White Collar Crime

The United States Attorney for the Southern District of New York, Whitney N. Seymour, is distributing a 64 page booklet entitled “Fighting White Collar Crime” to corporations and other business groups. This effort is a follow‑up to a speech last July by Mr. Seymour in which he stated: “Let there be no mistake about it, there is extensive crime in the business world. Our office currently is prosecuting scores of cases involving the payment of bribes, securities abuses, tax frauds, and numerous other violations. Virtually every single one of these cases was developed without any cooperation from the business community. In fact, most of these cases came about because of a look-the-other-way attitude by businessmen who could have prevented the crimes from ever happening in the first place.”

In that address before the Rotary Club of New York City, Seymour was clearly indignant. He complained that business crimes receive favored treatment in the courts which give much lighter sentences, frequently suspended, than are given to individuals prosecuted for petty stealing. “Businessmen,” he noted sharply, “too often tend to smile understandingly at illegal conduct by their colleagues — while loudly complaining about ‘crime in the streets.’ We must set these things right.”

Official complaints about “crime in the suites” are increasing. Acting FBI Director, L. Patrick Gray, told another business group in Cleveland recently that, among other lawbreakers, corporate executives who conspire to fix prices in violation of the antitrust laws “attack the society of law from within.”

State and local governmental units, recognizing that business crime costs consumers billions of dollars yearly, are stepping up their enforcement. California, for example, has brought suit under the antitrust laws against snack food manufacturers for allegedprice-fixing. Washington state has sued major dairy companies for fixing the prices of milk and milk products sold to local school districts. Illinois has cases in the courts over alleged statewide coal price-fixing and tie-in sales of milk and ice cream, milk price-fixing in Chicago, and beer price-fixing in Decatur. New York has charged a large oil company with price-fixing and price discrimination.

In addition to the increasing number of suits brought by state attorneys general, in cities consumer fraud offices are being expanded or opened at state and local levels/such as New York City, Cleveland, Pittsburgh and Los Angeles. The New York Department of Consumer Affairs, led by Bess Myerson, believes catching business violators is not enough. She says full refunds with interest must be repaid defrauded consumers. In Maryland, unprecedented prison sentences of six and ten years were meted out to the operators of an auto repair store which systematically fleeced motorists.

What is clear from a survey of business crime prosecutions brought by federal and state authorities in recent years is that the defendants represent a wide diversity and cross-section of industry and commerce. They are not just fly-by-night outfits. Price-fixing or other economic crimes have been located in such varied industries as companies selling pharmaceuticals, bread, heavy electrical equipment, steel sheets, plumbing fixtures, cranberries and chrysanthemums.

What such depredations do to the consumer dollar in the marketplace is similar to what a pay-cut or traditional inflation does to individuals’ purchasing power. Senator Philip Hart’s Antitrust and Monopoly Subcommittee, for example, reports that consumers spend about $10 billion annually on auto repairs (and parts) that are improperly done, unnecessary or not performed at all. A House subcommittee estimates that elderly citizens are swindled out of $1 billion yearly through medical quackery. The Michigan Department of Agriculture found shortages in 15 percent of 50,000 food packages that it examined.

Given these and many other similar surveys and cases, what is the reply to the Indiana official who stated at a recent antitrust meeting of state attorneys general: “We have no money and we have no staff. But we have a healthy interest.” The best advicefor state attorneys general is to vigorously apply for grants from the U.S. Justice Department’s Law Enforcement Assistance Administration (LEAA). According to LEAA’s General Counsel’s office, funds can be made available for corporate crime and consumer fraud law enforcement purposes. In fiscal 1973, LEAA will have almost $850 million for distribution to law enforcement agencies. Some of these funds can be wisely used to combat the corporate crime wave.