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Neutralization Theory and White-collar Crime: a Investigative Study

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Neutralization Theory and White-Collar Crime

Abstract

This paper examines white-collar crime in the context of Sykes and Matza’s (1957) neutralization theory. White-collar crime is widespread and incurs significant financial, social, and legal costs, and neutralization theory provides a potentially useful theoretical framework for studying it. This paper identifies and discusses selected empirical research support for white-collar crime as a consequence of Sykes and Matza’s (1957) techniques of neutralization, considering especially the retention of a non-criminal self-image among white-collar criminals (Benson 1985), the varying techniques of neutralization used in the commission of certain subsets of white-collar crime, and the contrast between neutralization theory and the acquisition of a deviant subcultural normative system among street criminals (Topalli 2005). The goal of this analysis is to demonstrate the validity and value of approaching white-collar crime through the lens of neutralization theory, and to explore the implications, in terms of both the theoretical strengths and weaknesses and policy ramifications, of such an approach.

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Neutralization Theory and White-Collar Crime

After interviewing thirty men convicted of white-collar crimes, Benson (1985) reported a wide range of emotional experiences among them throughout their legal proceedings. The interviewees recounted feelings of guilt, embarrassment, anger, and numbness as their situations progressed; however, contrary to their varied, intense emotional responses and despite the acknowledged illegality of their actions, these men universally rejected defining themselves as ‘criminals’ and denied the presence of mens rea during the commission of their offenses. Crucially, the interviewees also complained that their illegal actions were only one aspect of their lives – one not actually representative of their true selves – and therefore that judgments rendered for these small mistakes were unjust (Benson 1985, p. 295). The general objective of this paper is therefore to apply Sykes and Matza’s neutralization theory (1957) to white-collar crime in order to determine if the convicts that Benson (1985) interviewed were correct – that is, whether they were indeed non-criminals who nevertheless were able to temporarily neutralize their conventional, non-criminal norms and values in the commission of their crimes. To do so, it will first define and clarify the phenomenon of white-collar crime. Next, it will critically assess neutralization theory, detailing its key features, criticisms, and broad policy implications. Then, it will review and discuss a selection of the available research concerning the overlap of white-collar crime and neutralization theory, as well as neutralization theory generally. Finally, based upon the selected literature and discussion thereof, it will assess the value, implications, and limitations of neutralization theory as a framework for understanding both white-collar crime and social responses to it.

White-Collar Crime

Sutherland (1939) defined the term “white-collar crime” as “crime committed by a person of respectability and high social status in the course of his occupation”. This definition has since been elaborated upon and subdivided extensively by specific criteria, but in its most general sense includes a multitude of nonviolent crimes committed in commercial settings for financial gain (White-collar crime). White-collar crime manifests itself in many forms, with Sutherland identifying the most common as,

misrepresentation in financial statements of corporations, manipulation in the stock exchange, commercial bribery, bribery of public officials directly or indirectly in order to secure favorable contracts and legislation, misrepresentation in advertising and salesmanship, embezzlement and misapplication of funds, short weights and measures and misgrading of commodities, tax frauds, and misapplication of funds in receiverships and bankruptcies. (1940, pp. 2-3)

Sutherland (1940) contended that these numerous illegal activities could be distilled into two basic categories – misrepresentation of asset values and duplicity in the manipulation of power. Benson (1985), meanwhile, grouped white-collar crimes into four major categories – antitrust violations, tax violations, violations of financial trust, and fraudulence or false statements. For the purposes of this paper’s analysis, however, such subcategories are of minor importance, as white-collar crime will refer to Sutherland’s original, expansive definition unless otherwise specified.

Measuring the true extent of white-collar crime is difficult, due both to its clandestine nature and its comparatively low priority with law enforcement. As such, inferences made about its occurrence on the basis of estimated monetary losses, prosecutions, and self-reporting are likely inaccurate. Even so, white-collar crime incurs clear financial, social, and legal costs. When first identifying and describing the phenomenon, Sutherland (1940) speculated that the financial cost of white-collar crime was several times greater than the financial cost of all crimes more traditionally regarded as problematic. In the present day, the Federal Bureau of Investigation estimates that white-collar crimes cost more than $300 billion annually in the United States (White-collar crime); additionally, misconduct in the financial sector caused far-reaching economic damage and threatened the stability of the financial system by contributing to the financial crisis (Cohn, Fehr, & Maréchal 2014). Sutherland (1940) also contended that the social costs of white-collar crime – loss of trust in social institutions – exceed the financial costs. Cohn et al. (2014) concur, adding that this erosion of trust in institutions damages economic performance. Finally, government agencies and officials at both the federal and state levels – for instance, the Securities and Exchange Commission, the Federal Bureau of Investigation, the Internal Revenue Service, and state Attorneys General – devote resources to investigating and prosecuting white-collar crime (White-collar crime).

