Dr. JACOB RUB
PHILOSHOPHY OF HUMAN EVIL October 2018
Publishing : JACOB RUB
Researcher at the Haifa University National Security Center
Some of the articles in English were written with Prof. Lilia Girla ,from the State University of the Republic of Moldova (USM) Bibliographical Sources This book can be viewed in the original works of the editor below:
[email protected] https://ibn.idsi.md/en/author_articles/45855 © All rights reserved this publication is in copyright NOVEBER 2017, JACOB RUB, Haifa,Israel
[email protected] No Reproduction of any part may not take place without the written permission from JACOB RUB Printing: Digitol, Nesher
ISBN
2
978-965-572-449-3
The book is dedicated to my wife Yonat Which I wish her quick recovery
Table of content Introduction…………..……………………………………..……1
Chapter 1–White collar crimes as perpetrators of human evil……6
Chapter 2 -Terror crimes as perpetrators of human evil….…....219
White collar crimes as perpetrators of human evil In a series of articles published in Israel and around the world, some with Prof. Lilia Girla from USM university of the Republic of Moldova, as a K.G.B AND POLICE person. I have chosen to present the articles as two extremes of contemporary human evil: Pocketbook crime as white collar crime and sword crime by terrorism as blue-collar crime.Those two crimes of human beings represent matter and spirit: Sophisticated Looting money and taking of human life.
Introduction Evil perception .While the question of evil is often examined in theological aspects, the book focuses on the diffusion of human evil at the present time of globalization. Hobbes claimed that man was inherently evil. Nietzsche argues that the world by nature is chaotic and evil. Humans are willing to invest time and money in the consumption of evil, since from the dawn of their childhood they are used to enjoying it. Through the social and institutional mechanisms of ethics, aesthetics, marketing and media that is created evil. This book suggests that the consumption of evil is not a new phenomenon, attributed to what is considered "media", network, telecommunications, globalization, globalization. The book offers a possible expla1
nation and is accompanied by two chaotic phenomena: one is white collar crime (the wallet) that destroys the state coffers and harms the general population, and the other is terrorism (the sword). Cultural consumption of evil exists and exists through the so-called "new media", but it is also expressed in what is considered traditional media. We will try to indicate possible reasons for this. The main argument is that people are willing and willing to invest resources in the consumption of evil (money, time, murder and murder), since they are accustomed to consuming evil and enjoying it from their earliest days. This is done through social and institutional mechanisms of marketing and media that produces all the available events of purified evil, and the momentary coma of the heart, and thus also allows the ingestion of this drug. This is reflected in new mass media compared to traditional ones; Written media - literature and the press; Audio, popular and audiovisual music, cinema and television - with reference to different target audiences in the cross-section of age groups: children, youth, adults; Artistic genres: children's literature, horror, melodrama, satire, realia; Uses: In general and distinct dimensions and time of presentation: round / flat. The evil never left us, it seemed. So you do not need to come back. She is here, she is now and she has been here since becoming a vegetarian fruit picker and predator. Perhaps what distinguishes our era is the globalization of evil, as Ophir (2000) claims. Globalization, as Ophir claims, "goes hand in hand with the processes of globalization: the economy, the traffic, the media, the wars, tourism, the balance of terror and the inter-state relations: poverty, unemployment, epidemics, environmental pollution, All of these 2
do not know borders. " The book deals with the globalization of consumption of evil. On the other hand, he is faced with the statement that it is forbidden to say that the world is not perfect because it contains evil, on the contrary - the world is perfect precisely because of it the creators of the world needed evil to bring the good to be revealed. Good must first shatter on the rock of evil . The love of the whole can reach its peak only with the help of self-love. On the other hand, the point of departure is the assumption that evil is not merely a decree of the fate of human existence, and that the discussion of it is not only a matter of theological or metaphysical realm. Evil has a presence that cannot be fully expressed as the negation of good or evil or its absence. Evil is at least partly a product of social activity, and hence social and political philosophy constitute a natural and correct connection to the social theory in which the knowledge of evil cannot be put to the knowledge of good and has moral precedence that its attainment is a necessary condition for knowledge of the good and morally urgent. If evil is present everywhere and people are drawn to it, but to the question of what will prevail over what is good about evil or vice versa? It seems to depend on each of us, provided you believe it. It is widely believed that only about two percent of the "White Collar"Crimes (Dark crime) like money laundering, fraud, and more. These offenses are sophisticated and their rate increases in light of the dizzying technological progress, and they are essentially different from the "blue collar" crimes such as murder, robbery, theft, and more. Socioeconomic changes in Israeli society have also led to the transgression of many criminals from the classic "blue collar" crime to "white 3
collar" crime. In recent criminal investigations involving white-collar officials persons in Israel, well-known figures such as above 70 local council heads have been found with corruptions activities from 255 local authorities in Israel, directors of companies with senior positions in the government, and a long list of tenders managers in the public and private sectors. The main cause of white-collar crime and robbing public and state coffers. Internal police intelligence assessments indicate an increase in white-collar crime in Israel. In her study, the head of the research department at the Israeli Police and Strategic Planning Division of the Ministry of Public Security, Dr. Besora Regev, argues that white-collar offenses are committed by rational criminals who consider and decide to commit a white-collar crime based on cost-benefit calculations. The author study findings about White Collar Crimes are committed by criminals shows that the offenders weigh and make a risk decision under conditions of uncertainty of perception and punishment to commit a white collar crime on an intuitive (irrational), basis that is the most relevant explanation for predicting white collar offenders' A combination of psychological and personality measures with measures of Economy and Finance. Therefore, we have built a scale methodology / test to identify potential offenders of white-collar crime of candidates for confidence in public and private organizations , in the pre-employment and it was suggested a pilot, a proven process to reduce Offenses (dealing driven). There is Islamic crime and terrorism. There is violent and extreme part of Islam. No peace and quiet prevail in the world now. The last 15 4
years of terrorism, from the 9/11 attacks in 2001 to the terrorist attacks of this year, in dozens of countries across the globe, this terrorist campaign, most of which was perpetrated by factions of Sunni and Shi'ite Islam, changed the face of the world. This is a world war that Obama has denied. The lie is true. And this is nothing compared to the big fraud operation that accompanied the signing of the nuclear agreement with Iran of the ayatollahs, as recently discovered by Obama's senior adviser, Ben Rhodes. The last 15 years of terrorism, from the 9/11 attacks in 2001 to the terrorist attacks of this year, in dozens of countries across the globe, this terrorist campaign, most of which was perpetrated by factions of Sunni and Shi'ite Islam, changed the face of the world. Large-scale wars and civil wars, especially in the Middle East, but also in Africa and elsewhere (such as the war in Chechnya), which involved Islamic elements, radical and anti-establishment, and institutionalized regimes such as the regime Syria, or regimes in Iraq, Afghanistan, Pakistan and Lebanon, Sudan, Somalia, and more. During the Bush administration of President George W. Bush, 2001-2009, 12,760 terrorist attacks were committed. Killing 70,970 People. During Obama's tenure, by the end of 2015, there were 17,645 attacks. Killed 119,996 people. Since no slowdown has been recorded in the meantime, it can be assumed that the number of terror attacks and its casualties doubled during the period of Obama, compared to the Bush period. And that's just terrorism. Without taking into account more than half a million war dead in the Middle East, and hundreds of thousands more in Africa. And without talking about the millions of refugees. This is a world war. 5
