Another look at the "corporate advantage" in routine criminal proceedings.

• Author: Bacher, Jean-Luc
• Position: Canada

Si les organisations et les entreprises ayant commis des infractions reussissent plus souvent que les particuliers a eviter des sanctions penales, elles devraient donc reussir plus souvent, en tant que victimes, a faire imposer des peines aux contrevenants traduits en justice. C'est John Hagan (1982) qui a elabore cette hypothese et qui l' a mise a l'epreuve en y appliquant des tests empiriques. Dans le present article, les auteurs analysent toutes les affaires de fraude a l'endroit d'entreprises et ayant fait l'objet d'enquetes policieres entre janvier et juin 1991 a Montreal. Ainsi, selon les resultats provisoires, les affaires de fraude a l'endroit d'importantes entreprises seraient plus susceptibles d'aboutir a une mise en accusation, alors que les contrevenants ayant cible de petites entreprises seraient moins susceptibles d'etre traduits en justice. Or, les auteurs examinent dans quelle mesure le recours aux agences privees de securite, les caract&istiques des actes de fraude, les liens inter-organisationnels, les differences au niveau des reactions des enqueteurs policiers et des tribunaux de justice penale, ou encore d'autres variables potentiellement confusionnelles expliqueraient l'avantage dont semblent beneficier les organisations et les entreprises.

Introduction

If, as offenders, corporate actors are more likely than other offenders to evade or circumvent punishment, they should also, and for similar reasons, be more likely, as victims, to obtain punishment for those who offend them. This implication was explicitly formulated and empirically tested by Hagan (1982), whose study shows that corporate actors are indeed more effective than individuals in using criminal prosecutions against those who victimize them. Findings also show that the size of corporate actors matters and that the larger entities (as measured by number of employees) are more successful than their smaller counterparts in obtaining convictions: "As size is a reflection of power and resources, this finding is consistent with our focus on the corporate advantage in the criminal justice process" (Hagan 1982: 1011). Not unexpectedly, the corporate victims in the study were also more satisfied than individual victims with law enforcement performance, with sentences generally meted out by criminal courts, and with overall criminal justice outcomes.

The main thrust of Hagan's thesis is to link theoretically two lines of research: the behaviour of corporate actors as defendants in criminal court proceedings and their behaviour as complainants. The corporate advantage argument illustrates Donald Black's (1973, 1976) more general proposition that law--governmental social control--is a resource in itself and that the ability or the motivation to take advantage of this public good is a direct function of social rank and organizational capacity. Corporate actors should thus be more effective in their use of criminal proceedings than individual actors. In Hagan's (1982) study, this basic insight is given an elaborate specification. Corporate victims are more effective in making use of proceedings in three ways. First, they achieve better outcomes because they are more selective in the cases they bring to court and thus obtain a higher number of guilty pleas. For example, such cases are less likely to carry factors that mitigate blame attribution (such as a past history of intimacy between offenders and victims). Second, corporate actors may devote more resources (private security, legal counsel) to detecting suspects and assembling incriminating evidence. Third, police officers, crown attorneys, or magistrates may themselves be more responsive to organizational litigants. Responsiveness can be inferred from the fact that corporate actors have more interactions with the criminal justice system--for instance, more than one-third of burglaries and robberies reported to the police are reported by corporate actors--and are thus more likely to be acknowledged as "very important clients of the criminal justice system" (Hagan 1982: 999).

Corporate victims, Hagan found, were also more satisfied than individual victims of criminal proceeding outcomes, presumably because they achieved better outcomes but also because of structural affinities between governmental and corporate agencies: organizations (or their agents) are more likely to understand the behaviour of other organizations. They were also more satisfied because, beyond their natural substantive interest in penal outcomes, they view their formal interest in the long-term formal rationality of criminal courts as more significant than particular case rulings. This implies that general deterrence and predictability concerns should outweigh retribution and seriousness-of-crime concerns and attenuate the idiosyncratic impact of extra-legal attributes. Hagan's argument is intended to be quite general in scope, since it contrasts two sets of social actors: individual and organizational entities. His category of corporate actors includes both economic and non-economic organizations (such as churches, associations, and schools).