Neutralization Theory

Sykes and Matza (1957) developed what is now referred to as neutralization theory in order to address what they perceived as inadequacies of previous criminological theories. While they supported the theoretical assumption that criminality is learned, they disputed specific elements of subcultural and differential association theories of crime, primarily that delinquent behavior “springs from a set of deviant norms and values…from a situation in which a delinquent defines his delinquency as…morally correct” (Sykes & Matza 1957, p. 664). This dissent arose primarily from four observations. First, delinquents frequently express feelings of guilt, remorse, and the like after committing crimes (1957, p. 664). Second, delinquents often admire and respect those who adhere to the dominant, conventional culture, rather than regarding them as immoral or morally inscrutable (1957, p. 665). Third, delinquents distinguish between those who are eligible targets and those who are ‘off limits’ (1957, p. 665). Last, delinquents are not immune to at least some requisite conformity to the dominant, conventional culture (1957, pp. 665-66).

The observations listed above indicate that those who commit deviant acts are “partially committed to the dominant social order” (Sykes & Matza 1957, p. 666), and therefore presented a paradox for the existing criminological theories involving learned criminality; if criminals did not learn new values and norms, but instead retained those of convention, why would they violate laws which represent those conventional values and norms? In response to this contradiction, Sykes and Matza theorized instead that an individual “can avoid moral culpability for his criminal action – and thus avoid the negative sanctions of society – if he can prove that criminal intent was lacking” (1957, p. 666). To do so, an individual must demonstrate that, while his action was a violation of “the dominant normative system” (1957, p. 667), it was still acceptable due to some extenuation. The authors identified and described five “techniques of neutralization” (1957, p. 667) commonly employed by individuals to justify deviant behavior in this way. First, the denial of responsibility can be characterized by an offender’s assertion “that delinquent acts are due to forces outside of the individual and beyond his control” (1957, p. 667). Second, the denial of injury is an offender’s assertion that a delinquent act “does not really cause any great harm despite the fact that it runs counter to the law” (1957, p. 667). Next, the denial of the victim is an offender’s assertion that the harm inflicted by a delinquent act “is a form of rightful retaliation or punishment” (1957, p. 668) against the victim or victims. Fourth, the condemnation of the condemners is an offender’s direction of scrutiny “to the motives and behavior of those who disapprove of his violations” (1957, p. 668) and away from his offense. Finally, the appeal to higher loyalties is an offender’s framing of a delinquent act as the resolution of a dilemma imposed by the demands of a smaller social group taking precedence over the demands of society as a whole (1957, p. 669). Sykes and Matza argued that these techniques are used not only to rationalize an offense after it has occurred, but also to enable the deviant behavior itself by neutralizing internal and external constraints on that behavior. Accordingly, delinquency can be traced to the acquisition of these techniques of neutralization, rather than to the acquisition of values and attitudes contradictory to conventional ones (Sykes & Matza 1957, p. 667). This distinction is crucial to the objectives of this paper and will be examined in greater detail in the next section.

Neutralization theory is not without its weaknesses. Siegel (2011, pp. 178-179) points out that empirical attempts to substantiate the theory have produced mixed results, with some research in support of neutralization theory and some appearing to support alternate explanations for deviance such as subcultural theory. To reiterate, the use of techniques of neutralization is rendered unnecessary if an offender has learned a normative system contrary to the dominant one, and the empirical support which exists for the occurrence of such a scenario (Siegel 2011, p . 179) limits the broad application of neutralization theory. For instance, Topalli (2005) found that some varieties of street criminals do in fact adopt subcultural normative systems, and in fact utilize techniques of neutralization when acting conventionally. Additionally, Sykes and Matza (1957) provided few details regarding the mechanism for acquiring techniques of neutralization, beyond that they are learned, thereby leaving differences in the criminal tendencies of individuals and groups largely unexplained. In spite of these limitations, neutralization theory is critical in explaining offenders’ engagement in deviant behaviors which are socially disapproved of and of which they may disapprove themselves (Siegel 2011, p. 179). Furthermore, the limitations mentioned will be specifically addressed by this paper, which will attempt to show that they actually support the assessment that white-collar crime is a product of techniques of neutralization.