Chapter 1 White collar crimes as perpetrators of glob Human Evil White -collar crime: definitional issues and classification is one of the most complex and disputable problem of modern criminology. Edwin Sutherland wrote: „The financial cost of white-collar crime is probably several times as great as the financial cost of all the crimes which are customarily regarded as the „crime problem”. An officer of a chain grocery store in one year embezzled $6oo, ooo, which was six times as much as the annual losses from five hundred burglaries and robberies of the stores in that chain. Sutherland’s contribution expanded the discussion to include illegal deviance perpetrated by those who had the tools to achieve the goals that their society taught them to desire, and had, in fact, already used them to that effect. Most of the defendants in antitrust cases are not criminals in the usual sense. There is no inherent reason why antitrust enforcement requires branding them as such. If a civil fine were substituted for a criminal fine, a violation of the antitrust law would be as truly a crime as it is now. The thing which would be eliminated would be the stigma of crime. Consequently, the stigma of crime has become a penalty in itself, which may be imposed in connection with other penalties or withheld, just as it is possible to combine imprisonment with a fine or have a fine without imprisonment. A civil fine is a financial penalty without the additional penalty of stigma,while a criminal fine is a financial penalty with the 6
additional penalty of stigma. When the stigma of crime is imposed as a penalty it places the defendant in the category of criminals and he becomes a criminal according to the popular stereotype of „the criminal”. In primitive society „the criminal” was substantially the same as „the stranger”, while in modem society „the criminal” is a person of less esteemed cultural attainments. Seventy-five per cent of the persons committed to state prisons are probably not, aside from their unvalued cultural attainments, „criminals in the usual sense of the word”. It may be excellent policy to eliminate the stigma of crime in a large proportion of cases, but the question at hand is why the law has a different implementation for white collar criminals than for others. Three factors assist in explaining this differential implementation of the law, namely, the status of the business man, the trend away from punishment, and the relatively unorganized resentment of the public against white collar criminals. In the same perimeter of scientific research we have to mention that Edwin Sutherland proved an axiom: „The sentimental reaction toward a particular white collar crime is certainly different from that toward some other crimes. This difference is often exaggerated, especially as the reaction occurs in urban society. The characteristic reaction of the average citizen in the modern city toward burglary is apathy unless he or his immediate friends are victims or unless the case is very spectacular. The average citizen, reading in his morning paper that the home of an unknown person has been burglarized by another unknown person, has no appreciable increase in blood pressure. Fear and resentment develop in modern society primarily as the result of the accumulation of crimes as depicted in crime rates or in general descriptions, and this develops both as to white collar crimes and other 7
crimes”. Sutherland saw four main factors at play here: 1) civil agencies often handle corporate malfeasance that could have been charged as fraud in a criminal court; 2) private citizens are often more interested in receiving civil damages than seeing criminal punishments imposed; 3) white collar criminals are disproportionately able to escape prosecution „because of the class bias of the courts and the power of their class to influence the implementation and administration of the law”, and 4) white collar prosecutions typically stop at one guilty party and ignore the many accessories to the crime (such as when a judge is convicted of accepting bribes and the parties paying the bribes are not prosecuted) Since Sutherland, there continue to be debates. Among sociologists who argue that this definition is too vague. As a consequence several new definitions have been proposed by scholars. White-collar crime – definitional issues: a.) Sutherland defined whitecollar crime as ‘crime committed by a person of respectability and high social status in the course of his occupation’. b.) The role of class has been highly contested, as the status of an offender may matter less than the harm done by someone in a trusted occupational position. c.) The term ‘crime’ is also contentious as many of the harmful activities of businesses or occupational groups are not subject to criminal law and punishment but to administrative or regulatory law and ‘penalties’ or ‘sanctions’. d.) An alternative definition is ‘an abuse of a legitimate occupational role that is regulated by law’. Today, criminologists and social scientists offer various ways to define white-collar crime. These variations tend to overlap with one another and include the following: − White-collar crime as moral or ethical violations; − White-collar crime as social harm; − White-collar crime as violations of criminal 8
law; − White-collar crime as violations of civil law; − White-collar crime as violations of regulatory laws; − White-collar crime as workplace deviance; − White-collar crime as definitions socially constructed by businesses; − White-collar crime as research definitions; − White-collar crime as official government definitions; − White-collar crime as violations of trust; − White-collar crime as occupational crimes; − White-collar crime as violations occurring in occupational systems. For whistleblowers overweigh the criticism. Maintaining or restoring public confidence and strengthening financial market is one of the main objectives of every modern State. Therefore, analyzing and demarcating the role and the limits of the regulator on the topic is significant for sustainable development. White-collar crime is financial crime committed by trusted persons in important business positions. Sutherland in his seminal work defined white-collar crime as crime committed by a person of respectability and high social status in the course of his occupation. In the US, the law recommends heavier sentences when larger numbers of victims suffer a pecuniary loss as a result of an offender’s criminal conduct. This law section governs sentencing for financial identity theft and other financial crimes such as larceny, embezzlement, fraud, and various counterfeit offenses. External victims are more common than internal victims. For the external victim, there is an external source causing damage and loss. This is in line with alien conspiracy theory, which blames outsiders and outside influences for the prevalence of organized crime in society and financial crime in organizations. Over the years, unsavory images, such as well-dressed men of foreign descent standing in shadows with machine guns and living by codes of silence, have become associated with this 9
theory. The alien conspiracy theory posits that organized crime (the Mafia) gained prominence during the 1860s in Sicily and that Sicilian immigrants are responsible for the foundations of U.S. organized crime, which is made up of twenty-five or so Italian-dominated crime families. By Gerald Cliff and Christian Desilets, the term „white collar crime” means different things to different disciplines, as well as to different camps within those disciplines. Unfortunately, professionals within an environment where there is general consensus about the term’s meaning do not always clearly specify what they mean by the label of „white collar crime”. This can lead to confusion and (sometimes vigorous) disagreement when they interact with larger audiences that might contain a number of different understandings of the term. It is therefore quite important, when discussing white collar crime, to more closely examine what different people mean by it. Generally, the authors Gerald Cliff and Christian Desilets these definitions tend to concentrate on: the characteristics of the offender − (such as high social status) and/or; − the characteristics of the crime (such as crimes occurring within the scope of one’s employment). The American author S.Shapiro taking a definitively more sociological viewpoint argues that definitions of white-collar crime „share a fundamental problem: they confuse acts with actors, norms with norm breakers, and the modus operandi with the operator”. S.Shapiro argues that ultimately what defines white-collar crime is not the status of the criminal or the crime itself, but a violation of the norms of trust citizens’ place in economic and governmental institutions. Actors within these institutions exploit the norms cultivated within these institutions to lie and steal. Defining white-collar crime as moral or ethical violations follows ideals inherent 10
