Download White Collar Crime Notes on nature scope of white collar crime and more Study notes Criminology in PDF only on Docsity!
UNIT 1 A:
CONCEPT OF WHITE COLLAR CRIME AND CONVENTIONAL CRIME:
HISTORICAL BACKGROUND:
Edwin Sutherland an American sociologist who first defined the white collar crimes in the global. He described this crime to be committed by the person of high social status as compared to those who commit ordinary crimes during the course of his employment. In 1934, Again Morris drew attention to the necessity of a change in emphasis regarding crime. He arrested that anti-Social activities of persons of high status committed in course of their profession must be brought with the category of crime and should be made punishable. Finally, E.H. Sutherland through his pioneering Work emphasised that these ‘Upper Worked1 crimes which are committed by the persons of upper Socio-economic groups in course of their occupation - violating the trust , Should be termed as “ White Collar Crime “ So as to be distinguished from traditional crime which he called “ Blue Collar Crime “ And the concept of White Collar Crimes found its place in criminology for the first time in 1941
WHITE COLLAR CRIME IN UK, USA, & USSR:
UNITED KINGDOM:
2018 witnessed some key provisions of the Criminal Finance Act, 2017 coming into force. Among these was the power to issue 'unexplained wealth orders' or UWOs which allows investigating authorities to require people connected with serious crimes to explain their interest in and source of obtaining specified properties. Such laws have been introduced to address growing concerns in the UK with corrupt foreign officials using improper proceeds to acquire British real estate and other assets. The English courts have dealt extensively with the concept of litigation privilege in investigations. The English Court of Appeal recently ruled that:1 Litigation privilege will apply to communications between clients and their attorneys if there is reasonable contemplation of criminal proceedings, and litigation must be the sole or dominant purpose of investigation. It further observed that documents prepared by the solicitors and forensic experts forming part of the investigation following formal instructions of the solicitors would be protected. A comprehensive overview and analysis of this has been covered here. In a subsequent judgment2, the English Court of Appeal placed fetters on the liberal interpretation of privileged documents. It held that - correspondence exchanged for the dominant purpose of obtaining advice or evidence in respect of litigation, would be protected by litigation privilege. Such purpose may not be construed in broad terms. Thus, correspondence exchanged among the Board members of company, prepared to discuss a commercial proposal for the settlement of a dispute, would not be covered by litigation privilege. A comprehensive overview and analysis of this has been covered here.
UNITED STATES OF AMERICA:
Balancing implementation of the strict provisions of anti-corruption legislations such as the Foreign Corrupt Practices Act and protecting institutions from persecution, the US Department of Justice introduced a policy against 'piling on' of penalties by different regulators for the same offence. The policy recommends coordinated effort by relevant departments to ensure speedy, efficient and justifiably reasonable penalties to be imposed on guilty commercial institutions. Recent Examples
1. AMAZON: Amazon initiated an internal investigation pursuant to allegations reported in the Wall Street Journal about their offering internal data, via intermediaries, to independent merchants selling their products on the site to help them increase their sales in return for payments. Pursuant to such investigation, several Amazon employees in USA and India were sacked. In response to such data breach, Amazon reported having taken up several preventive and remedial measures, including deletion of thousands of suspect reviews, restricted access of sellers to customer data on its website, etc. 2. GOOGLE: Andy Rubin, creator of Android operating system, was offered an exit package of $90m post an internal investigation concluding on his sexual misconduct while being part of the organization. Information about any such internal investigation was kept hidden by Google for long before the protests by employees suggested other such instances. 3. SYMANTEC: An internal investigation was initiated by the Audit Committee, assisted by independent legal counsel and a forensic accounting firm with respect to certain filings made before the Securities Exchange Commission based on allegations of inconsistent behavior and violation of Code of Conduct and other related policies. Such investigations resulted in certain delays in filing of the annual report by the company. The Audit Committee also proposed certain recommendations which the Board of Directors subsequently adopted, including: appointment of a separate Chief Accounting Officer; a separate Chief Compliance Officer reporting to the Audit Committee; clarifying and enhancing the Code of Conduct and related policies; and adopting certain enhanced controls and policies related to the matters investigated. Symantec voluntarily contacted the SEC regarding the Audit Committee's investigation, followed by a formal investigation commenced by SEC. 4. HAWALA: Illegal currency transfers via non- banking channels are called Hawala. It is an underground banking system. Secret flows of money can take place in free currency areas as well as in areas where currency conversion restrictions arepracticed due to the shortage of foreign exchange. It operates in the following manner. Someone in the USA, for example, deposits $ with an underground banker for payment to be made in India. The US under-ground banker contacts their counter part in India immediately on the telephone or by wire service and sends a coded message for payment to the Indian recipient. The hawala operator in India would contact the recipient and fix a meeting place. The recipient, in the meanwhile, would have received instructions on the telephone about the code word s/he has to exchange with the hawala operator. Thus, the hawala operator in India and the recipient of the money would exchange code words and the hawala operators would hand over the money to the recipient. Of course, the hawala operator in USA would charge a fee for the service rendered. There is no physical transfer of money in hawala operations as in the regular banking channels. This channel is generally used by drug traffickers, smugglers and kidnappers. Basically, the system operates on an ethnic network. The network may include more than 3 or 4 countries. The principal operators engage agents and sub agents in various countries for collection and disbursement of money.
