Elizabeth Holmes. Roger Stone. Michael Cohen. Bumble Bee Foods. Purdue Pharma. Deutsche Bank. They have something in common. Each was charged with white-collar criminal offenses, a category that many consider to be a “victimless” crime. And each has treated prosecution as persecution. This perpetrator-as-victim posture has been fairly successful for affluent individuals and powerful businesses in a criminal justice system that often ignores or erases the actual victims of white-collar crime.
Holmes, a Stanford University dropout who built her endlessly lauded blood-testing firm Theranos into a $9 billion market valuation on a foundation of lies, fawning funders, falsified blood tests and financial reports, settled civil charges with the Securities and Exchange Commission in 2018. Following that, the oft-photographed wunderkind was indicted on multiple counts of wire fraud and conspiracy. She pleaded not guilty and is out on bail, awaiting her criminal trial, which was scheduled to start this October. It’s been indefinitely postponed due to the coronavirus. A close associate revealed that “Elizabeth sees herself as the victim.”
In February, a federal judge sentenced Donald Trump’s longtime ally, Roger Stone, to more than three years in prison after a jury convicted him on seven felony counts, including witness tampering, obstruction, and lying to Congress (a violation of the False Statements Act). These are all go-to-tools for a federal prosecutor where evidence of a more complex crime is well-hidden. Recall that Martha Stewart was convicted of both obstruction and making false statements. She was not even charged with insider trading. In commuting Stone’s sentence this July, the president said that Republican operative was a “victim” of a politically motivated investigation.
This August, the Justice Department demanded $6.2 billion to settle criminal claims against Purdue Pharma related to OxyContin –– the opioid that at one time represented 90 percent of the company’s sales. (Just this week, news broke they are nearing a settlement.) Back in 2007, Purdue and three executives entered guilty pleas for illegally misbranding. The firm pled to a felony and paid a fine, but the managers only to misdemeanors and served no prison time. Purdue continued to push OxyContin, earning more than $35 billion selling the “less addictive” painkiller. The owners, the Sackler family, took home $14 billion. Despite the apparent repeat offending, CEO Richard Sackler claims he has been unfairly “pilloried” by the press.
In June, Christopher Lischewski, the former CEO of Bumble Bee, was sentenced to 40 months in prison and ordered to pay a small fine in connection with a canned tuna price-fixing conspiracy involving rivals StarKist and Chicken of the Sea International. The company also pleaded guilty and agreed to pay a $25 million fine. Lischewski asserted that “I was found guilty of a crime I did not commit and a crime where there is no victim.”
This winter, the president granted clemency to a slew of mainly affluent felons. Their offenses? Bribery, investment fraud, tax evasion, Medicare fraud, public corruption, an extortion cover‑up, money laundering, conspiracy to defraud the federal government, obstruction of justice, mail fraud, wire fraud. The White House announcement used the word “successful” four times to describe those receiving pardons but made no mention of their victims.
Who are the victims?
Let’s start with Holmes. According to the indictment, in one fraud scheme, the alleged victims were Theranos investors, and for the other: doctors and patients. The government described one patient who received a lab report falsely stating that he was HIV-positive. Another was given a test result that said she was not pregnant, only to learn from another lab that she had a life-threatening ectopic pregnancy. Yet in February, the judge ruled that allegations that Holmes had defrauded doctors could not go forward. The only patients who can be counted in the defrauding case were those who paid for their blood tests out of pocket, not those with insurance coverage.
As for Purdue, the pharmaceutical at the center of the opioid epidemic, victims include a share of the 232,000 Americans who died of prescription opioid overdoes between 1999 and 2018. Thousands of these addicts initially were prescribed OxyContin based on misleading marketing to physicians. They got hooked. Each new patient was allegedly worth around $200,000 to Purdue. The addicts paid the price in prison or with their lives. Surrounding communities also suffered the ravages from crime.
The damage from a drug manufacturer extends in insidious ways. “Eliminated” diseases like measles re-emerged because too many parents believe vaccines are unsafe. The anti-vaxxers’ irrational skepticism stems in part from an understandable mistrust of Big Pharma, a more salient concern as we pin our hopes on a coronavirus vaccine to help us return to a semblance of normalcy.
The harm goes beyond these examples. White collar crime in America, such as fraud and embezzlement, costs victims an estimated $300 billion to $800 billion per year. Yet street-level “property” crimes, including burglary, larceny, and theft, cost far less— around $16 billion annually, according to the FBI. A 2019 Federal Trade Commission report estimated that in 2017, around 40 million Americans fell prey to mass-market consumer fraud schemes. But no government agency measures and reports full white-collar crime statistics. Individual private researchers try to piece it together.
Even the science of victimology, devoted to studying individuals and communities harmed by crime, neglects white-collar crime victims. A rare survey from 2010 of 2,500 adults revealed that nearly a quarter of households had been victimized by white-collar crime. Even when victims are revealed, it’s easy to get distracted by the money, audacity, and even the glamour of elite offenders. Theranos’s Holmes’s blonde hair, raspy voice, and Steve Jobs-style black turtlenecks were endlessly scrutinized as much as her deceptions. Researchers and readers long to get inside the minds of sophisticated con artists. Hearing stories about ordinary victims, not so much.
Victims come in all shapes and sizes. The elderly couple who loses nearly their entire life savings to a trusted big-shot money manager running a Ponzi scheme. The honest local storefront business that cannot stay afloat in the face of competitors who peddle shoddy goods online and are nowhere to be found for refunds. Think of the trustworthy employees who refuse to follow unlawful orders and get fired or the retired workers whose pension fund is plundered by corporate mismanagement. In a city where money launderers do a lot of cash sales, home prices become inflated. The launderers overpay for properties because they don’t care about the value, or they get cash kickbacks from the complicit sellers. These inflated prices make it harder for families to try to buy into the market. In that Hollywood scam to get rich kids into college, all the attention goes to the actors who committed fraud, not to the unknown, hardworking high school senior rejected from college because a classmate’s family paid off a coach to gain admission.
What can be done? Measurement and exposure of white-collar offenders is the place to start. We can help protect victims by establishing a nationwide registry of offending individuals and businesses, including those who have settled civil charges with federal agencies. Congress should provide funding without content control to independent journalists and ban forced arbitration of workplace legal disputes (which help discourage both resisting unlawful orders and whistleblowing).
Most promising would be to expand the False Claims Act, which gives special standing to regular people to bring legal cases on behalf of the U.S. against corrupt government contractors. Once known as “Lincoln’s Law,” it originally targeted businesses that were using wartime shortages to overcharge and provide shoddy goods, including poorly made uniforms to the federal government.
Enhanced greatly beginning in the mid-1980s, the FCA allows an ordinary person to start a case for the government and collect a bounty fee even if they have not been harmed by the misconduct or are an employee of the company in question. The Justice Department can take over the case as a civil or criminal matter if it wishes, or pass and let the private party pursue the matter directly. In 2014, the high-water mark for False Claims Act settlements, the Department of Justice recovered $5.69 billion, $3 billion of which were cases initiated by whistleblowers.
A carefully tailored expansion of the False Claims law could give standing to ordinary people (whether employees or consumers) to bring cases on behalf of the government against businesses that contract with the public. This would go a long way to empowering victims directly. But we need much more action than that. To stem the current white-collar crime epidemic, we must change our mindset and put our resources toward protecting the public. Curing this problem and inoculating the public could be a perfect day one project for Joe Biden and Kamala Harris and prove to be a lasting legacy.