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ABSTRACT:

‘White-collar crimes account for enough violations of law. By comparison, the instances of
white collar crimes are more than the conventional type of crimes such as theft, burglary, and
arson. The loss incurred through white-collar crimes is far higher than that of the conventional
type. In the American Context, it has been estimated that losses from such crime may be as
high as 200 billion dollars every year. In India also such type of crimes are increase.’ In this
article we endeavored to address the intricacies involved in white-collar crimes. Our analysis
of White-collar crime will differentiate between individuals who steal, defraud and cheat in
and out of an occupational context and those who commit the variety of offences attributed to
business corporations. We will also be analyzing the corporate crimes and corporate criminal
liability and the discrepancies, which flow along with it.

Keywords: Corporate crime, Crime, White-collar crime

INTRODUCTION

White-collar crime was defined by Edwin Sutherland as a “crime committed by a person of


respectability and high social status in the course of his occupation.” Since this term was coined
by Sutherland in 1939 during his speech for American Sociological Society, debates have risen
as to what particular crimes will be considered as white collar crimes. In general and ambiguous
terms, non violent crimes for financial gain were considered to be under this category. Some
of the most common activities under white collar crimes include antitrust violations, different
types of fraud (computer and Internet, credit card, bankruptcy, mail, financial and healthcare
frauds), insider trading and environmental law violations. Powers of the members of the
government, through another means of checks and balances, are also limited by including
public corruption and money laundering under white-collar crimes as well (Cornell University,
2010).1

1
David T. Johnson & Richard A. Leo, The Yale White-Collar Crime Project: a Review and
Critique, THE AMERICAN BAR FOUNDATION 63, 65 (1993).

1
In the modern judicial systems, common sanctions given to white-collar crimes offenders
include house arrest, fines and financial penalties, sentences of up to 30 years, and offenders
of economic crimes can be sentenced as much as that of offenders for violent street crime. The
sentencing guidelines are particularly applied by computing the effects or loss caused by the
fraudulent acts. Some of the famous white-collar offenders that were prosecuted were Bernard
Ebbers of WorldCom, Jeffrey Skilling of Enron, and John Rigas and son Timothy Rigas of
Adelphia (Podgor, 2007).

Despite the continuous development of the concept of white-collar crimes, no consensus has
been made about a criminology theory that explains white-collar crimes. Experts of the
sociology, legal, and criminology areas have clashing theories.

White Collar Crimes are the crimes committed by a person of high social status and
respectability during the course of his occupation. It is a crime that is committed by salaried
professional workers or persons in business and that usually involves a form of financial theft
or fraud. The term “White Collar Crime” was defined by sociologist Edwin Sutherland in 1939.
These crimes are non-violent crimes committed by business people through deceptive activities
who are able to access large amounts of money for the purpose of financial gain. White Collar
Crimes are committed by people who are involved in otherwise, lawful businesses and covers
a wide range of activities. The perpetrators hold respectable positions in the communities
unless their crime is discovered. The laws relating to white-collar crimes depends upon the
exact nature of the crime committed. White Collar Crimes may be divided into Occupational
Crime and Organizational Crime but in common parlance there exist 10 popular types of White
Collar Crimes as:
1. Bank Fraud- To engage in an act or pattern of activity where the purpose is to defraud a
bank of funds.
2. Blackmail- A demand for money under threat to do bodily harm, to injure property or to
expose secrets.
3. Bribery- When money, goods, services or any information is offered with intent to influence
the actions, opinions and decisions of the taker, constitutes bribery.
4. Cellular Phone Fraud- Unauthorized use or tampering or manipulating cellular phone
services.
5. Embezzlement- When a person, who has been entrusted with the money or property,
appropriates it for his or her own purpose.

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6. Counterfeiting- Copies or imitates an item without having been authorized to do so.
7. Forgery- When a person passes false or worthless instruments such as cheque or counterfeit
security with intent to defraud.
8. Tax-Evasion- Frequently used by the middle-class to have extra-unaccounted money.
9. Adulteration- Adulteration of foods and drugs.
10. Professional crime- Crimes committed by medical practitioners, lawyers in course of their
Occupation.
These crime are committed by people of high status in society such as doctors, advocates,
chartered accountants, governments officials and not by hardcore criminals for e.g. Thieves
robbers, dacoits, murders, rapists, etc means of crimes differ from the traditional crimes as
fraud, adulteration, malpractices, irregularities etc. These crimes are committed by means of
deliberate and planned conspiracies without any feeling and sentiments. When socio-economic
crimes are committed people tend to tolerate them because they themselves indulge in them
and they themselves often identified with those who do so.

White Collar Crimes are the crimes committed by a person of high social status and
respectability during the course of his occupation. It is a crime that is committed by salaried
professional workers or persons in business and that usually involves a form of financial theft
or fraud. The term “White Collar Crime” was defined by sociologist Edwin Sutherland in 1939.
These crimes are non-violent crimes committed by business people through deceptive activities
who are able to access large amounts of money for the purpose of financial gain. White Collar
Crimes are committed by people who are involved in otherwise, lawful businesses and covers
a wide range of activities. The perpetrators hold respectable positions in the communities
unless their crime is discovered. The laws relating to white-collar crimes depends upon the
exact nature of the crime committed.

