Chapter 1

Introduction
 CHAPTER 1

INTRODUCTION

Right from the very beginning of the civilizations, there has been existence

of power in few hands. There have always been people who either because of the

position or the knowledge they hold have dominated the public in general. Although

this can‘t be said for each one of them, but still the fact remains at large that when

the exercise of power is done without responsibility the result is crime. And when

this exercise of power is done for gaining financial gains it gives rise to white-collar

crimes. Right from the times immemorial there has always been allocation of power

to few for the general administration of the society. This allocation of power is due

to either the position they hold or the knowledge they possess. This gives them an

upper position in the social structure. During kingdoms the court men or the kin of

the king held this position. They had powers vested to them in the position they held,

which also had attached responsibility of doing the tasks they were allotted with

utmost sincerity and honesty. And it can be said that to a large extent except a few

there was no deviation from this.

But societies progressed and with this the demands and the needs also increased.

There burden on resources increased and with advent of industrialization the gap

between the needs and satisfaction also increased. There emerged a new class division

in the society the upper strata, middle strata and the lower strata. The upper strata

consists of the rich businessmen, politicians, bureaucrats and professionals like

advocates, doctors, accountants etc. This upper class holds a place of advantage in the
Introduction 2

society over and above the rest. They possess a degree of power which they exercise

over the general public.

With the advent of industrialization there was an increase in the financial

crimes. These crimes were mostly committed by the people of upper strata which

consisted of businessmen and politicians and bureaucrats. It was then in the year

1930 that criminologist Edwin Sutherland brought into the notice of the world the

very concept of white-collar crimes. Although he didn‘t define the term white-collar

crime but it was him who opened the eyes of the world to then a very young but

potential giant evil of the white-collar crime. Hence he is rightly tagged as ―the

father of white-collar crime‖. He at that time brought into the notice of the world

that how the businessmen using immoral means gained financial gains which had a

great impact on the unaware society. Till then there was ignorance of such acts as the

impact on the victims was hidden and indirect. The major characteristic of the white-

collar crime is that the victim is unaware of the loss and the impact of the crime

done against him. This very nature of the crime makes it even more dangerous and

difficult to control.

The contribution of Edwin Sutherland towards white-collar crime is

tremendous. He argued that:-

 Such type of crime involves betrayal of trust implied in the holding of the

position or an office.

 These are committed by people in course of their profession who belong to

high strata.
Introduction 3

 These crimes pose a threat which is greater as compared to other crimes to

the society as these encourage cynicism and distress amongst the members.

These crimes also incur huge financial loss to the society which in turn

affects the development of the society on the whole.

Sutherland‘s observation completely changes the mindset of the criminologists.

Earlier it was believed that the people who commit most of these crimes are the people

of lower strata. It was believed that poverty was the major contributor towards

criminal activities. It was believed that the people who are deprived of the luxuries

are most prone to commit crimes. But Edwin Sutherland changed the outlook and

the philosophy of crimes. He pointed out that the rich or the people of upper strata

are also likely to commit financial crimes. This marked a major shift in criminology

inquiry and research. This put more light on the curses of professional deviance and

white-collar crimes.

Often the crimes are classified by their types and the topic. The crimes are

catagorised into:

By type of offence, e.g. property related crimes, crimes affecting human

body, economic crimes and other crimes such as legal violations with respect to

safety and health. Sometimes the crimes are also recognized by the offender‘s

identity. E.g. bank frauds can be identified by the bank personnel. Such in the case

of PNB Bank scam that involved Neerav Modi the role of the manager of the bank

was always inclusive.

Introduction 4

By type of offender i.e. the socio-economic background of the offender. The

profession, academic qualification or the social position he holds. These crimes are

generally conducted due to the greed or fear of social status. The major motivation

behind conduct of such crimes is the desire to gain respect or recognition although

being false in the society. The major differentiation between the crimes is the

backgrounds and characteristics of the preparators. Nearly all white-collar crimes are

identifiable by lives of privilege, which grows from the class inequality. The class

inequality and the growing gap between classes promote crimes.

White-collar crimes majorly are conducted using the special knowledge or

the position that the offender holds in the society. The immoral, un-ethnical and

illegal acts that are conducted so as to gain material benefits using the professional

or positional edge over and above the others constitute white-collar crime.

