Why They Do It

Inside the Mind of the White-Collar Criminal


By Eugene Soltes

Formats and Prices




$24.99 CAD



  1. Trade Paperback $19.99 $24.99 CAD
  2. ebook $12.99 $16.99 CAD
  3. Hardcover $32.00 $40.00 CAD

This item is a preorder. Your payment method will be charged immediately, and the product is expected to ship on or around March 5, 2019. This date is subject to change due to shipping delays beyond our control.

What drives wealthy and powerful people to white-collar crime? Why They Do It is a breakthrough look at the dark side of the business world.

From the financial fraudsters of Enron, to the embezzlers at Tyco, to the insider traders at McKinsey, to the Ponzi schemer Bernie Madoff, the failings of corporate titans are regular fixtures in the news. In Why They Do It, Harvard Business School professor Eugene Soltes draws from extensive personal interaction and correspondence with nearly fifty former executives as well as the latest research in psychology, criminology, and economics to investigate how once-celebrated executives become white-collar criminals.

White-collar criminals are not merely driven by excessive greed or hubris, nor do they usually carefully calculate costs and benefits before breaking the law. Instead, Soltes shows that most of the executives who committed crimes made decisions the way we all do-on the basis of their intuitions and gut feelings. The trouble is that these gut feelings are often poorly suited for the modern business world where leaders are increasingly distanced from the consequences of their decisions and the individuals they impact.

The extraordinary costs of corporate misconduct are clear to its victims. Yet, never before have we been able to peer so deeply into the minds of the many prominent perpetrators of white-collar crime. With the increasing globalization of business threatening us with even more devastating corporate misconduct, the lessons Soltes draws in Why They Do It are needed more urgently than ever.





Not . . . bucket-shop operators, dead-beats, and fly-by-night swindlers

Pillars of the Community

BY 2013, SCOTT London had much to be proud of. Nearly two decades earlier, at the age of thirty-two, he had made partner at KPMG, one of the largest and most prestigious accounting firms in the world. Out of the nearly one hundred others who started at KPMG at the same time, he was the only one to reach the partnership rank.

London now led KPMG’s practice for the entire southwestern United States, with prestigious clients like the footwear company Deckers, maker of UGG boots. More than fifty partners and nearly five hundred professional auditors worked under his leadership. His position paid generously, too—he expected to take home at least $900,000 annually. London was a leader in the accounting world.

In his personal life, London felt equally lucky. He had been married for over twenty-five years. A recruiting visit to his alma mater as a junior accountant for KPMG led him to a fortuitous encounter. “I ended up recruiting a wife instead of a new candidate for the firm,” London fondly remembered. He and his wife had a son and a daughter, both in college. His daughter enthusiastically looked forward to following her father into the accounting profession. “Although our lives were all busy, we were a very close family,” London recalled. “I had an incredible family and felt very lucky both personally and professionally.”

The morning of Thursday, March 7, 2013, began like many others for London. He planned to spend the day in KPMG’s satellite office, some twenty-five miles outside Los Angeles. With the office close to home, London looked forward to avoiding LA’s notorious traffic and headed to the gym before arriving at the office around 9 a.m. After a few hours of routine administrative work, he met a few partners at a local food court before taking a short drive to meet an old friend, Bryan Shaw. “It was an unremarkable day,” said London. “I never knew it would change my life forever.”

London and Shaw had originally met more than a decade earlier playing golf at a local country club. Over time they connected over common interests, and soon the two started going out socially to dinner with their spouses. They attended concerts—Bruce Springsteen was a favorite—and traveled with friends to Las Vegas. Both London and Shaw enjoyed debating issues in the news and other topics that most of London’s other friends and colleagues avoided. “We were good friends,” London felt. “I could say anything and he did the same. I believed I could act without holding back. He provided an outlet that I did not have elsewhere.”

