White-collar crime was the term defined in back 1939 for the first time by the Federal Bureau of Investigation (FBI). It is a crime committed by any professional in his/her professional world which is in contrast of a large corporation, agency, or any other professional entity.”
Generally, it is called Corporate crime. Sometimes, with illegal objectives, for instance, to possess any property or money or to avoid losing or paying money the men of high class perform such crimes. It is also referred to as a Non-violent offence. This offence is mostly done by businessmen and government employees.
The concept of white-collar crime was first introduced by American criminologist Edwin Sutherland in 1939. The origins of corporate crime can be traced to the larger concept of white-collar crime. Professor Sutherland said, “when a person of high social status and respectability in course of his occupation which is justified by law, commits an act which is approximately a crime, it is a White Collar Crime”.
But later he modified his definition by stating, “A person of upper Socio-economic class who violates the criminal law during his/her course of occupational or professional activities.”
White Collar Crimes are committed by many individuals for the selfish desire of self-enrichment. This crime is also carried out collectively by a group of people or associations in any business, such crime can be called Corporate Crime. It hurts the commerce and economy of the nation. Additionally, it also gives rise to the loss of trust of the investors in the market.
A company can function only through human beings and humans who commit an offence for the benefit of a company or themselves will be liable for that offence himself A corporate crime takes place when a company or an entity intentionally hide or change sensitive information like accounting records, debt, prospectus, etc. due to which it then looks healthier.
Crimes performed by individuals who act on behalf of a corporation or other business entity or by any entity having a separate legal personality from the natural persons who manage some important activities is termed as Corporate Crimes.
The concept of white-collar crime was first introduced by American criminologist Edwin Sutherland in 1939. The origins of corporate crime can be traced to the larger concept of white-collar crime. Sutherland defined white-collar crime as,” A crime which I committed by a person.
Some types of Corporate crimes:
When goods, services, money or any type of information is revealed with intent to influence the opinions, actions and decisions of the taker, is Bribery.
When a person imitates or copies an item of the original creator without having the authority to do so is called Counterfeiting.
If a person has been entrusted with a certain amount of money or property, and if that person uses that money or property for his or her use then it is called Embezzlement.
- Bank fraud:
An unethical and/or criminal act by an organization or individual to illegally attempt to obtain or possess money, assets or other property owned or held by a bank or financial institution or try to obtain money from depositors by deceiving is known as Bank fraud.
- Money laundering:
Money laundering can be defined as a financial transaction scheme that intends to conceal the source, identity, and destination of illegally-obtained money.
When a person makes any false statement or omits a material fact in any report, certificate, prospectus or financial statement, it is called Forgery.
Various sectors affected by the Corporate crimes:
- Educational institutions:
In this field, white-collar crime has increased to a greater degree. The wrong or misleading prospectus, false recruitment, the problem of pay, transfer in government schools or universities, termination of services, etc. are the activities involved in white-collar crime. In Nidhi Kainv v. Madhya Pradesh case, the SC held that the help of unjust means in the examination would lead to disqualification of the same and also natural justice’s principal- Audi Alterum should be followed.
- Legal Professionals:
White-collar crime in this sector is also widespread. The crimes are done by legal advisors and lawyers. They sometimes present false evidence, advise organized criminals, also sometimes support false claims.
- Medical Field:
The person belonging to the medical profession is seen committing white-collar crimes in this sector. They issue false medical certificates, sometimes sell drugs, outdated medicines to patients, illegal abortions, etc. Medical negligence also includes an overdose of the medicine. Also sometimes doctors prescribe wrong medicines to the patient which adversely affect the health of the patient.
White-collar crimes are also seen in the field of Engineering. Engineers use low graded raw materials during constructing roads, dams, buildings, canals, houses, etc. Due to this, the safety of people at a large scale falls in danger. So it is illegal to do such acts.
Some reasons for Corporate crime may include:
- Less punishment and fine on individuals who commit such crime
- Legislators and law implementers also belongs to the same field to which the occupational criminals are related.
- Less enforcement drive from administration and law.
- Sometimes, because less wages are given to a person, it may force him to do such illegal acts to gain extra money.
White collar Crimes in India:
A “Top Corporate Criminal” list is released every year to highlight the corporate crimes which are performed by various companies of the world. Some worst issues like violation of human rights and voting rights, tax evasion, low pay, etc. are seen. Some companies are-
Satyam Scam 2009:
It was a scam case in the corporate sector of India. Satyam Computers was the company incorporated in 1987. It was converted into public Ltd in 1991. The company used to offer information technology and consulting services to various sectors. Later on, on 16 Dec 2008, the success-run of the company was disturbed.
The Chairman of the company misled the market and also other stakeholders by lying about the financial health of the company. Some basic facts such as operating profits, revenues, interest liabilities and cash balances were inflated to show that the company was in good health.
The books of accounts and the financial statements of the company were manipulated by the chairman of the company- Ramalinga Raju. He also tried to mislead the investors of the company. Mr Raju confessed that due to a small manipulation done many years back the scam of INR 71.36 Billion in the balance sheet of the company took place, and every attempt to fill the gap failed.
WorldCom Accounting Scandal:
A small company named Long Distance Discount Services in 1983 was merged with Advantage Companies Inc and became WorldCom Inc. CEO of the company was Bernard Ebbers.
During the period of the Internet boom, the stock of WorldCom was risen from pennies per share to over $60 per share. In the 1990s WorldCom became the ‘2nd -largest long-distance phone company in the US due to its aggressive acquisition strategy.
But from 1999 to early 2002, Bernard Ebbers, CEO of the company with the help of other senior management started using fraudulent and improper accounting methods for misleading investors and other directors. Records of internal audits were investigated.
It showed improper accounting of about $3.8 billion. The generally accepted accounting principles (GAAP) were ignored. In July 2002 WorldCom company was filed for Chapter 11 bankruptcy after disclosures of improper accounting methods which were used to inflate revenues and also to reduce expenses.
By the end of 2003, it was calculated that the total assets of the company had been inflated around $11 billion. It is the biggest accounting scandal in U.S. history.
Legislative measures to reduce Corporate crimes:
To place control on corporate criminal offences there are various regulations made in our system. To punish the offenders of corporate crimes the government has made few legislations. They are-
- The Companies Act,2013
- Income Tax Act,1961
- The Essential Commodities Act, 1955
- The Prevention of Corruption Act, 1988
- The Information Technology Act, 2000
- The Negotiable Instrument Act, 1881
- The Prevention of Money Laundering Act, 2002
- The Central Vigilance Commission Act, 2003
- The Special Court (Trail of the offences relation to Transactions in the Securities) Act, 1992
The tremendous progress in science and technology had given rise to a type of wrongdoing called “Desk Wrongdoing”. The Economy sometimes faces losses due to loopholes in the system which may result in corporate crimes. But with the correct combination of information, one could break the chance of cheat. Innovation can help different associations deal with extortion.
Also, the institutional mindfulness among representatives would prove significant to stop Corporate crimes. Most experts believe that the economic impact of white-collar crimes is more costly than any other ordinary crime. Because such crimes adversely affect consumers due to dangerous products and causes problems for society. So reducing such crimes is necessary.