When are White Collar Crimes Felonies?

When thinking of felonies, violent crimes probably first come to mind, then maybe major theft. What’s noteworthy in the theft category is that this isn’t always major bank robberies or grand theft auto. This also includes felonies often referred to as white collar crimes. These may seem more innocent because there doesn’t seem to be any physical damage, but they can take their toll on a victim in a very harsh and severe way.

What are White Collar Crimes?

First referred to as white collar crimes by the sociologist Edwin Sutherland in 1949, these crimes typically involve those that financially benefit the offenders without any violence. Sutherland explains it as a “crime committed by a person of respectability and high social status in the course of their occupation.”

As the law often attributes heavier punishments to those who abuse their position or power to commit their crime, these often qualify as felonies, especially when the financial damage is considerable. Some of the main types of white collar crimes are:

• Bribery
• Embezzlement
• Tax Evasion
• Money Laundering
• Insider Trading

It is not uncommon for these crimes to be brought to light by whistleblowers, individuals who report internal crimes they witness, especially because the perpetrators use their power to bury evidence heavily.

Cornell’s Law Information Institute reports that these crimes come out to cost the government over $300 billion each year. It often comes with more options for penalties, debatably better or worse, such as:

• Fines
• Imprisonment
• Home detention
• Supervised release
• Community confinement
• Paying the cost of prosecution
• Forfeitures
• Restitution

Both states and the federal government can pursue white collar crimes, a power given to the latter by the Commerce Clause in the Constitution, and are heavily patrolled by the FBI, IRS, and SEC (Security and Exchange Commission).

Bribery

Bribery is something most are familiar with, but it’s essentially offering or accepting something in exchange for any kind of influence on a person-in-power’s decisions. Most typically pursued by the criminal court system are ones involving public or political officials, or anyone else with high influence in the government. It could also be a particularly high damage bribery in the corporate world. These are the ones that are likely to be tried as felonies.

Misdemeanors may involve more minor bribes, either with less impactful exchanges or less influential people. This may involve a situation such as a basketball player exchanging throwing a game on purpose for a spot on a better team. These are sometimes called commercial bribery and typically will be tried by the state.

Laws

When it comes to federal bribery charges, this type of bribery is regulated under it’s own code: 18 U.S. Code §?201. It outlines what actions qualify as bribery of a public official. It defines a public official as a:

• Member of Congress
• Delegate of the House of Representatives
• Resident Commissioner (Representative of Puerto Rico)
• Any officer or employee acting for or on behalf of the U.S.
• Any office or employee acting for on behalf of a department, agency, or branch of government
• Any one working in any official function, under or by authority of any such department, agency, or branch of Government
• A juror
• Any person who has been nominated or appointed to be a public official, or has been officially informed that they will be nominated or appointed

It outlines cases of bribery being when someone directly or indirectly corruptly gives, offers, or promises anything of value to any public official. These include using bribery to:

• Influence any official act
• Influence them to commit or aid in committing fraud
• Influence them to act in violation of their public duty

It explains an official act as any decision or action on any matter that is either pending or may come before the public official within their authority.

This law also protects all witnesses in a trial of any court, committee, or agency.

How it’s Proven

For a bribery conviction, it’s necessary to prove that some kind of exchange took place. This is most often through acts like donating money to a public official for a vote in a legislature they want to see passed. Yet it must be clear that both parties knew of the arrangement that was being made – donating in the hopes that they’ll consider your opinion isn’t necessarily bribery. Some cases may also require evidence that there was a connection between a gift or something given and the result of the bribery.

Elements of the federal code that should be addressed include:

• The individual that was bribed is a public official
• Something of value was offered
• The official act that was to be influenced
• It was within the public official’s capacity
• The intent behind the bribery

As this is a crime that typically involves two people, it’s possible to prove that a bribery was offered but was not accepted, and a charge can still be made on the individual seeking the bribe. It is illegal to accept the bribe, but if that doesn’t occur, the public official has broken no law.

Penalties

Smaller cases of bribery may result in a misdemeanor, and these penalties and charges can vary vastly from state to state. However, most of the time, a misdemeanor does not exceed longer than a year in county or state jail.

A felony, on the other hand, comes with much more severe consequences. Bribery, especially of public officials, usually results in a felony, usually a level two or three. Prison time for this can run somewhere up to ten years and may be accompanied with a fine of $20,000.

Those who accept bribes may also find themselves losing their position and may have difficulties reentering their field, or may not be allowed to if they are a public official. Along with the usual felon stigmas, those convicted of bribery can especially lose that power and respect that they abused when accepting the bribe.

Embezzlement

Unlike a case of theft where an individual takes possession of something without permission, embezzlement occurs when someone has permission to possess something (typically money) and uses it in a specific way, but abuses that by taking or using it outside of what was allowed. Some ways this can be done is by using all of it, selling it, giving it away, inflicting serious harm on it, or just taking permanent ownership without permission.

It’s most common to see this crime occur in the corporate fields, and usually involves the misuse of company funds or something of the sort. However, it becomes a federal crime, and usually a felony, when it involves public funds or government-owned property.

How it’s Proven

In an embezzlement conviction, there must be proof that the property in question was obtained through this relationship where they were entrusted with it, that they either took or misused the property, and that it was intentional.

Penalties

Like most crimes, the penalty is usually affected by the severity of the damage done, and in these cases, it can be pretty easy to find a monetary number that can equate to justice for embezzlement. State laws will vary, but those are usually dealt with as misdemeanors, usually with a fine of up to $100,000.

When the federal government gets involved, it’s usually felony status, and it typically includes a few ways to impose consequences on the defendant. Felony punishments can range with prison time and fines in the $250,000 range. Most convictions will also require restitution, or repaying the amount or replacing the property.