White Collar Crimes may be divided into Occupational Crime and Organizational Crime but
in common parlance there exist 10 popular types of White Collar Crimes as:
1. Bank Fraud- To engage in an act or pattern of activity where the purpose is to defraud a
bank of funds.
2. Blackmail- A demand for money under threat to do bodily harm, to injure property or to
expose secrets.

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3. Bribery- When money, goods, services or any information is offered with intent to influence
the actions, opinions and decisions of the taker, constitutes bribery.
4. Cellular Phone Fraud- Unauthorized use or tampering or manipulating cellular phone
services.
5. Embezzlement- When a person, who has been entrusted with the money or property,
appropriates it for his or her own purpose.
6. Counterfeiting- Copies or imitates an item without having been authorized to do so.
7. Forgery- When a person passes false or worthless instruments such as cheque or counterfeit
security with intent to defraud.
8. Tax-Evasion- Frequently used by the middle-class to have extra-unaccounted money. 9.
Adulteration- Adulteration of foods and drugs.
10. Professional crime- Crimes committed by medical practitioners, lawyers in course of their
Occupation.

OVERVIEW OF WHITE COLLAR CRIME

The term “white collar crime” means different things to different disciplines, as well as to
different camps within those disciplines. Unfortunately, professionals within an environment
where there is general consensus about the term’s meaning do not always clearly specify what
they mean by the label of “white collar crime.” This can lead to confusion and (sometimes
vigorous) disagreement when they interact with larger audiences that might contain a number
of different understandings of the term. It is therefore quite important, when discussing white
collar crime, to more closely examine what different people mean by it. Generally, these
definitions tend to concentrate on: the characteristics of the offender (such as high social status)
and/or the characteristics of the crime (such as crimes occurring within the scope of one’s
employment). In the late nineteenth and early twentieth centuries, the theoretical constructs
used by sociologists to understand crime focused on it as a problem of poverty and of personal
characteristics believed to be associated with poverty (such as broken homes, mental illness,
association with criminal subcultures, and living in slum housing). One of the most influential
of those theories, Anomie Theory, is still in general use (in various forms) today, and was put

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forth a year before the introduction of the concept of white collar crime.2 It holds that in a
society where members are taught to value attaining certain goals (such as wealth), but the
means to achieve those goals are unevenly distributed, those without access to the societally
prescribed means are put under considerable pressure to find other ways (including crime) to
achieve those goals. In short, the theory holds that crime is a symptom of some members of
society not having the tools to achieve what their society defines as success.

One notable aspect of Sutherland’s conception of white collar crime is that he explicitly
rejected the notion that a criminal conviction was required in order to qualify.3 Sutherland saw
four main factors at play here:
1) civil agencies often handle corporate malfeasance that could have been charged as fraud in
a criminal court,
2) private citizens are often more interested in receiving civil damages than seeing criminal
punishments imposed,
3) white collar criminals are disproportionately able to escape prosecution “because of the class
bias of the courts and the power of their class to influence the implementation and
administration of the law,”4 and
4) white collar prosecutions typically stop at one guilty party and ignore the many accessories
to the crime (such as when a judge is convicted of accepting bribes and the parties paying the
bribes are not prosecuted). A related concept that again focuses on the offender is
“organizational crime”—the idea that white collar crime can consist of “illegal acts of omission
or commission of an individual or a group of individuals in a legitimate formal organization in
accordance with the operative goals of the organization, which have a serious physical or
economic impact on employees, consumers or the general public.”5 While these definitions
were vital for expanding the realm of sociology and criminology, they were not as well-suited
to the needs of other criminal justice stakeholders who dealt with these issues in a more
practical sense (including policymakers, law enforcement, and the legal community). These
definitions are geared for asking why white collar crime occurs or who commits it, but they are

2
Robert K. Merton, Social Structure and Anomie, 3 AM. SOCIOLOGICAL REV. 672
(1938)
3
EDWIN H. SUTHERLAND, WHITE COLLAR CRIME: THE UNCUT VERSION (1983)
(the censored first edition came out in 1949)
4 Sutherland on Types of Criminals.
5
Laura Shill Schrager & James F. Short, Toward a Sociology of Organizational Crime, 25
SOCIAL PROBLEMS 407, 411–12 (1978).

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not as well-suited to asking questions about how much white collar crime is occurring, or
whether prevention methods are working.

Edelhertz identified four main types of white-collar offending: personal crimes (“[c]rimes by
persons operating on an individual, ad hoc basis, for personal gain in a non business context”6),
abuses of trust (“[c]rimes in the course of their occupations by those operating inside
businesses, Government, or other establishments, or in a professional capacity, in violation of
their duty of loyalty and fidelity to employer or client”7), business crimes (“[c]rimes incidental
to and in furtherance of business operations, but not the central purpose of such business
operations”), and con games (“[white-collar crime as a business, or as the central activity of
the business”).

This has been operationalized by the FBI’s Criminal Justice Services Division to mean the
Uniform Crime Report (UCR) offences of fraud, forgery/counterfeiting, embezzlement, and a
rather longer list of National Incident-Based Reporting System (NIBRS) offenses. 8Thus, while
this definition and Edelhertz’s are very similar, the FBI’s definition functionally excludes non-
criminal illegal activity, as well as such incidents as are not reported to police, and such
incidents as do not fit into a relevant UCR or NIBRS category (for those jurisdictions that
participate in NIBRS). On the other hand, the FBI’s definition dovetails well with already-
collected data, making it a practical tool for generating statistics on white collar crime activity.

