How They Got Away with It HOW THEY GOT AWAY WITH IT White Collar Criminals and the Financial Meltdown EDITED BY SUSAN WILL, STEPHEN HANDELMAN, AND DAVID C BROTHERTON Columbia University Press New York Columbia University Press Publishers Since 1893 New York Chichester, West Sussex cup.columbia.edu Copyright © 2013 Columbia University Press All rights reserved E-ISBN 978-0-231-52766-8 Cover photos: © adam eastland/Alamy, © Sieda Preis/Getty Images Cover design: Marc Cohen Library of Congress Cataloging-in-Publication Data How they got away with it : white collar criminals and the financial meltdown / edited by Susan Will, Stephen Handelman, and David C Brotherton p cm Includes index ISBN 978-0-231-15690-5 (cloth : alk paper)—ISBN 978-0-231-15691-2 (pbk : alk paper)—ISBN 978-0-231-52766-8 (ebook) White collar crimes Commercial crimes Commercial criminals Financial crises I Will, Susan II Handelman, Stephen III Brotherton, David HV6768.H69 2013 364.16'80973—dc23 2012017414 A Columbia University Press E-book CUP would be pleased to hear about your reading experience with this e-book at cup-ebook@columbia.edu References to Internet Web sites (URLs) were accurate at the time of writing Neither the author nor Columbia University Press is responsible for URLs that may have expired or changed since the manuscript was prepared To the victims of corporate malfeasance CONTENTS Acknowledgments Introduction [Part I] Roots of the Crisis Wall Street: Crime Never Sleeps David O Freidrichs The Logics of Finance: Abuse of Power and Systemic Crisis Saskia Sassen America’s Ponzi Culture Susan Will Bernie Madoff, Finance Capital, and the Anomic Society Jock Young [Part II] Enablers of Fraud Unaccountable External Auditors and Their Role in the Economic Meltdown Gilbert Geis And Some with a Fountain Pen: Mortgage Fraud, Securitization, and the Subprime Bubble Harold C Barnett Generating the Alpha Return: How Ponzi Schemes Lure the Unwary in an Unregulated Market David Shapiro [Part III] Perverted Justice The Technological Advantages of Stock Market Traders Laureen Snider Why CEOs Are Able to Loot with Impunity—and Why It Matters William K Black 10 The Faỗade of Enforcement: Goldman Sachs, Negotiated Prosecution, and the Politics of Blame Justin O’Brien [Part IV] Perspectives from Afar 11 Reappraising Regulation: The Politics of “Regulatory Retreat” in the United Kingdom Steve Tombs and David Whyte 12 How They Still Try to Get Away with It: Crime in the Dutch Real Estate Sector Before and After the Crisis Hans Nelen and Luuk Ritzen 13 Economic and Financial Criminality in Portugal Rita Faria, José Cruz, André Lamas Leite, and Pedro Sousa 14 Greece “For Sale”: Casino Economy and State-Corporate Crime Sophie Vidali 15 Financial Fraud in China: A Structural Examination of Law and Law Enforcement Hongming Cheng EPILOGUE Can They Still Get Away with It? APPENDIX A Short (Global) History of Financial Meltdowns Compiled by Alex Holden Contributors Index ACKNOWLEDGMENTS We thank the McCormick Foundation for their financial support and the staff of John Jay College of Criminal Justice’s Center on Media, Crime, and Justice, who organized the April 2008 conference for journalists, academics, and other specialists, “How Do They Get Away with It? Tracking Financial Crime in the New Era,” which gave attention to the developing economic events We also thank our graduate research assistant, Alex Holden, who provided invaluable assistance His organizational skills, attention to detail, and sheer endurance greatly facilitated the completion of this book We greatly appreciate his devotion to this endeavor Finally, we thank the editors and staff at Columbia University Press who worked with us In particular, we are grateful for Edward Wade’s patience and editorial attention to detail and the masterful copyediting by Ron Harris and Julie Palmer Hoffman INTRODUCTION In a 2011 New York Times article, the authors ask why no bankers have gone to prison for activities related to the financial meltdown (Morgenson and Story, “In Financial Crisis, No Prosecutions of Top Figures,” April 14, 2011) Such a question, raised by one of the leading newspapers in the United States, goes to the heart of this volume: How did the movers and shakers of a world financial and economic system make the decisions they did, creating untold social harm to millions, and yet fail to be held accountable by our various governments? This book grew out of an initiative we took at John Jay College of Criminal Justice in 2008 to organize a conference for journalists, academics, and practitioners that would shed a criminological light on one of the biggest economic crises in U.S history Given that we were located in the eye of the storm (a twenty-minute subway ride from Wall Street) and as faculty members of the largest college of criminal justice in the nation (with a commitment to “educating for justice”), we felt compelled to put into context the social, political, and economic processes behind the meltdown and show culturally how this epoch had come about At the time, we thought that academics were paying scant attention to the extraordinary events of 2007–2008 Although hundreds of column inches, hours of broadcast time, and millions of cyber pixels were produced by investigative and other journalists, there was too little commentary or serious analysis from those of us who were supposedly trained to investigate scientifically the nature, type, and meanings behind the egregious transgressions that constituted this most recent rupture in the fabric of global capitalism Needless to say, the conference was a tremendous success As financial regulators, journalists, criminal investigators, criminologists, sociologists, rehabilitated Ponzi schemers, and accountants aired their perspectives, participated in heated debates, and dialogued with rapt audiences of several hundred students, faculty, and lay members of the public, it was clear that we needed to produce a compilation of the contributions heard that day But we also felt called to push the exploration further, with rigorous analysis of the criminality that lay behind much of the crisis—an aspect that while frequently touched upon by journalists and commentators has not received the attention it merits Some of the authors who contributed essays to this volume were present at the event Others sent us their analyses on hearing of our intention to launch such a project The result, we believe, is an extraordinary document that will well serve students, academics, and laypersons alike in their quest to understand the complexity of the issues behind the system’s partial collapse and the policies that we might consider if history is not to move so assuredly from tragedy to farce In the opening section of the book, we have assembled contributions addressing the roots of the crisis as their foundational theme Here David O Friedrichs, Saskia Sassen, Susan Will, and Jock Young, through their respective disciplines, pursue a series of distinctive inquiries that have emerged from the seismic shifts in the world’s political economy located at its financial heart Friedrichs begins by asking: Who or what is responsible for the financial economic debacle? The author makes clear that the crisis falls classically within the purview of white collar criminology and goes on to suggest several reasons why hardly a single perpetrator spent a night in one of the United States’ infamously overflowing prisons Sassen makes her particular mark on this intriguing discussion by analyzing how the restructuring of capitalism has almost inevitably led to the present set of contradictions, what she calls its “radical reshuffling” (p 