Following the 2009 recession, Shaw’s family-run jewelry business encountered difficulties. Around this time, he also started asking about London’s work. It began as gentle inquiries over dinner and on the golf course into how things were going at the office. Over time, Shaw asked more pointed questions about specific clients and how they were performing. “It slowly developed and evolved into something,” London remembered. A few months after these discussions started, London offered more detailed information about a particular client. Shaw traded on it, said he made $20,000, and gave London a couple thousand in return. “Once it happened and it worked, then it became easier for both of us,” London explained. In the coming months, London provided Shaw additional pieces of actionable intelligence that Shaw traded on. “Once I saw that nothing was happening, my standards became lower,” London admitted.

On that fateful spring afternoon in 2013, London met Shaw in a Starbucks parking lot. After a cursory greeting, Shaw handed London a small black bag containing a manila envelope. “I think we made a little bit more on Deckers than we anticipated,” Shaw explained. The company had announced record fourth-quarter earnings the prior week and the stock had jumped 15 percent in response—much as Shaw expected, since he relied on information provided by London. As a KPMG client, Deckers’ earnings were available for London to view ahead of their public release to the market.

Inside the manila envelope was $5,000 in cash. Shaw apologized that he had only $5,000 with him. London told him to keep the money and they’d “figure it out later,” but Shaw persisted and London took the envelope. Shaw asked London what he thought he should do with the remaining options he still had on Deckers. “Sell it and take the profits?” Shaw asked. London paused briefly, then responded: “Yeah, sell it and take the profit. . . . trust me, we’re gonna have . . . more . . . opportunities, so why risk losing anything of the profit that you got.”

Had London and Shaw been alone in the parking lot that afternoon, this brief interaction would have been quickly forgotten. But they weren’t alone. Not far away was a van with FBI agents armed with a camera and telephoto lens. They snapped a photograph of London, on the left, accepting the envelope and conspiring to provide inside information to Shaw. Shaw, someone whom London considered a close friend, wore a wire during their entire conversation.

Figure 1.1: Scott London, on left, accepting a payment from Bryan Shaw.

A week and a half later, London answered a knock at his door at 8:15 in the morning. Two men wearing suits presented their identification as FBI agents. At London’s kitchen table, the agents told him that they were aware of his discussions with Shaw and the profits Shaw had made by trading on this information. To the agents’ surprise, London quickly admitted his guilt. “I knew straight away that my KPMG career was over. Regardless of whether I fought it and sought advice from an attorney first, the likely outcome was set.” After twenty minutes, the agents left and London steeled himself for a difficult discussion with his wife and children. London would soon begin to prepare for the next, more difficult chapter in his life.

To most outside observers, London’s offense is obvious. In providing information to Shaw, London violated the confidentiality he owed his clients. Confidentiality was a sacred pillar at KPMG, as it was among all auditors. “In an elevator, in a restaurant—in any public place—you don’t talk about anything sensitive that’s client related. Those rules were firmly ingrained,” explained London. “I knew those rules and I was expected to set an example for everyone that worked for me.” Yet London supplied a friend with advance notice of upcoming news about several clients. Why would London violate the confidentiality rules that he himself had long preached to others and engage in insider trading? He had a prosperous career with an annual income nearing the seven-figure mark and an enviable family life. In return for the information he provided Shaw, he received some concert tickets, a Rolex watch, and a few envelopes containing cash—together valued at less than $70,000. London’s thirty-year career as a successful auditor ended on April 5, 2013, the day he was arrested and terminated by KPMG.

Today, we would take KPMG’s decision to fire London for granted—a professional does not violate the confidence of clients, and those who do deserve to be punished. However, this turns out to be a startlingly modern view. In the early 1960s, when Robert Morgenthau was the US Attorney for the Southern District of New York, one of the most prestigious and powerful prosecutorial positions in the United States, arresting an accountant was tantamount to turning on one’s own. “The general policy was not to indict and try lawyers and accountants on the ground they are professional people and that this would be too harsh a step,” Morgenthau recalled.