As a practical matter, many people have rather informal interpretations of the term. White
collar crime can refer to:
 Financial crimes
 Non-physical (or abstract) crimes
 That is, crimes that “occur” on a form, balance book, or computer
 Crime by or targeting corporations

6
FED. BUREAU OF INVESTIGATION, WHITE COLLAR CRIME: A REPORT TO THE
PUBLIC
7
Cynthia Barnett, The Measurement of White-Collar Crime Using Uniform Crime Reporting
(UCR) Data, FED. BUREAU OF INVESTIGATION, at 2 (2000)
8
Proceedings of the Academic Workshop: Definitional Dilemma: Can and Should There Be
a Universal Definition of White Collar Crime?, NATIONAL WHITE COLLAR CRIME
CENTER (1996)

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 Crimes typically committed by the rich
 Criminal businesses or organizations
 Including, for some, organized crime and terroristic organizations
 Corporate or professional malfeasance
 For some, this can include acts that are immoral, but that are not specifically prohibited
by law (for example, an insurance company automatically targeting every policyholder
who gets diagnosed with breast cancer for an aggressive fraud investigation to find any
possible pretext to drop the account).
 Anything that is against the law that the average beat cop would not typically handle °
Essentially, everything but street crime

CAUSES OF WHITE-COLLAR CRIME

The general perception is that the white collar crimes are committed because of greed or
economic instability. But these crimes are also committed because of situational pressure or
the inherent characteristic of getting more than others. However, there are various reasons for
white collar crimes.
 Not really a crime: Some offenders convince themselves that the actions performed by
them are not crimes as the acts involved does not resemble street crimes.
 Not realizable: Some people justify themselves in committing crimes as they feel that
the government regulations do not understand the practical problems of competing in
the free enterprise system.
 Lack of awareness: One of the main reason of white collar crime is the lack of
awareness of people. The nature of the crime is different from the traditional crimes
and people rarely understand it though they are the worst victims of crime.
• Greed: Greed is another motivation of the commission of crime. Some people think that
others are also violating the laws and so it is not bad if they will do the same.
Necessity: Necessity is another factor of committing crimes. People commit white collar
crimes in order to satisfy their ego or support their family.

LAWS RELATING TO WHITE COLLAR CRIMES IN INDIA

The government of India has introduced various regulatory legislations, the breach of which
will amount to white-collar criminality.

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Some of these legislations are Essential Commodities Act 1955, the Industrial
(Development and Regulation) Act, 1951.,The Import and Exports (Control) Act, 1947,
the Foreign Exchange (Regulation) Act, 1974, Companies Act, 1956, Prevention of Money
Laundering Act, 2002. The Indian Penal Code contains provisions to check crimes such as
Bank Fraud, Insurance fraud, credit card fraud etc. In case of money laundering several steps
have been taken by the government of India to tackle this problem. The Reserve Bank of India
has issued directions to be strictly followed by the banks under KYC (Know Your Customer)
guidelines. The banks and financial institutions are required to maintain the records of
transactions for a period of ten years.

In order to tackle with computer-related crimes, Information Technology Act, 2000 has been
enacted to provide legal recognition to the authentication of information exchanged in respect
of commercial transactions. Section 43 and 44 of Information Technology Act prescribes the
penalty for the following offences:
 Unauthorised copying of an extract from any data.
 Unauthorised access and downloading files.
 Introduction of viruses or malicious programmes
 Damage to computer system or computer network.
 Denial of access to an authorised person to a computer system
 Providing assistance to any person to facilitate unauthorised access to a computer.

THEORIES AND HISTORY OF WHITE-COLLAR CRIMES

This paper discusses five common criminology theories applied to principles of white-collar
crimes which includes: Edwin Sutherland’s theories, Anomie and Corporate Deviation,
Control Theory, Rational Choice Theory, and Integrated Theories. Each suggests different
roots of white-collar criminal behavior such as the society, individuality, and culture. The
motivations for rule breaking and committing such crimes are also presented in different
perspectives.

EDWIN SUTHERLAND’S DIFFERENTIAL ASSOCIATION AND SOCIAL DISORGANIZATION

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The original idea was to give a name to crimes or conspiracies committed by members of
wealthy classes who use their influence in commerce and industry for personal gain without
being held responsible to the law. Sutherland observed that often times, such cases were held
under civil courts because the subjects were the properties lost and not the act itself. Offended
parties were only concerned of their lost properties rather than filing a formal case to penalize
the offenders. Hence, during these times, the law was rather passive to such contempt (Siegel,
2009). The centers of jurisdiction were the properties lost and neither the offenders nor the act.
Seldom were the offenders convicted for this type of crime compared to convicted offenders
of lower class crimes such as violent crimes.

Sutherland stated that white collar crimes occurs in the business and industry world
(manipulation of stock exchange, bribery of and to public officials to achieve favorable
contracts, embezzlement) and in other professions such as abortion as administered by a
licensed doctor. He also delineated the boundaries of criminal behavior to be attributed solely
to the members of the lower classes of the society. He pioneered the belief that criminal
behavior does not regard status quo (Siegel, 2009).