26) characterized by two sets of logics that intersect with such devastating consequences The first logic is that associated with “privatization,” one of the many tentacles of neoliberalism as both an ideology and a practice The second logic is that of the expansion and proliferation of “extreme zones of profit extraction” (p 26) now famously contained in her notion of global cities These two logics produce conditions, beliefs, policies, cultures, and spaces that give rise to the nowubiquitous dynamic of financialization—a reference to the ascendancy of finance capital over industrial capital and the consequent liquid culture of superexploitation that now overdetermines outsourced, overproducing, and undercompensated labor Will, a criminologist, suggests that Ponzi scheme practices are not the exception but the rule in contemporary capitalism From the operations of Sanford and Madoff to the institutionalized promises of public pensions, Ponzi-like properties abound in the way we business as well as in the provisions of the social contract Will makes the important point that with the U.S government so impossibly intertwined with the goals, motives, and culture of the financial economy, the people have lost the guardian of their supposed interests Thus, we have moved irrevocably from a government of, by, and for the people to one that is beholden to the profit-based diktats of financial corporations, stockholder interests, and the well-connected individuals who occupy America’s boardrooms, many of whom now seem to routinely shuttle between their desks in the White House and their offices on Wall Street Rounding out this opening section, Young complements Will’s insights and argues that the present crisis must be seen as a facet of the generalized condition of anomie that has afflicted the United States for many a decade Young invokes Merton’s renowned 1930s sociological analysis of the impossibility for many citizens of reaching the mythic American Dream, despite the key role of this concept in the nation’s ideology, and he underlines Merton’s well-respected conclusion that this contradiction has consistently produced a moral crisis of immense proportions It is this moral crisis, according to Young, which is reflected in the culture of the present financial-economic crisis, as we watch the wanton criminality of the well-heeled who, for the most part, are feted and extolled by a craven culture of excess, greed, and human speculation As Young explains, “great wealth, as Merton pointed out, is itself seen as a sign of some inner virtue, regardless of how it has been accumulated” (p 77) This virtuous accumulation was present in the unabashed lifestyle of Madoff et al., consistently packaged and circulated by such entities as the News Corporation, whose dynastic heads during the summer of 2011 were exposed for their LIST OF CONTRIBUTORS DAVID C BROTHERTON is Professor and Chair of Sociology at the John Jay College of Criminal Justice and at the Graduate Center, the City University of New York His research focuses on social exclusion and resistance, and his most recent book, Banished to the Homeland: Dominican Deportees and Their Stories of Exile is coauthored with Luis Barrios They are also coauthors of Keeping out the Other: A Critical Introduction to Immigration Enforcement Today and The Almighty Latin King and Queen Nation: Street Politics and the Transformation of a New York City Gang and coeditors of Gangs and Society: Alternative Perspectives STEPHEN HANDELMAN is an internationally known author, journalist, and lecturer whose work has appeared in newspapers, journals, and magazines around the world A specialist in transnational crime and organized crime, he has served as a consultant to the United Nations, the FBI, and law enforcement agencies around the United States Since 2007, he has been director of the Center on Media, Crime, and Justice at John Jay College and executive editor of The Crime Report, the nation’s first comprehensive news and resource site on criminal justice SUSAN WILL is Assistant Professor of Sociology at John Jay College of Criminal Justice and has written about corporate bankruptcy, the Orange County bankruptcy, financial crime, legal culture, and the social impact of regulatory apparatus Her research interests are in the areas of white collar and corporate crime, sociology of law, and sociology of the environment HAROLD C BARNETT is Emeritus Professor of Economics at the University of Rhode Island He has published widely on the economics of corporate and white collar crime, including a major study of the Superfund hazardous waste program, Toxic Debts and the Superfund Dilemma He moved to Arizona in 2002, where he was involved in environmental mitigation, real estate development, and mortgage lending He currently resides in Chicago, where he is a mortgage market consultant and adjunct faculty with the Marshall Bennett Institute of Real Estate, Roosevelt University His contribution to this volume grew out of his expert research on mortgage fraud He is currently researching mortgage fraud trends and impacts in Chicago and the relationship between securitizer risk disclosures and default rates on mortgage-backed securities WILLIAM K BLACK is Associate Professor of Economics and Law at the University of Missouri–Kansas City He is a white collar criminologist, the former executive director of the Institute of Fraud Prevention, a former senior financial regulator, and the author of The Best Way to Rob a Bank Is to Own One and of numerous articles and book chapters on “control frauds” and financial crimes HONGMING CHENG is Assistant Professor of Sociology at the University of Saskatchewan, Canada His research focuses on white collar and corporate crime in the context of globalization and regional regulatory cooperation Recent publications include the book Commercial Crime and Commercial Regulation: A Comparative Perspective and articles including “Insider Trading in China: The Case for the Chinese Securities Regulatory Commission” and “White Collar Crime and the Criminal Justice System: Bank Fraud and Corruption in China” in the Journal of Financial Crime JOSÉ CRUZ is an associate professor affiliated with the Centre for Legal and Economic Research (CIJE) and is on the Law Faculty at the University of Porto (Portugal) He has written about economic crime and corruption RITA FARIA is on the Law Faculty of the School of Criminology at the University of Porto She has written about corruption in Portugal DAVID O FRIEDRICHS is Professor of Sociology/Criminal Justice and Distinguished University Fellow at the University of Scranton He is author of Trusted Criminals: White Collar Crime in Contemporary Society and Law in Our Lives: An Introduction and editor of the two-volume State Crime He has published more than 100 journal articles, book chapters, encyclopedia entries, and essays and well over 300 book reviews He has been a visiting professor or guest lecturer at many colleges and universities, including the University of South Africa and Flinders University in Australia He served as editor of Legal Studies Forum (1985–1989) and president of the White Collar Crime Research Consortium (2002–2004) In November 2005, he received a Lifetime Achievement Award from the Division on Critical Criminology of the American Society of Criminology GILBERT GEIS is Professor Emeritus of Criminology, Law and Society at the University of California, Irvine He is a prolific writer who has authored over twenty books, including leading texts on criminology and white collar crime, and over 300 articles and book chapters He is a former president of the American Society of Criminology