This article elaborates on the nature and scale of white-collar crime in the savings and loan crisis. It provides an overview of the thrift industry and the impact of deregulation on opportunities for fraud. Violations are then discussed under the general headings of “unlawful risk taking,”“collective embezzlement,” and “covering up,” and similarities are noted between criminal activities of thrift operators and those of persons associated with traditional organized crime. Government enforcement issues are discussed, focusing on both statutory changes and the law in action. Finally, the article argues that future policymaking, when considering changes in regulatory structure, must take into account the criminogenic environment produced by earlier legislation.
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References
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U.S., Congress, Senate, Committee on Banking, Housing and Urban Affairs , Problems of the Federal Savings and Loan Insurance Corporation (FSLIC): Hearings before the Committee, 101st Cong., 1st sess., 3 and 7-10 Mar. 1989, pt. 3.
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2. Oswald Jonston, “GAO Says S&L Cost Could Rise to $500 Billion,”Los Angeles Times, 7 Apr. 1990.
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3. Christian G. Hill, “A Never Ending Story: An Introduction to the S&L Symposium,”Stanford Law and Policy Review, 2(1):21 (Spring 1990).
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U.S., Congress, House, Committee on Government Operations, Combatting Fraud, Abuse and Misconduct in the Nation's Financial Institutions: Current Federal Reports Are Inadequate, 72d report by the Committee on Government Operations, 13 Oct. 1989.
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5. Resolution Trust Corporation, Office of Investigations, Resolutions and Operations Division, Report on Investigations to Date, 31 Dec. 1989.
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6. James R. Dudine, The Extent of Misconduct in Insolvent Thrift Associations, Testimony before the Commerce, Consumer and Monetary Affairs Subcommittee, Committee on Government Operations, U.S. House of Representatives, 15 Mar. 1990.
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7. Jack Katz, “Legality and Equality: Plea Bargaining in the Prosecution of White-Collar and Common Crimes,”Law and Society Review, 17(3):431 (Winter 1979).
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8. 12 U.S.C. 1421 et seq.
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9. 12 U.S.C. 1724 et seq.
10.
10. Personal interview.
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11. Martin Mayer, The Greatest-Ever Bank Robbery: The Collapse of the Savings and Loan Industry (New York: Charles Scribner's Sons, 1990).
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12. Pub. L. 96-221.
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13. Pub. L. 97-320.
14.
14. Mayer, Greatest-Ever Bank Robbery, p. 8.
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15. U.S., Congress, House, Committee on Banking, Finance and Urban Affairs, Subcommittee on Financial Institutions Supervision, Regulation and Insurance, Financial Institution Reform, Recovery, and Enforcement Act of 1989 (H.R. 1278): Hearings before the Subcommittee, 101st Cong., 1st sess., 8, 9, and 14 Mar. 1989.
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16. Ned Eichler, The Thrift Debacle (Berkeley: University of California Press, 1989).
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17. U.S., General Accounting Office, Failed Thrifts: Internal Control Weaknesses, p. 8.
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18. Ibid., p. 11.
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19. Ibid., pp. 13-24.
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20. U.S., General Accounting Office, Failed Thrifts: Costly Failures Resulted from Regulatory Violations and Unsafe Practices, Report to Congress, GAO/AFMD-89-62, June 1989, p. 21.
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21. Kitty Calavita and Henry N. Pontell, “ `Heads I Win, Tails You Lose': Deregulation, Crime and Crisis in the Savings and Loan Industry,”Crime & Delinquency, 36(3):309 (July 1990).
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22. U.S., General Accounting Office, Failed Thrifts: Costly Failures, p. 17.
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John Hagan , Modern Criminology: Crime, Criminal Behavior, and Its Control (New York: McGraw-Hill, 1985).
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Paul Jesilow , Henry N. Pontell, and Gilbert Geis, Prescription for Profit: How Doctors Defraud Medicaid (Berkeley: University of California Press, 1993).
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25. Stanton Wheeler and Mitchell Lewis Rothman, “The Organization as Weapon in White Collar Crime,”Michigan Law Review, 80(7):1403 (June 1982).
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28. Ibid.
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29. Sutherland, White Collar Crime, p. 231.
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30. Donald R. Cressey, Other People's Money: A Study of the Social Psychology of Embezzlement (Glencoe, IL: Free Press, 1953).
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31. Lawrence Sherman, Scandal and Reform (Berkeley: University of California Press, 1978).
32.
32. Wheeler and Rothman note the distinction between embezzlement and corporate crime in pointing out that “either the individual gains at the organization's expense, as in embezzlement, or the organization profits regardless of individual advantage, as in pricefixing.” They argue that this separation ignores cases where both organization and individual may benefit, as when an individual's career is advanced by crime perpetrated on behalf of the organization. Wheeler and Rothman, “Organization as Weapon,” p. 1405. What they neglect to note, however, is the possibility of organizational crime in which the organization is a weapon for perpetrating crime against itself.
33.
33. Michael D. Maltz, “On Defining `Organized Crime': The Development of a Definition and Typology,”Crime & Delinquency, 22(3):338 (July 1976).
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U.S., Congress, House, Committee on Standards of Official Conduct , Report of the Special Outside Counsel in the Matter of Speaker James C. Wright, Jr., 101st Cong., 1st sess., 21 Feb. 1989.
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Mayer , Greatest-Ever Bank Robbery.
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36. General Accounting Office, Failed Thrifts: Costly Failures, p. 51.
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37. Ibid., p. 40.
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38. Michael Lewis, Liar's Poker (New York: Penguin Books, 1989).
39.
39. Resolution Trust Corporation, Report on Fraud, Abuse and Malpractice in RTC-Controlled Thrift Associations, Statement of James R. Dudine to the Oversight Board, 18 July 1990.
40.
40. Ibid.
41.
41. 18 U.S.C. 1032 et seq.
42.
42. 18 U.S.C. 1517 et seq.
43.
43. Robert A. Rosenblatt, “1,000 Bank, S&L Fraud Cases Go Uninvestigated, Lawmaker Says,”Los Angeles Times, 15 Mar. 1990.
44.
44. Personal interview.
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45. Resolution Trust Corporation, “Report on Investigations to Date.”
46.
46. U.S., Department of Justice, Office of the Attorney General, Attacking Financial Institution Fraud: A Report to the Congress of the United States, May 1991.
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47. John W. Meyer and Brian Rowan, “Institutionalized Organizations: Formal Structure as Myth and Ceremony,”American Journal of Sociology, 83(2):340 (Sept. 1977).
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48. Martin Needleman and Carolyn Needleman, “Organizational Crime: Two Models of Criminogenesis,”Sociological Quarterly, 20(4):517 (Autumn 1979).
