What Is White Collar Crime? Definitions, Examples and Penalties

White collar crime is a phrase almost everyone recognizes and few can define. It appears in coverage of corporate collapses and in the case files of bookkeepers, contractors and small business owners who never expected the label to attach to them.

It is a category, not a charge. No California statute creates an offense called white collar crime. The phrase covers offenses that are non-violent, committed for financial gain, and carried out through deceit or the abuse of a trust rather than force.

Where the term white collar crime came from

The phrase belongs to Edwin Sutherland, a sociologist who used it in his 1939 presidential address to the American Sociological Society. He described a crime committed by a person of respectability and high social status in the course of his occupation. His point was that criminology treated crime as a product of poverty, when costly offenses were also being committed in accounting departments.

The phrase outlived the argument and now covers financial offenses generally, with no requirement of status. Most people charged are not executives but employees with access to money, and owners whose records an investigator is reading in the least charitable way possible.

What makes an offense white collar

There is no statutory test, but these offenses share four features. No force is alleged. The motive is money, property or credit. The conduct depends on deception or on the breach of a trust the accused held. And it moves through ordinary channels: invoices, transfers, claim forms and email.

That last feature is why these cases feel different: the evidence is the paperwork of normal business life. The dispute is rarely about whether a transaction happened. It is about what the person intended, and intent is the one thing a bank statement cannot show.

Types of white collar crime under California law

These are the offenses most often prosecuted under the label, with the statute and what must be proved. Many are wobblers, which lets the district attorney file them as a misdemeanor or a felony depending on the amount and the record.

• Embezzlement (Penal Code sections 503 and 508): property lawfully entrusted to you, usually by an employer, was fraudulently used for another purpose. Punished as theft, so value decides grand or petty.
• Grand theft (Penal Code section 487): taking money, labor or property worth more than $950. Below that it is petty theft, and prosecutors routinely aggregate small transactions into one count by alleging a single scheme.
• Theft by false pretenses (Penal Code section 532): obtaining property through a knowingly false representation the owner relied on, the usual charge in state investment fraud.
• Forgery (Penal Code section 470): signing another's name, or making or passing a false check, contract or deed, with intent to defraud. Signing in the honest belief you had authority is not forgery.
• Check fraud (Penal Code section 476): making, passing or possessing a fictitious or altered check with intent to defraud. Checks on insufficient funds fall under section 476a.
• Credit card and access card fraud (Penal Code sections 484e through 484j): theft or sale of account information, forging a card, fraudulent use, and possessing counterfeiting equipment.
• Identity theft (Penal Code section 530.5): obtaining, retaining or using another person's identifying information for an unlawful purpose without consent. It reaches possession, not only use.
• Insurance fraud (Penal Code section 550): presenting a false or inflated claim, staging a loss, or supporting a claim with information known to be false.
• Workers compensation fraud (Insurance Code section 1871.4): knowingly making a false statement to obtain or deny benefits. Claimants are charged, as are employers who misreport payroll.
• Real estate and mortgage fraud: rarely one statute, but a combination of grand theft, forgery and Penal Code section 115, which makes filing a false instrument in a public record a felony.
• Securities fraud (Corporations Code sections 25401 and 25541): selling or buying a security by means of an untrue statement of material fact or a material omission, charged criminally when willful.
• Money laundering (Penal Code section 186.10): moving money through a financial institution above the statutory thresholds, either to promote criminal activity or knowing it is criminal proceeds.
• Bribery (Penal Code sections 67 and 68 for public officers, section 641.3 for commercial bribery): corruptly giving or receiving value to influence an official act or an employee's conduct.
• Computer fraud (Penal Code section 502): knowingly accessing a computer, network or data without permission, including access taken to defraud or to copy, alter or delete data.
• Tax fraud (Revenue and Taxation Code, including section 19706): willfully failing to file, filing a false return, or evading a tax. Payroll and sales tax run through separate agencies.
• Ponzi and investment schemes: a pattern rather than a statute, charged as theft by false pretenses plus securities violations, and federal wire fraud once money crossed state lines.

The element that runs through all of them

Nearly every offense on that list requires proof of intent to defraud, or knowledge that the conduct was wrongful. A transfer, a signature and a journal entry look identical whether fraudulent or merely wrong, so these cases turn on what the person knew.

The aggravated white collar crime enhancement (Penal Code section 186.11)

Section 186.11 is the one place California law uses the phrase, and it is an enhancement rather than an offense. It applies when a person is convicted of two or more related felonies with fraud or embezzlement as a material element, committed as a pattern of related felony conduct, involving a taking or loss to victims of more than $100,000. Losses above $500,000 fall into a higher tier.

Two things follow. A consecutive term is added to the sentence for the underlying felonies, with the length tied to the loss. And the prosecution can ask the court early on to freeze assets so money stays available for fines and restitution, so a person can lose access to accounts and property before a jury hears anything.

When a white collar case becomes a federal case

Most of this conduct can be prosecuted in state court, in federal court, or in both. Federal prosecutors tend to take cases involving larger losses, conduct spanning more than one state, federally insured banks, federal benefit programs, securities or taxes.