and recipient of its Edwin H Sutherland Award for outstanding research He has also received research awards from the Association of Certified Fraud Examiners, the Western Society of Criminology, the American Justice Institute, and the National Organization for Victim Assistance ALEX HOLDEN recently completed a master of arts degree in criminal justice at John Jay College of Criminal Justice He is currently interning for the New York City Department of Investigation ANDRÉ LAMAS LEITE is an assistant professor on the Law Faculty at the University of Porto He has written about criminal law and criminal justice HANS NELEN is Professor of Criminology and Chair of the Department of Criminal Law and Criminology of the Faculty of Law at Maastricht University, the Netherlands Between 1986 and the beginning of 2001, he was employed as a senior researcher and research supervisor at the Research and Documentation Centre of the Ministry of Justice in the Netherlands (WODC), mainly involved in drug, fraud, organized crime, corporate crime, and police research Between 2001 and 2006, he was associate professor and senior researcher at the Institute of Criminology of the Vrije Universiteit, Amsterdam Nelen has published several books and articles on a variety of criminological subjects, including corruption and fraud, occupational crime, the administrative approach to organized crime, the proceeds-of-crime approach, drugs, and evaluation JUSTIN O’BRIEN is Professor of Law and Director of the Centre for Law, Markets and Regulation, at the University of New South Wales in Sydney, Australia A specialist in the dynamics of financial regulation, he has authored three books on regulatory politics: Wall Street on Trial; Redesigning Financial Regulation; and Engineering a Financial Bloodbath In addition he has edited several anthologies on corporate governance, including Governing the Corporation; Private Equity, Corporate Governance and the Dynamics of Capital Market Governance; Corporate Business Responsibilities; and The Future of Financial Regulation, which he coedited with Iain MacNeil Prior to his career in academia, Professor O’Brien was an investigative journalist for a range of national and international broadcast networks LUUK RITZEN holds a bachelor’s degree in health sciences and a master’s degree in forensics, criminology, and law Currently, he is working as a criminological researcher and lecturer at Maastricht University He is specializing in organized crime, white color crime, corporate crime, and money laundering His doctoral dissertation focuses on the entanglement between real estate and serious forms of crime In addition, he participates in the Regional Intelligence and Expertise Center, Limburg, an organization responsible for gathering intelligence and expertise to combat organized crime SASKIA SASSEN is the Robert S Lynd Professor of Sociology and cochair of the Committee on Global Thought at Columbia University (www.saskiasassen.com) Among her books are The Global City (2001) and Territory, Authority, Rights: From Medieval to Global Assemblages (2008) She has now completed for UNESCO a five-year project on sustainable human settlement based on a network of researchers and activists in over thirty countries; it is published as one of the volumes of the Encyclopedia of Life Support Systems (http://www.eolss.net) Her books are translated into twenty-one languages She has written for the Guardian, the New York Times, Le Monde, the International Herald Tribune, Newsweek International, and the Financial Times, among others She contributes regularly to HuffingtonPost.com and OpenDemocracy.net DAVID SHAPIRO currently leads the corporate investigative unit for a major international corporation He is also an adjunct lecturer at John Jay College of Criminal Justice, where he instructs in the field of forensic analysis of financial records and reports Previously, he was a corporate investigator for Kroll Associates in New York; an assistant prosecutor in Essex County, New Jersey; a special agent and assistant legal advisor with the FBI in Albany, New York; and a certified public accountant and management consultant LAUREEN SNIDER is Professor of Sociology (Emerita) at Queen’s University, where she specializes in corporate crime, surveillance, and legal reform Recent publications include “The Conundrum of Financial Regulation,” Annual Review of Law & Social Sciences (2011); “Moral Panics Deflected: The Failed Legislative Responses to Canada’s Safety Crimes and Market Fraud” (with Steve Bittle), Crime, Law & Social Change (2011); “Framing E-Waste Legislation: The Obfuscating Role of Power,” Criminology & Public Policy (2010); “Tracking Environmental Crime Through CEPA: Canada’s Environment Cops or Industry’s Best Friend?” (with Suzanne Day and April Girard), Canadian Journal of Sociology (2010); “The Challenges of Regulating Powerful Economic Actors” (with Steve Bittle), in European Developments in Corporate Criminal Liability, edited by James Gobert and Ana-Maria Pascal (London: Sage, 2011); and “Mega Events and Mega-Profits: Unravelling the Vancouver 2010 Security-Development Nexus” (with Adam Molnar), in Surveillance Games, edited by Colin Bennett and Kevin Haggerty (2011) PEDRO SOUSA is an economist who is an auxiliary professor on the Law Faculty, School of Criminology, at the University of Porto He has written about central banks and monetary policy STEVE TOMBS is Professor of Sociology and co-director of the Centre for the Study of Crime, Criminalization and Social Exclusion at Liverpool John Moores University His primary research interests are the incidence, nature, regulation, and harm of corporate crime He is also interested in the politics of knowledge He is on the Steering Committee of the European Group for the Study of Deviance and Social Control Recent books that he coauthored with David Whyte include Corporate Criminal (Key Ideas in Criminology); Regulatory Surrender: Death, Injury and the Non-Enforcement of Law; Safety Crimes; and A Crisis of Enforcement: The Decriminalisation of Death and Injury at Work He coedited State, Power, Crime with Daniel Dorling, Dave Gordon, Paddy Hillyard and Christina Pantazis; Criminal Obsessions Why harm matters more than crime and Beyond Criminology? Taking Harm Seriously In addition, he has written numerous articles and book chapters He currently edits a column, Crimes of the Powerful and Insurgent Resistance, with Frank Pearce, on Crime Talk, http://www.crimetalk.org.uk/library/section-list/38-frontpage-articles/174-crimes-of-the-powerful.html SOPHIE VIDALI is Associate Professor of Criminology and Crime Policy in the Department of Social Administration at Democritus University of Thrace, Greece She is the author of several books, book chapters, and articles on a wide range of criminological topics, including crime policy, criminological theory, forensic investigation, terrorism, organized crime, drugs, crimes among youth, crime control, and crime-control institutions (police and policing) DAVID WHYTE is a reader in sociology at the University of Liverpool His primary research interests are in the area of corporate power, corporate crime, and corporate legal responsibility and accountability Recent books that he coauthored with Steve Tombs include the Corporate Criminal (Key Ideas in Criminology); Regulatory Surrender: Death, Injury and the Non-Enforcement of Law; and A Crisis of Enforcement: The Decriminalisation of Death and Injury at Work, and Safety Crimes In addition, he has written numerous articles and book chapters He received the 2007 British Journal of Criminology Leon Radzinowitz Memorial Prize for his article on corporate