The main propositions of Sutherland may be summarized as follows. First, white collar crimes
are indeed a criminality. He argued that white-collar crimes are violations of criminal law;
hence should be under the scope of criminology. Second, he acknowledged the administrative
differences between lower class criminality and white collar ones. Judiciary processes of the
two types of crimes should be segregated. Third, criminal behavior is not limited within the
boundaries of poverty and inadequacy like other criminal behavior theories suggest. This leads
to the fifth proposition that criminal behavior is not limited to members of the lower class.
Lastly, he suggested that differential association and social disorganization theories will be the
best criminal behavior theories particularly applicable to white collar9.

Sutherland’s theory of differential association asserts that criminal behavior is not just solely a
by product of poverty and inadequacy. It neither takes root from individual traits nor
socioeconomic condition. Rather, it is a function of learning process. He supported this claim
by stating that acquiring behavior is neither political nor legal in nature. Criminal behavior is

9 (Crutchfield and Weis, 2000)

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a learned result achieved from exposure to pro crime values and attitude which leads to such
behavior 10

According to Sutherland, criminal behavior is a product of the learning process. It is mainly a


product of interaction and socialization and not from low IQ and family problems as stated by
other criminology theories to pinpoint members of the lower class of society as the only
offenders of law. Moreover, this interaction and learning takes place with intimate groups such
as family members, peers and co workers, and friends regardless of the status quo one belongs
to.11

Sutherland added that criminal techniques are even learned directly or indirectly. Learning
crimes can be as direct as having mentors and learning through experience. Hence, the mass
media can also create a pro crime environment by showing alike situations in programs that
are available to children and even older counterparts. Other methods of learning can be made
by taking drugs or alcohol so as to facilitate their criminal acts. Cultural differences in legal
code can also influence pursuance of a crime. A perception that such act is not punishable by
law in other cultures justifies intentions of committing the same on the other side of the globe
where it is unacceptable. Likewise, exposure to justification of the criminal behavior such as
the belief of “End justifies the means” can also provide impetus for rule breaking.12

Social disorganization theory, on the other hand, state that criminal behavior is a product of
unfavorable conditions in a disorganized zone. Such disorganized zones have difficult
situations that force individuals to break rules and commit crimes. This theory is more
concerned of the psychological rather than social aspects of criminal behavior. However,
sociological conditions such as difficult family situations and personal relationships may take
effect too.13

EDWARD GROSS’ CORPORATE DEVIANCE

By explaining criminal behavior, Gross pointed at the structure of the organization rather than
the society as a whole. An organization that is structured as a goal-oriented entity and

10 (Vito et al., 2007). Crimes and its tendency.


11 (Vito et al., 2007). Crimes and its tendency
12 Ibid.
13 (Gaines and Miller, 2009).

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competition object and subject can be a sole source of a crime. Simply put, goal plus
competition is a perfect breeding ground for motivations to break rules and to achieve a goal
at all cost. An organization that put high remarks on their goals has more tendencies for rule
breaking 14

Moreover, it can deepen the criminal tendencies if achievement of these goals is the objective
and may be only basis of good performance. In the case of for-profit organizations, profit is
the goal and this may be the only basis for judging one member’s achievement. Non-
achievement of the expected profit is automatically considered as non compliance and poor
performance regardless of the effort and time exerted towards the achievement of the goal. This
pressure leads to fraudulent deals made by the members of the organization in order to be
labeled with good performance (Benson and Simpson, 2009).

Meanwhile, the presence of goal displacement can lessen tendencies for rule breaking.
However, this may only be true for non-profit organizations for their counterpart organizations
will always have profit as their end goal. Another factor is the presence of the subunits within
the organization. Subunits that have more interaction tend to face more motivation to break
rules. For example, the sales department, which is more likely to interact with external entities,
is more prone to criminal acts than that of the engineering department (Benson and Simpson,
2009).

In summary, the aspects of the organization that affects the occurrence of white-collar crimes
include: accountability of the members to achieve the common goal, objectivity of performance
evaluation, work environment interaction, and flexibility or adjustability of the goal (Benson
and Simpson, 2009). Hence, in order to lessen the incidence of white-collar crime in a for-
profit organization, the organization should be open to displace their goals so as not to exert
overwhelming pressure to its employees. If adjusting goal will be unfavorable, it can devise
subjective performance assessment methods and should not rely mainly to objective methods.

TRAVIS HIRSCHI’S SOCIAL BOND THEORY

Travis Hirschi proposed that an individual will tend to break rules when his or her bond to the
society is weak. For him, deviance is a natural characteristic of an individual but it can be

14 (Benson and Simpson, 2009). Criminal behaviour vis-à-vis white collar crimes.

11
influenced by outside forces and personal dispositions. The elements of the criminal behavior
under this theory are centered on attachment to others, commitment to predetermined lines of
action, exposure to criminal behaviors, and personal belief and compliance of society’s
common laws and values.

While this is originally devised for juvenile delinquency, James Lasley converted it to the
practice of white-collar crimes. He asserted that strong bond with the corporation can make
managers and executives resist committing white-collar crimes.