Actions that today earn long jail sentences, from insider trading to the manipulation of financial statements, were not widely seen as criminal until the middle of the twentieth century, when an academic from a mid-western university began proclaiming that everybody had it all wrong.

Illuminating Executive Misconduct

On the evening of December 27, 1939, Edwin Sutherland took to the podium to deliver his presidential address at the fifty-second annual meeting of the American Sociological Society. Soft-spoken and admired for his scholarly objectivity, Sutherland had distinguished himself as a conservative yet influential sociologist. Many in the audience knew him from his popular university textbook Principles of Criminology. Based on his past work, few of the distinguished sociologists and economists in attendance were prepared for Sutherland’s provocative remarks that evening.

Sutherland began his speech by arguing that much of what his colleagues understood about crime was “misleading and incorrect.” By relying on public criminal records, Sutherland chided his fellow criminologists for mistakenly concluding that crime was restricted to the streets and largely committed by individuals in the lower social classes. In Sutherland’s view, much of the most serious crime was being committed not by the poor or the “delinquent” but, instead, by society’s most well-known and respected business leaders. Deviance committed by “respected business and professional men” was simply overlooked because people of high socioeconomic standing were not usually convicted in criminal courts. During his talk, Sutherland even coined a new term for this class of deviance: “white-collar crime.”

In what was a rare privilege for an otherwise obscure academic presentation, several leading newspapers covered Sutherland’s speech the following day. The Philadelphia Inquirer noted that his speech “heaved scores of sociological textbooks into a waste basket” and that sociologists in attendance were “astonished” by his remarks. The New York Times credited Sutherland for giving an address “which discarded accepted conceptions and explanations of crime.” The article, echoing Sutherland’s speech, noted that “the financial cost of white-collar crime is probably several times as great as the financial cost of the crimes which are customarily regarded as the crime problem.” As evidence, the Times article gave one of Sutherland’s examples about a grocery store executive who embezzled $600,000 (the 2016 equivalent of more than $10 million) in just one year. This was six times the entire amount from five hundred robberies that occurred at the same chain of stores during the year.

This professional malfeasance, in Sutherland’s mind, was hardly an isolated phenomenon. Although he lacked broad statistical evidence at the time, Sutherland offered detailed examples of manipulative practices across every major industry—banking, utilities, insurance, oil, real estate—that he believed were just as disruptive and harmful as most street offenses against people and property. He insisted that this white-collar criminality was not restricted to “ambulance chasers, bucket-shop operators, dead-beats, and fly-by-night swindlers” but, rather, was present within many of the leading corporations in America. To his surprised audience, Sutherland went so far as to compare some of these corporate practices to the “legitimate rackets” operated by Al Capone, the notorious Chicago mobster. “White-collar crime is real crime,” he contended. “It is not ordinarily called crime, and calling it by this name does not make it worse, just as refraining from calling it crime does not make it better than it otherwise would be.”

The concerns Sutherland expressed about pervasive malfeasance perpetrated by the leaders of corporate America stood in stark contrast to the widespread veneration of businessmen only a few years earlier. In 1928, a well-known advertising executive named Earnest Calkins wrote in his book that “the most admirable and efficient piece of work being done today is the work business is doing. No king or general or priest is accomplishing so much, even in terms of his own métier, as the captains of industry. . . . Business is doing its job, and as much cannot be said of the traditional and historic leaders of mankind.” The executive was credited in popular media as being the “most influential man in our time,” and entering the field of business could hardly sound more attractive and glamorous when described as “something of the glory that in the past was given to the crusader, the soldier, the courtier, the explorer, and sometimes to the martyr.” Much of this ebullience toward business could be attributed to the rising stock market, which nearly doubled in value between 1926 and early 1929. The wealth created by the market ushered in an era of prosperity, carrying with it executives who enjoyed the public’s admiration and respect.

