How White-collar Crime Works

History of White-collar Crime

Although forms of bribery and embezzlement or even monopolistic price fixing surely outdate recorded history, the earliest documented case of white-collar crime law dates back to 15th century England. The law, enacted in 1473, was a response to embezzlement or larceny in what's known as the Carrier's Case, a situation where the agent entrusted to transport wool attempted to steal some of it for himself [source: Salinger].

However, white-collar crime didn't garner much public attention until it became more widespread after the Industrial Revolution in Western industrial societies. As companies rose in power, they were able to squelch competitors and then implement monopolistic policies without fear of being outsold by other companies. The public became enraged when they had to pay outrageously high prices for something that was previously cheap, for no reason other than corporate greed. But, under the law, manufacturers weren't doing anything wrong -- it was perfectly legal. However, popular opinion held that this was corruption that should be illegal and warranted government intervention.


Political movements rallied for laws to prevent monopolistic practices and succeeded in the United States in 1890, when Congress passed the Sherman Antitrust Act. It essentially attempted to make monopolies illegal. Other industrialized countries like England had a history of penalties involving white-collar crime by this time, but none so sweeping as the Sherman Act. Some nations implemented a smattering of these laws, known as competition or antitrust law, but didn't strongly enforce them for very long. Therefore, the Sherman Act is generally considered the first modern competition law [source: Furse].

Stock fraud, as you might guess, is as old as the stock market itself. One age-old scheme called stock touting occurs when someone lies about his company's prospects and promises sure-fire returns for investors. After it's too late, the investors find that the schemer deceived them and instead pocketed the money and ran off. Whereas back in the day, a conspirator might lie to say he had a company that was building railroads in other countries, modern examples include those discovered upon the burst of the dot-com stock bubble, when actual results fell far below promised returns [source: Salinger].

What's more, from time to time, you may receive e-mails from people you don't know asking for your help -- like a wire transfer -- to claim some long-lost fortune or to act as a shipping agent. These schemes are forms of Internet fraud, and they're often perpetrated by scammers working from Internet cafes in Nigeria and Russia. The government of Nigeria -- with financial support from the governments of the United States and Great Britain --- has ramped up its Economic and Financial Crimes Commission to crack down on con artists who spam phony pleas to e-mail addresses throughout the world [source: Green].

More anti-white-collar crime sentiment rose in the late 19th and early 20th century in the United States as a result of a group of journalists known as muckrakers. These writers strayed from regular news reporting to expose corruption in the public and private sectors. They wrote, among other things, of stock fraud, insurance fraud and underhanded practices of monopolistic companies that had fallen through the cracks of the Sherman Act. The muckrakers' exposés incensed the public and resulted in some reform. By 1914, Congress attempted to solidify and strengthen the sentiment of the Sherman Act -- which was used against labor unions -- with the Clayton Antitrust Act. This act went further than the Sherman Act to make particular monopolistic practices illegal.

Nevertheless, in the ensuing decades, white-collar crime continued to rear its ugly head -- or rather, all too often, go about unpunished. This phenomenon led to the birth of the concept white-collar crime as we know it today, which we'll talk about next.