There are a few important implications of viewing crime through the lens of neutralization theory. First, and most obviously, crime is learned – and more specifically, learned through the mastering of techniques of neutralization, which allow the offender to commit crime. Second, on a policy level, the control of crime is necessarily achieved through the prevention of this learning. Of course, the source of learning must be identified and the process of learning understood before policy intervention can occur. The final implication of crime as neutralization is that crime of all varieties, committed by individuals and groups of every socioeconomic class, is underwritten by the same cause. Since the final implication is not entirely supported by empirical backing, as previously noted, it is important to clarify that the scope of this paper is limited to the examination of white-collar crime, and to demonstrating the merits of neutralization theory as an analytical framework for only that variety of crime.

Literature Review and Discussion

In addition to the five techniques of neutralization originally identified by Sykes and Matza (1957), Moore and McMullan (2009) compiled five more, which they identified as employed by university students to neutralize and rationalize digital piracy. These extended techniques of neutralization include: the ledger technique, where an offender contends that a crime is made acceptable by the ‘larger balance’ of good deeds; the denial of the necessity of law, where an offender disputes the greater social benefits of a law and thus its appropriateness; the appeal to majority, where an offender concludes that widespread disregard for the law effectively nullifies it; the appeal to entitlement, where an offender claims entitlement to a crime due to the presence of special circumstances; and the appeal to necessity, where an offender acknowledges the inappropriateness of a crime but regards it as necessary to prevent greater crime or some other dysfunction (Moore & McMullan 2009, pp. 443-444). While the specifics of Moore and McMullan’s (2009) research will not be addressed by this paper, these additional techniques widen the explanatory breadth of neutralization theory and will as a result be useful for further analyzing white-collar crime.

As mentioned at the outset of this paper, Benson (1985) found that the thirty white-collar criminals in his sample uniformly denied their criminality. First, they were divided into four subgroups based on the nature of their offenses: antitrust violations, such as industrial collusion; tax violations, such as underreporting income; violations of financial trust, such as embezzlement; and fraud and false statements, such as check-kiting (Benson 1985). Then, they were interviewed and their qualitative responses were recorded and examined to identify the offenders’ feelings regarding their offenses and treatment by the justice system. Antitrust violators emphasized the perennial ubiquity of their crime within their industry and their blamelessness in regards to their crime, criticized the motives and tactics of their prosecutors, and favorably compared their crimes to those of street criminals (Benson 1985). Crucially, they also cited an adherence to the rules and values of business – namely to “stay in business and make a profit” (Benson 1985, p. 298) – as taking priority over the rules and values of society at large. Tax violators labeled their crimes as mistakes or products of special circumstances, and like antitrust violators, emphasized the ubiquity of their offenses and their altruistic motives while committing their crimes and favorably compared their crimes to those of street criminals (Benson 1985). Violators of financial trust, meanwhile, emphasized their offenses as behavioral aberrations in their lives and characterized their crimes as products of special circumstances (Benson 1985). Finally, perpetrators of fraud ascribed responsibility for their crimes to others, questioned the motives and the actions of their prosecutors, emphasized the harmlessness of their crimes, and explained their crimes as products of special circumstances.

Benson’s (1985) results directly corroborate the hypotheses of Sykes and Matza (1957) and align with the findings of Moore and McMullan (2009). The criminal justifications provided by the interview subjects are real-world manifestations of many of the ten theorized techniques of neutralization described previously, including the appeal to majority, the denial of responsibility, the condemnation of the condemners, the ledger technique, the appeal to higher loyalties, the appeal to entitlement, and the denial of injury. This correspondence, between the neutralizations and rationalizations of the white-collar criminals in Benson’s (1985) research and the techniques of neutralization assembled by Sykes and Matza (1957) and Moore and McMullan (2009), offers strong empirical support for white-collar crime as a phenomenon of neutralization. Viewed more specifically, Benson’s (1985) findings also suggest that the techniques of neutralization employed vary by the type of white-collar offense committed. Again, these results validate Sykes and Matza’s contention that “Certain techniques of neutralization would appear to be better adapted to particular deviant acts than to others” (1957, p. 670). Finally, the rejection of the criminal identity by white-collar offenders (Benson 1985) indicates their successful exercise of neutralization, as Sykes and Matza (1957) believed that in such a case “an individual is freed to engage in delinquency without serious damage to his self-image” (p. 667) even if his justification is not deemed valid by the legal system. In summary, white-collar criminals perceive themselves as ‘normal’ because they retain dominant normative values, only neutralizing them temporarily to commit their crimes.