within principles of what is known as natural law. Natural law focuses on behaviors or activities that are defined as wrong because they violate the ethical principles of a particular culture, subculture, or group. The immoral nature of the activities is seen as the foundation for defining certain types of white-collar activities as criminal. Some individuals, for example, define any business activities that destroy animal life or plant life as immoral and unethical. To those individuals, the behaviors of individuals and businesses participating in those activities would be defined as white-collar crimes. Some prefer to define whitecollar crime as violations of criminal law. From this framework, whitecollar crimes are criminally illegal behaviors committed by upper class individuals during the course of their occupation. From a systems perspective, those working in the criminal justice system would likely define white-collar crime as criminally illegal behaviors. Crime, in this context, is defined as „an intentional act or omission committed in violation of the criminal law without defense or justification and sanctioned by the state as a felony or misdemeanor”. Applying a criminal law definition to white-collar crime, white-collar crimes are those criminally illegal acts committed during the course of one’s job. Here are a few examples: − an accountant embezzles funds from his employer. − Two nurses steal drugs from their workplace and sell them to addicts. − A financial investor steals investors’ money. − A prosecutor accepts a bribe to drop criminal charges. − Two investors share inside information that allows them to redirect their stock purchases. White collar crimes are threats to nations which are striving hard for economic development. Such white collar crimes under the sphere of commercial law mainly take the forms of capital market malpractices, money 11
laundering, financing to terrorism and falsifying company accounts. These crimes do not take place just in a single day. These are well planned and continuous dealings by few perpetrators. Some employees, associates or responsible citizens who come to know the happening of wrongdoing may be concerned to disclose but will be reluctant to reveal it due to reasons of fear or retaliation by their superiors or others connected. The category of people who are willing to make disclosure of information relating to crimes committed by high ranking people in the society is called whistleblowers. These whistleblowers need encouragement and protection to fight white collar crime. The law to deal with whistleblowers is a timely one since the repercussion of white collar crimes are so great that they affect innocent public, stock markets, regulators and the government economy. Though there are contra views for the regulation of whistleblower protection stating that overly complex regulatory environment will undermine people dealing with commercial entities, the pros of proper regulatory mechanism The USJD’s (U.S. Department of Justice, Federal Bureau of Investigation) definition focuses on the nature of the criminal activity as well as on the job of the offender. The USJD uses the working definition: „White-collar offenses shall constitute those classes of nonviolent illegal activities which principally involve traditional notions of deceit, deception, concealment, manipulation, breach of trust, subterfuge or illegal circumvention” (Simon, Swart, 1984). This definition is clearly not one set in stone. Several studies have used broad definitions of WCC to include acts that are not violations of criminal law currently; the definition of white-collar crime is still hotly contested within the community of experts. Although there is a multitude of variations, 12
there appears to be three major orientations: those that define whitecollar crime by the type of offender (e.g., high socioeconomic status and/or occupation of trust); those that define it in terms of the type of offense (e.g., economic crime); and those that study it in terms of the organizational culture rather than the offender or offense. Additionally, there are also those that confine the definition mainly to economic crime, as well as others that include other corporate crimes like environmental law violations and health and safety law violations. The FBI, when it specifically addresses white collar crimes (nowadays, it usually references „financial crimes” instead), uses a very similar definition: „those illegal acts which are characterized by deceit, concealment, or violation of trust and which are not dependent upon the application or threat of physical force or violence. Individuals and organizations commit these acts to obtain money, property, or services; to avoid the payment or loss of money or services; or to secure personal or business advantage”. Having so many definitions in use means that it is often difficult to compare data gathered by different white collar crime stakeholders, and that theoretical constructs in use by one group may be completely misaligned to the needs of another. One way that various groups have tried to reduce these inefficiencies is by crafting definitions that could enjoy buy-in from larger groups of stakeholders, providing them a common language (and compatible tools) for discussing white collar crime. In 1996, the National White Collar Crime Center convened a group of noted academics specifically to address this definitional dilemma. Attendees were selected from among the most noted scholars 13
in the criminal justice field, who had devoted significant effort to the study of white collar crime. Several aspects of white collar crime were examined and discussed at length. The result of the process was that white collar crime was examined from a variety of perspectives. Most agreed the following characteristic features of WCC: 1) the lack of direct violence against the victim – the critical element; 2) the criminal activity should have been the result of an opportunity to commit the crime afforded by the offender’s status in an organization or their position of respect within the community; 3) deception to the extent necessary to commit the criminal offense (such as misrepresentation of the perpetrator’s abilities, financial resources, accomplishments, some false promise or claim intended to deceive the victim, or possibly a deliberate effort to conceal information from the victim). Focusing on the interactions between offender characteristics and offense characteristics, the same research demonstrated that white-collar crime was more likely than street crime to: − Be national or international in scope. − Involve a large number of victims. − Have organizations as victims. − Follow demonstrated patterns. − Be committed for more than a year. − Be committed in groups. Recognizing the differences between white-collar crime/white-collar offenders and street crimes/street offenders is significant for theoretical and policy reasons. In terms of theory, as will be demonstrated later in this text, if one of the criminological theories can explain both types of crimes, then that theory would be seen as having strong explanatory power. In terms of policy, it is important to recognize that different criminal justice strategies may be needed for the two types of offenses and those street of14
fenders and white-collar offenders may respond differently to the criminal justice process. Consider efforts to prevent crime. Strategies to prevent street crimes might focus on community building and poverty reduction; preventing white-collar crime is much „more complex”. In the late nineteenth and early twentieth centuries, the theoretical constructs used by sociologists to understand crime focused on it as a problem of poverty and of personal characteristics believed to be associated with poverty (such as broken homes, mental illness, association with criminal subcultures, and living in slum housing). One of the most influential of those theories, Anomie Theory, is still in general use (in various forms) today, and was put forth a year before the introduction of the concept of white collar crime. It holds that in a society where members are taught to value attaining certain goals (such as wealth), but the means to achieve those goals are unevenly distributed, those without access to the societal prescribed means are put under considerable pressure to find other ways (including crime) to achieve those goals. In short, the theory holds that crime is a symptom of some members of society not having the tools to achieve what their society defines as success. Weisburd, Chayet, and Waring, used official crime records of specific types of WCC such as embezzlement, mail fraud, false claims, credit fraud, bribery, tax evasion, securities fraud, and antitrust violations. Other studies have measured WCC as intentions to offend using vignettes. Of the individual-level theories, rational choice/deterrence has received the most attention among WCC researchers likely because WCC is seen as a calculating and rational decision. Additionally, individuals in corporations are trained to make 15