There have been various definitional issues regarding white-collar crimes.

White-collar crimes were never defined by Sutherland but he quoted that ―a crime

committed by a person of respectability and high social status in the course of his

occupation‖. Now if we study the statement following points can be deduced:

1. That it is a crime committed by a person of respectability and high social

strata. Meaning thereby that it is only the people of upper strata of the society

that can commit white-collar crimes. This statement ignores the crimes such

as tax violations, frauds which can be committed by a person of low strata

too, cybercrimes, food adulteration etc. such crimes can be committed by a

layman or any person of the society. Hence the Sutherland‘s view with

respect to the class is narrow and limited.

Introduction 5

2. The crimes are done in course of his occupation. Meaning thereby that the

crimes are done by the people using their knowhow of the occupation they

are in. here it can be argued that it is not necessary that all white-collar

crimes are committed in course of one‘s occupation. Crimes like bribery, tax-

evasion, embezzlement, frauds etc. are not done under the course of

occupation yet they are crimes.

Hence although the contributions of Sutherland cannot be denied but the

statement on white-collar crime given by him do not justify the complexity and

seriousness of the white-collar crimes.

1.1 Criticism of Sutherland

The view of Sutherland on white-collar crimes has been subject to lot of

criticism. Coleman and Moynihan have cited that the most controversial is the

absence of definite criteria of white-collar crime. It may be perceived that

Sutherland meant absence of crimes other than white-collar crimes from convictions.

The term high strata is very vague, and lacks definite value and holds a very narrow

meaning in today‘s world. Even Sutherland was unable to stick to phrase as he

mentioned thefts and frauds committed by middle and lower strata people. Another

criticism is that it includes crimes which are not necessarily done in the course of the

occupation such as bribery, fraud, pilfering etc. Sutherland was of the view that

these crimes are done in course of one‘s occupation. Many argued that these acts

may be termed as ―occupational crimes‖ instead of white-collar crimes. Some critics

viewed that the acts like tax evasion etc. are in the purview of special tribunals,

boards and commissions hence cannot be crimes as these cannot be punished by

Introduction 6

conviction. Tappan was of the view that ―treating white-collar violators as criminals

would deviate from the legal definition of crime‖. Another major criticism is the

doctrine of mensrea which constitute the major ingredient of crime. In white-collar

crimes the mensrea may be absent and the requirement of guilty mind may be

excluded in these cases explicitly in implication. However the contribution of

Sutherland is very important as it was him that opened the eye of people towards a

new phenomenon white-collar crime. The observations of Sutherland not only

helped others to study and research a new field in criminology and law but also

helped a great deal towards uniform development of the society.

Leaving aside the definitional issues, the pioneering work of Sutherland

ignited the minds of the people for few decades. Certain detailed studies of

particular offences such as violations of financial trust, were the exceptions rather

than the rule. Some analysts discussed occupational crimes rather than white-collar

crimes. Offenders in these were not of exclusively high strata but mediocre people

such as retailers, bank tellers etc. During the period majority of the criminological

studies were concentrated on juvenile and crimes that were violent in nature.

The Sutherland‘s work generated so little attention of researchers, law

makers and a social thinker is not understandable. However there might be few

reasons that might explain the reason for ignorance. Firstly, the massiveness of the

concept and the confusion about white-collar crime might have played a huge role.

Secondly, the years of 1950s and 1960s does not refer to depression era, the issues

concerning employment and development of the younger generation were at the

center of government‘s policy. Thirdly the traditional criminologists were convenient

Introduction 7

in studying the weaker and underprivileged class of the society rather than the rich,

high society and powerful persons. Apart from these the socio-economic conditions

prevailing in that era might have also contributed towards a dull attention and

progress towards the subject.

1.2 Definitional Issues

From the above discussion we can that the definition given by Sutherland

although informal but still have many lacunas in it. The definition neither defines the

term white-collar crime clearly nor is a complete statement. After Sutherland various

thinkers, sociologists, criminologists and people related with law gave various

definitions of white-collar crime. Some of them are:

Herbert Edelhertz proposed to define white-collar crime as "an illegal act or series

of illegal acts committed by nonphysical means and by concealment and guile, to

obtain money or property, to avoid payment or loss of money or property, or to

obtain business or personal advantage"1.

