TOPIC

A BRIEF INSIGHT INTO THE MEANING AND ATTRIBUTES OF THE

WORLD OF WHITE COLLAR CRIME

By: KM SONIYA

INTRODUCTION

White collar crime refers to non-violent crimes committed through deceptive

practices, for the purpose of financial gain. Typically, white collar crimes are

committed by business people who are able to access large amounts of money,

though the term is sometimes applied to others who pilfer monies in other

circumstances. White collar crimes are non-violent, and are committed by a broad

range of activities, such as insider trading. To explore this concept, consider the

following white collar crime definition.

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Definition of White Collar Crime

Meaning

Crimes that are committed using deceptive practices for financial gains.

Origin

Term created by Edwin Sutherland, Professor of Sociology, President American

Sociological Society in 1939.

Common Types of White Collar Crime

The term white collar crime covers a wide array of crimes, but they all involve

crimes committed through deceit for the purpose of gaining money or other assets.

The most common types of white collar crime include fraud, insider trading, and

bribery. White collar crimes can often be difficult to prosecute, as the perpetrators

take sophisticated steps to ensure their illegal activities are difficult to detect. The

most common types of white collar crime are explained below.

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1.Fraud

Fraud is committed by misrepresenting facts in order to gain something in return.

The crime of fraud requires four elements:

 The perpetrator made a statement of fact that he knew to be false

 The perpetrator intentionally made the false statement

 The victim believed the statement to be true, relied on the statement, and lost

something of value, based on his belief

Example of Fraud:

Rahul responded to an ad about an apartment for rent. He met with the supposed

landlord, toured the apartment, and agreed to rent the apartment by signing a lease.

Rahul paid the security deposit and first month’s rent up front. The next week,

Rahul went to the apartment to pick up the key, and learned that someone else

actually occupied the residence.

After doing some investigation, Rahul learned that the apartment was not for rent

at all, but that the man he met with and gave the money to was not the property

owner. In this example of white collar crime, the man who posed as the owner to

swindle money out of a prospective tenant has committed fraud.

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2.Insider Trading

Insider trading is often considered a type of fraud, though many people are

surprised to learn that not all insider trading is illegal. Insider trading is against the

law if a securities transaction, which is the sale or purchase of stocks, is engaged in

by a person, or small group of people, inside the company, who have special

knowledge not available to others.

Example of Insider Trading:

Deepak works for a private company that is working on a device that can detect

certain serious heart problems. One day, while at work, Deepak receives an email

that was intended for his boss. The email stated that the device would be released

on a certain day, which had not been announced to the public. Deepak immediately

calls family and friends, telling them to buy company stock right away.

By time the product is released, which immediately raises stock values, the

company’s stocks have already been bought out. In this example of white collar

crime, Deepak used “insider information” to give his friends and family an edge,

enabling them to obtain company stocks at the previously low rate.

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3.Securities Fraud

Securities fraud comes in many flavors, but one common type is "insider

trading," , as discussed earlier,in which someone with inside information about a

company or investment trades on that information in violation of a duty or

obligation. For example, an executive knows confidential information about an

upcoming company earnings report decides to sell of a chunk of his stock in the

company. That would be considered securities fraud, specifically, insider trading.

Another type of securities fraud occurs when someone seeks investment in a

company by knowingly misstating the company's prospects, health or finances. By

luring an investor to put up money based on false or misleading information, the

company and individuals within it commit securities fraud. False or misleading

statements in public reports from publicly traded companies also can constitute

securities fraud. To commit securities fraud, those speaking on behalf of the

business must make these false statements with knowledge that they are false, or at

least reasonably should know them to be false.

One of the most well-known white-collar criminals is Bernard Madoff, who was

convicted in 2009 of a massive fraud that cost investors $65 billion. Madoff,

sentenced to 150 years in prison, ran an elaborate Ponzi scheme, which promised

large returns on investments. For many years, Madoff used money from new

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investors to pay previous investors without actually investing the funds. Madoff’s

scheme fell apart when a significant number of investors demanded their money

back,and Madoff was unable to pay them.