Similarly, research by Piquero, Tibbetts, and Blankenship (2005) found a statistically significant role for certain techniques of neutralization in the commission of corporate crime, a subset of white-collar crime. In their study, they administered questionnaires – designed to assess responses regarding a hypothetical scenario involving the promotion and sale of a harmful drug, called Panalba, subject to an impending Food and Drug Administration ban – to one hundred and thirty-three students enrolled in an undisclosed university’s MBA program (Piquero et al. 2005). The researchers recorded each student’s decision regarding corporate action concerning Panalba, coded on a scale from one – immediate recall and destruction – to six – continue efforts to market Panalba abroad after its domestic ban, as the dependent variable (Piquero et al. 2005). As independent variables, the researchers measured both favorable definitions, to assess the influence of differential association on intention to commit corporate crime, and Sykes and Matza’s (1957) five techniques of neutralization, to assess the influence of neutralization on intention to commit corporate crime (Piquero et al. 2005). The techniques of neutralization were operationalized in the form of students’ Likert scale responses – one being strongly disagree, three being neutral, and five being strongly agree – to the following statements: “The government exaggerates the danger to consumers from most products,” a proxy for the denial of injury; “Government regulations impede business,” a proxy for the condemnation of the condemners; “Profit is emphasized above everything else at my place of work,” a proxy for the appeal to higher loyalty; “Caveat emptor is the motto of my employer,” a proxy for the denial of the victim; and “Where I work, it is all right to do anything to make a profit unless it is against the law,” a proxy for the denial of responsibility (Piquero et al. 2005). After recording the students’ responses to all three categories of variables, Piquero et al. (2005) examined the impact of the dependent variables on offending intentions. They found that the beliefs that the government exaggerates dangers to consumers and that profit was the highest priority of business had significant positive effects on the students’ intentions to commit corporate crime, while the effects of the others were insignificant (Piquero et al. 2005). While the model for offending intention including only the five techniques of neutralization accounted for just 14% of the total variation in offending intention, Piquero et al. (2005) concluded that, due to the significant effects of the denial of injury and the appeal to higher authority techniques even in the model including all independent variables, neutralization plays an important role in the commission of corporate crime. These results signal that neutralization theory plays a role in explaining at least some subsets of white-collar crime.

Cohn, Fehr, and Maréchal (2014) also studied a subset of white-collar crime, dishonesty and fraud in the banking industry. To do so, they divided a sample of one hundred and twenty-eight professionals employed in the banking sector into two groups (Cohn et al. 2014). Every subject in each group performed a coin tossing task and anonymously self-reported the results, with subjects being financially rewarded for ‘successful’ flips (Cohn et al. 2014). In one group, which this paper will refer to as the banking-salient group, subjects had been asked a series of questions designed to increase the saliency of their occupation prior to beginning their coin tossing tasks (Cohn et al. 2014). In the other group, which this paper will refer to as the control group, the series of questions preceding the coin tossing task was unrelated to the subjects’ occupation (Cohn et al. 2014). To ensure that the question treatment had in fact increased occupational relevance in the banking-salient group, Cohn et al. (2014) had subjects complete word fragments however they chose, and found that the banking-salient group did in fact complete the word fragments into banking-related words significantly more frequently than the control group.

After confirming that the treatment was effective at differentiating the two groups, Cohn et al. (2014) discovered that the banking-salient group was significantly more dishonest than the control group in reporting the results of their coin tossing task. While the control group behaved largely honestly – reporting successful flips on 51.6% of attempts, which includes the rate of 50% in its 95% confidence interval, the banking-salient group reported successful flips on 58.2% of attempts, which does not include 50% in its 95% confidence interval and is significantly different from the results of the control group (Cohn et al. 2014). Additionally, in previous iterations of the coin tossing task conducted by other researchers for different studies, many individuals do not cheat even when it is individually undetectable due to the presence of conventional norms of honesty and valuation of an honest self-image (Cohn et al. 2014). These results, chiefly the honest behavior of the control group, suggest that techniques of neutralization associated with the banking profession encourage temporary neutralization of conventional, noncriminal values. If fraud in the banking industry were a product of a dishonest subculture which professionals in that occupation acquire, it would be expected that the control group would behave more dishonestly. Instead, temporary value neutralization seems to be the culprit for banking malfeasance, once again supporting neutralization theory as an explanation for this subset of white-collar crime.