Hence, the following theorems were devised:

1) strong bond of executives to co-workers will lessen occurrence of white-collar crimes,

2) firm compliance to the organization’s principle, mission and vision can also lessen white-
collar crime tendencies,

3) the more employees are involved in corporate activity, the less are white-collar crimes,

4) strong belief in the corporate rules can also lessen tendencies of white-collar crimes. A
survey he conducted with 521 executives and managers supported these theorems (Benson and
Simpson, 2009).

This theory was furthered developed when Hirschi and Gottfredson proposed self-controlled
theory. They asserted that lack of self-control plus crime opportunity equate to crime. This self-
control is achieved in the earlier life and is assumed to remain relatively constant. However,
some argue that these may not be applicable to white-collar crimes because people with low
self-control may have lower chances to qualify to white-collar jobs (Benson and Simpson,
2009).

RATIONAL CHOICE THEORY

This theory originated from the writings of significant criminology philosophers Beccaria and
Bentham. Among their important contribution to the course of criminology includes the
assertion that people and naturally rational and that each individual is a product of free will.

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Their approach towards criminal behavior is purely of rational justifications and even suggest
that punishment should be considered equal to the damaged caused.15

This theory suggests that self-interest, including the costs and benefits, is the motivation to
commit a crime. If the benefits of the criminal acts are higher than that of the non-criminal act,
one will likely to choose to commit the crime. Moreover, objective pros and cons (formal
sanctions and higher profit gain) and subjective pros and cons (lower self-respect, conscience,
and convenience) are also weighted and examined carefully (Benson and Simpson, 2009).

Benson and Simpson (2009, p.67) argue that rational theory justifies the opportunity
perspective of white-collar crimes. It is one of the few theories that acknowledge the
importance of opportunity as a motive for committing a crime. Hence, to fully understand the
patterns of such type of crime, organizations belonging to the legitimate business world should
limit the opportunities in paths that may lead to white-collar crimes. Through expansion of
government programs, transformation of banking and financial services, and the rapid growth
of communications technology, new opportunities for white collar crimes have developed too.
Hence, there is a need to restructure some processes to limit the foreseen opportunities brought
by white collar crimes.16

INTEGRATED THEORIES

Based on an integrated criminal behavior theory, a perfect culture that encourages a crime is
that of which promotes competition, materialism, justification, and rationalization of criminal
act and removes unified sociological values and attitudes. Moreover, a structure of a perfect
crime opportunity is composed of a possibility to control formal sanctions and attractive
possibilities. In a more detailed way, Coleman stated that white collar crimes are prevalent in:
society that promote culture of competition, an organization that is financially pressured, an
occupation with high financial opportunities, and a subculture that directly or indirectly
promote or encourage illegality (Friedrichs, 2009).

15(Gerber and Jensen, 2007).


16
David T. Johnson & Richard A. Leo, The Yale White-Collar Crime Project: a Review and
Critique, THE AMERICAN BAR FOUNDATION 63, 65 (1993).

13
On the other hand, Braithwaite suggested that white-collar crimes are products of individual
egoism trapped in a capitalist society and differential association. He combined differential
association and rational choice theory by concluding that a criminal act is learned but actual
pursuance is highly dependent on the nature of the opportunity. Moreover, he suggested the
concept of differential shaming: the higher is the contempt of the society on the act; the lower
is the occurrence of offenders (Friedrichs, 2009). Otherwise, absence of contempt is as good
as promoting the crime.

These theories attempt to describe the roots of the criminal behavior in different perspective:
from the culture, individual, and organization. These theories centered on the sociological and
psychological scope of the criminal behavior. In the next sections, legal aspect of white collar
crimes will be the focus. The next section discusses the types of white collar crimes such as
anti-trust violations, frauds, tax evasion, public corruption and others.

TYPES OF WHITE COLLAR CRIMES

Since white- collar crimes are non-violent, it takes many other forms. Different types of white
collar crimes include: frauds, anti trust violations, tax evasion, public corruption, and many
others. We look closely at these types in the section.

ANTI TRUST VIOLATIONS

Shevefield and Stelzer (2001, p. 1-2) defined anti trust law as a set of rules meant to preserve
the competitive process and to ensure that the commodities needed by the consumers are
available at their satisfaction. It basically protects the competitive integrity of the market. It
limits the decision making and intervention of the government within free trade. Hence, it is
also called as “Magna Carta of free enterprise.” It limits any trust relationships and presence
of monopolies in any commodity present for free trading.17

Anti trust law protects the free market against trusts and monopolies. Trust is a right to acquire
a property under fiduciary relationship with another party who takes the benefit of the property.
On the other hand, monopoly is an economic condition wherein an entity shall have

17
David T. Johnson & Richard A. Leo, The Yale White-Collar Crime Project: a Review and
Critique, THE AMERICAN BAR FOUNDATION 63, 65 (1993).

14
commercial advantage to set prices, even high prices, and to set the standard quality of a certain
service or commodity as well. Anti trust law guard the economy against these anti competitive
practices which let an entity for price control and promote diminishing initiative because of the
absence of the threat of competitors. This can stagnate and even cause depression of growth of
the industry or may hinder the entire economic growth (Cornell University, 2010).