4.Bribery

Bribery is committed when a person uses something of value to tempt or influence

someone to act in a specific way, to make certain decisions, or to express certain

opinions. This is most commonly seen in one person offering to pay money to

another person, who is in a position of authority, for the purpose of persuading him

to do something, or to refrain from doing something. Both offering bribes, and

accepting bribes, are considered illegal.

Example of Bribery:

DrillTech company is in the process of engineering a horizontal drilling project for

a company installing a pipeline that runs through Indore. The City Engineering

office is dragging its feet on approving the drilling project, bringing up question

after question about the project. Mr. Smith, DrillTech’s Vice President of hole-

drilling, invites Ram, the City Engineer to lunch, during which he offers to

“donate” Rs.10,00,000 to his children’s education fund, if Ram will just finish the

approval process, allowing DrillTech to get on with the project.

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This is considered bribery, as its purpose is to induce a city official to take an

action that will benefit the company’s business and profit. In this example of white

collar crime, DrillTech has committed an illegal act in attempting to bribe the city

official. If Ram accepts the bribe and greenlights the drilling project, he has also

committed an illegal act.

5.Forgery

The altering, making, possession, or use of a falsified document, such as a check,

contract, or other document, with the intent to defraud or injure the recipient of the

document. This includes such crimes as passing forged checks, and creating,

possession, or selling falsified art.

.6.Embezzlement

Embezzlement is improperly taking money from someone to whom you owe some

type of duty. The most common example is a company employee that embezzles

money from his employer for example by siphoning money into a personal

account.

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Embezzlement can take many forms, however. Lawyers who improperly use client

funds commit embezzlement. So do investment advisers who improperly use client

funds they have been entrusted to protect.

7.Tax Evasion

Criminal tax evasion is a white collar crime through which the perpetrator attempts

to avoid taxes they would otherwise owe. Tax evasion can range from simply filing

tax forms with false information, to illegally transferring property so as to avoid

tax obligations. Individuals, as well as businesses can commit criminal tax evasion.

As with fraud, there are perhaps infinite ways to commit tax evasion.

8.Money Laundering

Money laundering is the criminal act of filtering illegally obtained ("dirty")

money through a series of transactions designed to make the money appear

legitimate ("clean"). Money laundering often involves three steps. First, the money

is deposited typically into a financial institution such as a bank or brokerage. Next,

the money is separated from its illegal origin by layers of often complex

transactions, making it more difficult to trace the "dirty" money. The third step is
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integration. This is where the freshly "cleaned" money is mixed with legally

obtained money, often through the purchase or sale of assets.

Other Types of White Collar Crime

a)Telemarketing scams:

Telemarketing fraud is fraudulent selling conducted over the telephone. The term

is also used for telephone fraud not involving selling.

Telemarketing fraud often involves some sort of victim compliance whether it

involves the victim initiating contact with the perpetrator or voluntarily providing

their private information to the offender; thus, fraud victims may experience

feelings of shame and embarrassment that may prevent them from reporting their

victimization.

Older people are disproportionately targeted by fraudulent telemarketers and make

up 80% of victims affected by telemarketing scams alone. Older people may be

targeted more because the scammer assumes they may be more trusting, too polite

to hang up.

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b)Ponzi schemes:

A Ponzi scheme is a form of fraud which lures investors and pays profits to earlier

investors by using funds obtained from more recent investors. Investors may be led

to believe that the profits are coming from product sales, or other means, and

remain unaware that other investors are the source of profits. A Ponzi scheme is

able to maintain the illusion of a sustainable business as long as there continues to

be new investors willing to contribute new funds and most of the investors do not

demand full repayment and are willing to believe in the non-existent assets that

they are purported to own.

The scheme is named after Charles Ponzi, who became notorious for using the

technique in the 1920s. The idea had already been carried out by Sarah Howe in

Boston in the 1880s through the "Ladies Deposit". Howe offered a solely female

clientele an 8% monthly interest rate, and then stole the money that the women had

invested. Howe was eventually discovered and served three years in prison. The

Ponzi scheme was also previously described in novels, for example, Charles

Dickens' 1844 novel Martin Chuzzlewit and 1857 novel Little Dorrit each feature

such a scheme. Ponzi carried out such a scheme and became well known

throughout the United States because of the huge amount of money he took in.