There was a dramatic shift in this perception when the stock market crashed in October 1929. Between August 1929 and June 1932, the S&P Composite Index lost 86 percent of its value. More than simply dampening the public’s enthusiasm toward business, the once infallible executives who gained almost heroic status in the 1920s now found themselves the targets of blame for the nation’s economic woes. The chairman of the country’s largest bank, Charles Mitchell, was lauded by one New York paper as the “ideal modern bank executive” in May 1929. Six months later, he found himself chastised as one of the individuals most “responsible for this stock crash” and the subsequent economic turmoil.

During the backlash against the business elite in the early 1930s, Sutherland developed his scholarly interest in corporate malfeasance. This attention arose from his personal misgivings about the behavior of executives and the outcome of one trial in particular. In the fall of 1932, a well-known Chicago utility executive, Samuel Insull, was charged with twenty-five counts of mail fraud and embezzlement. As the trial unfolded Insull insisted that he’d acted as any businessman would have and, therefore, that there was nothing wrong with his actions. During his cross-examination, when asked about one of the allegations, Insull exclaimed: “I would do it again—I would do it today!” Following the two-month trial, Insull won a complete dismissal of all charges. According to Marshall Clinard, a student in Sutherland’s graduate seminar and later a respected criminologist himself, Sutherland was outraged. Sutherland was baffled that someone in Insull’s position could be acquitted since, in his view, Insull’s behavior was so obviously criminal.

Soon thereafter, Sutherland began taking a scholarly interest in professional deviance. Inspired by his reading of E. A. Ross’ book, Sin and Society, Sutherland came across the concept of the “criminaloid,” people who commit acts that are not necessarily illicit but nevertheless undermine societal well-being. In Ross’ depiction, the criminaloid prospers “by flagitious practices which have not yet come under the effective ban of public opinion.” “But,” as Ross wrote, “since they are not culpable in the eyes of the public and in their own eyes, their spiritual attitude is not that of the criminal.” According to Ross, a criminaloid is a man who “murders with an adulterant instead of a bludgeon, burglarizes with a ‘rake-off’ instead of a jimmy, cheats with a company prospectus instead of a deck of cards, or scuttles his town instead of his ship, [and] does not feel on his brow the brand of a malefactor.” Picking up on Ross’ description of the criminaloid soon after the Insull trial, Sutherland wrote in the 1934 edition of his textbook that “these white-collar criminaloids . . . are by far the most dangerous to society of any type of criminals from the point of view of effects on private property and social institutions.” Sutherland further alluded to criminaloids in several additional articles before finally giving his own detailed interpretation of malfeasance by professionals and others of high social standing in his 1939 presidential address.

Corporate deviance had been historically overlooked by criminologists because it was not actually considered criminal in most instances. This circumstance arose, in part, from the lack of regulation prohibiting injurious behavior in the conduct of business. Except for some laws regulating competition and the sale of adulterated products, the federal government largely left individual states free to enact their own regulation to protect consumers and investors. These state laws were commonly referred to as “blue-sky” laws, after the belief that without them “financial pirates would sell citizens everything in [the] state but the blue sky.” Despite their intent to protect investors, blue-sky laws were often ineffective. The laws themselves were weak, and enforcement was even weaker—deliberately so in some cases, because state legislators did not want to lose licensing fees to other states with more lenient regulation.

Despite the ill effects created by deviant executive behavior, there was little effort to rein in corporate conduct and limit destructive behavior at the federal level in the 1920s. Although support for additional regulation grew in the immediate aftermath of economic downturns, subsequent improvements in conditions muted support for the passage of additional legislation. Ten weeks after the stock market crash of October 1929, six members of Congress introduced legislation to regulate corporate financial reporting and securities trading. However, this legislation was passed over during a modest, but short-lived, recovery in early 1930. When the stock market began another deep slide in the summer of that year, President Hoover anxiously chided the private governing bodies of the securities markets to enact their own changes, but he resisted efforts to take federal action as part of his desire to champion a laissez-faire, pro-business philosophy.