crime and the rule of law in Iraq In 2005, the Scottish justice minister appointed him to the Scottish Government Expert Group on Corporate Homicide JOCK YOUNG is Distinguished Professor of Sociology and Criminal Justice at John Jay College of Criminal Justice and the Graduate Center, City University of New York, and Professor of Sociology at the University of Kent, in the United Kingdom He is best known as the coauthor of The New Criminology, the 1973 book that founded a new school of thought about the subject His theoretical interests have been oriented to the development of the new field of cultural criminology, of which he has written widely He received the American Society of Criminology’s Sellin-Glueck Award in 1998 for Distinguished International Scholarship In 2003 he received a Lifetime Achievement Award from the Critical Criminology Division of the American Society of Criminology A prolific writer, he has written numerous books, articles, and book chapters His recent trilogy, The Criminological Imagination, The Vertigo of Late Modernity, and The Exclusive Society, offers a critique of social exclusion in contemporary society INDEX Page numbers refer to the print edition but are hyperlinked to the appropriate location in the e-book ABACUS, 123, 124, 127n20, 179, 184, 187, 188, 190, 192 ABC transactions, 230–231 abstracted empiricism, 73 ACA, 185, 189, 197nn13,14 accounting: Arthur Andersen, 92–96; Bank of America and, 86, 87–89; Buffett on, 99; Dodd-Frank Act and, 98; Enron and, 92, 95–96, 182, 197n5; Ernst & Young, 86–87; fraud, 89, 94–96; 105, 142, 173–175, 182; Goldman Sachs and, 318; HealthSouth and, 97–98; Lehman Brothers and, 86–87; Madoff and, 87, 89–90, 138, 142–143; with pension funds, 57–58 public faith and, 85–86; Pricewaterhouse-Cooper, 87; Sarbanes-Oxley and, 95–97, 145; savings and loans and, 94, 95– 96; Stanford Investment Bank and, 90–92 adjustment crises, 34–36 Advanced Detection System, 155 African Americans: prejudice against, 79; redlining and, 109; subprime mortgages of, 31, 32t, 104, 109 “agency capture,” 19 AIG (American International Group), 89, 125, 143, 324, 337 Akerlof, George, 174 Allais, Maurice, 62n1 Allen, Paul R., 175n2 alpha return, 130, 136–137, 140, 144 “alt-A” loans, 54, 126n14 American Dream: xv; crime and, 69–70; home ownership and, 46, 53; overemphasis on financial success in, 69–70; paradox of, 78–79 American Dream Downpayment Act, 53, 336 American International Group See AIG (American International Group) Ameriquest, 172, 336 analyst research, conflicts of interest in, 182 anomie, xv, 69–71, 78, 290–291 Argentina, 35, 335 Arnall, Roland, 172 Arthur Andersen, 92–97 Arthur Andersen LLP v United States, 93 Arthur Young & Co., 85–86, 94, 95, 100n1 ASE See Athens Stock Exchange (ASE) Asian Americans, subprime mortgages of, 31, 32t Asian financial crisis, 34, 36, 38f, 334 ASIC See Australian Securities and Investments Commission (ASIC) ASIC v Citigroup, 193 asset pricing, 143–144 Athens Stock Exchange (ASE), 284–285 Aubin, George, 171 auctions, collusion at, 235, 236–237 auditors: Arthur Andersen, 92–95; Arthur Young & Co., 94, 95; Bank of America and, 86, 88–89, 100; Buffett on, 99; DoddFrank Act and, 98; Ernst & Young, 86–87; HealthSouth and, 97–98; Lehman Brothers and, 86–87, 324; Madoff and, 87, 89–90; public faith and, 85–86; Sarbanes-Oxley and, 95–97, 145; savings and loans and, 95; Stanford Investment Bank and, 90–92 See also external auditors Augar, Philip, 12 AUS See Automated Underwriting Systems (AUS) Australia, 17, 155, 193, 320, 328n4 Australian Securities and Investments Commission (ASIC), 193–194 Automated Underwriting Systems (AUS), 113, 115 bailout(s): 33, 61, of banks in the United Kingdom, 211–212, 215; of banks in the United States, 39, 41; of countries, 316, 326, 338–340; debt and, 33; as final frontier of financialization, 34; fraud and, 173; Goldman Sachs and, 15, 166n5; for pensions, 58–59; risk and, 61; TARP, 173; use of funds, 147n10 bank cards, 50 banking See fractional reserve banking; shadow banking system Bank of America: 337; auditors and, 86, 87–89; Countrywide and, 105, 126n12, 337; credit offerings and, 50; Merrill Lynch merger, 87; SEC and, 88, 100, 179, 182, 198n6; settlement, 340 Bank of China, 307 Bank of England, 212, 336 bank robbery, 11–12 bankruptcy, 109, 159, 281, 335, 337, 339; of Lehman Brothers, 30, 86, 336; of MF Global, 22; of MILA, 114, 117; of New Century, 114 117, 336; of pension plans, 58; in Portugal, 247, 254, 272t, 273n5 banks See investment banks Baptist Foundation of America, 92 Basis Capital, 180, 184 Basis Yield Alpha Fund v Goldman Sachs, 180 Bayou Group, 14, 138 Bear Stearns, 8, 63n15, 89, 152, 324, 337 Beebe, Herman K., 171 Bermuda, 242n10, 243n17 Bernanke, Ben, 62n7 Black, Donald, 297, 311 Black, William K., 10, 46, 47, 149 Black Monday, 163 Blackstone Group, LP, 131 Black-Scholes-Merton formula, 73 Blacks See African Americans Blair, Tony, 208, 209 Blow, Charles, 79 Blue Arrow, 208 Bowman, Raymond, 175n2 bribery, 231, in China, 296–297, 300–301, 305, 307–308; in Greece, 286–287, 319; in Portugal, 254–255, 258–260, 273n6 See also corruption Brown, Desiree, 175n2 Brown, Gordon, 209, 211 Buffet, Warren, 99, 185 Bush, George W., 19, 49, 53, 85, 172, 337 Business Portuguese Bank, 247 Cable, Vince, 213–214 Caixa Geral de Depósitos (CGD), 273n1 capitalism: 26, 61, 80, 98, 220, 246, 285; contradictions of, 70–71, 217; crony, 171; finance, shift to, 49–50, 289; as inheriting conditions from other systems, 71; Madoff as embodiment of, 80; neoliberal, 219; as perfect, 72–73; primitive accumulation and, 28–32; restructuring of, after Cold War, 26; social order and, 70–71 Capitalism: A Love Story (film), capture, 19, 94–95; theory, 216–217 See also regulatory capture Carlin, George: on the American Dream, 78 casino capitalism, 47; in Greece, 280–281, 292 casinos, 48–49 Cassano, Joe, 324 CBRC See China Banking Regulatory Commission (CBRC) CDO See collateralized debt obligations (CDOs) Central Bank of Denver v First Interstate Bank, 181 CenTrust, 95 CFPB See Consumer Financial Protection Bureau (CFPB) CFTC See Commodity Futures Trading Commission (CFTC) CGD See Caixa Geral de Depósitos (CGD) Chambliss, William J., 17 Chen Liangyu, 308 China, 6, 42, 328n4; criminal law in, 300–301; Cultural Revolution in, 299–300; elite class in, 298–299; financial fraud in, 296–311; financial fraud investigation politics in, 305–310; fraud in legal system in, 302–303; fundraising in, 303–305; Huang Guangyu case, 307–308; illegal enrichment in, 303; investors from, 229; middle class in, 299; Netherlands and, 229; political culture in, 299–301; social class in, 298–299; white-collar crime in, status of, 297–298; Wu Ying case in, 304–305; Xu Ting case in, 302 China Banking Regulatory Commission (CBRC), 296, 305–306 Cioffi, Ralph R., 63n15, 324 Circuit City, 58 Citadel Investment Group, 161 Citicorp, 172 Citigroup, 22, 144, 193, 197n1, 323, 336–340 Clear, Todd, 18 Clinton, Bill, 19, 53, 172 collateralized debt obligations (CDOs): 39f, 51, 55, 105, 197n2; Goldman Sachs and, 13–14, 117, 179–180, 184–191; market as skewed, 179–180; securitization of, 55, 179; synthetic, 13, 89, 123–125, 187 collusion, in China, 300; in the Dutch real estate market, 83, 111, 234, 240; between managers and service providers, 142; price, 249; at public auctions, 235–237 Colonial Bank, 63n15, 172, 173, 175n2 Colonial Realty, 92 Commodity Futures Trading Commission (CFTC), 140, 146, 159, 322, 323 Community Reinvestment Act, 109 compliance theory, 216–217 concentration of power, 27, 42 concerted ignorance, 234 conflicts of interest: in analyst research, 182–183; at investment banks, 13 Conservative Party, in United Kingdom, 