearticle.PartIIIexaminesthedataextractedfromthesamplingandoffersobservationsaboutthecurrentstateoflegalscholarshiprelatedtowhitecollarcrime.PartIV drawssomeconclusionsbasedonourfindingsandproposesfurtherquestionsfordiscussion.Inbrief,weconcludethattheamountofinformationaboutwhitecollarcrimeisincreasing,butitseemstobeconcentratedinjustafewareas.Theappendixcontainstablesandidentifiesthekeysourcesavailabletosomeoneresearchinglegalaspectsofwhitecollarcrime.

    1JohnD.GillisanattorneyandaCertifiedFraudExaminerandservesastheResearchDirectorfortheAssociationofCertifiedFraudExaminers(ACFE)inAustin,Texas.MarkScottisanattorneywhoservesastheLegalEditorfortheACFEinAustin.Youmaycontactthemat research@ACFE.comorthroughtheACFEswebsite:www.ACFE.com.

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    PartII.Methodology

    Todevelopasenseofwhatwhitecollarcrimescholarshiphasbeenpublishedinlegalperiodicals,2wecollecteddataaboutlegalperiodicalsthatarguablyfocusonfraud.Ourresearchmethodologyproceededin threesteps.

    First,weidentifiedproxy terms3thatarerelativelyuniquetoandoccurfrequentlyinwhitecollarcrimeliterature,asillustratedby Table1,inAppendix A.4

    Next,wesearchedtheUSLawReviewsandJournals,Combineddatabasein theLexisNexiselectronicsearchserviceforarticleswiththesetermsintheirtitle,focusingonarticlespublishedduringthepasttwentyfiveyears(fromJanuary1,1983 toDecember31,20075). Accordingly,welookedatvirtuallyeveryresultingarticlepublishedintheavailable667legalpublicationssince1983.6Overall,atthissteptherewere3,979 articlesinitiallycollected.7However,weexcludedcertaintypesofarticlesnotintendedtobescholarly,suchasbookreviews.8Wethenremovedanyduplicateresultsandexaminedeacharticleindividuallytoensureitwasaboutwhitecollarcrime,excludinganyarticlesthatdidnotaddresswhitecollarcrime,suchasarticlesdiscussingthestatuteoffraudsorinternationalseapiracy.Throughthissearch,wecollectedinformationabout3,513 whitecollarcrimearticles.9

    Ourstudyisnot offeredasqualitativelyflawless,andcertainitemsthatwouldaffectthenumberofarticlesreturnedinasearchwerenotconsidered.Forexample,thereareinherentlimitationswhen searchingLexisNexis.Notably,Lexisdoesnothaveacompletecoverageoflawreviewandsecondarylegalpublications.10Also,theentireUSLawReviewsandJournals,CombineddatabaseisnotaccessiblethroughBooleanwordsearchesordatesearches.Forexample,the

    2Weusetheterm periodical toincludeallavailabletypesoflegalscholarship,includinglawreviews,legaljournals,andbarjournals.3SeeApp.A, Table1foradditionaldataassociatedwiththese terms.4Onceagain,intheinterestoftime,weincludedinoursearchtermsthoseproxiesthatwebelievebestrepresentwhitecollarcrimelaw.Ofcourse,strongargumentscouldbemadethatotherproxiesshouldbeincludedinthisgroup.5Wechosethesetimeperiodsintheinterestoftimeandsowecouldcomparefiveequaltimespans.Wechosetoreviewarticlespublishedthrough2007toidentifythemostcurrenttrends.6AccordingtoLexisNexis,itsUSLawReviewsandJournals,Combineddatabaseprovidesaccessto667legalpublications.7See Table1.8Theonlyarticlespublishedintheseperiodicalsthatweexcludedfromouranalysiswerebookreviewsandsummaries.9See Table2.10Primarylegalsourcesarestatutes,cases,andregulations.Socalledsecondarysourcesarecommentarieswrittenaboutthelaw,suchaslawrevieworotherlegalarticles.

  • 3

    titlesofarticlesarenotsearchableincertainpublications.11Also,sinceitsinception,thevolumeofmaterialinLexisNexissdatabaseshasprogressivelyincreased,12andLexisNexiscoverageisextremelyvariablefromtitletotitle.13Finally,LexisNexisdoesnothavefullcoverageofsomeolderpublications,whichmayskewtheresults.

    Inaddition,ourmethodshaveobviouslimitations.Forexample,itislikely thatadditional proxytermsareavailable,andalargernumberofproxytermswouldimprovecertaintyintheresults.

    Also,duetotheinterdisciplinarynatureandthelargeamountof legal scholarship,timeandeconomiclimitationspreventthereviewofeverylegalpublicationonwhitecollarcrime.Similarly,thenumberofwhitecollarcrimearticlesinadatabasesearchisanimperfectmeasureoftheamountofscholarshipproduced.Forexample,itdoesnotreflectanactualcountingofeverywhitecollarcrimearticlepublished,anditispossiblethatmorelawreviewsandjournalspublishedrelevantarticleswedidnotreview.

