Informal Networks and White Collar Crime: Evidence from the Madoff Scandal
54 Pages Posted: 18 Jan 2011
Date Written: August 17, 2010
We examine the importance social and spatial distance in the criminal activity of Bernard Madoff, perpetrator of one of the largest white collar crimes in United States history. Most white collar crimes are exploitations of trust, which can be fostered by a shared religious identity between the victim and perpetrator; affinity fraud in particular targets members of a particular social, demographic, or religious group. We construct two measures of Jewish religious network strength at the county level: the concentration of Jewish non-profit organizations and the revenue of Jewish non-profit organizations relative to other religious non-profits. We show that residents of counties in which there were stronger Jewish networks were more likely to have been victimized by Madoff. In addition, we find that residents of counties that were geographically distant from areas where Madoff lived or worked were less likely to be victimized, but that Jewish network strength appears to counteract this “distance effect.” Non-profit organizations, which were also victims of Madoff, were less affected by informal network strength.
Keywords: White Collar Crime, Affinity Fraud, Victimization, Informal Networks
JEL Classification: K42
Suggested Citation: Suggested Citation