various forms of social, political, economic, commercial and financial activity i.e. railway, insurance, banking, public utilities, stock exchanges, the power industry and receiver ships etc CRITICISM OF SUTHERLAND’S VIEWS ON WHITE COLLAR CRIME Sutherland’ definition of white collar crime has evoked criticism from many jurists. Coleman and Moynihan has criticized and pointed out that there is no accurate and definite criteria for determining persons who can be defined as ‘person of respectability and status’. They also have said that the element of “high status” as used in the definition of white collar crime leads to confusion. Don C Gibbons, Blumber, Richard Knudten have noted that Sutherland has not been consistent in attempting to explain the import of his definition. At one place, he has defined white collar crime as crime committed by a person of high status and some where he declares that the white collar criminal is defined as a person with high socio-economic status who violates the laws designed to regulate his occupational activities. Sutherland found it difficult to give a clear and consistent interpretation of that feature of his definition which tends to limit it to persons of a particular social status. A year after, he observed that ‘white collar crime’ is used to refer principally to business managers and executives. Robin Williams remarks that Sutherland’s discussion of this concept is ‘a model of obfuscation.’ And, thus the work of Sutherland doesn’t give the crystal clear definition of white collar crime. Even some critics have suggested that such crimes should be called as occupational crimes instead of white collar crimes because the element in the definition of white collar crime is not socio- economic status of individuals, but rather the type of crime and the circumstances of its commission.
UNIT 1B:
CAUSES COMPONENTS AND TYPES OF WHITE COLLAR CRIME:
What Elements Are Required to Prove White Collar Crimes?
The elements required to prove that a white-collar crime was committed is the following:
- Intent : To commit a wrongful act or to achieve a purpose that is inconsistent with the law or public safety with the intent that the purpose is achieved. This usually occurs when the defendant acts or commits a behavior with the knowledge that the act is unlawful and can be publishable by law.
- Disguise and Concealment : The hiding or concealing of the real purpose of the crime. This usually occurs when the defendant hides or conceals his criminal violation with the purpose of not getting caught.
- Knowledge : For a defendant to be liable for a white-collar crime, the defendant must have knowledge that he is committing the crime. This usually occurs when the defendant knowingly and intentionally commits the act to gain a financial advantage.
- Reliance : Reliance occurs when the victim or plaintiff relied on the defendant’s fraudulent scheme or act.
What Are Some Common Example of White-Collar Crimes?
As discussed above, most common white-collar crimes are committed by individuals who are business executives or within the business or corporate settings who commit the crime for a financial gain. Some types of common examples of white-collar crimes include: Insider trading Embezzlement of store funds by a manager or employee Ponzi Schemes Pyramid schemes West African Scams Racketeering Investment schemes Insurance Fraud What Are Some White-Collar Crime Defenses? One of the main defenses for a white-collar crime is the absence of intent. Since all white-collar crimes require the defendant to commit the criminal scheme or activity with knowledge and intent that the crime is being committed in motivation of a financial gain, if a defendant did not intend to do the crime, the defendant may not be held liable. The following are common defenses used for a white-collar charge: Absence of Intent : The defendant did not have intent to commit the crime or the activity that was carried out by the defendant was not intentionally done for a personal and financial gain. Entrapment : Entrapment occurs when the defendant did not have intent to commit the white-collar crime, but law enforcement officials coerced criminal activity CLASSIFICATION OF WHITE COLLAR CRIMES : Ad hoc crimes :-They are also called as personal crimes as in this category , the offender pursues in his own individual objective having no face to face contact with the victim. For example: - Hacking on computers, credit- card frauds, tax evasion etc. Breach of trust :- In this type of crime breach of faith bestowed by an individual or institution on perpetrator. Insider Trading: -When some uses the confidential information to trade in shares of publicly held corporations. Bank Fraud : - It means to engage in such activities which is taken place in order to defraud a bank or using illegal means to obtain assets held by financial or non - financial institution. Bribery : -Bribery means offering money, goods or any kind of gift to some government officials in order to have control over his actions or making them to work as per the choice of giver in an illegal manner. Computer Fraud : Computer frauds are very common these days. It has increased with the advancement in the technology. It can also include cyber- crimes. Computer frauds in simple words