Hartung defines a ―white-collar offense as a violation of law regulating business, which

is committed for a firm by the firm or its agents in the conduct of its business.‖2

Many more definitions were proposed and stated but most of these did not

pay heed to the problem of professional deviance, which one major aspect of white-

collar crime. The definitions given previously have stressed on the business

1
Edelhertz, Herbert. The nature, impact, and prosecution of white-collar crime. Vol. 2. National
Institute of Law Enforcement and Criminal Justice, 1970.
2
Hartung, Frank E. "White-collar offenses in the wholesale meat industry in Detroit." American
Journal of Sociology 56.1 (1950): 25-34.
Introduction 8

prospect. However in today‘s world the role of professionals is far more active and

important. Today the need of professionals in every field of life is unavoidable.

Right from accounting to paying taxes to managing household to e-management, we

are dependent on the professionals and their skill set. In one way or the other we

need the services of professionals for our various needs.

Also the fact that all white-collar crimes may not be done through illegal

acts, makes the previous definitions more ambiguous. For example a sales

representative can offer commission to doctor to prescribe his medicine, despite it

being more expensive. Or a teacher may show favor to the students who take tuitions

from him. Now there is nothing illegal but surely unethical in these cases. We need

to identify these acts as well as put them in purview of white-collar crimes as these

fulfill all the criteria of victimization of white-collar crime. Hence it is important to

include these in the definition also. And thereby we suggest a new definition of the

white-collar crime.

―Any act whether illegal or unethical done with the intention to gain

material benefit whether immediate or deferred, in cash or in kind done in the

capacity of the knowledge or the position the person holds which ultimately results

in financial benefit is white-collar crime‖

To explain the definition further the act may be legal or illegal. As discussed

above for any act to be white-collar crime the act necessarily need not be illegal. By

giving the example of commission we have explained that an act which is legal but

unethical also constitutes white-collar crime. The act can be illegal or unethical. Say

for another example a doctor recommends pathological tests from a specific

Introduction 9

laboratory which offers commission to the doctor on each patient they receive for

pathological tests. Secondly the mens rea is an important element. For any act to be

crime the intention to do wrong should be there. This principle is applicable in

almost all legal aspects exception being torts. You cannot punish a person who does

an act innocently without knowing the wrong he will commit by the performance of

that act. So for any act to be white-collar crime there has to be an intention or mens

rea to gain benefit. Thirdly the benefit can be immediate as in the case of bribe to the

receiver or deferred as in the case of the person who bribes to get transfer or

promotion. But the ultimate motive is financial gain. This condition of financial gain

is necessary to separate it from blue collar crime. Fourthly the act must be done in

the capacity of ones specialized knowledge as in the case of professionals or in the

capacity of the position one holds as in the case of a bank manager sanctioning loan

by receiving bribe. Now to analyze further if we take professionals they possess

special and specific knowledge of their field. This knowledge is about their subject

which they use to earn money. Since a common man is not capable of having in

depth knowledge of every subject hence he uses the services of professionals to get

his work done. These professionals sometimes dupe their customer by various

means using the ignorance of the customer. And the customer relying on the

professional and having faith in him suffer losses and damage. Again by use of

position we mean suppose a tax payer who holds unique position of paying his

taxes. Now if evades from paying his taxes, he uses the position he is in for payment

of taxes, another example take a police officer who is investigating a case and he let

go the culprit by taking bribe. Now here the culprit knowing that the police officer is

in the position to investigation the case offers him bribe which he accepts. Hence
Introduction 10

here the use of position for white-collar crime comes in place. Fifthly the act should

result in financial benefit ultimately. Say a person pays bribe for transfer to desired

department of for promotion. Although we cannot be very sure that in case of

transfer the motive is to gain posting where he can get bribes or excess money, but

the probability of that much higher and again the promotion shall result in increase

in the salary package which he shall eventually get being on that position. So we can

say that the financial may not be immediate but the act shall result in ultimate

financial benefit.

Hence we feel that this is a complete definition of white-collar crimes.

However changes in can be made in future considering the new dimensions that

open up in white-collar crimes.

