Investigators Nightmare, Examining a White Collar Crime (WCC)

By Shreya Sharma, M.Sc. Criminology

Concept of White-Collar Crimes

The practitioners of evil, the hoarders, the profiteers, the black-marketeers and speculators are the worst enemies of our society. They must be dealt with sternly, however well placed important and influential they may be. If we acquiesce in wrongdoing, people will lose faith in us’’ (Shodhganga, 2017)

     –  Dr. Radha Krishnan

The concept of White collar crime is usually associated with E.H Sutherland, who prolifically worked in the area of criminology. White collar crime was coined by Edwin H. Sutherland, an eminent American Sociologist in late 1930’s. He propounded that “white collar crime is a crime perpetrated in the course of employment by persons of high social rank.” It may be termed as a crime committed by people who enjoy their high social status, great repute, and respectability.

White collar crime is a generic term which refers to a broad range of crime or illegal acts which are usually committed by respectable people with high occupational roles. What Sutherland meant by respectable and social status individuals is not clear, but in today’s business world we can assume he intended to refer to business managers and executives. They are individuals with power and influence which is associated to respectability and high social status. They are simply law-abiding and mainstream individuals, who are mostly assumed to be irregular offenders, rather than people who engage in crime on a regular basis. These criminals are typically wealthy, high educated or socially connected. Unlike regular street criminals, white-collar criminals do not live a life of crime.  White-collar criminals do not consider their actions to be a crime and have no guilt feeling. The criminal also has resources to hire a top white-collar attorney.

Classification of White-collar crimes (Levi, 2008)

1. Ad hoc crimes: also known as personal crimes. In these types of crime, the offender pursues his own individual objective, having no face-to-face contact with the victim.  It may include hacking, credit-card frauds, tax evasion, health care frauds etc.
2. Breach of trust: these crimes involve breach of faith of an individual or organizations on the perpetrator. Financial embezzlement, misuse of funds, fictitious pay, hoarding and insider trading are some of the examples for breaching of trust.
3. High positioned crime: Individuals who hold high positions or status in the course of their occupation, commit such crime, not because it is their central purpose but because they incidentally find an opportunity to illegally earn quick money or gain undue advantages by using their power or influence. e.g., 2G Scam, CWG Scam, Fraud Bills, fake organization etc.
4. Infringing: Violation of trade mark, domain names, trade symbols, or copyright comes under this category of white collar crimes.  These crimes are committed as being a part of businesses. There’s a necessary violation of trade mark in such crimes.

Characteristic of White-collar crimes

White collar crimes are characterized by deceit, concealment and violation of trust and aren’t dependent on the application or threat of physical force or violence. The motivation behind these crimes is financial and assets i.e., to obtain money, property or services to secure a personal/ business advantage. These are victimless crimes. A single scam can destroy a whole organization, devastate families, and can cause investigators a typical loss of millions and billions of currency.  All white-collar crimes, share some certain characteristics and properties using particular techniques. In overall basis, white collar crimes possess particularly three characteristics:

1.  The offender has certain legitimate access to the target or victim who is present at any organizational position: Legitimate access means that white collar offenders do not have to solve a problem, that most predatory offenders confront i.e., the problem in getting close to the target. For example, before a thief can steal something from someone’s place, he must first gain access to the place by somehow entering it. This is usually done by using force to break in a door or window. Breaking in creates an additional risk of exposure for the offender. White collar offenders on the other side, aren’t exposed to this additional risk just because their occupation roles give them legitimate access to the target of their crime. For example, because of the occupational position, bank employees have a legitimate access to a person’s money and can embezzle it without breaking into their home or physically confronting them. Similarly, in other forms of white collar crime, such as security violations, anti-trust violations and health care frauds, the perpetrators take advantage of their occupational roles to get access to their targets.
2. The offender is spatially separated from the victim: In white collar crimes, the offender never directly confronts or comes in contact with their victims. They tend to act behind the real cause. Consider an example of an anti-trust violation of price fixing. Illegal price fixing occurs when competitors of an industry get together and collide to set prices for their products or services as opposed to sell the products either for free or at minimal price for open competition in the market.
3. Offender’s actions have a superficial appearance of legality: The most apparent and troublesome aspect of white collar crime, is its superficial appearance. Many illegal white collar crimes have been turned into legal forms, e.g.: in case of medical insurance frauds, many medical professionals have been illegally attached to commission of white collar crimes with such fraud organizations.