decisions based on maximizing profits, and as such are presumed to be rational decision-makers. Most studies that have tested the theoretical propositions of rational choice theory as applied to WCC find support for the theory. For example, Patternoster and Simpson found that individuals were less likely to commit WCC when confronted with formal sanctions, moral commitments, and organizational factors. Nagin and Paternoster and Piquero found that there is an interaction between individual differences (self-centeredness and desire-for-control, respectively) and the likelihood of being deterred by perceived risk. More specifically, Nagin and Paternoster found that individuals who are selfcentered are less likely to weigh the costs of engaging in WCC, where Piquero et al. found that desire for- control was positively related to sanction threats and negatively related to perceived benefits. White collar crimes, as traditionally defined, are conflated with many other types of illegal or deviant activities with which they have nothing significant in common. D.O. Friedrichs has argued elsewhere that the concept of white collar crime is inevitably a heuristic and relativistic term, and illegal and harmful activities may be viewed as more or less purely white collar crime; some kinds of illegal activities are characterized as cognate, hybrid, or marginal forms of white collar crime. But all such activities have a clear, logical relationship to both the original meaning of white collar crime put forth by Sutherland, and the meaning in public discourse. Many of the activities identified as forms of occupational crime, occupational deviance, and workplace crime, have absolutely no logical or coherent relationship to white collar crime. Accordingly, it would be far more productive to retain the original meaning assigned to occupational crime by Marshall Clinard and 16
Richard Quinney, with a qualifying thesis, as financially oriented offenses committed by individuals within the context of a legitimate occupation, and specifically made possible by that occupation; to restrict the use of occupational deviance to activities deviating from norms within an occupational setting, including the norms of the employer, the norms of professional associations, and the norms of co-workers; workplace crime is best restricted to conventional forms of crime – e.g. homicide; assault; rape; molestation; robbery; theft; etc. – that occur at the workplace. Such conceptual distinctions should be useful in theorizing about crime, in engaging in empirical study of it, and in formulating policies in response to it. E.Goode who deals in social deviation describes the unique characteristics of white-collar criminality and claims that the corporate criminality is conducted by a complex technical way and out of interaction with others. In majority of cases it is combined with a legitimate behavior, diffusion of the victims, the enormous amount of the financial sums under discussion over a long period of time, their acts almost never sued as it is difficult to detect and present irrevocable evidences, and they are not sentenced to long prison terms, the white-collar criminality is not compatible with the stereotype of a real criminal – these offences do not arouse the condemnation responses typical to street crimes, and are not involved in a real social stigma. These offences are not reported by the media in a full and detailed manner as the street crimes are. In order for such a report to reach the news it needs the following: the sum stolen should be high, the steal needs to be related to some scandal or the suspect needs to be of important figure. These offences usually bore the public, and also most people lack the financial knowledge to have understand17
ing of these crimes. And finally, the perpetrators themselves do not perceive themselves as criminals. Classification of White Collar Crimes. White collar crimes are crimes that are non-violent in nature committed by financially motivated high ranking people in the society. These white collar crimes take many forms such as bribery, fraudulent investment schemes, capital market manipulation, insider trading, cybercrime, money laundering, identity theft, terrorist financing and falsifying company accounts etc. In general, these are malpractices for financial gain. Repercussions of white collar crimes are many. It creates fear in the minds of an ordinary citizen in his/ her day-to-day transactions and it affects the business and the financial system of the country as well. Sudden collapse of large companies is a good example for such malpractices because it is crystal clear that the reasons behind a corporate collapse is a series of wrong doing which is not done by one, but by many, surreptitiously. Leaking of secret information leading to wrong doing cannot be prevented. Those who come to know about the surreptitious dealings are the center point. Why are they not making known the information about such secret illegal dealings as they become aware, to the appropriate authorities is the crucial question. It is obvious that it is due to fear of reprimand or punishment directly or indirectly by the perpetrators. Classifications of crimes are done using various methods and it varies in different judicial systems. One such classification is traditional crimes falling under the penal code or criminal code of a country and the other. Many argue that the term „white-collar crime” insufficiently describes the wide range of offences committed by the „power18
ful”, be they wealthy individuals or corporations. Most accept a distinction between: − „classic” white-collar crime, which involves personal gain, at the expense of employers, „the government” or clients (which can also be described as occupational crime); − offences which involve increased profits or the survival of the organization – often known as organizational or corporate crime. The crime pie of whitecollar criminality includes: − embezzlement – a theft of a white-collar employee from the corporation he is employed in; − collective embezzlement – a crime against a corporation that is conducted in the name of the corporation; − criminality of the free professions; − corporate crime; and − public governmental criminality – personal corruption and briberies of political position holders. Others prefer to use the broader term economic crime (used in many European, particularly Scandinavian countries, where the term „white-collar crime” is crime, and it has been used interchangeably with such terms as occupational deviance and workplace crime. In the interest of greater conceptual clarity within the field of white collar crime the argument is made here for restricting the term ‘occupational crime’ to illegal and unethical activities committed for individual financial gain – or to avoid financial loss – in the context of a legitimate occupation. Occupational crime refers to personal violations that take place for self-benefit during the course of a legitimate occupation, while corporate (organizational) criminal behavior refers to crimes by business or officials, committed on behalf of the employing organizations. Although organizational crime refers to crime on behalf of the organization, it becomes corporate (business) crime when it is done for the benefit of a private business. Thus, much of what ordinarily would be branded as corpo19
rate crime in a free enterprise economy is labeled organizational crime when committed by state bureaucrats in socialist systems. The organizational, economic crimes are also distinct from political crimes by government; the latter have more to do with efforts to maintain power, ideology, and social control than with economic advantage. The term ‘occupational deviance’ is better reserved for deviation from occupational norms (e.g. drinking on the job; sexual harassment), and the term ‘workplace crime’ is better reserved for conventional forms of crime committed in the workplace (e.g. rape; assault). The conceptual conflation of fundamentally dissimilar activities hinders theoretical, empirical, and policy-related progress in the field of white collar crime studies. Gerald Cliff and Christian Desilets have contributed essentially to the interpretation of the term „white collar crime”. In their opinion, white collar crime can refer to: − Financial crimes; − Non-physical (or abstract) crimes. That is, crimes that „occur” on a form, balance book, or computer; − Crime by or targeting corporations; − Crimes typically committed by the rich; − Criminal businesses or organizations. Including, for some, organized crime and terroristic organizations; − Corporate or professional malfeasance. For some, this can include acts that are immoral, but that are not specifically prohibited by law (for example, an insurance company automatically targeting every policyholder who gets diagnosed with breast cancer for an Aggressive fraud investigation to find any possible pretext to drop the account). Anything that is against the law that the average beat cop would not typically handle. Essentially, everything but street crime. On the other hand, an example 20
of occupational crime would be embezzlement, such as when Bernie Madoff absconded with his investors monies for his 4 own personal gain. Occupational crime can also be as simple as pilfering from the office supply cabinet: Bernard Lawrence Madoff founded Bernard L. Madoff Investment Securities LLC, a small Wall Street investment firm in 1960. The firm was initially a small penny stock trader but it grew fast due to its use of in rarely used). Economic crime defined as „crimes of profit which take place within the framework of commercial activity”. White-Collar Crime Offence includes: − Corporate and/or business fraud White-collar Crime; − Bribery and Corruption; − Insider dealing and market abuse; − Money laundering and terrorist financing. Another classification is by way of status of people who commit crimes. Division of white-collar crime and blue-collar crime comes within the latter category. These are generalized classifications coined by the media to make ordinary people understand the nature of the crime, and are not codified as crimes in the classic sense in our judicial system. A notable iteration is that of Marshall Clinard and Richard Quinney. These authors suggest that white-collar crime should be divided into corporate and occupational crimes. − Corporate crime is committed by employees for the benefit of a corporation, and occupational crime committed by employees for personal gain. Corporate crime is often veiled in „improper accounting procedures”. For example, American International Group (AIG), an insurance broker for large corporations, was charged with inflating assets and deflating losses. The goal was to improve the financial profile of the company to the market. Corporate malpractices were not very common during the early part of the twentieth century since there was only little growth of 21
