Publication White Collar Crime As Described By Andrew Sutherland

Crime has been an evolving term throughout our nations existence. It has seen change in all aspects of the word crime. It started with being very centered around violent crime, but has evolved into many different types of crime. One in particular new branch of crime is the study of White Collar Crime. White Collar Crime, as described by Andrew Sutherland, is “Crimes committed by a person of respectability and high social status in the course of his occupation.” This refers to accountants, financial advisors, brokers, board members on Wall Street, etc.

Each of these types of occupations usually tend to have a certain crime that coexists with the occupation. For instance, if you were a board member of a multi-million-dollar company, it could be very easy for that board member to manipulate the stocks with engaging in insider trading, a type of securities fraud. One individual who fell victim to insider trading was icon Martha Stewart.

Stewart was indicted on a variety of different types of White Collar Crimes, including insider trading.

  Martha Stewart is an icon businesswoman, chef, writer, and a television host. She has had a wide variety of fame for a very long time, so when her indictments of inside trading, obstruction of justice, and lying to investigators became known to the public, the media was on top of it immediately. Covering every square inch of the drama at hand, the media blew the case up so the entire public would be able to keep up and discover the outcome of her case.

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On June 4, 2003, Martha Stewart was indicted on charges of security fraud, or in particular insider trading, obstruction of justice, conspiracy, and of lying to federal investigators. This meant that Stewart, being the 27thmember of the New York Stock Exchange (NYSE), would be the first member of the board ever involved in insider trading.

Yet another reason why the public and media are so focused on the outcomes of this case. Stewart had hefty stock position in the company ImClone. This was a pharmaceutical biotech company that was trying a new cancer drug out that seemed to be very efficient. ImClone was taking a major risk on this and when the Federal Drug Association, or FDA, denied their request it meant big losses for the companies. The CEO Dr. Samuel Waksal advised his daughter to withdraw her stocks from the company. Eventually, when broker Peter Bacanovic finally was told to withdraw the stocks, he reportedly had reached out to other clients. One of these other clients was Stewart. Stewart’s assistant received memos from Bacanovic. These were all beginning processes to committing a White Collar Crime, in particularly security fraud.

The first major red flag that popped up after the immense drop of stock, was how just two days before, Stewart sold her stock for over 200,000.00$. Very soon after, Bacanovic was placed on “administrative leave and pending further investigation.” As the weeks moved on, it became know that Bacanovic was suspended “because an in house investigation had raised “factual issues” regarding a client transaction.” Merill Lynch had reported that, “The “factual issues” were that the same broker had reportedly sold a big chunk of ImClone stock for Dr. Waksal’s daughter, and the attempted to reach Stewart.” The reason this raises question for the FBI and SEC is that these are clear signs of insider trading. To top off the suspicious phone calls about withdrawing stock positions in ImClone, Dr. Waksal had resigned from the position of CEO at ImClone. As investigators began to look into Stewart, they had discovered a memo from Stewart’s secretary. This memo stated, “he (Bacanovic) thinks ImClone is going to start tracking down,” implying that the stock will slowly begin to decrease in revenue and that it would be a very smart idea to sell your stock.

Investigators searched for anything that they could to build this case. As they continued to search for evidence against Stewart and Bacanovic, they received a statement for the prosecutors. This statement stated, “he had been instructed to tell Stewart that the Waksal family was selling large amounts of Stock.” (Rosoff )p.251 However, this could only do so much for investigators. The evidence against Stewart was enough to charge her with conspiracy, lying to investigators, obstruction of justice and even securities fraud. (Rosoff p.253) Therefore, on June 4, 2003, Martha Stewart was indicted and arrested for these White Collar Crimes. The FBI, SEC, and other private investigators believed that they had produced enough information to build a case against Stewart. Stewart was put fourth before the jury in a criminal court case.

Her trial was to be reviewed by a judge with a jury, where she would be able to defend herself and convince a jury of her innocence. According to an article from the guardian Stewart’s most severe charge, securities fraud, was dropped. ‘The evidence and inferences the government presents are simply too weak to support a finding beyond a reasonable doubt of criminal intent.’ (Guardian Article) This was great news for Stewart. Security fraud carried a maximum sentence of 10 years in prison, compared to the other counts, which were only a five-year maximum; however, Stewart still had multiple other charges forming against her. At the end of the case, Stewart was convicted on all of the charges, which were obstruction of justice, conspiracy, and two counts of lying to investigators.

She was sentenced to five months in Prison, five months of home confinement, and ordered to pay a 30,000.00$ fine. Had the prosecutors been able to prove a solid case of evidence up for the Security Fraud charge, the results could have been much different. For example, a similar yet very different case had similar qualities but was much more severe than Stewart’s case. Michael R. Milken was sentenced to 10 years in prison and requested to pay a hefty fee of $1.1 billion in total. Milken was convicted on multiple charges of securities fraud. The case is similar Stewart’s case where both of the offenders end up in prison for a certain amount of time and the main difference is the overall severity of each case. Martha Stewart’s case was followed very carefully, but that was mainly because she was a celebrity icon and the whole world wanted to know what was going on. Milken, was on a new level of severity.

He was convicted for stealing a tremendous amount of money from a whole lot of people. This case was substantial since the amount taken from investors was over 1 million dollars. The results with Milken’s case were harsher, involved so much more evidence, and the consequences were a lot tougher. Milken’s case was one of the greatest cases for securities fraud in America. The evidence that was given for each case differed. The Prosecutors that took the Milken trial had loads of evidence and traces of the securities frauds compared to the Stewart trial, which had slim to none. This led both of the outcomes to differ amongst one another. Both Stewart and Milken committed crimes and were prosecuted for each convicted charge. Their criminal acts reflect the ever changing evolvement of the word crime. When Martha Stewart sold her shares, the price per share was 60$.

This was a pretty good price considering the Market, but her selling for a grand total just over $200,000. On the day the FDA denies the ImClone drug, the stock priece per share drops immensely. A starting drop of 15% (Fox News) was a gigantic drop in share value. It eventually led to the amount per share being $35.83, which is almost a 50% drop of value. The stock also continued to plummet over the next few weeks, and eventually got as low as $21.15. The investors who were involved with this case lost an immense amount of money, and it really did effect the stock market. It was a very tense drastic change in the market, and many people lost lots of money. Crime is an evolving term in American Society. It has evolved and expanded in countless ways.

Separating different crimes into more precise and accurate groups so we are able to understand it. White Collar Crime, according to Sutherland, is “Crimes committed by a person of respectability and high social status in the course of his occupation.” These crimes are usually surrounded by men and women of Wall St. The crimes that are associated with White Collar Crime are securities fraud, conspiracy, money laundering, and many more. The world of White Collar Crime has expanded and seen all types of convicts from celebrities, like Martha Stewart, and big businessmen, like Mike Milken. Messing with investor’s money is messing with their lives. A U.S. attorney of the southern district of New York stated, “The word is—beware—don’t engage in that type of conduct because it will not be tolerated.” (Rosoff p. 254) This acknowledges the very little leniency that the government will provide White Collar Criminals with. These cases have helped improve and evolve our ways of discovering and figuring out how to trace down criminals and help to keep our money safe.