An exploratory study of organizational deviance and insider white collar crimes in the savings and loan industry using the organizational ecology paradigm

This dissertation uses a multiple case study methodology to explore both the presence and the absence of white collar insider abuse and fraud in seventeen savings and loans operating in Maryland, Pennsylvania, and Virginia between January 1, 1987 and December 31, 1992. The research findings are addressed to the financial community at large, to those charged with future reform of the American thrift system, and to sociologists interested in organizational behavior and white collar crimes. In this dissertation, major concepts from organizational ecology literature are used to analyze why and how organizational white collar crimes and insider white collar crimes were perpetrated and the effects these crimes had on institutional survival. Organizational ecology is a useful paradigm, because it provides a conceptual frame to study populations of organizations and individual organizational behaviors. Organizational ecologists have advocated that the paradigm be explored at a micro, intraorganization level of analysis. The study of thrifts was an appropriate application of the model to explore change in internal decision-making and management culture at this tertiary level. This dissertation studies the life cycles of three thrift institutions that operated in Maryland, nine that operated in Pennsylvania, and five that operated in Virginia. These case studies provide opportunities to compare and contrast diversity and variability in the thrift population and how each institution strategized and positioned itself in the turbulent operational environment of the industry. Organizational ecology posits that a broad range of measures affect the evolution of organizations. Internal and external factors associated with thrifts were explored for their interpretative value to changes in the thrift industry and individual thrifts. These factors were: (1) asset size; (2) niche and location; (3) niche concentration; (4) institutional ownership, capitalization; (5) client services that were offered; (6) organization, and compensation of the board of directors; (7) management culture; (8) the role of board audit committees; (9) the role of outside accountants; (10) insider lending policies; and (11) directors and officers insurance coverage. With specific reference to the Mid-Atlantic thrifts, the ecology paradigm was a useful explanatory tool. Analysis of the case studies discloses that twelve of the seventeen thrifts had some type of insider abuses and/or fraud, even though, federal regulators and prosecutors have not proceeded with charges against all of them at the time this dissertation was written. The study concludes that internal changes and management decision-making within the organization had a far greater impact on the likelihood that abuse and fraud would have occurred. In addition, the study finds that the survival of institutions was linked to historically strong financial patterns and law-abiding, prudent management cultures. These findings are compared and contrasted with several other recent studies completed on the savings and loan industry. Finally, the study provides descriptive data on patterns of insider abuse and fraud which broadens our understanding of white collar criminology.