Four statutes carry most of the weight: mail fraud (18 U.S.C. section 1341), wire fraud (section 1343), bank fraud (section 1344) and conspiracy (section 371). Wire fraud is extraordinarily broad, since nearly any modern transaction involves an email or a transfer, and conspiracy lets the government charge an agreement, reaching people whose own conduct was limited.

Federal cases from here are brought by the United States Attorney's Office for the Southern District of California, covering San Diego and Imperial counties. Charges normally come by grand jury indictment rather than by complaint, so there is no early hearing at which the defense tests the evidence. Sentencing follows an advisory guidelines range driven, for fraud, mainly by loss amount under guideline section 2B1.1, with adjustments for the number of victims and the defendant's role.

How these cases are investigated before anyone is charged

Most people assume a criminal case starts with an arrest. These usually do not. They run quietly for months or years before a charge exists, because they are built from documents rather than eyewitnesses:

• Grand jury and administrative subpoenas to banks, employers and accountants, often without the subject being told.
• Search warrants executed at a business or home for computers, servers, phones and files.
• Target letters advising a person that they are the subject of a grand jury investigation.
• Forensic accountants who reconstruct years of transactions into a narrative of intent.
• Interviews of coworkers, customers and vendors, before the subject knows anything is happening.
• Parallel inquiries by regulators such as the Securities and Exchange Commission, alongside the FBI and IRS Criminal Investigation.

Why people usually learn about it long before an arrest

Because the government collects records from third parties, word travels. A bank mentions a subpoena. A coworker says agents came by. A target letter arrives. That period is when the case is most open to influence, and when people do themselves the most harm: explanations given from memory, to agents holding documents the speaker has not seen in years, create inconsistencies the government later calls deception.

White collar crime penalties in California

Penalties follow the charge, not the label. Because so many of these offenses are wobblers, the same conduct can end as a misdemeanor with probation or as a felony with custody. Many California theft and fraud felonies are served under Penal Code section 1170(h) in county jail rather than state prison, and a term can be split between custody and mandatory supervision.

Restitution is close to automatic: Penal Code section 1202.4 requires full restitution for a victim's economic loss, enforceable as a civil judgment and surviving probation. Fines are separate and are multiplied by state and county penalty assessments, so a stated fine is never what is paid.

Asset freezes and forfeiture are a distinct harm. Section 186.11 allows pretrial preservation orders in state cases, and federal forfeiture reaches proceeds and property traceable to them. Losing operating accounts while a case is pending can hurt a business owner more than the sentence.

What a conviction means for a licensed professional

Dishonesty offenses are classified in many settings as crimes of moral turpitude, and that label travels. Licensing boards for physicians, nurses, attorneys, accountants, real estate agents and contractors can open their own proceedings on a conviction, and some act on a pending charge.

For non-citizens, fraud and theft convictions can be deportable or inadmissible depending on the sentence and the loss. Civil suits from victims or insurers often run alongside the criminal case, and an admission in one can decide the other. Any felony conviction also carries a lifetime firearm prohibition in California.

Common defenses to white collar charges

Because these offenses turn on intent and knowledge, the defenses usually attack the government's reading of conduct that is not itself in dispute.

• No intent to defraud: the transactions happened, but reflect error, disorganization or a failed business plan rather than deception. Bad judgment is not a crime.
• Good faith belief: someone who believed the money was owed to them, or that a representation was true, lacks the required mental state even if the belief was wrong.
• Authorization and consent: funds borrowed, advanced or spent with the owner's permission were not embezzled, even where the arrangement was undocumented and later fell apart.
• Mistake and accounting error: a forensic reconstruction builds in assumptions about categorization and timing, and independent analysis can show the shortfall is smaller than alleged, or absent.
• Entrapment by estoppel: where an authorized government official said the conduct was lawful and the person reasonably relied on that, the reliance can bar the prosecution.
• Insufficient evidence of knowledge: the government sometimes charges employees who processed transactions without knowing anything was wrong. Proximity is not participation.
• Statute of limitations: for the fraud, embezzlement and breach of fiduciary obligation offenses listed in Penal Code section 803(c), section 801.5 gives the prosecution four years from discovery of the offense, or from when it could reasonably have been discovered. That date is contestable.
• Challenging the loss figure: reducing the alleged loss can move a case below an enhancement threshold or down a sentencing range, which is often where the most value lies.

What to do if you think you are under investigation

Timing matters more here than in almost any other kind of case. Before charges are filed, counsel can speak to investigators so the client never does, manage subpoenas so privileged material is protected, and present records the government has not seen. Prosecutors sometimes decline to file, or file something narrower, as a result.

If agents come to your home or workplace, you are not required to speak with them and you should not. Be polite, ask for a card, say your attorney will be in contact, and end the conversation. If they have a warrant, do not interfere, but do not consent to a broader search. If your employer's counsel asks for an interview, remember that they represent the company. Preserve records rather than tidying them: deleting files after learning of an investigation creates a worse problem than the one you had.

Then get advice from someone who handles these cases in state and federal court. Marc S. Kohnen has defended clients in San Diego since 2008 and has taken cases to jury verdict. Every case is different and prior results do not guarantee a similar outcome. The Law Office of Marc S. Kohnen is at 425 Tenth Avenue in downtown San Diego, (619) 398-2500.

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