White-collar crime is a non-violent crime where the primary motive is typically financial in nature. White-collar criminals usually occupy a professional position of power and/or prestige, and one that commands well above average compensation.
The term “white-collar crime” was coined in the 1930s by sociologist and criminologist Edwin Sutherland. He used the phrase to describe the types of crimes commonly committed by “persons of respectability” – people who are recognized as possessing a high social status. Sutherland eventually founded the Bloomington School of Criminology at the State University of Indiana.
Prior to Sutherland’s introduction of the concept of white-collar crime, the upper classes of society were thought to be largely incapable of engaging in such criminal activity. Such a belief was so deeply entrenched in society that when Sutherland first published a book on the subject, some of America’s largest companies successfully sued to get the book heavily censored.
Summary
- White-collar crime is a type of non-violent crime that is financially motivated.
- White-collar crimes may be perpetrated by individuals or at a corporate level. Due to the sophisticated technology now available, however, even white-collar crimes committed by an individual may result in tens of millions in losses for the victims.
- A sociologist and criminologist, Edwin Sutherland, invented the phrase “white-collar crime” in 1939. Prior to his writings on the subject, many people resisted believing that members of the “upper class” engaged in criminal activity.
Blue-Collar vs. White-Collar Crimes
The difference between white-collar crime and blue-collar crime stems from the different types of criminal activity that the criminal has access to engage in.
Blue-collar crime, because of the more limited means of the people committing it, tends to be more straight-on – robbery, burglary, etc. In contrast, white-collar criminals are more often in a position – such as being a loan officer in a bank – to commit widespread and complex fraud schemes.
Types of White-Collar Crime
White-collar crime encompasses a wide range of offenses, including the following:
1. Fraud
Fraud is a broad term that encompasses several different schemes used to defraud people of their money. One of the most common and simplest is the offer to send someone a lot of money (say, $10,000) if they will simply send the fraudster a little money (say, $300 – the fraudster may represent the smaller sum as being a processing or finder’s fee). Of course, the fraudster gets the money that is sent to him but never sends out the money he promised to send.
2. Insider trading
Insider trading is trading done with the benefit of the trader possessing material, non-public information that gives him or her an advantage in the financial markets. For example, an employee at an investment bank may know that Company A is preparing to acquire Company B. The employee can buy stock in Company B with the expectation that the company’s stock will rise significantly in price once the acquisition becomes public knowledge.
3. Ponzi scheme
Named after Charles Ponzi, the original perpetrator of such a scheme, a Ponzi scheme is an investment scam that offers investors extremely high returns. It pays such returns to the initial investors with the newly deposited funds of new investors.
When the scammer is no longer able to attract a sufficient number of new clients to pay off the old ones, the scheme collapses like a house of cards, leaving many investors with huge losses.
4. Identity theft and other cybercrimes
Identity theft and computer system “hacking” are two of the most widespread computer crimes. It’s estimated that losses from identity theft in the United States alone totaled nearly $2 billion in 2019. California, with over 73,000 cases of identity theft reported, was the state whose citizens suffered the most from the crime – Florida was a very distant second with 37,000 reported cases.
5. Embezzlement
Embezzlement is a crime of theft, or larceny, that can range from an employee taking a few dollars out of a cash drawer to a complex scheme to transfer millions from a company’s accounts to the embezzler’s accounts.
6. Counterfeiting
Our money has become more colourful and expanded in detail because it had to in order to combat counterfeiting. With today’s computers and advanced laser printers, the old currency was just too easy to copy. However, it’s questionable how successful the government’s efforts in this area have been. Rumour has it that very high-quality copies of the new $100 bill were available within 24 hours of the new bill first being issued.
7. Money laundering
Money laundering is a service essential to the needs of criminals who deal with large amounts of cash. It involves funnelling the cash through several accounts and eventually into legitimate businesses, where it becomes intermingled with the genuine revenues of the legitimate business and is no longer identifiable as having originally come from the commission of a crime.
8. Espionage
Espionage, or spying, is typically a white-collar crime. For example, an agent of a foreign government that wants to obtain part of Apple Inc. technology might approach an employee at Apple and offer to pay them $10,000 if they will provide a copy of the desired technology.
Below are some of the top 5 white-collar crime cases in India
1. Harshad Mehta Securities Fraud (1988-1995)
Harshad Mehta was a stockbroker, and he established his security firm in 1990, “ Grow More Research & Asset Management Limited”. He was a reputed name in the stock market, and is considered the ‘Sultan of Dalal Street’, investors blindly followed Mehta’s footsteps. He took a loan of huge amounts from the bank and purchased the scrips at high prices, thereby creating a false market. He misused his status and manipulated the stock prices of certain scrips for his gain. This resulted in the unnatural pumping of money in the stock markets causing an abnormal rise in the price of these shares. This act of Harshad Mehta though being immoral was not illegal. The problem arose when Mehta obtained capital to invest in the stock market by misappropriating the bank’s money. This misappropriation of money falls in the purview of money laundering. He earned approximately ₹ 5000 crores.[3] The then renowned journalist Sucheta Dalal exposed this scam. This unabated selling caused the market to lose ₹ 0.1 million in a day. This was the biggest ever crash which the Indian stock market had ever experienced. To curtail such transactions various changes were brought in SEBI rules and regulations.
2. Satyam Scandal: biggest-ever corporate accounting fraud
This scam came into light on 7th January, 20009 by way of a confession letter written by B. Ramalingam Raju (Founder and chairman of Satyam Computers Services Limited) published in Times of India. The letter confessed to manipulating his books of account by overstating the assets and understating liabilities.
The books of accounts are the reflection of the company’s financial standing. They act as an important tool on which investors can rely on before investing their money. Accounts books were manipulated to cheat investors and shareholders.
The whole scam cost approximately ₹14,000 crore and is considered to be an important factor which contributed to the recession of 2009.
In this scandal, SEBI hit back strongly, holding Ramalinga Raju and nine major associates and guilty of insider trading, indulging in fraudulent and unfair trade practices. SEBI directed the accused to pay approximately ₹3000 crores within 45 days and debarred them from accessing the security markets in any way for 14 years. SEBI managed to lash back strongly to ensure such a scam never happened again.
3. 2G Scam
This scam involves the sale of the 2G spectrum licenses using a fixed price. And A Raja did so as the option of auction led to less profit. He gave licenses to those applicants that were ineligible for it. These applicants not only lied but also gave false documents, submitted incomplete details, and hidden them as well. As a result, this led to a loss of 1.76 lakh crore rupees.
Conclusion
The term- white-collar crime- comes from an outdated assumption that business executives wear white shirts and ties. when a person or group of persons violate the law in the course of a legitimate business enterprise or occupation is termed as a White-collar crime. Secondly, the execution of a White-collar crime involves the co-operation and participation of many people
This article is written by Dipti during her internship.