corporations. When corporations started to develop rapidly and became the major contributor to the economy, misdeed also originated. Perpetrators, with the only objective of making quick money, went to every extreme to achieve it. As a result, there were many collapses. These were due to non-adherence of accepted accounting standards or corporate governance rules and capital market manipulative activities. If there had been a tip off and a timely investigation, the position would be different. One cannot come to a conclusion that no one was aware of any suspicious activity until the real collapse or the exact occurrence of capital market manipulation that affected innocent general public or investors in billions. The culture of silence has not only resulted in many corporate failures but wrongdoers go undetected gives more and more encouragement to the prospective wrong doers. There are many reasons for one to decide not to reveal the information he becomes aware of. It may be that he was not bothered; he did not understand the gravity of it or due to fear of retaliation. If it is the first two reasons, then the person should be encouraged to become a whistleblower while assuring that he will be protected by the law. If it is the third reason, i.e., due to fear, there should be adequate laws to protect him. − The concept of occupational crime – as one of the principal forms of white collar crime – has been quite familiar and widely invoked since the publication of Clinard and Quinney’s influential Criminal Behavior Systems: A Typology. More recently, however, the term occupational crime has been applied to activities quite removed from the original meaning of white collar innovative computer technology. The firm became one of the largest market makers in the US, and by 2008, the year of B.L. Madoff’s arrest; Bernard L. Madoff Investment Securities 22
LLC was the sixth largest market maker on Wall Street. One division of the company was the „advisory and investment management division”, where investors could put their money in a hedge fund. Over the years this „hedge fund” continued to deliver an almost constant return to the investors on just above ten percent. This is a very high return given over a long period of time, which made people concerned. Madoff himself explained to The Wall Street Journal in 1992 that there was nothing special with the high returns, and referred to the high average annual returns for the US stock index. As it would turn out later, the fund was in fact the world’s largest Ponzi scheme. The method of the scam was a classic Ponzi scheme. The definition of a Ponzi scheme given by Investopedia is: „A fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for older investors by acquiring new investors”. This was basically how the advisory and investment management division of Bernard L. Madoff investment securities LLC operated. The division started as a perfectly legitimate business, but he confessed that the returns given since approximately 1995 were fabricated. When a customer made an investment, he simply put the money into a bank account, and when asked for a withdrawal he took the money piled up in that account. Withdrawals were simply covered by new investments. Bernard L. Madoff used a variety of techniques that made it difficult to disclose the scam. At the end of each month Madoff sold all stocks and financial instruments so that the hedge fund only reported the amount of cash to the authorities. Further on, investors did not have any online access to their investments, instead they received a mail with their account information and balance each month. As a result of these precau23
tions and many more, explained in the next section, it took until late 2008 before the scam was exposed, although people had accused the so-called hedge fund for fraud as early as 2001. A related concept that again focuses on the offender is „organizational crime” – the idea that white collar crime can consist of „illegal acts of omission or commission of an individual or a group of individuals in a legitimate formal organization in accordance with the operative goals of the organization, which have a serious physical or economic impact on employees, consumers or the general public”. The distinction between occupational and organizational crime points to omen major contrasts. Broadly speaking, occupational crime, a typical example of which is embezzlement, involves offenders, either individually or in groups, engaging in illegal or rule-breaking activities for personal gain at the expense of consumers, clients or employers. Organizational crime, on the other hand, a typical example of which is the neglect of safety regulations, does not involve personal gain, but may be seen as being ‘for the good of’ the organization by enhancing profitability or efficiency. Whereas occupational crime more obviously involves intent and individual responsibility, organizational crime illustrates the diffusion of responsibility. Where an employee neglects or violates a regulation they can claim that it is ultimately the organization’s responsibility to ensure that regulations are complied with. This distinction parallels others. While these definitions were vital for expanding the realm of sociology and criminology, they were not as well-suited to the needs of other 24
criminal justice stakeholders who dealt with these issues in a more practical sense (including policymakers, law enforcement, and the legal community). These definitions are geared for asking why white collar crime occurs or who commits it, but they are not as well-suited to asking questions about how much white collar crime is occurring, or whether prevention methods are working. Gerald Cliff and Christian Desilets have shown a model of white collar crime that leant itself somewhat more too empirical data analysis was Herbert Edelhertz’s 1970 definition: „An illegal act or series of illegal acts committed by nonphysical means and by concealment or guile, to obtain money or property, to avoid the payment or loss of money or property, or to obtain business or personal advantage” Herbert Edelhertz identified four main types of white-collar offending: − personal crimes („crimes by persons operating on an individual, ad hoc basis, for personal gain in a non business context”); − abuses of trust („crimes in the course of their occupations by those operating inside businesses, Government, or other establishments, or in a professional capacity, in violation of their duty of loyalty and fidelity to employer or client”); − business crimes („crimes incidental to and in furtherance of business operations, but not the central purpose of such business operations”); and („whitecollar crime as a business, or as the central activity of the business”) We have to begin using something more along the lines of „economic crime”, „elite crime”, or simply „financial crime”. The status of offenders continues to be an important feature of these definitions, with some referring to elite crime or crimes of the powerful, and to corporate and state crime. Some activities can be seen as largely motivated 25
by financial gain, whereas others intentionally or otherwise cause physical harms. Thus, some people distinguish financial white collar crimes from others. Many people now accept that a broad distinction can be drawn between offences primarily motivated by individual monetary gain and those that are more directly related to the survival or profitability of organizations, although in this respect, as in so many other respects, the characteristics of offenders are also important. WHITE-COLLAR CRIMES ARE IN THE PUBLIC AND PRIVATE SECTORS OF EVERY STATE.As such, according to empirical findings, white-collar criminality is a wide-spread phenomenon with a lot of categories of white-collar violations which are situated out the Substantive Criminal Law and they cannot be adequately calculated and taken into consideration. The golden age of white-collar criminality is the age of 40. We can see that the prevalence of the persons engaged in criminal whitecollar criminality in private sector of the .In east Europe states, we assume that it is linked with the specific character of the job which is executed by the defendant. In such a manner, in public sector the offender often is a young man who is selected for the job in law enforcement authorities of the State, whose salary is very little, and who commits acts of corruption in connection with his profession. Often, such acts of corruption are associated with abuse or excess of power. At the same time, a classic profile of a white-collar offender in the private sector is significantly different: often it is a person older than 40 years old, with great experience in management and finances, with good material situ26