206–208, 213 consumer debt, 29, 50–51, 110 Consumer Financial Protection Bureau (CFPB), 158–159, 160, 328n5 control fraud, 10, 173–175 Cordray, Richard, 159, 328–329n5 corporate boards, as responsible party for crisis, 5, 16 corporate crime: defined, 9; finance crime vs., 9–10; financial crisis as, 7–11 See also crime; white-collar crime corruption, 74; in China, 303, 305–306, 308, 310–311; in the Dutch real estate market, 232–233, 240; in Greece, 285–287; in Portugal, 249, 258–260, 267, 269, 270, 271t, 273n6, 274n14, 274–275nn16,18,19 See also bribery Corruption Perceptions Index (CPI), 265–267, 275n23 Corzine, John, 22 Countrywide, 22, 63n15, 105, 126nn6,12,152, 323–324, 336, 337 Cox, Christopher, 85 CPI See Corruption Perceptions Index (CPI) Crawford, Bill, 11 creative enforcement strategies, 178–179 credit: availability, 1, 47, 50–51, 53, 119, 143, 246, 319; cheap, 144; crisis, 211, 321, 333–334; in fractional reserve system, 59–60; fraud, 300–301; history, 53, 109, 120; housing bubble and, 53–54; line of, 55, 109, 116, 126nn5,10; 336; predatory lending and, 111, 112; scores, 113, 115; tightening of, 36, 109, 125 credit cards, 48, 50–51, 62n4, 79; debt securitized, 29; fraud, 254, 300–302 See also bank cards credit default swaps: AIG and, 143; cashing in of, 30; as derivatives, 38–39; in financial crisis, 34, 37; increase in, 40f; as insurance, 37–38, 123; as negating risk, 74–75; relationship to CDOs, 123; in shadow banking system, 26, 37–39, 179; value of, 34, 40f, as a vehicle to earn fees, 131 credit rating agencies, 106, 118, 123, 124, 126n15, 145, 159, 316; Fitch, 98, 113, 115, 124, 126nn6, 328n1, 336, 338; Goldman Sachs and, 121–123; Moody’s, 98, 118, 119, 124, 126nn6,14,15, 319, 328n1, 340; oversight by, 145; as responsible party for crisis, 5, 16 106; Standard & Poor’s, 98, 122, 124, 126n15, 316, 328n1, 336, 338, 339; standards for, 159 credit rating(s): borrower’s, 112; of Iceland, 328n1; of mortgage-backed securities, 118–119, 121–123, 126n15; of United States, 316, 339 See also debt rating creditworthiness, 30, 107, 109, credit scores, 113, 115 See also credit rating Credit Suisse, 63n15, 180 crime: American Dream and, 69–70, 78; control of, 219, 252; in criminology, alternate conceptions of, 8–9, 20–21; financial crisis as, 3, 4, 7–11, 230, 236; harm caused by, 5–6, 9–10, 12; humanistic conception of, 8; inequality and, 78, 219; as label, 250; lawbreaking vs., 250–251; and the media, 259; organized, 48, 236–237, 307; prevention, 224, 247; social class and, 4–8, 11–21, 70, 78, 219, 297–311, 324; statistics (Portugal), 251, 258, 261–264, 262f–268f, 271f, 275n20; theories of, 69, 224, 238, 241n3; white-collar crime vs., See also corporate crime; finance crime; state-corporate crime; white-collar crime crime, categories of, 218, 223; in China, 300–304; in Dutch real estate, 230–234; in Portugal, 249, 253–259, 262, 272–273, 273n3; crime, conceptions of, 4–12, 15–18; in China, 297, 301–302, 310, 312n1; in Portugal, 249–253 crime facilitative, 223, 225, 233, 235, 240, 241n2 Criminal Justice Act (United Kingdom), 207–208 criminal law, history of, 17–18 criminogenic conditions, 6, 15–16, 18–23, 48, 175, 241n1 criminology: alternate conceptions of crime in, 8–9, 74–75; of Ponzi schemes, 69; regulation and, 216; white-collar crime’s place in, 4–5 crisis, 34–35, 74, 206; Asian, 34–36; of confidence, 31, 34, 37, 39, 223; debt, 37, 211, 315; foreclosure, 31, 34, 39, 322; global economic, 3, 15–16, 37, 60, 152, 223; in Greece, 278–281, 284, 291–292, 318–319; investor, 30; moral, xv, 80; political crisis, 284; in Portugal, 247, 249, 251, 254, 270; and reform, 152, 157, 158; savings and loan, 11, 33, 60, 171– 173; sub-prime mortgage crisis, 29, 31, 37, 105, 315 See also financial crisis crisis-reform cycle, 151–152 crony capitalism, 171 Cultural Revolution, 299–300 culture: of the banking industry, 188; criminogenic, 69, 249, 326, 327; defined, 47–48; financial, xv, 6, 48; litigious, 178; political, in China, 299–301; Ponzi, 47–60; punitive, 153; of real estate market, 234; popular, and crime, 8, 21; statecorporate, 289–290 Cuomo, Andrew, 88, 182–183 Cutler, Steve, 197n5 Dalmady, Alex, 91 Daniel, Vincent, 93–94 dark pools, 163–164, 166n5 data manipulation, 143, in Greece, 278–284, 292n2 Davis, James M., 90–91, 97 Davis, L J., 45 debt, 47–48; bailouts and, 33; consumer, 29, 50–52, 54, 107–108, 110; financial instability and, 50–51, 135; in Greece, 14, 279–281, 316–319, 338–339; Iceland’s, 317–318; income growth vs., 55, 62n5; in Ireland, 316–317, 319, 339; Italy’s, 319; mortgage, 30, 116, 118, 236, 321; in Portugal, 247, 252, 316–317, 319, 338–339; public, 41, 56, 59, 315–319, 334; revolving, 50–51, 79; in Spain, 316–317, 319, 337 debt ratings, downgrade, 316 Department of Justice, United States, 13, 105, 171–174, 179; aggressive approach, 179; allocation of resources, 172; deferred prosecutions, 88 Delaney, Charlotte, 104, 106, 113, 114, 118 demutualization, 154 derivatives: credit-default swaps as, 37–39; Dodd-Frank and, 98, 158, 159; Greece and, 34; toxic, 85, 98; value of, 30, 32 Deutsche Bank, 180, 326 Digitization of trading, 154 differential association, 290 Dodd-Frank Wall Street Reform and Consumer Protection Act, 98, 151, 157–161, 180–181, 185, 322, 338, 340; and SEC, 100, 158, 180; undermining of, 22, 322, 325, 327 Dongyang People’s Procuratorate v Wu Ying, 304–305 Dreier, Marc, 46, 61 due diligence, 104; and ACA, 189, 198n13; and Goldman Sachs, 104, 119, 121–122, 184; 192; failure to conduct, 90, 104, 192 Durkheim, Emile, 70, 287 Eisenberg, Thomas, 94–95 electronic trade monitoring, 155–156 elite class, 17; in China, 298–299 See also ruling class; upper class; wealthy empiricism enforcement, 155–160, 210, 240, 278, 290; creative, 178–181, 194; vs financial growth, 186; against Goldman Sachs, 186– 192; media representations and, 181–182; and politics of, 181, 183, 279; powers, 158; private, 180, 196, 324–325; responsive, 217; social class and, 297–298, 303–306, 308–311; strict, 217–218 Enron, 13, 92–93, 95–97, 197n5, 335 equity withdrawals, 54 Ernst & Young, 86–87, 100n1 ethnicity, subprime mortgages and, 31, 32t Eurostat, 279, 282, 292n2 external auditors: Arthur Andersen, 92–95; Bank of America and, 86, 87–89; Buffett on, 99; and conflict of interest, 99; DoddFrank Act and, 98, 100; Ernst & Young, 86–87; HealthSouth and, 97–98; Lehman Brothers and, 86–87; Madoff and, 87, 89–90; public faith and, 85–86; Sarbanes-Oxley and, 95–97; savings and loans and, 95; standards for, 96; Stanford Investment Bank and, 90–92 Fannie Mae, 53, 63n8, 106, 108, 110, 334; credit requirements, 321; Goldman Sachs and, 180, 184–185, 197n3; Taylor Bean & Whittaker and, 172–173 Farkas, Lee B., 63n15, 172, 175n2 Fear of falling, 78 Federal Home Loan Bank Board, 63n8, 171 Federal Housing Administration, 63n8, 326 Federal Housing Finance Agency, 105, 328n5 Ferguson, Charles, fiduciary duty: as elastic, 193–194; of Goldman Sachs, foreclosure of, 191–192; imposing, at law, 193–196 finance capitalism, 47, 152–153, 164, 165; and extracting value, 34; in Greece, 279–281, 284; Madoff and, 68, 80; shift to, 49–50, 289 finance crime: in China, 296–311; corporate crime vs., 9–10; defined, 9; financial crisis as, 7–11; at Goldman Sachs, 12–15; on grand scale, 12–15; mismanagement vs., 247–248; occupational crime vs., 9–10; offender characteristics in, 249– 250; in Portugal, 246–273; white-collar crime vs., 10 See also crime; white-collar crime financial crisis: xiii–xx, 3, 17–18, 51, 61, 86, 320–327; causes of, 5–7, 158; crime and, 7–11, 172–174, 247; credit default swaps and, 34; criminogenic conditions contributing to, 15–16, 223; cost of, 315–316, 318; defined, 35; Germany and, 36; impact