Anti trust law originated from the US via the enactment of Sherman Anti trust Act in 1890. It
aimed to protect the free market from anti competitive practices which reduce market
domination. Competition has been the basic rule of free trade since then. This has been the
basis of other anti trust laws in different trading regions and nations. Later on, international
anti trust law was also patterned to this premise (Cornell University, 2010).

According to Shevfield and Stelzer (2001, p. 114), anti trust law became an international
concern because of the following scenarios:

1) globalization of major businesses going beyond national boundaries,

2) realization that competition can contribute significantly to wealth of the nations, and

3) continuous deregulation of the natural monopolies including gasoline companies,


telecommunications, electricity suppliers, and others.

Since, US has the most detailed streamline anti trust enforcement, it led the international trade
against anti trust violators. From its institution in 1996, violators have been sanctioned and
competition has been more or less ensured. According to American Bar Association (2009, p.
56), since 1997 up to 2007, the international antitrust division acquired more than $4billion
from individual criminal anti trust fines while for corporate violators, hundred million dollars.18

Profit- diminishing sanctions for anti-trust violations can be classified as criminal fine and
private treble damage suit. Criminal fine is the most frequently imposed. This deprives the
violators with some amount of the illegally gained profit. According to Sherman Act, the
maximum criminal fine for individual violators is $ 1 million dollars and for corporate

18
David T. Johnson & Richard A. Leo, The Yale White-Collar Crime Project: a Review and
Critique, THE AMERICAN BAR FOUNDATION 63, 65 (1993).

15
violators, a maximum of $100 million. Under its provision, the fines may be twice as high as
the illegal profit gained or lost by the damaged party (Geis, 2009).

Frauds

Fraud is one of the most common types of white collar crime. It works by plotting
misinterpretation and deception to secure financial or information gain though illegal means.
It usually takes place when an individual pays for a good or service but does not receive what
he has paid for. Unlike petty robbery, fraud for financial gain by initiating a transaction to its
victims, promising material gain, gets the money and then gets lost. It is very common that in
a survey conducted, 36 % of US households have been victims of fraudulent transactions
(Shover and Hocksletler, 2006).

Fraud is a general term. It has many specific forms. In this paper, we focus on computer and
Internet fraud, bankruptcy and financial fraud, and healthcare and insurance fraud.

Computer and Internet Fraud

Computer and Internet fraud is defined as the unauthorized access of computer and Internet
facilities. It is to create intentional avenues for misinterpretation of facts to initiate loss. These
can be done through the following methods:

1) change computer input in an arbitrary authorized methods,

2) change or even delete stored data, and

3) rewrite software codes to completely access information. Some of its common form is
hacking via using sophisticated tools to access computer or Internet accounts or the theft of
password, credit card information to give authorization of use, and even identity (Cornell
University, 2010). Particularly vulnerable to this fraud are bank users’ information that will be

16
used for credit card cramming. Violators can use the information to create fake credit cards,
along with the real password and identification number.19

Another type of Internet fraud that the author wants to add is the intentional distribution of
dangerous computer viruses. These computer viruses are also misinterpreted as useful
programs which may also be considered a fraud and can even destroy software systems and
even the hardware facilities.

Bernnett, et al. (2007, p. 485), according to The Computer Crime Research Center, the
following are the top 10 computer and Internet fraud in descending order: healthcare fraud,
solicitation fraud, vacation scams, investment scam schemes, business and work at home
scams, pyramiding scams, information hacking (credit card cramming), Internet website design
scams, ISP scams, and Internet auction frauds. These fraudulent deals over the Internet have
caused millions of damage and thousands of victims.

Sanctions for computer aided frauds ranges from three times maximum of imprisonment and
two times maximum fine. Nevertheless, the rapid boom of Internet during the 20th century
posed serious problem in a worldwide scope. While there are efforts to enforce law over the
cyberspace such as: No Electric Theft Act, Fraud and Related Activity in Related Activity in
Connection with Computers, Wire Fraud, and other codes of law (Cornell University, 2010),
the huge and rather overwhelming size of the cyberspace is one main problem. Hence, there is
a need to restructure this virtual world or if it is impossible to do at the present time, it is up to
the people to use common sense or be critical to recognize fraudulent deals over the Internet
and report them to authorities. Search engines such as the mighty Google and Yahoo! cannot
sort out fraud and fake deals for us. We need to be smart for us not to be consumed by these
technologies.

Bankruptcy Fraud

Bankruptcy fraud takes three major forms. The first one occurs when debtors are concealing
assets to avoid forfeiting. This accounts for more than 70% of all bankruptcy fraud cases.
Failure to liquidate and reveal certain assets can allow debtors to keep their assets in spite of

19
Richard M. Titus, Fred Heinzelmann & John M. Boyle, Victimization of persons by fraud,
41 CRIME & DELINQUENCY, 1, 54 (1995).

17
having outstanding debt. Second, individual debtors file incorrect or incomplete forms. These
can also conceal some significant information about properties subject for liquidation. Third is
the multiple record filing. Debtors filing multiple false or correct documents can cause delays
and hinders forfeit of their properties. Lastly, bribery of court-appointed trustee is also a
prevalent case. Debtors may opt to pay huge amount of money than to lose their properties
(Cornell University, 2010).