    However,despitetheselimitations,webelieveourmethodologyhasvalueandservesabroadgeneralsummaryofthetypesandamountsofarticlesonwhitecollarcrimethathaveappearedinthemajorlegalpublicationsduringthelasttwentyfiveyears.Thus,thisreviewissufficienttogenerallycomparelegalpublicationsandtogetasenseofthetrendsofwhitecollarcrimeinlegalliterature.

    PartIII.Findings

    1.TherehasbeenanincreaseinwhitecollarcrimelawscholarshipOurdatashowsagrowinginterestinwhitecollarcrimeresearchbylegalscholars,asmeasuredbytheincreasednumberofarticlespresentinlegalliterature. Table2reportsonthenumberofwhitecollarcrimearticlespublishedeachyearsinceJanuary1,1983.Ourdatashowthatthenumberofwhitecollarcrimearticleshasgenerallyincreasedduringthesampledtwentyfiveyearperiodwiththerateofpublicationessentially doublingin1993through1997andin 1998through 2002, thenincreasingbynearly 50%in 2003 through2007,14suggestingthatthesubject

    11Forexample,afterconductingasearchforkickbackinthetitlesofarticlesinthe USLawReviewsandJournals,Combined,LexisNexissfeedbackonoursearchindicatedthat TITLEisnotsearchablein FederalSentencingReporter.12OlufunmilayoB.Arewa,OpenAccessinaClosedUniverse:Lexis,Westlaw,LawSchools,andtheLegalInformationMarket,10Lewis&ClarkL.Rev.797, 822 (2006).13RichardA.Leiter,UseofLawReviewsinModernLegalResearch:TheComputerDidntMakeMeDoIt!90LawLibr.J.59,61(1998).14See Table2.

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    ofwhitecollarcrimehas,overthepasttwentyfiveyears,increasinglybecomeanareaoffocusforlegal writing.

    Thereareseveralprobablereasonsforthis.Mostnotably,therehasbeenanincreasein thenumberof legal publications.Asanexample,considertheincreaseinthenumberoflawreviewsover thesecondhalfofthetwentiethcentury.In1937,therewerefiftylawreviews bythemiddleofthe1980s,therewereabout250.15Currently,thenumberhasrisentoapproximately350.16

    Thenetresult,ofcourse,isthatthereisanenormousamountofinformationavailableforconsumption.Infact,oneestimateisthatlegalperiodicalspublish150,000to190,000pageseachyear.17Thus,itisanaturalresultthatthegrowthinthenumberoflegalpublicationshasledtoanincreaseinwhitecollarcrimearticlessincetherearemorevenuesavailableforpublication.

    Also,therehasbeenanincreaseintheabilitytosearchlegalpublications.Lexissfulltextlegalinformationservicedidnotbeginuntil1973,andsinceitsintroduction,Lexishasprogressivelyincreasedthevolumeofmaterialcontainedinitsdatabases.18Mostnotably,however,isthattheLexisNexisfulltextlawreviewdatabasebegan coveragein198219 thus,themorerecenttheperiod,themorepublicationsavailableforsearch.

    Furthermore,overthepastfewdecades,whitecollarcrimehasbecomemoreprevalentinthepublicconsciousness.Thepublicsawarenessofwhitecollarcrimeisimportantbecausecultureinfluencesthelaw.20Tohaveanypracticalimpact,legalscholarshipmustberelevantinaparticulartime,inducinglegalscholarstorespondtoissuesthatareculturallyrelevant,suchasfraudandwhitecollarcrime.

    Whitecollarcrimehasbecomemoreculturallyrelevantprimarily becausethepublichasbecomemoreconcernedwithitsdetectionandpunishment.21Theincreasedattentiononwhitecollarcrimeessentiallybeganinthe1980s,arisinginthewakeoftheWatergatescandal,whenthe

    15ReinhardZimmermann, LawReviews:AForayThroughAStrangeWorld,47EmoryL.J.659,662(1998).16 Id.17ChristianC.Day,TheCaseforProfessionallyEditedLawReviews,33OhioN.U.L.Rev.563,568(2007).18OlufunmilayoB.Arewa,OpenAccessinaClosedUniverse:Lexis,Westlaw,LawSchools,andtheLegalInformationMarket,10Lewis&ClarkL.Rev.797, 822 (2006).19BernardJ.Hibbitts,LastWrites?ReassessingtheLawReviewintheAgeofCyberspace,30AkronL.Rev.175,177(1996),availableat http://www.uakron.edu/law/docs/hibbitt.pdf.20LawrenceM.Friedman, Law,Lawyers,andPopularCulture,98YaleL.J.1579(1989).21ZviD.Gabbay,ExploringtheLimitsoftheRestorativeJusticeParadigm:RestorativeJusticeandWhiteCollarCrime,8CardozoJ.ConflictResol.421,433(2007).Americaexperiencedanunusualwaveofcorporatescandalsthatcausedmassiveharmbetweenlate2001and2003,andpublicresponsedidnotwaitlongtofollow.

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    governmentattemptedtocleansewhitecollarcrime.22The1980salso