ation, who commits grievous criminal offences in the sphere of embezzlements by abuse of trust associated with forgery in official documents. Indeed, they can be called white-collar criminals. Among them acts of corruption are met rarely. often white-collar women offenders are more engaged in private sector, rather than in public sector. all the offenders charged with and convicted for these categories of white-collar crimes are without previous conviction (the criminal history is absent). absolutely all criminal misdeeds are directly linked to the profession of the offender and committed during the period when the person has been employed. The offender has been submitted to a cumulative punishment (imprisonment and criminal fine simultaneously) for the majority of white-collar cases perpetrated in the public sector, while the whitecollar offenders from the private sector have been submitted only to one basic punishment (or imprisonment, or criminal fine). In spite of this fact, white-collar offenders from private sector are submitted to more harsher and severe punishment than the defendants from public sector, especially; the term of imprisonment is increased and is applied more often. in the majority of white-collar cases perpetrated in the public sector the offender has been charged with and convicted for acts of 27
corruption, while in case of white-collar offenders from the private sector there is detected an absolute prevalence of the cases of abuse of trust (acts of dishonesty) and embezzlement. So it is interesting if white-collar criminal offenders making the decision of implement crime while rational decision? Is the crime decision is closer to the rational model than any other type model? We have done a research in Israel as a developed Middle – East state, and Moldova republic in East Europe as a developing state. The basic premise that white-collar felons and tender felons in particular, make decisions according to the "prospect theory" of Cahanman & Taversky (1979), which combines social psychology with behavioral economics, and is an advanced development of the rational utility theory. To our opinion, white-collar felons in general and especially tender felons, do not behave according to a model based on rational decision, and do not make decisions according to a calculation of profit or loss from perpetration of a crime as stated in the study of Besora-Regev (2008), that is based on Cornish & Clarke (1986), about financial and quantitative aspects of law enforcement policy of white-collar crimes. Further premise in current studies relates to the facts that law offenders and criminal elements will attempt to pursue infiltration into the operations of public organizations through cooperation with white-collar employees of the corporation of organization, including winning of tenders that would, in actuality, cause an increase in financial damage to organizations and the state. As an outcome of this premise we can suppose that as a general rule, a white-collar employee who conducts a 28
tender in a public organization, who partakes directly or indirectly in criminal activity, meaning a perpetration of a crime, and has been found to be performing his activity while threatening and employing physical violence on the part of criminal elements outside the public organization, would cause ineffective organizational conduct, from a financial aspect, due to constraints of the rule of fear. In relation to the above mentioned premises, an illegal behavior is an occasion of a white-collar felon deciding to take the law into his own hands while taking risks. It likely to assume, that a white-collar felon in a public organization considers the opportunity - the reward of committing a crime, and the level of risk in perpetration of the crime or the activity. Naturally, the level of values and personality of the felon constitute a significant factor. Therefore, the subject to deal with, is – what can be done to limit white-collar crimes in general and tender crimes in particular. In other words – how can an effective prevention of the desire or impulse of the felon to perpetrate a crime, be created ? Limitation of white-collar crimes must encompass a sober, aggressive, systematic and compelling policy. The difficulty to persuade a felon to limit his criminal activity stems from the fact that the financial reward from perpetration of these crimes is relatively high in comparing to other transgressions. These are offences with a color of financial fraud and deceit, with a high appeal of a high financial profit which the whitecollar felon will have a hard time resisting. Therefore, the felon will be ready to take more risks and possibly with a cost of being apprehended and punished. When deterring in white-collar crimes is not effective, as proven in the findings of studies, it can be said with certainty, that there are reasons for it when severity of punishment is insufficient, for 29
instance. On the other hand there is the fact that felons' imprisonment necessarily decreases the volume of criminality. An innovative aspect of mine current study in the USM University in Moldova offers an examination of deterring through a prism of the white-collar felon who makes the decision to perpetrate a crime according to irrational components as well. A matter of interest that came up in the Israeli study of Besora-Regev (2008), from the strategy department in Israeli police, and that would come up in mine current study with the purpose of limitation the desire to perpetrate white-collar offences is – would it be realistic to isolate the impact of deterring by punishment alone? Apparently, it seem almost impossible to prove that deterring is a result of punishment alone, as by the fact of imprisonment of the felons we necessarily decrease the supply of criminality, therefore it is unclear whether the decrease in criminality is also a result of deterring or just of the imprisonment of the felon . There is a variable which effect might be even bigger than the effect of the variable of punishment, which is the certainty of apprehension. This variable has been studied by Besora-Regev (2008) and as stated in her study it has been initially researched by Beccaria (1972), where it has been claimed that certainty of apprehension will have a bigger effect on deterring than the severity of punishment in white-collar felons. The effect of this variable has been found to have a significant value in deterring. Another innovative aspect of our study is in examining the suitability of the model that is based on "prospect theory" of Kahneman & Tversky (1979) that combines social psychology with behavioral economics, and which constitutes an advanced development of the utility theory developed by VonNeumann & Morgenstern. The use of variables from the world of so30
cial psychology and behavioral economics, which explain the way people make decisions – as branches which constitute an advanced development of the rational utility theory that explains how people should make decisions, is practical for the understanding of preventive activity regarding white-collar criminality in Israel. A decision model which has also an irrational component indeed reflects the characteristics of white-collar criminality on Israel and Moldova, while the curve of subjective probability for perpetrating of a crime and the curve of utility (value) explain how people make decisions. As white-collar felons are felons who mostly have legitimate income and work, it is likely that the crime will be perpetrated in the framework of their work. It is possible that the higher is the rate of unemployment, the tendency to perpetrate an offence in order to achieve an illegitimate source of income will increase. This is an example of a variable that emphasizes the fact that it would be difficult to understand white-collar criminality in its entirety according to the prospect theory model of Kahneman & Tversky in its raw and deterministic form. The study of decision and human judgment is characterized in disagreements between the rational models of decision-making based on financial considerations that is in the basis of economics, and between the models that takes into account irrational components as well, that is based on psychological considerations which occasionally are not compatible with the principles of rational decision. The sources of tension are in the fact that human behavior and thinking are multi-facial. For example: A relatively small body of research has addressed self-control theory within a criminal-careers context. Benson and Moore (1992) explored the tenability of self-control theory by using a sample of 2,462 persons con31
