What is Red Collar Crime?
Red collar crime is a subgroup of white collar crime in which the perpetrator uses violence to avoid detection or prosecution. Although red collar crime appears to be a rare event in the U.S., this is not necessarily the case, and it is advisable for businesses to have a process through which white collar crime can be reported anonymously.
The term “white collar crime” is usually identified with financially motivated, nonviolent crimes committed by employees against their employer, or by individuals against a financial institution. The crimes typically consist of forgery, insider trading, fraud, or embezzlement, and are estimated by the FBI to cost U.S. businesses more than $300 billion per year.
Nobody really knows the true cost of white collar crime because not all white collar crimes are detected. Furthermore, when they are, only 54% of white collar crimes are reported to law enforcement agencies according to the Association of Certified Fraud Examiners in their 2020 Report To The Nations, who also claim businesses on average lose 5% of their revenue each year to fraud and that 43% of white collar crimes are identified via a tip rather than via an internal audit or investigation.
When White Collar Crime Turns Red
When white collar crimes are detected, the most common outcome is an admission of guilt and – depending on the nature and severity of the crime – a custodial sentence, a financial settlement, or disciplinary action. However, when the perpetrator doesn’t want the nature of his actions disclosed, the outcome can be much different.
Around 50 recorded cases have occurred in the past 30 years in which the perpetrator has either murdered the person who discovered their crime or paid somebody else to do it. Many of these cases were reviewed by Frank Perri – a criminal psychologist at the DePaul University in Chicago – to develop psychological profiles of offenders who commit red collar crimes.
Perri’s results were published in the International Journal of Psychological Studies in 2016, and they make a fascinating read. His review of the cases found red collar criminals typically harbor behavioral risk factors that lead them to use violence as a solution to a perceived problem, in the same way as non-white-collar offenders resort to violence.
Examples of Red Collar Crime in the Workplace
One of the earliest examples of recorded red collar crime in the workplace dates back to 1982, when the owner of the Candor Diamond Company of Manhattan – Irwin Margolies – contracted a hitman to kill two employees. The first he suspected of alerting federal prosecutors to his multimillion dollar fraud, and the second was due to testify against him – even though she had benefited from the fraud herself.
In the workplace, red collar crime does not necessarily result in the murder – or attempted murder – of a colleague. In 2008, Sallie Rohrbach, an agency examiner with the North Carolina Department of Insurance, was murdered by insurance company owner Michael Howell after she discovered evidence of insurance fraud. In this case, Sallie was a lone worker at risk rather than a colleague
More recently in 2016, a former bank employee – Naquan Reyes – was convicted of paying for the murder of a co-conspirator, who had been caught conducting check fraud on Reyes’ behalf and who had agreed to testify against him. Although not a colleague-on-colleague red colleague crime, other co-conspirators had worked in the bank with Reyes and were equally as guilty in the check fraud scam.
The Extent of Red Collar Crime is Unknown
In the same way as nobody really knows the true cost of white collar crimes, the extent of red collar crime is also unknown. There could be many dozens more murders attributable to the cover-up of white collar crime; but, because the white collar crime has remained undetected, the connection is never made. Conversely, a murder could go undetected when a white collar crime has been discovered.
There have been a number of failed red collar crimes – for example, in 2008, Randy Nowak was found guilty of attempting to hire a hitman to murder an IRS agent he believed was about to uncover his tax fraud and money laundering schemes. Unfortunately for Nowak, the hitman he tried to hire was an undercover FBI agent who subsequently turned him in.
Sometimes white collar criminals turn on white collar criminals, as was the case when Scott Kimball ratted on cellmates Arnold Flowers and Sompong Khamsomphou who had been incarcerated awaiting trial for check fraud. Kimball – who was also accused of check fraud – alleged Flowers had asked him to hire a hitman to kill U.S. District Judge Russel Holland, U.S. Attorney Crandon Randell, and two witnesses. Due to Kimball being an unreliable witness, the charges were later reduced to witness tampering.
How to Prevent Red Collar Crime
The best way to prevent white collar crime – and therefore by association red collar crime – is for businesses to have a process through which white collar crime can be reported anonymously. As mentioned above, 43% of white collar crime is detected by tips, and anecdotal evidence suggests this figure is considerably higher when employees can alert businesses to fraud anonymously.
Implementing an anonymous tip service has more financial benefits than just alerting security personnel to internal fraud. The Association of Certified Fraud Examiners found that losses attributable to white collar crime were 50% smaller for businesses with a tip service, and also that these businesses were less exposed to fines for regulatory noncompliance because they had controls in place to prevent fraud.
For businesses that do not yet have an anonymous tip service in place, another potential solution is an employee safety app. The mobile app supports two-way anonymous tip texting and has personal safety features such as the virtual escort that can help protect lone workers – such as Sallie Rohrbach. To find out more about implementing an anonymous tip service or protecting employees with employee safety apps, do not hesitate to get in touch.