These charges can also be aggravated when the offender takes advantage of someone particularly vulnerable or when a high level of trust is involved.

Tax Evasion

Tax evasion usually involves withholding income when reporting taxes to the IRS. This can either be in order to avoid paying taxes on income, or to hide earnings that were not obtained legally. Because it technically involves stealing from the government, as you are not contributing the funds you are expected to pay, this most often results in a felony. There is a difference between evasion and making an error – taxes should be prepared with care, but there must be intent of not reporting income for it to qualify as tax evasion.

Some signs that tax evasion may have occurred are:

• Too many deductions or exemptions
• False documents
• More than one set of financial ledgers
• Reporting personal expenses as business expenses
• False Social Security number
• Claiming exemptions that aren’t applicable

Laws

The 26 U.S. Code §?7201 section of the Internal Revenue Code categorizes tax evasion as a felony and outlines its penalties. It sets a punishment of no more than five years in prison and/or up to $100,000.

How it’s Proven

Obviously the first item that needs to be proven is that there is an amount that an individual owes and that a falsification in reporting occurred. They must then show that this wasn’t just an error, but in fact an intentional maneuver to avoid paying taxes. This is one of those crimes that requires proof beyond a reasonable doubt.

Money Laundering

In 2015, the National Treasury estimated that about $300 billion is laundered every year. Typically, money laundering occurs when money is obtained unlawfully, which is being concealed through funneling the money into different channels to produce different cash that appears legal. This is normally done through one of two ways: a shell company or an offshore account.

Shell companies hide the source of their money by putting up a front of being, usually, a mainly cash business. They then “provide services” in exchange for cash, which allows them to take the money through different accounts, changing the cash they have been receiving into money in bank accounts with a seemingly legal source. They can take this money out of the bank, fresh and clean, or continue muddying the source by transferring it around some more.

Offshore companies work because they aren’t regulated by the federal government, meaning launderers can hide money here, never report the account’s existence, and then never have to pay taxes on it; therefore, never prompting an investigation.

Laws

To deter this, the federal government passed the Bank Secrecy Act of 1970, which requires banks to report when they receive cash payments over $10,000 from businesses.

Next came the Money Laundering Control Act of 1986, criminalizing knowingly participating or concealing the act of money laundering.

How it’s Proven

The first aspect that must be proven is that the money came from an illegal source. It’s simply tax evasion if what was being concealed was the fact that there was an income made; it becomes money laundering when it’s being concealed because it was not made lawfully and would lead to criminal proceedings and charges.

The prosecutor must also prove that there was an intent to conceal the source of the money. Just hiding the money for the sake of not wanting it to be found doesn’t count as money laundering. There must be the act of trying to change the money to conceal its source specifically.

Besides the obvious of having to prove that the source of the money was illegal and was being laundered in order to conceal its source, it also must be proven that the money was laundered, not just used directly to purchase something. That becomes the difference between just theft and money laundering.

Penalties

More often than not, these cases will be handled by the federal government and result in felony convictions. However, in smaller instances, there are times when it may just be a misdemeanor conviction. These punishments will be lesser, usually around a year in prison and thousands of dollars in fines.

The Money Laundering Control Act established a punishment of $500,000 or twice the amount laundered, whichever is greater, and up to twenty years in prison. This felony punishment can sometimes come with probation as well.

Insider Trading

Insider trading occurs when someone uses their knowledge that they acquired by being a part of an corporation in order to gain a profit, usually by buying or selling stocks. Typically pursued by the SEC, some other common examples of this crime include:

• Friends, family members, or anyone else that receives a tip from an insider using the information to purchase or sell their stocks
• Trading intel between corporations in exchange for services, which leads to a profit
• Government employees using information they earned while in their position
• Anyone who comes upon secret information through their employment that they use to benefit from
• Anyone who takes advantage of information they receive from their employers, family, friends, or anyone else in a position that allows them to receive confidential information

Basically, it qualifies as insider trading if you’re using information you obtained yourself or from someone else that was kept confidential, which could influence investors’ decisions to buy or sell stocks.

How it’s Proven

This is heavily patrolled by the SEC, and they usually have evidence to pull from their marketing surveillance activities. It will also often be brought to light by whistleblowers, sometimes people who received bad information. They will then launch full investigations, citing witnesses, trade documents, phone records, and any other evidence they can get their hands on.

The main aspects they need to prove here are that: the knowledge came from someone leveraging their position to receive confidential information; they acted on that information; and they benefited from it.

Penalties

The Insider Trading and Securities Fraud Enforcement Act of 1988 established, when pursuing insider trading convictions, a punishment of up to one million dollars, or three times the amount that they made off of the exchange of information, whichever is greater.

In 2013, the SEC stated that, “the maximum prison sentence for an insider trading violation is now 20 years. The maximum criminal fine for individuals is now $5,000,000, and the maximum fine for non-natural persons (such as an entity whose securities are publicly traded) is now $25,000,000.” Insider trading, especially when the profit is extensive, is usually tried as a felony.

White collar crimes can be misdemeanors when the crime is lesser, there’s less money (damage) involved, or sometimes even if the offender seems repentant and willing to serve their justice and change. However, more often than not, they are going to result in a serious felony conviction, particularly because there tends to be big money involved with these cases. Punishments will also come with the need to pay restitution when applicable, meaning these crimes can have huge fines attached, as well as severe prison sentences.

Although they may not be violent, there are still major victims to these crimes, often the American people as a whole. Because of this, federal agencies typically monitor these kinds of behavior, and the federal government makes a lot of the convictions, especially in felony cases.