of, 36, 42; investment banks and, 185; losses in, 38f, 39f; Madoff and, 71–72, 76; moral panic and, 78–80; mortgage fraud, 172–174; Ponzi schemes and, 46, 47, 130; response to, 212, 213; responsibility for, 5–7, 39, 206; scapegoating in society and, 78–80; as structural feature, 36; as systemic logic, 32–36; as two separate crises, 37–41; unemployment and, 315; world GDP and, 315 Financial Crisis Inquiry Commission, 1, 62n7, 83, 124, 149, 183, 203, 339 financial culture, 48 Financial Industry Regulation Authority (FINRA), 155 financial instability hypothesis, 50–51, 106–107 financialization, 33–34 Financial Stability Oversight Council (FSOC), 158, 159, 160 FINRA See Financial Industry Regulation Authority (FINRA) “flash orders,” 162 Fitch Ratings, 98, 113, 124, 336, 338; Iceland, 328n1 Florida, 125n2, 320–321; home price appreciation, 124; homes with negative equity, 79 food commodities market, 15 foreclosure, 31, 109, 120, 236, 320–322; decrease in house prices and, 37, 108, 125; harm, 31, 63n12; relationship to the financial crisis, 34, 39; rescue schemes, 104, 111, 112–113 fractional reserve banking: credit in, 59–60; development of, 59; as Ponzi scheme, 59–60 fraud: accounting, 87–97, 173–175, 197n5; accusations of, 180; in Chinese legal system, 302–303; control, 10; detecting, 142, 146; enablers of, xvii; foreclosure, 104, 112–114, 321–322; fundraising, 303–305; housing, 111–112; mortgage, 105– 106, 119, 149, 172–174, 235–236; in Ponzi schemes, 46, 132–134, 140; real estate, 223–241; the savings and loan crisis and, 171–173; by the SEC, 179, 185; stock market, 154; subprime mortgage, 109–125, use of technology to regulate, 153, 157 See also securities fraud Freddie Mac, 53, 106, 108, 334, 336 Free Enterprise Fund v Public Company Accounting Oversight Board, 96 free markets See capitalism Fremont Investment & Loan, 118, 337 Friehling, David G., 90 Friehling & Horowitz, 90, 138 FSOC See Financial Stability Oversight Council (FSOC) Fuld, Richard, 324 fund management, 134; alpha return and, 137; asset pricing and, 143–144; leverage and, 135; privileged relationships and, 136; specialized skills and, 135–136; technology and, 142–143; transparency and, 137–139 fundraising: and China, 303–305 Galbraith, James, 74, 325 Galbraith, John, 74 gambling, 48–49 GAO See Government Accountability Office (GAO) Garn-St Germain Act, 19, 334 Geithner, Timothy, 88, 174 Germany, rise of Nazism in, 78–80 Glass-Steagall Act, 19, 61, 157, 334, 335 Global Corruption Barometer, 267, 271t globalization, 27, 208, 327; discourse, 214; Dutch real estate market and, 229, 233; neoliberalism and, 214 Goldman Sachs 13; ABACUS, 123–124, 179, 184, 187, 188, 190, 192; ACA and, 185, 189, 197n13; as amoral, 188; Basis Capital and, 180, 184; Bayou Group and, 14; Business Standards Committee at, 185–186, 196; case against, 186–192; due diligence by, 121–122; Fannie Mae and, 180, 184–185, 197n3; federal action against, 63n15, 178–179, 182; fiduciary duty of, 191–192; finance crime at, 12–15; food commodities market and, 15; Greece and, 14, 33–34, 280–281, 318–319; as iconic, 13; Levin, Carl and, 184; Liberty Mutual and, 180, 184–185, 197n3.; litigation stakes of, 183; Madoff vs., 76; MILA and, 104, 106, 121; and mortgage backed securities, 118, 121–122; New Century and, 106, 119–120; oil market and, 14–15; public relations position of, 183–184; reputation of, 184–186; SEC and, 182–188, 190; securitization by, 117, 118, 122; settlements, 13–14, 63n15, 178; Structured Product Correlation Trading Desk, 186–187; synthetic CDOs and, 13, 123; Wells Notice of, 183 Government Accountability Office (GAO), 59, 180–181 government-sponsored enterprises (GSEs), 53 Gramm-Leach-Bliley Act, 61, 157 Great Depression, 48, 71, 151, 334 Greece: Athens Stock Exchange in, 284–285; casino capitalism in, 280–281, 292; corruption in, 285, 287; data manipulation and, 279, 281–284, 292n2; debt, 280–282; economy of, 279–280; factors in debt of, 318; finance capitalism in, 279–281, 284; financial crime in, 278–279, 283, 285–291; financial crisis in, 279–281; fraud in, 285, 286; Goldman Sachs and, 14, 33–34, 280–281, 318–319; International Monetary Fund, 278, 316; J.P Morgan and, 288; public debt refinancing in, 279– 281; Siemens and, 286–287; Social Security embezzlement in, 288–289; unemployment in, 291, 315, 320; Vatopedi case in, 287 “Gresham’s” dynamic, 175 GSAMP (Goldman Sachs Alternative Mortgage Products) Trust, 119–120 GSEs See government-sponsored enterprises (GSEs) Guangdong Faction, 308 Guangzhou People’s Procuratorate v Xu Ting, 302 Hall, Henderson, 112–114; 121 Hampton, Philip, 212, 220n2 Hampton Review, 210 Harvey, David, 53 Hawthorne, Mary, 112–114; 121 HBOS (Halifax Bank of Scotland), 212 HealthSouth, 97–98 hedge fund(s), 14, 130–132, 140, 335–336; Basis Capital, 180, 184; Bayou Group, 14; managers, 8, 22, 63–64n15, 75–76, 135–136, 329; Paulson and Co., 123, 187, 188 Hedging, 118; Madoff scheme and, 75–76; Ponzi schemes vs., xvi, 131–132, 133–134; speculation vs., 51–52, 107 HFT See High Frequency Trading (HFT) High Frequency Trading (HFT), 162, 163, 165, 166n4–5 Hispanic Americans: prejudice against, 79; redlining and, 109; subprime mortgages of, 31, 32t Hobbes, Thomas, 70 Hobsbawm, Eric, 71–72 Hoffman, Thomas E., 56–57 home ownership: American Dream and, 46, 53–54; encouragement of, 53, 63n8 Home Owner’s Loan Corporation, 63n8 Horowitz, Jeremy, 90 household debt: income growth vs., 55 housing bubble, 203, 319; credit and, 53–54; and the financial crisis, 1, 172; as Ponzi scheme, 46–47, 52–56, 60, 76; relationship to subprime mortgage bubble, 106–107 humanistic conception of crime, Iceland, 152, 315–318, 328n1, 338 income: changing sources of, 50; growth, debt vs., 55, 62n5; inequality, 20; stagnant, 321 IndyMac, 58, 337–338 influence trafficking, 254 In re: Lehman Brothers Holdings Inc., 86 In re: MILA, 115, 116 In re: Morgan Stanley, 105, 116 In re: New Century, 114, 116, 119 instability hypothesis, 50–51, 106–107 insurance, credit-default swaps as, 37–38, 123 Internet bubble, 14 investment banks: characterization of, 12–13; conflicts of interest at, 13; credit rating agenxies and, 122; crimes by, 10, 11– 12, 248; economic meltdown and, 85, 185; imposing fiduciary duty upon, 193–196; lack of prosecutions of, 22; Ponzi schemes and, 55; wages at, 12–13 Investment Company Act, 194 “investment pyramid,” 14 Ireland, 152, 223, 242n10, 316–317, 319; unemployment rate, 315, 320 “irrational exuberance,” 194 Italy, 316, 317, 319, 320, 333, 340; unemployment rate, 315, 320 Jacobson, Peter, 193 Japan banking crisis, 38f Jedinak, Rebecca M., 172 Jedinak, Russell M., 172 Jing Changmin, 303 J.P Morgan, 288, 323, 325, 327, 337, 340 Justice Department, United States See Department of Justice Kaufman, Ted, 7, 165 Khuzami, Robert, 179 Kissick, Catherine, 175n2 Klein, Joel, 56 Klein, Naomi, 320 Korea See South Korea Krugman, Paul, 7, 19, 203, 325 Kuttner, Robert, 16 labor: outsourcing of, 26, 28–29, 50 Labour Party, in United Kingdom, 208–210 “laddering,” 14 Langrick, Roger, 59 Law, John, 59 lawyers: as enablers, 76, 152, 326; government (China), 324; as responsible party for crisis, 5–6 Lee, Matthew, 86 Legislative and Regulatory Reform Act (United Kingdom), 210 Lehman Brothers, 336, 337; auditors and, 86, 87, 324; financial scandal involving, 152; moved by, 86; pension bailout of, 58; Repo 105 leverage, 46–47, 144; bubbles and, 51, 107, 187; casino capitalism and, 50; defined, 135; financial crisis and, 50–51; risk and, 136 Levin, Carl, 184–185 Liaocheng People’s Procuratorate v Jing Changmin, 303 Liberty Mutual, 180, 184–185, 197n3 Liberty Mutual v Goldman Sachs, 180, 184, 197n3 Liu Mingkang, 296 Lloyds, 212 logic, systemic, crisis as, 