Salient features of white-collar crime

1. Deceitful: It is a misrepresentation made with the express intention of defrauding someone, which subsequently causes injury to that person. Often fraudulent actions are practiced in case of white collar crimes.
2. Intentional: It is an anticipated outcome that is intended or that guides your planned actions. It is an act of intending or determining to do a specific thing in a specific manner. White collar crime is a deliberate act of an offender to illegally acquire another person’s or organizational assets for their own profits.
3. Negligence: It is a failure to take reasonable care to avoid causing injury or loss to another person. It is an inability or failure to meet a standard of behaviour established by high authorities for the protection of others against unreasonable risk of harm. White collar crime often forgets the measure the resultant losses to the victims.
4. Breach of trust: Failure in maintaining the responsibility of keeping something safe. White-collar crime is a definite infraction of law leading to breaching of trust of an individual or organization.
5. Cannot be concealed: White collar crimes committed in different respects are often left unreported. Offences are typically tough to conceal within occupational and the organizational routines are difficult to be detected by victims, observers or law enforcers, and out of them, only a handful of offenders are identified, acquainted and sentenced in court.  It is claimed that only 10% of the white collar crimes are identified and detected (Gottschalk & Gunnesdal, 2018).
6. Has enduring effects: These crimes have severe and long-lasting effects. They can ruin a person’s life by completely draining their life savings. Or even the widespread tactics can cause hundreds and thousands of people to lose money that they have earned.
7.  Absence of violence: White collar crime is a non-violent crime committed for financial gains and often results in distress and loss to some other person or organization.

Root Causes behind Commission of White-Collar Crime

Talking in general, the causes and effects of white collar crime are economic difficulty and greed. There are other causes such as opportunity to commit crime, situational pressure on the individual or organization to gain mass profits and go higher in markets. There are many inherent characteristics in commission of white collar crimes:

1. Lack of awareness: One of the root causes of commission of white collar crime is ignorance of people on its regard. As the nature of this crime is entirely different from traditional crimes, people rarely understand it, though they are the worst victims of the crime. The more awareness among people, the lesser the numbers of white collar crimes. These crimes are different from traditional crimes in its approach and hence the victims often fail to understand it and are easily fooled at the hand of perpetrators.
2. Greed: Rationalizing greed is a common trait of White Collar criminals. Some white collar criminals think that since everyone breaks company laws, it’s okay if they do too. Therefore, another reason for white collar crime is avarice. So, greed is another motivation for White Collar Crime. White collar crimes are becoming one of the largest accounting frauds in history (Eugene Soltes, 2016). It is very aptly said that “There is ample for a man’s need but never get enough with his greed”. The increasing demand and the desire of the current situation is making man greedier and more vulnerable towards commission of such crimes.
3. Non justifiable/ understandable: Some of the business people feel justified and completely prepared towards commission of white collar crime because they believe that government regulations do not really understand the business world and their activities, or the problem of competing in this free enterprise system.
4. Necessity: Besides greediness, need and desires play an important role. Executives may tamper with the company because they feel the need to keep or improve the quality of role at their jobs, satisfy their ego or support their families.
5. Scientific and technological development: The proper advancement of science and technology is assisting in the emergence of “mass society,” which has a sizable rank and file and a small ruling elite. This “mass society” is encouraging the growth of monopolies, the emergence of a managerial class, and the development of complex institutional mechanisms. The rise and expansion of White Collar and economic crimes are caused by the inability of all societal segments to fully understand this necessity.
6. Lack of proper implementation of laws in this regard: It is an inability to execute existing laws in a strict manner often result in rise of such acts. In most of the cases, these criminals are not even prosecuted.

White collar crimes in India

Over time, white collar crimes have become more prevalent in India. They are rapidly spreading into every aspect of society. They are spreading like a rapid fire in every sphere of society. Just like corruption, one of the species of white collar crimes, has been the most talked about issue revolving around all spheres: social, economic, political and even psychological. Like other countries, India is equally in the grip of white collar criminality. White collar crime has been a worrying trend which threatens to globally cripple the economy. These crimes find their footing in history upon intersection of business and law, and its interaction with innovation, moral discourse and public perception, as well as the changing nature of state policies over the centuries. They have a significant impact on corporate India.