victed of white-collar crimes (bank embezzlement, bribery, income tax violations, false claims, and mail fraud) and 1,986 persons convicted of conventional crimes (narcotics offenses, postal forgery, and bank robbery). They found that street offenders have lower self-control than that of white-collar offenders. The reality, as in any theory, the likes of the workers' "motivational theory", is that there are studies with different paradigms; however, what motivates people at work is a mixture of psychological and material factors (intrinsic and extrinsic variables). People's decisionmaking, or that of organizations, also includes both rational and irrational components, as found out in studies. As opposed to the study of Besora-Regev (2008) it is our claim that profit or loss is not exclusive economics or psychological terms. In the study of Besora-Regev (2008) it is stated that studies that integrated economics and psychology, have found regularity in instances when people act irrationally (Kahneman & Tversky, 1979; Sunstein, 1997).On the other hand, in the study of Prof. Israel Uman, a Nobel Prize laureate in economics (2005) on the subject of rationality and behavior, it has been found that the Regularity is expressed in the rationality of rules in the human mind and not in the rationality of actions as explained in the rational model of decision making that is based on rationality of rules . We do not concur with the assertion in the study of Besora-Regev (2008,), as it is written: "it is important to indicate that the rational model of choice between perpetrating or not perpetrating a crime applies to people who have the principal willing32
ness to perpetrate crimes, and that white-collar criminality might be the closest one to the rational model than any other criminality, as it is not accompanied by an expression of emotions of wrath or violence". Indeed, instrumental crimes such as bank frauds or tax evasions, being different than expressive crimes such as murder, manslaughter, etc., however, as mentioned earlier, the causes of the perpetrating of a crime by the white-collar felon, must be examined with assistance of data that would contribute to comprehension of the personality components, such as assuming responsibility for the criminal act when there is an opportunity for perpetration of a crime. Naturally, the study of personality components will contribute to the development of a study of personal deterring. White-collar crime, as family violence, and other socially harmful behaviors are often excluded from examination. Of our opinion all the theories as follow are the base of the reasons to make an offence, but in reality, the white-collar criminality closer to the non rational model than any other type model.There are a lot of theories of crime. For example: •Deterrence and Rational Choice Theories of Crime • Individual Theories of Crime: Biological and Psychological Perspectives • Social Structure Theories of Crime • Social Process Theories of Crime •Social Reaction Theories of Crime •Recent Developments in Criminological Theory. Kenneth Tunnell (1992) points out those cognitive psychologists have adopted a different model of human decision-making. People are seen as less than fully rational. Oftentimes they do not make decisions that would appear to be in their own best interest for a variety of reasons. First, people do not always have all of the information they need to 33
make informed decisions, and even if they do, may not have the capacity to optimally process that information. Their analytical abilities may be impaired by drugs or alcohol, by cognitive deficiencies or negative learning experiences. Moreover, they may assess things quite differently than some of us, given their life experiences. As Alfred Blumstein (1998) noted, “This problem of differential deferability is particularly acute for crimes involving individuals who see no particular options in the legitimate economy, for whom life in the street is very risky anyway, and who have not been effectively socialized against committing crime. Even though prison may not be very attractive option, its disutility is likely to be far less than it is to middle-class populations.” The personalities, experiences and options that we all bring to bear on given choice in life are so diverse that it is quite naive to assume that we will all assess the situation similarly and arrive at similar choices. Many criminal events appear not to be very rational choices at all, or at least reflect patterns of decision making quite different from those more typically seen among law-abiding citizens. Positivistic theories reviewed in the following three chapters are quite at odds with the rational choice approach. Continuing our discussion, our thoughts about DECISION THEORY ARE ABOUT RENEWING THE EMPIRICAL STUDY OF ECONOMIC BEHAVIOR. Comparing to the crimes data from white-collar offences in the study of Besora-Regev (2008) from Israel , in which the sample period is between the years 1980-1998, there has been a rise of about 5% in the number of the overt records reported in the Israeli Police of white-collar crimes in the sample period of 1998-2011, related to by current study. The annual 34
number of crimes is around 50,000 of reported crimes. The trend shows an average descent of about 5% in the number of reported crimes in current study in comparison to the previous one. In fraud and abuse crimes, the numbers of overt file records opened in the Israeli police, in the sample periods of the two studies are equal, and are between 4,578 and 6,309 reported crimes in the fringes, with an average of about 5,400 crimes annually. Still, we emphasize that the important datum is the limitation of existing data – a limitation that exists almost in every statistical study on the subject of law enforcement, which in our relation to the statistical data reflecting the number of crimes reported to the Israeli Police as opposed to the number of actual crimes. Although this is the only datum we have and the widest one, it would be correct to announce that this datum has a real research validity that reflects in the "closest" manner white-collar criminality in Israel, as addressed by the previous study of Besora-Regev (2008). The reason is that it is estimated that only 2-3% of the white-collar crimes are reported to the Israeli Police. The handling of these offences is finalized inside the organizations, due to fear of damage to reputation etc., as well as due to the key fact that there is much difficulty in discovering white-collar crimes as they are sophisticated and hard to discover. Several years ago, the Commissioner of Customs and VAT estimated that the amount of black capital in Israel reaches about 17 billion $. This estimation is based on the assumption that the amount of black capital in Israel approaches the rate of 15% of the Gross Domestic Product. The origin of a significant portion of the black capital which is estimated at 2-5% of the Gross Domestic Product is in laundering of capital procured by criminal activity. According to the Mol35
dova Money Laundering Report 2012 – by US State Department, the Government of Moldova (GOM) monitors money flows throughout the country. Criminal proceeds laundered in Moldova derive substantially from tax evasion, contraband smuggling, and corruption. Money laundering in Israel and the Republic of Moldova is often more extensive than what is acknowledged: many crimes are not registered. We assume that the data on the scope of black capital as a result of criminal activity is similar to its scope in Israel. Therefore, the data on white-collar criminality in Israel and the republic of Moldova require a different approach to the fighting with this type of criminality. We have to deal with a new strategy for decreasing white-collar crimes in Israel and Moldova. WCC crime in Israel and in the Republic of Moldova is often more extensive than what is acknowledged. Economic Crimes in Moldova, as everywhere in former Soviet republics, has risen dramatically since the fall of the Soviet Union. According to the 2011 Corruption Perceptions Index which measures the perceived levels of public sector corruption in 183 countries and territories around the world. The Israeli score was 5.8 and the Republic of Moldova score was 2.9, in a public sector scale of 0 - 10, where 0 means that a country is perceived as highly corrupt and 10 means that a country is perceived as very clean. The practical application of the way people ought to make decisions is called decision analysis, with the assumptions of perfect information and rationality. According to my point of view, different prescriptions or predictions must be produced regarding various behaviors that will 36
show decision-making that takes place in practice in Israel and the Republic of Moldova. For example: supplying a combined explanation for public organizations, with the unequivocal assumption that public organizations with tender crimes, both of tender conductors and participants are a result of a rational decision which comes about due to "prices" (cost and benefit in perpetrating a public tender crime). To our opinion, it is improper to talk about rationality decision in Israel and the Republic of Moldova which includes a combination of legal variables such as criminal offence punishment, together with statistical variables such as apprehension probability, that would assist in examining the optimal deterring effect on a tender offender, enables the examination of efficiency of strategy for handling tender crimes in Israel and the Republic of Moldova, that have spread as a disease. Future decision theorists may find insight in such questions as: •What algorithm would this agent prefer over his current one? •Can I identify a class of dilemmas which the old theory solves?