As already mentioned, qualitative interviews conducted by Topalli (2005) indicate that perpetrators of some urban street crimes utilize techniques of neutralization not to commit those crimes, but to behave ‘normally’. These results are important for two reasons. First, they demarcate neutralization theory’s boundaries of usefulness by empirically supporting subcultural theory as a description for street crime; criminals of this variety acquire subcultural, deviant normative systems conducive to crime (Topalli 2005), in contrast to white-collar criminals, who simply acquire techniques to temporarily neutralize the dominant normative system. Second, and by extension, they suggest a possible explanation for the discrepancy in perceptions – legal, public, and with offenders themselves – and policy priority between white-collar crime and street crime. Although white-collar offenders are criminals in the sense that they have committed an act against or outside of the law, Sykes and Matza (1957) and Benson (1985) showed that they do not perceive themselves as criminals in the vein of street offenders, since they have retained ‘normality’. On the other hand, Topalli (2005) showed that street offenders do not retain this ‘normality’. Therefore, the harsh sentencing and moral panic associated with street crime, and the comparatively light sentences, “resort prisons”, and lack of public accountability associated with white-collar crime, may be partially explained by criminological theory; we judge and punish those who are not ‘like us’, but white-collar criminals are, while street criminals are not.

Summary and Conclusion

This paper has provided a brief overview of white-collar crime, a cursory discussion of neutralization theory, and an analysis of white-collar crime within the framework of neutralization theory supported by selected empirical research. Examination and analysis of this research yields four main conclusions. First, neutralization theory as conceived by Sykes and Matza (1957) offers a valid and valuable theoretical context for studying white-collar crime, demonstrated especially by the findings of Benson (1985). Second, the results obtained by Piquero et al. (2005) and Cohn et al (2014), in addition to those of Benson (1985), indicate that the use of techniques of neutralization may vary by industry and subset of white-collar crime, even though neutralization theory itself is a persistent explanation for white-collar crime as a whole. Third, Sykes and Matza’s (1957) claim that certain techniques of neutralization may be more suited to certain crime types is supported not only by the varying neutralizations employed by differing types of white-collar criminals, but by the findings of Topalli (2005), which demonstrated that some street crime types are not neutralization-dependent. Fourth, and last, Topalli’s (2005) results, contrasted with those of Benson (1985), Piquero et al. (2005), and Cohn et al. (2014), offer a possible explanation for the divergence in perception and treatment between white-collar crime and street crime – namely, that white-collar crime is the product of neutralization of conventional cultural norms, while street crime is the product of an entirely different deviant subculture.

As a result of these conclusions, this paper’s critical assessment of neutralization theory is largely positive. However, there are three elements of the theory, beyond those already mentioned, which remain unsatisfactorily verified by the empirical research examined in this paper. These shortcomings can be illustrated using examples of neutralization theory as applied to white-collar crime. First, empirical support for the use of neutralization seems to be frequently accompanied by support for post hoc rationalization of crime. Sykes and Matza (1957) mentioned this occurrence, but did not address it as a theoretical limitation of neutralization theory. For example, Benson’s (1985) research was conducted post-conviction, meaning that the white-collar offenders were reflecting upon their crimes after the fact. As a result, it is difficult to demonstrate if neutralization actually occurred before the crimes, or if the techniques of neutralization simply followed the crimes in the form of rationalizations. Second, the existence of contrary theories detracts from the soundness and universality of neutralization theory. Certain aspects of the findings of Benson (1985) and Cohn et al. (2014), for instance, could be interpreted as supporting subcultural origins for white-collar crime, while the findings of Piquero et al. (2005) explicitly quantify the significant role of differential association in corporate crime. Third, neutralization theory does not adequately address the varying occurrence of crime in different white-collar subsets. While Cohn et al (2014) demonstrated empirically that neutralization occurs in fraud by banking professionals, they replicated the experiment with samples of professionals from other industries and of students and were unable to obtain the same results. These findings conflict with those of Benson (1985), who observed the occurrence of white-collar crime in multiple industries, and with those of Sykes and Matza (1957), who hypothesized neutralization theory as broadly applicable. Accordingly, more exploration is needed of the mechanism for transmission and acquisition of techniques of neutralization, especially in the professional realm, to determine the cause of this inconsistency. On the whole, however, neutralization theory is a valuable and intriguing model for studying white-collar crime that enjoys the support of ample empirical evidence.

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