has redefined medical negligence to include overdose of medicines, not informing patients about the side effects of drugs, not taking extra care in case of disease having high- morality rate and hospitals not providing amenities that are fundamental for patients.30 Dilatory tactics is used by the members of this fraternity while treating their patients with aim to extracting huge sums of money from them. Engineering:- Some white collar crimes in field of engineering includes using of wrong and cheap materials with sub – standard for the constructions of buildings, roads , canals , dams etc. resulting the danger for the safety of public at a large scale. Educational Institution:- The governing bodies of educational institution are also now involved in white collar crime. Cases on Educational Institution have increased. The activities involved in white collar crimes in this area includes :- false recruitment , wrong and misleading prospectus, termination of services , problems in pay – scale , unfair transfer in government schools and university etc. In case of Nidhi Kain v. Madhya Pradesh(SCC 208) Supreme Court using unfair means with the admission exams will amount to disqualification of exam and principle of natural justice “audi altream” must be followed. IV. Legal Profession:- The white collar crime in the field of law is fairly wide spread. The legal professional ethics are widely committed by members of legal fraternity. The common legal and professional violation committed by lawyers and legal advisors are advising organized criminals, aiding in false claims and fabricating false evidence. The incidence of white - collar crime are also very high among some other professionals like advertisers, property advisors, Chartered Accountant and Company Secretary and management consultants etc.
UNIT 2 A:
EMERGENCE OF WHITE COLLAR CRIMES IN INDIA:
ANCIENT PERIOD - Dating back the history, it is an undaunted fact that ever since human being started living together commission of crime has erupted. A few types of crime have become obsolete and many new forms of crime have taken different dimensions in the present society. White collar crime is not a new phenomenon. In the ancient and medieval literatures of India numerous references are found about these crimes since Vedic period. Mannu, the great law giver of India felt that there was an age when ‘dharma’ prevailed in perfection but gradually ‘adharma’ made its headway giving rise to the tendencies like theft, falsehood and fraud. Bribery- According to Brahaspati, in former ages men were strictly virtuous and devoid of mischievous propensities. Now that avarice and malice have taken possession of them. The concept of bribe is not a new concept in India. Reference to bribery can be seen even in many sacred books. Narada says “what has been given by men with fear, anger, lust, grief or in jest or by mistake or through any fraudulent practice by a minor, an idiot, a person not his own master, one insane or intoxicated, an outcast or in consideration of work unperformed be considered as ungiven or bribe.
Yagnavalkya says that the king shall reward his honest officers and kill the dishonest officers. Further, he says that those who tried to extort money from suitors in court of justice shall be banished and their whole property be confiscated and they may also be transported. Kautilya in his ‘Arthashastra’ has warned about the ministerial person and their functions should be strictly examined. A fine twice the amount of their pay and of the expenditure (incurred by them) shall be fixed for any inadvertences on their part. He said that if a superintendent makes as much as more than, the amount of fixed revenue, he shall be honored with promotion and rewards. Whoever lessens the revenue, eats the kings wealth, if owing to inadvertence, he causes diminution in revenue, he shall be compelled to make good the loss. Adulteration - Hindu Dharmastra writers always think for the better society, therefore Smrtikars take into consideration the problem of health and disease of the people. In this context they discard non-eatables whose sale is punishable. Yajnavalkya first pointed out that sale of the dog’s meat is an offence and those connected with such sale must be penalized. Their hands, nose and ears are to be mutilated besides pecuniary fines. Vijnaneswara commenting on this verse also mentions that nose, ears, hands, the three organs of the body should be mutilated. Kautilya has proposed amputation of hand and leg for the sale of non-eatable meat. In his opinion the heavy fine of nine hundred may be imposed on the person responsible for sale. Yajnavalkya has gone into evaluation of such conduct and recommends fine for adulteration of the food objects such as medicine, ghee, other liquid materials, perfume and cereals etc. Kautilya is mild in this respect and fine is limited to twelve panas only for the adulteration. All this indicates that jurists had paid sufficient attention to the health problem of the society. Even the pollution of water was considered as crime. Urination does spoil the water of nearby tank or well. Hence the person has to find proper place for urination which is punishable if done near a tank. The fine may go up to five hundred panas. Most probably the adulteration of food objects was considered on nationwide scale in order to keep the society sound and people healthy. The notion started from the time of Asoka who established hospitals for human beings and animals. In his edicts he warns the people not to use meat and kill different types of birds. Crimes of Medical Profession - Indian penologists, have considered the problem of the physician and his relation with patients. Manu proposed heavy fine for a physician whose diagnosis is defective and incorrect. Vishnu has supported the opinion of Manu in respect of punishment of physician. The embryology was thoroughly known in ancient India and removal of immature fetus was taken as crime and the highest sin. Kathaka Samitha decries and mentions along with Maitrayini Samitha the removal of fetus as more severe crime than killing of a Brahmin. Yajnavalkya has keenly looked to this heinous crime and has proposed serious penalty to the person responsible for the destruction of embryo. Defective Weights and Measures- It is very essential to keep the weights and measures in perfect order for sound and healthy economic conditions of the country. The faulty measurement or deceitful weight would declare the social life of the community as criminal minded. It reflects the wrong habits of the person concerned and ultimately lower the national value and ethics. The famous political thinker Kautilya had a national outlook and mentioned the appointment of the superintendent of market to look after the deceitful actions of the traders and commercial minded people.While Kautilya suggested penalty of twelve panas for wrong weight, Yajnavalkya insisted for a heavy fine of two hundred rupees (panas).