Ponzi's original scheme was based on the legitimate arbitrage of international reply

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coupons for postage stamps, but he soon began diverting new investors' money to

make payments to earlier investors and himself.

Typically, Ponzi schemes require an initial investment and promise well-above-

average returns. They use vague verbal guises such as "hedge futures trading",

"high-yield investment programs", or "offshore investment" to describe their

income strategy. It is common for the operator to take advantage of a lack of

investor knowledge or competence, or sometimes claim to use a proprietary, secret

investment strategy in order to avoid giving information about the scheme.

The basic premise of a Ponzi scheme is "To rob Peter to pay Paul". Initially, the

operator will pay high returns to attract investors and entice current investors to

invest more money. When other investors begin to participate, a cascade effect

begins. The "return" to the initial investors is paid by the investments of new

participants, rather than from profits of the product.

Often, high returns encourage investors to leave their money within the scheme, so

the operator does not actually have to pay very much to investors. The operator

will simply send statements showing how much they have earned, which maintains

the deception that the scheme is an investment with high returns. Investors within a

Ponzi scheme may even face difficulties when trying to get their money out of the

investment.

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Operators also try to minimize withdrawals by offering new plans to investors

where money cannot be withdrawn for a certain period of time in exchange for

higher returns. The operator sees new cash flows as investors cannot transfer

money. If a few investors do wish to withdraw their money in accordance with the

terms allowed, their requests are usually promptly processed, which gives the

illusion to all other investors that the fund is solvent, or financially sound.

Ponzi schemes sometimes commence operations as legitimate investment vehicles,

such as hedge funds. Hedge funds can easily degenerate into a Ponzi-type scheme

if they unexpectedly lose money or fail to legitimately earn the returns expected. If

the operators fabricate false returns or produce fraudulent audit reports instead of

admitting their failure to meet expectations, the operation is then considered a

Ponzi scheme.

c)Pyramid schemes:

It works by recruiting “members” to invest into a scheme. Most of the money is

made by recruiting new members and a prime characteristic of the scam is the

product is of little value. The people at the bottom of the pyramid pay the people at

the top. Inevitably they will run out of new recruits and the scheme will

collapse. Some individuals may profit from pyramid schemes, but the vast majority

of those who join later on in the scheme will not.

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d)Bank fraud:

Bank fraud is the use of potentially illegal means to obtain money, assets, or other

property owned or held by a financial institution, or to obtain money

from depositors by fraudulently posing as a bank or other financial institution. In

many instances, bank fraud is a criminal offence. While the specific elements of

particular banking fraud laws vary depending on jurisdictions, the term bank fraud

applies to actions that employ a scheme or artifice, as opposed to bank robbery or

theft. For this reason, bank fraud is sometimes considered a white-collar crime.

e)Racketeering:

A racket is a planned or organized criminal act, usually in which the criminal act is

a form of business or a way to earn illegal or extorted money regularly or briefly

but repeatedly. A racket is often a repeated or continuous criminal operation.

Originally and often still specifically, a racket was a criminal act in which

the perpetrator or perpetrators offer a service that is fraudulently offered to solve a

nonexistent problem, a service that will not be put into effect, or a service that

would not exist without the racket. Conducting a racket is racketeerin. Particularly,

the potential problem may be caused by the same party that offers to solve it, but

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that fact may be concealed, with the specific intent to engender

continual patronage for this party.

The most common example of a racket is the "protection racket", which promises

to protect the target business or person from dangerous individuals in the

neighborhood and then either collects the money or causes damage to the business

until the owner pays. The racket exists as both the problem and its solution, and it

is used as a method of extortion.

