Monthly Review

Monthly Review, Nov, 2002

NOVEMBER 1952

The customary answer to the problem of business crime...is public regulation. But [Edwin H.] Sutherland [author of White Collar Crime] argues that this is not the answer at all. It doesn't work. He proves the point by his study of...fifteen...public utility corporations, all of them subject to rigorous and detailed regulation by federal commissions. The evidence shows that, despite such supervision, these fifteen power and light corporations were just as big crooks, if not bigger than, the other seventy unregulated corporations....

Utility operating corporations, unlike others, do not aim to keep costs down and profits high. They work in reverse. Since the rates charged to consumers are based on the costs and earnings of the operating companies which actually provide the gas and electricity, it becomes the job of the parent holding company executives to think up ways of loading every kind of cost on the operating company and siphoning off all its possible earnings. These business managers do their jobs well:

The result has been that the top holding companies have "milked" their subsidiaries in every possible way which would result in a showing of increased costs of operations and decreased profits. The misrepresentations which have been used in this process have yielded millions of dollars of fraudulent income in the top holding companies during the last generation, and these millions of dollars have been paid principally by consumers. ([Sutherland], p.195).

Leo Huberman, "Capitalism and Crime, Part II,"