32–36 Long Beach Mortgage, 118, 124, 324 lower class, in China, 303, 307 Macey, Jonathan, 94–95 Madoff, Bernard, 45, 46, 138, 338; auditors and, 87, 89–90; background of, 68; as diversion, 61; as embodiment of finance capitalism, 80; escape of scrutiny by, 21; excesses of, 76–77; financial crisis and, 71–72; Goldman Sachs vs., 76; on government, 56; as hedge scheme, 75–76; Palm Beach Country Club and, 77; prosecution of, 323; puzzle of, 69–71; social position of, 75; transparency and, 138 Major, John, 207 market(s): food commodities, 15; oil, 14–15; rational, myth of, 72–75; as social constructions, 195–196 market timing, 162 Markopolos, Harry, 138 “Martin Act,” 182 Marx, Karl, 50, 70 mathematical precision, running of the market, 73–74 MBA See Mortgage Bankers Association (MBA) MBS See mortgage-backed securities (MBS) McCulley, Paul, 52 media: enforcement and, 181–182; focus and lack of, 4, 21, 88, 89, 152, 181–182, 184; in China, 308; in Greece, 281, 284; in Portugal, 259, 270, 271t; influence, 302 Meng Jtanzhu, 312n3 Merrill Lynch, 87, 180, 182, 335 Merton, Robert C., 73 Merton, Robert K., 69–70, 73, 78 MF Global, 22, 339 middle class, 35, 78–79; in China, 299, 311; in Greece, 284; in the United States, 50; MILA See Mortgage Investment Lending Association (MILA) Mills, C Wright, 73 Minsky, Hyman, 51–52, 107, 118 money laundering, 229, 230–231, 237, 240, 242–243n11, 254, 256, 300–301; defined, 231 monitoring systems: for the stock market, 155–156 monopolies, 17–18 Moody’s, 98, 118–119, 124, 126nn6,15, 340; Iceland and, 328n1; Spain and, 319, 340 Moore, Michael, moral hazard, 16 moral panic, 78–80, 286 Morgan Stanley, 105, 116, 325 Morris, Albert, 248 mortgage-backed securities (MBS), 104–105, 117–122; defined, 117; and Fitch, 113; ratings of, 121–125, 126n15; risk in, 117–118; shorting of, 187 Mortgage Bankers Association (MBA), 174 Mortgage Investment Lending Association (MILA), 104, 106, 113–115, 116–117, 118, 121 mortgages: fraud with, 104–106, 110–112, 122–124, 149, 173–174, 235–236; modest-income individuals and, 29–31; refinancing of, 54; underwater, 79, 320 See also subprime mortgages Mozilo, Angelo, 22, 63n15, 323–324 “National Homeownership Strategy, The,” 53 National Socialism, 78 Neoliberal(ism): British, 206–215; business-friendly, 208; in China, 306; Cold War and, 28; political response to, 214; privatization and, xiv; punitive culture under, 153; rational market and, 72; state intervention increase under, 207, 219; in times of crisis, 151; values of, 71; view of the state, 216–217 Netherlands, The, 319; notary public in, 238–239, 241–242n4; overview of, 225; real estate crime in, 223–241; real estate sector in, 225–230, 226f; as tax haven, 242n10 Nevada, 321 New Century Financial, 105, 106, 114–115, 116–117, 118–120, 336 New Jersey: securities fraud in, 57 New Labour, 208, 209, 212 New York Business Law of 1921, 182 New York City: Occupy Wall Street, 339–340; pension fraud in, 56; post-retirement health benefits, 57; subprime mortgage racial demographics in, 31, 32t New York State, post-retirement health benefits, 57 New York Stock Exchange (NYSE), 155; surveillance of, 156–157 notary public, 238–239, 241–242n4 NYSE See New York Stock Exchange (NYSE) Obama, Barack, 16–17, 21, 183, 242n10, 328n5, 339; appointment of Richard Corday, 159, 328n5, 340; crackdown on financial crime, 63n15, 340 occupational crime: corporate crime vs., 249; defined 9; finance crime vs., 9–10 See also finance crime Occupy Wall Street, 22, 317, 327, 339–340 Office of the Comptroller of the Currency, 173, 328n5 offices, unoccupied, 237–238 oil market, Goldman Sachs and, 14–15 Operation Ivy, 243n15 Operation Stolen Dreams, 105, 111 organized crime, 15, 48, 236–237, 307 originate-to-distribute model, 106, 114–117 outsourcing, 26, 28, 30, 50, 72, 76 overdraft fees, Paulson & Co., 123, 188 Paulson, John, 134, 136, 187–189, 198nn13,14 PBGC See Pension Benefit Guarantee Corporation (PBGC) PCAOB See Public Company Accounting Oversight Board (PCAOB) penal policies, 17 Pension Benefit Guarantee Corporation (PBGC), 58–59 pension plans: accounting with, 57–58; bailouts for, 58–59; fraud with, 56–57; as Ponzi schemes, 56–59; private sector, 58– 59 See also retirement systems Pontell, Henry, 10, 60 Ponzi, Charles, 45, 46 Ponzi culture, 47–60; defined, 48; endurance of, 61–62; gambling and, 48–49; taxes and, 60 Ponzi scheme(s), xv, 45, 76–78; as con, 69; credit cards as, 50–51; criminology of, 69; defined, 46; financial system as, 46– 47; flourishing of, 130; fractional reserve banking as, 59–60; fraud in, 132–133; hedging vs., 131–132, 133–134; home purchase as, 46; housing bubble as, 53–56; Madoff on, 56; pensions as, 56–59; Social Security as, 46; speculative finance as, 51–52; subprime mortgages as, 55–56; Wall Street and, Portugal, 316–317, 319, 338–340; bribery in, 254–260; corruption in, 259–260, 271t; Corruption Perceptions Index in, 265– 267; criminal code in, 253–256; debt-to-GDP ratio in, 317; evidence in courts of, 274n14; evidence gathering, 257; finance crime in, 246–273; influence trafficking in, 254; law in, 253–258; penalties in, 253–255; stock market law in, 257; tributary scams in, 260–261; unemployment in, 247, 315, 320; white-collar crime in legal system of, 253, 255, 257–258; witness protection in, 257 Portuguese Commercial Bank, 247 Portuguese Private Bank, 247 Posner, Richard, 94 power, concentration of, 27 predatory borrowing, 111 predatory lending, 105, 109–111, 126n5 predictability, 70–71, 73 PricewaterhouseCoopers, 87 primitive accumulation, capitalism and, 28–32, 43n3 private equity funds, 131–135, 142; Volker rule and, 157–158 Private Securities Litigation Act, 181, 194 Privatization, 320; capitalism and, 26; in Greece, 278, 279, 283, 286, 287; regulation and, 207; in UK under Thatcher, 207, 209, 215 privileged relationships, fund management and, 136 prosecute(d), 10, 21–22, 63n15, 105, 324; Arthur Andersen, 93; capacity to, 194; in China, 309, 311; deferred prosecutions, 88, 178, 220n2; failure to, 171–173; in Portugal, 252, 259, 274–275nn16,19; reluctance to, 197n5; savings and loan criminals, 171; Spitzer and, 182 See also retrospective prosecutions prosperity, 35; understanding of, 41–43 public auctions, collusion at, 236–237 Public Company Accounting Oversight Board (PCAOB), 96 public debt, in Greece, 279–283, 292n1, 2, 316–317, 318–319; in Ireland, 316–317; in Portugal, 247, 252, 317 “pump-and-dump” scheme, 14 pyramid schemes, 62n2 See also Ponzi scheme(s) Quality Mortgage, 172 race, subprime mortgages and, 31, 32t Ragland, Sean, 175n2 Rakoff, Jed, 22, 87–89, 179, 182, 197nn1,340 rational choice approach, 224–240 “rational man” model, rational market, myth of, 72–75 Reagan, Ronald, 19, 206 real estate fraud, 223–241 real estate market: culture of, 234; players in, 224; state of denial in, 234 redlining, 109 refinancing, 54, 107, 116 reform, 195, 207; agency capture and, 19; Dodd-Frank Wall Street Reform and Consumer Protection Act, 22, 98, 151–152, 157–161, 180–181, 193–194, 322; legislative, 157–161; negative consequences of, 18–19; outrage and, 151; technology and, 153–157 regulation, 28, 60–61, 73–74, 80, 97, 123, 133, 190, 240, 252; in capture theory, 216–217; in compliance theory, 216–217; criminology and, 216; cycle of, 125, 151–152; deregulation, 38, 61, 72, 106, 206–209, 214–215, 246, 291, 317; digitization and, 154; Hampton Review and, 210; in neoliberalism, 216–217; outrage and, 151; privatization and, 207; problems with, 322–323; as responsive, 217–218, 220; technology and, 153–157, 161–164; in United Kingdom, 205–219; white-collar crime and, 218 Regulation AB, 160–161, 165n3 regulatory capture, 183, 325 Regulatory Reform Act (United Kingdom), 209, 