Seizing on Hoover’s inaction, Franklin D. Roosevelt promised swift adoption of federal securities legislation during his 1932 presidential campaign. Capitalizing on the public’s anger, President Roosevelt highlighted the dangers posed by irresponsible business practices and proposed regulation to control executives, or “privileged princes” as he once called them. Not surprisingly, many executives were opposed to the proposed regulation. During the congressional inquiry into the causes of the 1929 stock market crash, Time magazine revealed that “bankers high & low throughout the land, while not condoning the acts of 1929, loudly proclaimed that last week the greater villains were U.S. Senators who would risk the credit of the U.S. by putting scandal into the headlines when Confidence had already received body-blows.”

Despite strong resistance by corporate leaders, legislators eventually recognized a need to address weak state blue-sky laws, which led to the creation of the first major pieces of federal securities regulation—the Securities Act of 1933 and the Securities Exchange Act of 1934. The 1933 Act mandated the disclosure of accurate financial information to investors prior to selling securities. The 1934 Act created sweeping legislation governing the financial markets and controlled how securities could trade in the United States. To help restore investor confidence, the 1934 Act also created a new agency, the Securities and Exchange Commission (SEC), to regulate securities offerings and corporate reporting.

Despite these advances in regulating business conduct, Sutherland was deeply unsatisfied. He lamented the fact that executives who perpetrated injurious conduct and violated criminal law usually avoided criminal prosecution. By doing so, they fortuitously avoided the stigma of being labeled as a “criminal.” Sutherland believed that this favored administration of justice insulated corporate offenders from more serious criminal prosecution. He argued that “the crimes of the lower class are handled by policemen, prosecutors, and judges, with penal sanctions in the form of fines, imprisonment, and death.” But “the crimes of the upper class either result in no official action at all, or result in suits for damages in civil courts, or are handled by inspectors, and by administrative boards or commissions, with penal sanctions in the form of warnings, orders to cease and desist, occasionally the loss of a license, and only in extreme cases by fines or prison sentences.”

Sutherland attributed the development of this alternative punitive system to the fact that respected individuals used their power and influence to determine not only what laws were passed but also “how the criminal law as it affects themselves is implemented and administered.” Even the newly minted SEC, which was created in 1934 to explicitly police fraudulent investment practices, had only the power to sanction executives, file civil suits, and levy fines. It could not bring criminal charges against firms or individuals itself. Rather, if officials at the SEC believed a case warranted criminal indictment, they were required to refer it to prosecutors at the Department of Justice, who in turn chose whether to pursue it or not. As a result, Sutherland found that “white-collar criminals are segregated administratively from other criminals, and largely as a consequence of this are not regarded as real criminals by themselves, the general public, or the criminologists.”

With limited regulation of professional behavior and even less effort to prosecute this behavior criminally in his opinion, Sutherland compared executives to the clergy in medieval society who could act with relative impunity. According to the official statistics, criminal activity seemed to be largely restricted to street crimes such as murder, assault, and burglary. This led to one unequivocal, but misleading, conclusion—that criminal activity had a very high incidence among individuals in the lower social classes and a low incidence among people of high socioeconomic standing. By Sutherland’s estimate, over 98 percent of documented crime occurred among people of the lower classes.

Relying on these statistics on the incidence of crime, Sutherland rejected the widespread notion among criminologists of the 1930s that “since crime is concentrated in the lower class, it is caused by poverty or by personal and social characteristics believed to be associated statistically with poverty, including feeblemindedness, psychopathic deviations, slum neighborhoods, and ‘deteriorated’ families.” He fervently sought to overturn this belief by arguing that “businessmen are generally not poor, are not feebleminded, do not lack organized recreational facilities, and do not suffer from the other social and personal pathologies.” The theory that poverty caused crime simply captured the fact that regulation usually excluded deviant activities undertaken by people of the upper or professional classes. Sutherland later likened this approach by criminologists to collecting data only on criminals with red hair and then erroneously finding that red hair caused criminal behavior.