Bankruptcy fraud is often used to facilitate other white collar crimes such as money laundering,
mortgage fraud, public corruption, and even identity theft (Cornell University).Bankruptcy
fraud has criminal charges. A violator can be sentenced with up to five years imprisonment
or/and a fine of $250,000. However, most of such cases diminish within the lenient bankruptcy
law processes. Hence, there is a need to make the enforcement of the law much harder
(Wichouski, 2007).

Healthcare Fraud and Insurance Fraud

Healthcare and insurance fraud often go hand in hand. Healthcare fraud is filing false healthcare
records and information in order to gain profit while insurance fraud is falsely obtaining
improper payment from an insurance benefactor (Cornel University, 2010). These are also
prevalent via the Internet and also among the top cases for Internet fraud (Bernnett, et al. 2007).
Moreover, there are other methods and approaches to perform such crimes.

Healthcare fraud can be made through various means. One can obtain fully-covered medical
materials and medicines and sell for profit. One can file a bill that was never rendered. A
benefactor can also duplicate claims of already obtained materials. Lastly, incorrect reporting
of diagnosis to maximize benefits is also a scheme. Healthcare providers pass all of these costs
to their customers. A 30-day rule for claiming healthcare frauds by healthcare providers limit
the investigation procedures of the company. Hence, more often than not, healthcare companies
suffer from their inefficiencies. Some do not recover from loss and end up with bankruptcy,
leaving all other customers without any benefits (Cornell University, 2010).

Insurance fraud is defined as “any act or omission with a view to illegally obtain an insurance
benefit.” This includes fabricated claims, false statement and other dishonest claims. By
fabricating relevant information with the intention for fraud and personal gain, although
rightful of the insurance, make it still an act of crime (Milevesky, 2005). It is prevalent and its

18
occurrence is increasing because such crimes are relatively difficult to detect. Such cases
amount up to $80 billion each year.

There are two types of insurance fraud namely “hard fraud” and “soft fraud.” Hard fraud is the
actual and deliberate destruction of property for collecting insurance money. This includes
fabrication of accidents, death, and other destruction of property to claim the insurance
benefits. Some fake their death, have their family claim the money and then support them in a
secluded place. On the other hand, soft fraud occurs when a true policy holder collects too
much of the remitted amount and lies about certain conditions and coverage of the insurance
subscription. It can also happen via collecting of funds by fake or illegitimate policy holders.

Tax Evasion and Money Laundering

Tax evasion is basically non compliance of tax- paying policies or avoiding payment by illegal
means. Some of the schemes include an individual or corporation intentionally
misrepresenting details of income with the motive to pay lower that they are supposed to
pay. Intentional misrepresentation of income occurs via underreporting, inflating deductions,
and even hiding amounts of money along with interest and other sources of income (Cornell
University).

Friedrichs (2009, p. 121) argues that tax evasion should not be limited to individual or
occupational white collar crime. Other sources of income outside occupation such as
investments and other properties can also be subjects of tax evasion. Moreover, failure to
comply with tax laws is not only limited to non payment. Some other violations include failure
to file and report income, false income claims and deductions, and other neglect of the tax
paying processes. Low compliance to tax laws is a major problem in most countries. A
significant amount of the nation’s income is lost due to non-payment and tax evasion. Many
countries continue to devise methods to detect tax evasion, make the payment process more
convenient and other means so as to encourage their citizens to pay their respective taxes.

In many countries, tax evasion is a crime that is subjected to serious criminal cases. Tax evaders
are sentenced with huge fines or imprisonment or both. In the United States for example, a tax
evader is amounted of not more than $100,000 or over $500,000 for corporate attempts and/or
imprisonment of not more than 5 years. In a likely condition, this includes all the sanctions of
the prosecution such as forfeit of the ownership of properties (Cornell University, 2010).

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Money laundering refers to any transaction comprising of financial scheme with the motive of
concealing the identity, source, and destination of an illegally sum of money. A money
laundering can be observed within three exclusive stages:

1) the illegal activity of getting the sum of money such as bankruptcy fraud or bribery,

2) the launderer keeps the money via a complex scheme of bank transactions or any other
method to give the money to the criminal partner in the transaction and,

3) the partner return the money to the launderer in obscure way (Cornell University, 2010). In
some cases, the partner in the transaction is the same person as the true launder. False identities
are used to secure the money in a bank account.

In the absence of trusted partners, launderers opt using offshore accounts in overseas banks to
hide their ill gotten money to achieve greater privacy brought about by less regulation, and
even reduced taxation. Because any country has no authority to require foreign banks to report
the interest earned by their citizen from foreign bank accounts, the money launderer keeps the
account abroad along with his money without being noticed by his or her country (Cornell
University, 2010).

Becker (2005, p. 427) described money laundering as a scheme on how to legitimate a


previously illegitimate income. He stated that money laundering are frequently products of
income from illegal drugs. Along with the increase of prevalence of illegal drugs, occurrence
of money laundering increased too.

The International Monetary Fund acknowledges that money laundering is a threat to financial
integrity and social stability. Presence of money from drug trafficking and money laundering
accounts for 2 to 5 % of global domestic income. Hence, to improve the processes of combating
money laundering, many nations have participated to modify bank secrecy laws and to
strengthen law enforcement efforts (Cortright et al., 2002).