Differentiating the white-collar from the blue-collar or traditional crimes

In the definition of white-collar crimes we have stated that these are the

crimes done using the position or specific knowledge that the person possesses.

However there are certain crimes which can be done by the same means yet they

cannot be considered ass white-collar crimes. E.g. a doctor can sexually assault a

patient on pretext of medical treatment. Or a person can commit breach of trust for

he has the complete knowledge of that particular thing or is in possession of the

thing which he can use for the personal benefit. Hence it becomes really tricky to

identify and differentiate between the two. However using the following checks we

can differentiate between the two:

 First criterion is that in blue collar or traditional crimes most of the times the

victim is immediately located and when the act is done he is well aware of
Introduction 11

the wrong committed against him, while in white-collar crime this is totally

reverse. In white-collar crimes the victim is not aware of the wrong done

against him immediately. Say victims are not aware that what resulted in

sudden crash of market, why a bank closes of a sudden.

 Secondly the victim is not able to assess the loss imparted on him due to the

white-collar crime. E.g. in case of a theft the victim can assess the actual loss

incurred by him due to the crime, however in a fraud the victim is unable to

assess the actual loss incurred by him. It takes time or it takes someone else

to give the knowledge of the loss that has been imparted on the victim due to

the crime.

 Thirdly the blue collar or traditional crimes may not be essentially economic

or financial crimes that are done against a person, community or society on

the whole. Whereas the white-collar crimes are essentially financial or

economic crimes that can be done against a person, community or society on

the whole. E.g. murder is done of person or more, hate crimes can be done

against a particular community and riots are done against the society.

Whereas fraud can be done against a person such as Bank Card frauds,

against a community such Embezzlement of money of a trust of the

community and bank frauds that affect the whole society such latest P.N.B.

and Neerav Modi case.

 Fourthly the difference is due to judging of mens rea in both the cases. In

traditional crimes the mens rea is very important however there are certain

crimes which do not consider mens rea as essential element while punishing

for a crime e.g. negligence, strict and absolute liability, and various other
Introduction 12

torts. While we feel that mens rea should be an essential element while

judging a white-collar crime. A white-collar crime cannot be done in

innocence. The accused in case of white-collar crimes is well aware of his

acts and its results. E.g. a person violating tax is well aware of the act he is

doing, a person who is adulterating any food stuff is well aware of act he is

doing. Hence for any offence to be white-collar offence mens rea is implied

or essential element. Although many sociologists argue that even if the act

done was not intentional still the act should be punished severely so as to

prevent other people from doing such acts. But again it would be unfair to

punish any person for an act which he has done innocently or in good faith.

Hence we can now differentiate between the white-collar crime and the

traditional crimes. Further in the following chapters we shall have a detailed

discussion on various topics related to the white-collar crimes. In chapter 2 we shall

discuss white-collar crimes in U.S.A. India has very close ties with U.S. whether it

the trade or defense or any other field. Since the term white-collar crime originated

in the U.S. by the works Edwin Sutherland, hence it would be best to study the

scenario of the U.S. with respect to white-collar crime.

In the chapter 3 we shall discuss white-collar crimes in India, its basic

features like causes and consequences of rise in the white-collar crimes in India.

Also we shall give a brief review of the laws made with respect to tackle the issue of

white-collar crime in India. Then in chapter 4 we shall discuss the concept of

Professional Deviance, the definition and the meaning of professional deviance

along with causes of the rise of professional deviances in India. Then further in
Introduction 13

chapter 5 we shall look in the professional deviances in various professions such as

legal, medical, sports etc. we shall discuss leading cases and laws. Then in chapter 6

we shall discuss the judicial response towards white-collar crimes in India. In the

light of few major cases we shall analyse the laws and their effectiveness and

usefulness in controlling and combating the problem of white-collar crimes. In

chapter 7 we shall briefly discuss few of the major scams that ate into the society.

Through we shall be able to analyze the reasons for the growth of white-collar

crimes in India. And at last but not least in chapter 8 we shall after analyzing the

complete matter and the results of the survey to reach out at a conclusion. And on

the basis of the conclusion we shall suggest certain changes that can be made so as

to effectively deal with problem of white-collar crime in India.