What is Red Collar Crime?

Picture of Andrea Lebron By Andrea Lebron

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whistleblower red collar crimeRed collar crime is a sub-group 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, non-violent 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 were estimated by the FBI in 2016 to cost U.S. business more than $500 billion per year.

Nobody really knows the true cost of white collar crimes because not all white collar crimes are detected. Furthermore, when they are, only 58% of white collar crimes are reported to law enforcement agencies according to the Association of Certified Fraud Examiners (PDF), who also claims businesses on average lose 5% of their revenue each year due to forgery, insider trading, fraud, or embezzlement.

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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 fifty recorded cases have occurred in the past thirty 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 fascinating reading. 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.

Read the Latest Workplace Violence Statistics

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 benefitted 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.

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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 have 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. According to the Association of Certified Fraud Examiners, 40% of white collar crime is detected by tips, and this figure rises to 46% when businesses have a hotline or other service assigned for receiving tips.

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 non-compliance 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 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. The app can also be integrated with other mass notification services to warn employees of dangerous situations in advance.

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Written by Andrea Lebron

Andrea is Rave's Director of Digital Marketing, a master brainstormer and avid coffee drinker. Andrea joined Rave in August 2017, after 10 years of proposal and corporate marketing at an environmental engineering firm. You'll find her working with her amazing team in writing and producing blogs like this one, improving your journey to and through our website, and serving you up the best email content. When she's not in front of a keyboard, she's chasing after her three daughters or indulging in her husband's latest recipe. Andrea has a Bachelor's degree in Marketing/Management from Northeastern University and an MBA from Curry College.

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