Despite Sutherland’s deliberate attempt to appear objective in his address, he could not remain detached. Underneath the veil of his academic style, he deeply believed that it was insufficient to simply classify executives who perpetrated socially injurious acts as criminal in a scholarly sense. He believed that deviant executives ought to be condemned and prosecuted as criminals without any special regard for their prior accomplishments or esteemed social status.

A Futile Effort

In the ten years following his speech in Philadelphia, Sutherland labored to create his magnum opus on white-collar crime. For $60 a month, he hired graduate students to laboriously hand-collect every violation and legal decision against seventy large firms. Using court records, reports from federal agencies, and articles from the New York Times, Sutherland’s students recorded every action, both civil and criminal, against each firm. Incredibly, Sutherland found that every single firm in his sample had at least one decision against it. Furthermore, 60 percent of the firms were convicted in criminal court, each with four convictions on average. Sutherland’s analysis provided sobering evidence, as he later noted, that “the ideal businessman and the large corporation are very much like the professional thief.”

All of Sutherland’s findings were published in his book, White Collar Crime, in 1949. Sutherland’s disheartening assessment of business and the gall it took to identify certain business activities as criminal, which were not prosecuted as such at the time, were provocative. As one reviewer of the book from Yale University put it, Sutherland was “daring to call criminal a phenomenon which neither the Chicago Police Department nor the Federal Bureau of Investigation or the Attorney General’s Department list under that heading. This is as daring as a medieval philosopher discarding Aristotle and the Church Fathers.” Sutherland believed that “an unlawful act is not defined as criminal by the fact that it is punished, but by the fact that it is punishable.”

Sutherland’s contentious conclusions were not well received in all quarters. When Sutherland approached his publisher with the draft of his book, the publisher demanded that he remove the names of firms from the text, worrying that it would face libel suits. Administrators at Sutherland’s school, Indiana University, further appealed to him to remove the names of firms out of fear that it could offend wealthy donors to the school. Eventually, Sutherland acquiesced to these demands and he removed the names of firms from his book.

Despite the absence of firms’ names in the published book, academic reviewers were nearly unanimous in recognizing that Sutherland’s contribution was significant. Now that the pervasiveness of deviant corporate behavior had been explicitly quantified, few could dispute Sutherland’s basic argument that there were undesirable activities occurring at the highest echelons of society.

There was an immediate flurry of academic scholarship in the wake of the book’s publication, but its influence on policy and the public perceptions of corporate behavior was considerably less significant. Harper’s Magazine,


  • "[Soltes] has done a great service with Why They Do It. Not only does he draw on psychological research to dissect the way white-collar criminals think-or fail to think-before they act. But he also interviews several of the most famous white-collar criminals of our time, among them, the corrupt lawyer Marc Dreier and the financial swindlers Allen Stanford and Bernie Madoff. He presents what he has found in a spirit of understanding rather than condemnation."—Wall Street Journal
  • "[Soltes] takes a unique approach, looking for the connections between what motivated these men - and yes, they are all men - and asking not what they did but why they did it....Soltes creates some fascinating portraits."—Washington Post
  • "Groundbreaking...[an] impressive debut...A forcefully developed and documented contribution to our further understanding of high-level criminality in lightly regulated free markets."—Kirkus Reviews

On Sale
Mar 5, 2019
Page Count
464 pages

Eugene Soltes

About the Author

Eugene Soltes is the Jakurski Family Associate Professor of Business Administration at Harvard Business School. His research on corporate malfeasance has been cited by the Wall Street Journal, Financial Times, USA Today, and Bloomberg News. Professor Soltes teaches in Harvard Business School’s executive education programs and is the recipient of the Charles M. Williams Award for Outstanding Teaching. He received his PhD and MBA from the University of Chicago Booth School of Business and his AM in statistics and AB in economics from Harvard University.

Learn more about this author