210 “regulatory retreat,” 205–219; political construction of idea of, 206–210 Reich, Robert, 321 Rent-a-Bank scandal, 171 Repo 105, 86 responsibility, for crisis, 5–7 retirement systems, 79, Illinois, 56–57 See also pension plans retrospective prosecutions, 181, 186, 192 revolving debt, 50–51 risk, 5, 16, 30, 69, 89, 108, 123, 180–183, 209, 246, 326; accountants and, 94; bailouts and, 61; credit-default swaps as negating, 74–75; credit rating agencies and, 98; credit scores and, 113, 115; Goldman Sachs and, 117–118, 125, 180 190, 197n3; innovation and, 62–63n7; leverage and, 135; in mortgage-backed securities, 106, 117–118; Ponzi culture and, 48–49; regulatory, 194; rising, 40f; securitization of, 117–122; subprime loans, 108, 113, 116 risk officers, as responsible party for crisis, “robo-signers,” 321–322 Rockefeller, John D., 17 Romer, Paul, 174 Rosoff, Stephen, 10, 93 Roubini, Nouriel, 46–47 ruling class, 77, 292 See also elite class; upper class; wealthy Samuelson, Paul, 73 Sarbanes-Oxley Act (SOX), 95–97, 132, 145, 335 savings and loan crisis, xvii, 11, 38f, 45, 75, 95, 171–173, 334 scapegoatism, 78–80 Schechter, Danny, Schwendinger, Herman, Schwendinger, Julia, Scrushy, Richard M., 97 SEC See Securities & Exchange Commission (SEC) Securities Act of 1933, 188–189 Securities and Exchange Act of 1934, 188–189 Securities & Exchange Commission (SEC), 19, 22, 49, 96, 155, 156–157, 158, 164, 334; Bank of America and, 87–88, 100, 182, 197n1; creative enforcement by, 178–179; criticism of, 85, 158, 183; Dodd-Frank and, 98, 100, 158–159, 180, 194; Friehling and, 90; Goldman Sachs, 13, 123, 178–180, 182–193, 196, 198n13; increasing responsibilities of, 322; New Jersey, action against, 57; Regulation AB and, 160–161, 165n3, rush to settle, 179; Stanford and, 90–92, 139 Securities & Exchange Commission v Bank of America, 88–89, 179, 182, 197n1 Securities & Exchange Commission v Goldman Sachs & Co and Fabrice Tourre, 178–179, 187, 188, 189, 198n13–14 Securities & Exchange Commission v Stanford International Bank, Ltd., 91–92 securities fraud, 10–11, 57, 139, 297; guilty of, 63n15; regulate, 194; and regulatory reform, 180–181 securitization, 29, 55, 108, 111, 116, 282; Dodd-Frank and, 158; Goldman Sachs and, 118, 187; regulating, 158, 184 Sen, Amartya, 325 Serious Fraud Office (SFO), 208 SFO See Serious Fraud Office (SFO) shadow banking system, 26, 37–39, 55 shareholder value, 28, 30 Sherman Antitrust Act, 17–18 “shock doctrine,” 320 Siegelman, Don, 97 Siemens, 286–287 Simmel, Georg, 70 Skilling, Jeffrey, 95–96 Smith, Adam, 71, 89, 196 social class, 69; bias, 324; in China, 298–299, 308, 310 social order, 48, 70–71, 78, 219 Social Security: in Greece, 288–289; in United States, 46, 49 “Social Structure and Anomie” (Merton), 69 Solomon Brothers, 93, 94 Soros, George, 37 South Korea, 36, 328n4 SOX See Sarbanes-Oxley Act (SOX) Spain, 223, 317, 319, 337; debt rating, 316, 340; unemployment in, 315, 320 specialized skills, fund management and, 135–136 speculative finance, 32–33, 51–52, 107; hedging vs., 52, 107 “spinning,” 14 Spitzer, Eliot, 182–183 Standard & Poor’s, 118, 124; 336; 338–339; changed rating model, 122; publicly traded indices, 138; rating of Iceland, 328n1; rating of the United States, 316, 339 Standard Oil, 17 Stanford, Robert Allen, 45, 46, 61, 90–91, 139 Stanford Investment Bank, 90–92 Starr, Kenneth L., 46 state-corporate crimes, 283, 285, 286, 289–290, 290–292; defined, 279 Stiglitz, Joseph, 316, 325 stock market fraud, 153, 154 Stock Watch, 155 Stoneridge Investment Partners, LLC v Scientific-Atlanta, Inc., 181, 197n4 strain theory, 69–70, 238 Structured Product Correlation Trading Desk, 186–187 subprime mortgages, 22, 336; bubble, 106–109; contract in, 29; defaults on, 108; financial instability and, 107; foreclosure and, 31; fraudulent, 104–105, 109–125; growth of, 107–108; history of, 29–31; home ownership and, 53–54; home prices and, 108; originate-to-distribute model and, 114–117; packaging of, 29; as Ponzi scheme, 55–56; predatory lending and, 109–110; racial demographics of, 31, 32t; securitization of, 29–30, 108, 117–122 success: emphasis on, 69–70 Sunbeam, 92 surveillance, 156–157 Sutherland, Edwin, 8, 247–249, 250, 290, 308, 324 systemic logic, crisis as, 32–36 Taibbi, Matt, 14, 76 Tannin, Matthew M., 63n15, 324 Tappan, Paul, 8, 250 TARP See Troubled Asset Relief Program (TARP) Tavakoli, Janet, 55 tax(es): fraud with, 232; havens, 242n10; Ponzi culture and, 60 Taylor Bean & Whittaker Mortgage Corporation, 63n15, 172, 175n2 technology: fund management and, 142–143; monitoring, 155–156; regulation and, 153–157, 161–165, 323; surveillance, 156–157; trading activity and, 136, 246 Thatcher, Margaret, 73, 206, 207 Tillman, Robert, 10, 60 Timberwolf, 180 Touche Ross, 95–96 Tourre, Fabrice, 124, 187–188, 188–189, 198nn13,14 “trajectory crossing,” 163 tranches, 55, 117–124, 198n14 Transco, 220n2 transparency, 137–139, 153, 158, 161; increased, 166; lack of, 124, 135, 163, 233, 238, 258 Transparency International, 265, 267 tributary offenses, 256, 260–262 Troubled Asset Relief Program (TARP), 173 See also bailout(s) UBS, 180 underclass, in China, 298, 309 underwater mortgages, 79, 107, 320 underwriting, 106, 212; automated, 113, 115; fraudulent loans, 112–114; guidelines, 14, 116, 121; lax, 104, 108, 110, 111; standards, 107, 119, 120, 317 unemployment: American Dream and, 79; Asian financial crisis and, 36; as effect of financial crisis, 315; in Greece, 291, 315, 320; in Ireland, 315, 319, 320; in Italy, 315, 320; in Portugal, 247, 315, 320; in Spain, 315, 320; in the United States, 321 United Kingdom, 42, 205–219, 320 United States: credit rating of, 316; debt ceiling debate in, 316; foreclosures in, 320–321; future of, after crisis, 320–322 See also American Dream United States v Arthur Young & Co., 85–86 Unity Management Development Corporation, 112–114 unoccupied offices, 237–238 upper class, 78 See also elite class, ruling class vagrancy laws, 17 Valukas, Anton R., 86 Vatopedi case, 287 Vesco, Robert, 91 video surveillance, 156–157 Volcker Rule, 157–158 wages, at investment banks, 12–13 Walker, Richard, 92 Wall Street Reform and Consumer Protection See Dodd-Frank Wall Street Reform and Consumer Protection Warren, Elizabeth, 159, 338 “Washington consensus,” 206–207 Washington Mutual, 63n15, 118, 172, 326, 335, 337 wealth, 48, 57, 60, 75–78, 174; accumulation of, 48, 326; concentration of, 42, 60; creation of, 12, 13, 108; distribution of, 20, 35, 41, 269, 278, 290; home ownership and, 53; measured, 279; redistribution of, 63n12; 283, 285 wealthy See also elite; ruling class; upper class Wells Notice, 183 white-collar crime, in China, 297–298; crime vs., 8; in criminology, 4–5; defined, 9, 251; finance crime vs., 10; financial crisis as, 7–11, 9–10; Merton and, 70; offender characteristics, 249–250; in Portuguese law, 253, 255; regulation and, 218; Schumpeterian view of, 251 See also corporate crime; crime; finance crime Wilson, James Q., 71–72 witness protection, 257 working class, 50, 53, 78; in China, 299 WorldCom, 13 Wu Ying, 304–305 Xu Ting, 302 Yeager, Matthew, 77 Zheng Shaodong, 307 .. .How They Got Away with It HOW THEY GOT AWAY WITH IT White Collar Criminals and the Financial Meltdown EDITED BY SUSAN WILL, STEPHEN HANDELMAN, AND DAVID C BROTHERTON Columbia... they got away with it : white collar criminals and the financial meltdown / edited by Susan Will, Stephen Handelman, and David C Brotherton p cm Includes index ISBN 978-0-231-15690-5 (cloth : alk... wholly unrealizable But whether or not it can be realized, it should be at the center of our dialogue about the financial system and the harm emanating from it A Postscript: How They Got Away with