•Successfully, and
of which my new dilemma is not a member? •Is there a super class that includes both the new dilemmas and the old ones?
•Which algorithm
solves the super class? We have to create, in Israel and the Republic of Moldova, a new decision theory—to convince hardened decision theorists not to automatically reject the theory on the grounds that it absurdly one-boxes in Newcomb’s Problem. Our purpose so far, is to dissuade the reader of some prevailing presumptions in current decision theory, and more importantly, to convince you that intuition should not be a sovereign judge over decision theories. Rather, it is 37
legitimate to set out to reshape intuitions, even very deep ones, if there is some reward—some improvement of agent outcomes—thereby to be gained. Rationality is often best pursued without explicit appeal to rationality. We have to create for a new decision theory; if you are still satisfied with classical causal decision theory and the method of arguing from intuitive absurdity now is the time to make a change. One theme which is prevalent in behavioral finances is Heuristic: people and white collar criminals often make decisions based on approximate rules of thumb and not on strict logic. In recent decades, there has been increasing interest in what is sometimes called 'behavioral decision theory' and this has contributed to a re-evaluation of what rational decision-making requires. Decision Analytics promotes the applications of computer technology, operations research, statistics, and simulation to decision-making and problem-solving in all organizations and enterprises within the private and public sectors. The Journal focuses on predictive as well as prescriptive analytics taking organizations to a higher degree of intelligence and competitive advantage. While predictive analytics, such as forecasting, emphasize the future, prescriptive analytics, such as optimization, enable organizations to choose the best course of action. The combination of predictive and prescriptive analytics can help organizations achieve both efficiency and effectiveness. In the 20th century, interest has been reignited by Abraham Wald’s (1939) pointing out that the two central procedures of samplingdistribution based statistical-theory, namely hypothesis testing and parameter estimation, are special cases of the general decision problem. 38
Wald's paper has renewed and synthesized many concepts of statistical theory, including loss functions, risk functions, admissible decision rules, antecedent distributions, Bayesian procedures, and mini-max procedures. The revival of subjective probability theory, from the work of Bruno de Finetti and others, has extended the scope of expected utility theory to situations where subjective probabilities can be used. At same time, von Neumann's theory of expected utility has proved that expected utility maximization has followed from basic postulates about rational behavior According to my point of view, the subject of crime in general, and of tender crimes especially is not rationality subject, it is non-rationality aspect. It means that the idea of expected value or expected utility is not practical regarding perpetration a crime, because the rational procedure is to identify all possible outcomes of expected value, and to choose the one action that causes a rise to the highest total 'expected value' - this theory must be normatively wrong and does not belong to crime offenders that make a decision to carry out a crime. The non-rationality aspect: Prospect Theory of Kahneman and Tversky As mentioned, the subject analysis in this article focuses on how to understand the decision analysis of crime offenders. The nonrationality aspect that represents the “prospect theory” of Daniel Kahneman and Amos Tversky, meaning, how people manage risk and uncertainty, have renewed the empirical study of economic behavior with less emphasis on rationality presuppositions. Kahneman and Tversky have found three regularities in actual human decisionmaking: 1) “Losses loom higher than gains”; 2) Persons focus more on change in their utility states than they focus on absolute utilities; 3) 39
The estimation of subjective probabilities is severely biased by anchoring. The theory of Kahneman and Tversky (Nobel Prize laureates in Economics for 2002), which has been developed over a thirty year period, is, however, highly important in economics and especially in financial economics, according to the subject of decision analysis by crime elements. Kahneman & Tversky started their research investigating apparent anomalies and contradictions in human behavior, when offered a choice formulated in one way might display risk-aversion, but when offered essentially the same choice formulated in a different way might display risk-seeking behavior. Example of the author: A crime offender may carry out a crime with guaranteed profit of 200,000$ while the potential profit is of 600,000$, but would not carry out a crime where the profit is 200,000$ and a potential profit of more than 600,000$, but less sure. A very important result of the work of Kahneman and Tversky is demonstrating that people's attitudes toward gain concerning risks may be quite different from their attitudes toward loss concerning risks. For example, when given a choice between getting 1,000$ with certainty or having a 50% chance of getting 2,500$, they very well might choose the certain 1000$ in preference to the uncertain chance of getting 2,500$ even though the mathematical expectation of the uncertain option is 1,250$. This is a perfectly reasonable attitude described as risk-aversion. But Kahneman and Tversky have found that the same people, when confronted with a certain loss of 1,000$ versus a 50% chance of no loss or a 2,500$ loss often would choose the risky alternative. This is termed as risk-seeking behavior. This is 40
not necessarily irrational but it is important for analysts to recognize the asymmetry of human choices. Some of the problems of interpreting crime offender behavior in the face of risk, has to do with the problem of people making decisions on the basis of subjective assessments of probabilities which may be quite different from objective or true probabilities. Events of small probability that have never occurred before may be assessed as having a probability of zero in decisionmaking, but this leads to tragedies in which people find they have been playing Russian roulette without even knowing they have been doing so. Small probabilities add up when chances are being taken repeatedly. A calculator is provided here to show the probability of avoiding a danger given the probability and the number of repetitions of the risk. A noteworthy phenomenon is what happens to the probability of avoiding a small risk event when the probability is increased, say doubled. For example, suppose the probability of being involved in an apprehension after perpetrating a crime is 0.0001. In 20 cases the probability to commit a crime and not being apprehended is about 0.82. If the probability of being involved in an apprehension is doubled to 0.0002, perhaps as a result of commitment to criminal behavior, the probability not being apprehension in 20 cases drops to 0.67. The point is that while probabilities of 0.0001 and 0.0002 seem too small to be significant, they are not actually zero, and there is a big difference between 0.0001 and 0.0002. The Prospect Theory of Kahneman & Tversky describes how people choose between probabilistic alternatives and evaluate potential losses and gains: The theory describes the decision processes in two stages: editing and evaluation. In the first one, outcomes of the decision are ordered as a result of some heuris41
tics. Particularly speaking, people decide which outcomes they see as basically identical, set a reference point and then consider lesser outcomes as losses and greater ones as gains. In the following evaluation phase, people behave as if they would compute a value (utility), based on the potential outcomes and their respective probabilities, and then choose the alternative which has a higher utility. A potential felon considers two options: a. there is a 1% chance that the perpetration of the offence will be successful and the gain will be 500,000$; b. the cost will be of 5,000$ as a result of the exposure of the crime by the organization. Analysis: the potential white-collar felon preferred the lottery effect than the value expectancy of the exposure of the crime he has perpetrated. According to the prospect theory – v (5,000)