However, the term "racket" has expanded in definition and may be used less

strictly to refer to any illegal organized crime operation, including those that do not

necessarily involve fraudulent practices. For example, "racket" may be used to

refer to the "numbers racket" or the "drug racket", neither of which generally or

explicitly involve fraud or deception with regard to the intended clientele.

f)Healthcare Fraud:

The majority of health care fraud is committed by organized crime groups and a

very small minority of dishonest health care providers. The most common types of

health care fraud include:

 Billing for services that were never rendered-either by using genuine patient

information, sometimes obtained through identity theft, to fabricate entire

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 claims or by padding claims with charges for procedures or services that did

not take place.

 Billing for more expensive services or procedures than were actually

provided or performed, commonly known as "upcoding"-i.e., falsely billing

for a higher-priced treatment than was actually provided (which often

requires the accompanying "inflation" of the patient's diagnosis code to a

more serious condition consistent with the false procedure code).

 Performing medically unnecessary services solely for the purpose of

generating insurance payments.

 Misrepresenting non-covered treatments as medically necessary covered

treatments for purposes of obtaining insurance payments-widely seen in

cosmetic-surgery schemes, in which non-covered cosmetic procedures such

as "nose jobs" are billed to patients' insurers as deviated-septum repairs.

 Falsifying a patient's diagnosis to justify tests, surgeries or other procedures

that aren't medically necessary.

 Unbundling - billing each step of a procedure as if it were a separate

procedure.

 Billing a patient more than the co-pay amount for services that were prepaid

or paid in full by the benefit plan under the terms of a managed care

contract.

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  Accepting kickbacks for patient referrals.

 Waiving patient co-pays or deductibles for medical or dental care and over-

billing the insurance carrier or benefit plan (insurers often set the policy with

regard to the waiver of co-pays through its provider contracting process;

while, under Medicare, routinely waiving co-pays is prohibited and may

only be waived due to "financial hardship").

White Collar Crime Statistics

 White collar crime most commonly occurs in companies with fewer than 100

employees

 75% of white collar crime is committed by men

 The typical perpetrator of white collar crime is a college-educated male.

 On average, companies lose $9 or more per day, per employee due to fraud.

 Managers are responsible for four times the amount of loss than employees

 Each year, there are around 5,000 arrests per 100,000 people in the United

States alone for white collar crimes

 Of those arrests, 635 are related to property crimes

 Bribery accounts for the fewest white-collar-crime-related arrests

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  Estimates show that one out of every four households will be the subject of a

white collar crime at some point in their life

Related Legal Terms and Issues

 Civil Lawsuit – A lawsuit brought about in court when one person claims to

have suffered a loss due to the actions of another person.

 Damages – A monetary award in compensation for a financial loss, loss of or

damage to personal or real property, or an injury.

 Felony – A crime, often involving violence, regarded as more serious than

a misdemeanor. Felony crimes are usually punishable by imprisonment more

than one year.

 Fraud – A false representation of fact, whether by words, conduct, or

concealment, intended to deceive another.

 Intent – A resolve to perform an act for a specific purpose; a resolution to use

a particular means to a specific end.

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  Victim – A person who is injured, killed, or otherwise harmed as a result of a

criminal act, accident, or other event.

Definitional issues

Modern criminology generally rejects a limitation of the term by reference, rather

classifies the type of crime and the topic:

 By the type of offense, e.g., property crime, economic crime, and other

corporate crimes like environmental and health and safety law violations. Some

crime is only possible because of the identity of the offender, e.g., transnational

money laundering requires the participation of senior officers employed in

banks. But the narrow approach defines white-collar crime as "those illegal acts

which are characterized by deceit, concealment, or violation of trust and which

are not dependent upon the application or threat of physical force or violence".

 By the type of offender, e.g., by social class or high socioeconomic status, the

occupation of positions of trust or profession, or academic qualification,

researching the motivations for criminal behavior, e.g., greed or fear of loss of

face if economic difficulties become obvious. Shover and Wright point to the

essential neutrality of a crime as enacted in a statute. It almost inevitably

describes conduct in the abstract, not by reference to the character of the

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 persons performing it. Thus, the only way that one crime differs from another is

in the backgrounds and characteristics of its perpetrators.