As per the 2014 Global Corruption Index, India was ranked 85^th position which subsequently improved to 76^th position in 2015 as useful measures were taken to tackle with white collar crimes (Asthana, 2019). The reason for this enormous increase in white collar crime in recent decades is to be found in the fast-developing economy. In India particularly, many legal reports like the Santhanam committee report gives a vivid picture of white collar crime committed by reputed persons of organizations (Affairs, 1964).

Types of White-collar crimes

White collar crime can be found in every sector, profession, and job and takes different forms. However, there are five major forms of white collar crime:

 Anti-trust Violations:

Anti-trust laws are meant to protect competition in the marketplace. They tend to preserve competition in order to promote consumer benefits. These violations are referred in a field of crime because they eventually hurt competition, cause an increase in consumer prices and can potentially damage the economy (Cruze, 2018).  These crimes can be divided into two broad groups: Restrictive trade agreements, and monopolies or monopolistic practices.

• Restrictive trade agreements involve an illegal agreement or understanding between competitors in an industry to restrict how the industry works. Two main forms of restrictive trade agreements are:
  • Price fixing: It refers to agreement between competitors to set prices at a certain level. For instance, if a group of community’s vegetable sellers get together and agree among themselves to charge schools a set price for the vegetable used in school meal programs, this is price fixing. E.g., Match fixing (1999-2000 India-south Africa match fixing scandal), gambling etc.
  • Market sharing or division: It occurs frequently e.g.; two paving contractors might divide up a town so that one takes the east side and other takes the west side of the town.
• Monopolies and monopolistic practices involve unfair attempts to corner a market or to drive out competitors from a market place. A monopoly exists when one company controls an entire market, but a company can have monopolistic control even though it has competitors control over a large share of market. Microsoft windows operating system, for example was declared a monopoly even though there are other operating systems successfully available(Hahn, 2000).
• Techniques of monopolistic practices:
  • Using predatory pricing: It occurs when a company sets a price for its product or service that is economically unfeasible in order to drive competitors out of business.
  • Gaining control: In this technique, companies pressurize or control other companies that supply or deal with competitors so as to put them at a competitive disadvantage. Again, Microsoft was accused of doing with computer manufacturers.

Security Violations:

Security is an evidence to ownership, creditability or debt. It is a piece of paper or an account number or something that indicates that someone has a financial interest or stake in an economic undertaking. For e.g., Stocks, bonds, sharing up of mutual funds, profitable notes etc. There are five major types of security offences:

• Misrepresentation: Involves lying on the part of condition or value of a security.
• Stock manipulation: It occurs when an individual or a group of individual attempts to artificially manipulate the price of a security.
• Mis-appropriation is an offence committed by brokers or other financial advisors who take money that their clients have given them to invest and inappropriately use for their own purpose.
• Insider trading: It is the most publicized security offence. It arises when people trade on the basis of inside and non-public information. It is illegal for insiders to buy or sell stock on the basis of information that is unavailable to the general public.
• Investment scheme: In this offence, the perpetrator tricks people intentionally to invest money in an undertaking or security by falsely promising investors that they will receive a high rate in return of their investment.

Consumer Frauds:

It is one of the most common forms of white collar crime. It involves the use of deceit or deception in marketing and even selling of goods and services. This offence usually involves the deliberate use of false, deceptive, or misleading statements about the cost, quality, or effectiveness of a product or service. Consumer fraud offenders are drawn from all type of business and represent a continuum of size and complexity. There are seven main forms of consumer frauds:

• Mislabelled products and misleading advertising: While buying a product, consumer relies on what is seen and heard i.e., by relying on advertisement world. After spending heavily to purchase his product he feel cheated. Deceit in terms of quality, quantity, danger, services, price etc. that practically prejudice a person’s freedom of choice, all constitute fraudulent advertisement. A well-known example of such advertising was a reebok advertisement that encouraged infidelity. The heading “cheat on your girlfriend, not on your workout”. The shoe company faced backlash and even boycott from customers.
• Real-estate fraud: These frauds involve lying or being deceptive about the condition of real property, things such as land, house and building.
• Free-prize scams: In these types of scams, people are told that have won a free valuable prize, but in order to collect the same, they are requested to send money or make a phone call. e.g., Amazon gift-card
• Bait-switch advertising: These frauds are popular in legitimate retail businesses. This advertising involves some well-known products, such as a T.V or major appliances at a ridiculously low price. Customers are informed that the item is either temporarily out of stock or sold out when they visit the store. And, then the sellers claim and steer the customers to buy expensive products that are currently available.
• Repair frauds: these typically involve big ticket items such as homes, automobiles or electrical appliances and the fraud involves either doing unnecessary repairs or doing substantial work and then charging the victim a full and hiked price.
• Charity frauds: These frauds appeal in relation with emotions. The victims think that they are donating the money or goods for noble purposes or with better intentions to help a worthy cause, but in reality, the money is allegedly kept by those who collected it. As per The Delhi High Court, 99 % of the existing NGOs are fraud and simply money-making devices, only one out of hundred serve the purpose they are set up for” (Nair, 2013) g. Iskon temple is in a front line for charity but at the same time has a front foot in money laundering (Rai, 2016).
• Advance-fee swindles: When someone is asked to pay in advance for a service or product, he or she is vulnerable to an advance-free swindle. Typically, in these frauds someone promises to do something for victim, but the offender asks the victim to first pay and then the offender never stands out with the promise. Often, the promised service is one where it may be difficult to confirm, one or the other way whether the service is provided or not. For e.g., services like funding, housing or educational loans etc.

Health-care Frauds:

These kinds of frauds can be committed by any person of an organization in the health-care industry who is involved with the provision of health-care services to patients, this includes physicians, mental-health professionals, hospitals, nursing homes, equipment suppliers and pharmaceutical companies. Just because physicians deal mostly directly with patients, their involvement in fraud is particularly serious. The Securities and Exchange Board of India (SEBI), is the top  authority who works on the functioning of fraudulent activities in health care sectors. One of the most prestigious and reputed hospitals was found having alleged funds of  approximately more than 2000 crores (Teena T, et. al. 2019). Although, the exact cost of health care fund is unknown, it is estimated to be in hundreds of billions of dollars in a year (Miller, 2009).  There are three common forms of health fraud are:

• Unnecessary procedures: Most people know very little about the problems in their body. Then, they rely completely on the expertise of the physicians, who are supposed to provide treatment based on their expertise. Some, physicians however, make decisions based not on the medical needs of the patient but rather on their financial goals. Physicians, in some case may recommend that patients undergo unnecessary procedures, ranging from relatively simple but unnecessary tests to life-threatening surgeries. A group of unscrupulous doctors set up a shop and recruit low-income patients, drug addicts, alcoholics, homeless people and so-on. The patients are paid a small fee, run through a battery of unnecessary tests, and then the government is billed for the costs of the tests.
• Fee-splitting: Most general practitioners cannot handle serious illnesses or medical conditions, when confronted with these types of cases, often refer patients to specialists. But sometimes, physicians make referrals because they have financial arrangements with a particular specialist. In return for referring patients to the specialist, the general practitioner gets a kick-back in the form of a cut of the specialist fee.
• Fraudulent billing: These frauds can be accomplished in a variety of different ways, but basically it involves submitting claims for reimbursement for services that were never really provided. For example, a physician may submit a claim saying that he or she has performed medical service for a patient when the service really was not provided indeed.

Environment Crime:

It is defined as any violation in local, state or “environmental laws”, which seek to protect the quality of the air, water and soil by regulating both, harmful additions to the environment and harmful subtractions from the environment. One of the most important types of environment crime is the illegal disposal of hazardous waste materials (Simpson Carole Gibbs Melissa Rorie et al., 2013).

To conclude…

Sir Walter reckless claims “White collar crimes are the ones committed by a person of status, not for need but for greed” (Criminality, 2015). The tip of the iceberg is just a metaphor. The tip of an iceberg is usually viewed as the small, noticeable part of the problem, whereas the total size of the berg is comparatively unimaginable.  The tip of the iceberg is only the beginning and just a minute reflexive indication of a larger problem. Floating ice-bergs have a huge proportion of their mass below the surface of the water, which can’t be seen by the viewer. Same goes for white collar crime. The beginning is often, just the few offenders who are caught, prosecuted and even convicted. But the reality stands below water. The iceberg itself includes many offenders who are never brought to trial and often remain neglected and unnoticed. These offenders fall under the category of dark crime.

REFERENCES

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