| This paper makes the general argument that one of the consequences of the globalization of financial markets has been the creation of what Saskia Sassen has called "regulatory voids," markets that operate with little or no governmental oversight. As empirical support for this argument the paper presents a case study of frauds committed in California's surplus lines insurance indsustry in the late 1980s and early 1990s. There, the departure of legitimate companies from the auto insurance and inner-city commercial insurance markets left the door wide open for white collar criminals to sell bogus insurance policies issued by companies domiciled in foreign, often Caribbean, countries. These schemes took advantage of California laws that allowed non-admitted, i.e., nonlicensed, insurance companies operating in the surplus lines market to sell insurance products without meeting the financial standards required of licensed insurers. When these firms inevitably failed, policyholders were stuck with hundreds of millions of dollars in unpaid claims. The case study illustrates how changing markets create the opportunities for white-collar criminals to utilize specific organizational forms to achieve their goals. |
Updated 05/20/2006