 By organizational culture rather than the offender or offense which overlaps

with organized crime. Appelbaum and Chambliss offer a twofold definition:[7]

 Occupational crime which occurs when crimes are committed to promote

personal interests, say, by altering records and overcharging, or by the

cheating of clients by professionals.

 Organizational or corporate crime which occurs when corporate executives

commit criminal acts to benefit their company by overcharging or price

fixing, false advertising, etc.

Relationship to other types of crime

1.Blue-collar crime

The types of crime committed are a function of what is available to the potential

offender. Thus, those employed in relatively unskilled environments and living in

inner-city areas have fewer opportunities to exploit than those who work in

situations where large financial transactions occur and live in areas where there is

relative prosperity.[8] Blue-collar crime tends to be more obvious and thus attracts
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more active police attention such as vandalism or shoplifting. In contrast, white-

collar employees can incorporate legitimate and criminal behavior, thus making

themselves less obvious when committing the crime. Therefore, blue-collar crime

will more often use physical force, whereas in the corporate world, the

identification of a victim is less obvious and the issue of reporting is complicated

by a culture of commercial confidentiality to protect shareholder value. It is

estimated that a great deal of white-collar crime is undetected or, if detected, it is

not reported.

2.Corporate crime

Corporate crime deals with the company as a whole. The crime benefits the

investors or the individuals who are in high positions in the company or

corporation. The relationship white-collar crime has with corporate crime is that

they are similar because they both are involved within the business world. Their

difference is that white-collar crime benefits the individual involved, and corporate

crime benefits the company or the corporation.

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3.State-corporate crime

The negotiation of agreements between a state and a corporation will be at a

relatively senior level on both sides, this is almost exclusively a white-collar

"situation" which offers the opportunity for crime. Although law enforcement

claims to have prioritized white-collar crime, evidence shows that it continues to

be a low priority.

When senior levels of a corporation engage in criminal activity using the company

this is sometimes called control fraud.

4.Organized transnational crime

Organized transnational crime is organized criminal activity that takes place across

national jurisdictions, and with advances in transportation and information

technology, law enforcement officials and policymakers have needed to respond to

this form of crime on a global scale. Some examples include human trafficking,

money laundering, drug smuggling, illegal arms dealing, terrorism,

and cybercrime. Although it is impossible to precisely gauge transnational crime,

the Millennium Project, an international think tank, assembled statistics on several

aspects of transnational crime in 2009:

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 World illicit trade of almost $780 billion

 Counterfeiting and piracy of $300 billion to $1 trillion

 Global drug trade of $321 billion

5.Occupational crime

Individuals may commit crime during employment or unemployment. The two

most common forms are theft and fraud. Theft can be of varying degrees, from a

pencil to furnishings to a car. Insider trading, the trading of stock by someone with

access to publicly unavailable information, is a type of fraud.

6.Crimes related to national interests

In the modern world, there are a lot of nations which divide the crimes into some

laws. "Crimes Related to Inducement of Foreign Aggression" is the crime of

communicating with aliens secretly to cause foreign aggression or menace.

"Crimes Related to Foreign Aggression" is the treason of cooperating with foreign

aggression positively regardless of the national inside and outside. "Crimes Related

to Insurrection" is the internal treason. Depending on a country, conspiracy is

added to these. One example is Jho Low, a mega thief and traitor who stole billions

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in USA currency from a Malaysian government fund and is now on a run as a

fugitive.

CONCLUSION

As compared to other crimes, white collar crimes are the most significant in terms

of financial losses, injury, disease and death caused to the public. Numerous types

of white-collar crimes exist, and they are increasing in number, in contrast to other

types of crimes which are declining in incidence. The crimes occur in a wide range

of institutions and organizations including business, the medical field, government

organizations, and others. Of all the types of white-collar crimes, consumer fraud is

the most prevalent, with high profits made on substandard or dangerous products.

Corporate irresponsibility resulting in environmental offenses and adverse impacts

on occupational health and safety are other major areas of white-collar crime.

The economic, environmental and human consequences of the crime are

inestimable. Hence, urgent and effective measures need to be taken by law

enforcement, to stem the increasing damage being done.

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