Public Corruption, Bribery, and Embezzlement

Public corruption involves an infringement of public trust and/or abuse of office by government
officials together with private sector counterparts (Cornell University, 2010). It is a crime of
official misconduct with the known corrupt behavior of an official in the course of exercising

20
his or her duty (Lippman, 2000). Some of the types of this misconduct include embezzlement,
misappropriation or diversion of properties and obstruction of justice. There are different view
regarding public graft and corruption and it is only in the recent years that countries aim to
come up with international standards of what will be included as public corruption. This
standardization aims to include specific offences and not only generic definition and offense
of corruption (OECD, 2008).

In many countries, especially in the third world countries, public corruption is a major problem.
It accounts for significant losses of public funds. Sectors that are particularly vulnerable are
the less represented ones such as the agriculture and fisheries sector, the youth and education,
the senior citizens and veterans and other minority groups.20

On other hand, bribery is the offering, giving, soliciting, or receiving of any token of value
used to influence the actions of an official holding a public office or legal duty. Bribery of any
kind is objectively handled in best suiting of the private interests with regard to the maker of
the decision .21

CONCLUSION

Although offenses similar to what is referred to as white-collar crime have been around for
centuries, it is likely that white-collar crime will become even more prevalent in the future than
it is now or was in the past. Social and technological changes have made white-collar crime
opportunities more available to a broader range of people than ever before. The important
changes include

(a) a rise in white-collar– type jobs,

(b) the growth in state largesse,

20
Richard M. Titus, Fred Heinzelmann & John M. Boyle, Victimization of persons by fraud,
41 CRIME & DELINQUENCY, 1, 54 (1995).
21
Sutherland, E. H. (1940). White-collar criminality. American Sociological Review, 5, 1–12.

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(c) an increase in trust relationships,

(d) economic globalization,

(e) the revolution in financial services, and

(f) the rise of the Internet as a means of communication and business.

In modern postindustrial economies, more people have access to the tools of white-collar crime
because they work in offices with forms and files and computers. These paper and electronic
documents can be manipulated and altered so as to create a false impression of reality and
permit employees to have illegal access to financial and other resources. In addition, more and
more white-collar employees find themselves in jobs that are somehow connected to banking
or financial services. The potential to engage in fraud is therefore great.

Opportunities to engage in fraud have also been expanded by the growth in programs associated
with the welfare state, including Social Security, Medicare, and Medicaid, as well as a host of
other less well-known programs such as the Federal Crop Insurance Program. All of these
programs distribute enormous amounts of money to literally millions of applicants annually.
They all depend on written materials and all are open to the possibility of fraudulent
applications.

There is another change in the social organization of work and the economy that has increased
opportunities for white-collar crime—the rise in trust relationships involving agents and
principals. A trust relationship is one in which someone (called the principal) depends on
someone else (called the agent) to manage assets or provide specialized services. For example,
contributors to a pension fund are in a trust relationship with the pension fund managers, in
that the contributors have to trust that the managers will manage the fund’s assets in a
financially prudent manner. Similarly, someone who goes to a doctor is in a trust relationship
with the doctor in that the person has to trust that the doctor will treat him or her according to
what is in the person’s best medical interests. In the modern world, people increasingly find
themselves in trust relationships in which they have to depend on others to do things for them
that they cannot do for themselves. Trust relationships raise two main problems for the people
who must rely on them. First, it is often difficult for principals to monitor and evaluate agents
because of the complexity or hidden nature of the services that agents provide. In effect,

22
principals often do not know whether agents really are doing the right thing for them. Second,
agents have their own financial interests that may conflict with those of the principals whom
they are supposed to be serving. Taken together, these two features of trust relationships mean
that agents often have the motivation and means to take advantage of others.

The increasing number and complexity of political-economic ties that cross national borders
have been a boon to white-collar criminals. This globalization of the economy has made it
easier for potential offenders to contact victims, orchestrate complex criminal fraud schemes,
and avoid detection and punishment by governments. Companies can be set up in one place to
victimize individuals, businesses, and governments in other places. For example, some foreign
companies have attempted to take advantage of changes in trade regulations in the United
States that benefited North American manufacturers. These new regulations followed the
passage of the North American Free Trade Agreement (NAFTA). To take advantage of the
new regulations, foreign companies would mislabel their products as being manufactured in
North America. Opportunities to engage in these sorts of frauds are plentiful today, because
most global business transactions are not conducted via face-to-face meetings. Rather, they are
conducted by means of telephone, fax, email, and other forms of electronic exchange. All of
these impersonal modes of communication create abundant opportunities for fraud and
deception.

Since the 1980s, the financial services sector of many national economies, including that of the
United States, has exploded in size and democratized in scope. Insurance, consumer credit,
mutual funds, and other securities, once available only to the wealthy, are now offered to
middle- and lower-income individuals. Vast amounts of money flow between individuals and
institutions in electronic funds transfers. The temptation and opportunity to engage in fraud are
ever present.

Many, if not all, of the social and economic developments outlined above have been made
possible as a result of technological changes. The effects of the emergence of the personal
computer, network servers, and the Internet as the standard means of information storage,
manipulation, and communication can hardly be overstated. Money and information flow faster
now than ever before. More and more transactions take place anonymously rather than through
face-to-face contact. In this environment, opportunities to engage in fraud and deception
abound, and white-collar crime flourishes.

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