Hagan's (1982) seminal study also reports a variety of puzzling findings. First, repeat players are not, contrary to expectations (Galanter 1974), more successful in securing convictions, even though larger companies are more likely to be repeat players. This may imply that some other factors can partially neutralize the corporate advantage. Another puzzling finding is that although corporate victims were more satisfied than individuals with the overall case outcome, they were nonetheless just as unsatisfied as individual victims with the actual sentence meted out by courts. This suggests that magistrates' judicial preferences may override "structural affinities." Another intriguing finding that receives no particular comment is that although victims who testified in court did not have a significant impact on sentencing outcomes in cases involving individuals, they had a significant negative impact in corporate cases, suggesting again that magistrates are less responsive to corporate concerns than to individual needs.

Although the organizational status of litigants in appellate courts has been extensively scrutinized, especially by political scientists (for a review, see Songer, Sheehan, and Haire 1999), students of lower criminal courts have not attempted to replicate or elaborate upon Hagan's (1982) extension of legal mobilization or "party capability" theory. In this article, we restrict our analysis to a sub-set of property offences (cheque and credit-card fraud) and a sub-set of corporate actors (retail and financial institutions) but include prosecuted as well as non-prosecuted cases. We also examine more closely the extent to which victimized businesses rely on private security agencies in bringing fraud cases to court and the impact of such agencies on the outcomes of criminal proceedings. Our intent is not to challenge Hagan's basic argument that corporate actors are more likely to take advantage of criminal justice resources but, instead, to examine the derived proposition that this corporate advantage increases as a function of organizational size.

Data and context

We retrieved all archived police files on credit-card and cheque fraud (N = 775) against retail (57%) and financial (43%) institutions investigated by Montreal's police department between January and May 1991. (See Appendix A for descriptive statistics on dependent and independent variables.) In this sample, 21% of cases involved cheque fraud and 79% involved credit-card scams. Fraud cases may involve single or multiple fraudulent transactions. As it happens, most cases (63%) were solo transactions. Repeat fraud, however, involved on average 4.3 transactions (775 fraud cases but 1,938 fraudulent transactions). As a result, 71% of all fraudulent transactions were repeat or "string" offences. Because the number of fraudulent transactions is higher for cheque fraud than for credit-card fraud, cheque transactions represent 35% of all fraudulent transactions. There are also many more fraud cases (N = 775) than distinct victims (N = 199), since large companies typically have many branches or commercial outlets. In fact, 20% of companies (N = 41) experienced more than 80% of all fraudulent transactions (for similar findings see Burrows, Anderson, Bamfield, Hopkins, and Ingram 1999: 28). The skewed distribution of commercial victimization is even more salient than distributions of personal property or violent victimizations (Ellingworth, Hope, Osborn, Trickett, and Pease, 1995; Trickett, Ellingworth, Hope, and Pease 1995). This is partly because large organizations are attractive and stable hunting grounds for organized or professional networks of offenders (see, e.g., Mativat and Tremblay 1998; Lacoste and Tremblay 2003). Losses were also distributed very unequally (a standard deviation of $3,347 for an average loss per fraud of $946). As is often the case, however, the distribution of losses is lognormal and the geometric mean (geomean) of the average loss is $371 per fraudulent transaction. Since victims experience 2.2 transactions per fraud, the geomean of total losses per fraud is $594 and the geomean of total losses per company is $2,313.

Although police reports provided no information on the organizational capacity of victimized businesses (sales, assets, and number of employees are typical indicators of size), they did record their economic activities and business names. This is very useful information, since governmental agencies routinely collect data on the average number of employees by type of businesses (Statistics Canada 1993). The 1992 census counted 9,697 business premises involved in retail activities and 701 establishments engaged in financial and credit activities in the Montreal Urban Community. These represented respectively 25.9% and 1.9% of the overall population of...