- White collar crimes are estimated to cost society many times more than crimes such as robbery and burglary. The amount of death caused by corporate mishap, such as inadequate pharmaceutical testing, far outnumbers those caused by murder.
- The emergence of cutting edge technology, growing businesses, and political pressures has opened up new avenues for these criminal organizations to prosper.
- This increase is due to a booming economy and technological advancement such as the Internet and fast money transfer systems. Law enforcement is sometimes reluctant to pursue these cases because they are so hard to track and investigate.
- It is very difficult to detect as white collar crimes always committed in privacy of an office or home and usually there is no eyewitness.
- But naturally a question arises that if we have specific legislations to trace out White Collar Criminality then why these offenders go unpunished. Main reasons for which these white Collar criminals or occupational criminals go unpunished are: i) Legislators and the law implementers belong to the same group or class to which these occupational criminals belong; ii) Less police effort; iii) Favorable laws; iv) Less impact on individuals. **RECENT CASES:
- ICICI Bank:** ICICI Bank resorted to internal investigation amidst investigations by the Reserve Bank of India, Securities and Exchange Board of India and Central Bureau of Investigation pertaining to allegations of fraud against Chanda Kochhar, the erstwhile CEO of ICICI Bank for breach of provisions relating to the Code of Conduct and regulatory provisions relating to conflict of interest. ICICI Bank engaged retired Supreme Court Justice B. N. Srikrishna, to head an internal probe panel in the matter. Justice Srikrishna was assisted by a law firm and a forensic audit company. In July 2018, ICICI Bank instituted yet another internal probe to examine the allegations of irregularities in 31 loan accounts as per reports from another whistle-blower. The bank hired a law firm to investigate these allegations of inflation of profits by $1.3 billion over 8 years by delaying provisioning of the 31 Non- Performing Assets accounts. 2. Punjab National Bank ("PNB"): The Bank was faced with a USD 2 Billion fraud involving diamantaire Nirav Modi and Mehul Choksi. The fraudulent activities of Nirav Modi and Brady House Branch of PNB were revealed after complaints made to Central Bureau of Investigation by forex banks. An internal probe conducted by PNB suggested that officials from Brady House Branch of PNB had fraudulently issued undertakings to forex banks, from whom Nirav Modi had taken credit. This raised huge concerns about PNB's audits, compliance, vigilance systems and internal governance. PNB appointed a consultancy firm to undertake forensic audit of five group companies of Nirav Modi. The investigation revealed 54 officials of PNB ranging from clerks to senior managers were involved in the fraud. Based on the report, 21 officials were suspended by PNB. The internal report has been handed over to the police and relevant investigating authorities and is being used as part of evidence.
3. Flipkart: Pursuant to allegations raised against Flipkart co-founder and group chief executive Binny Bansal for serious misconduct, an independent investigation was done on behalf of Flipkart and Walmart. This led to subsequent resignation by the co-founder. There were reports that the allegations pertained to certain instances of sexual harassment in 2016, which were denied by Mr. Bansal. 4. Cognizant Technologies Solutions: Lifshitz & Miller announced investigation into possible securities laws violations and Foreign Corrupt Practices Act against officials of Cognizant Technologies Solutions relating to improper payments in facilities in India. The company reported the violations in their regulatory filing before the Securities Exchange Commission ("SEC") and US Department of Justice to ensure voluntary disclosures to reduce or limit the imposition of penalties. 5. HDFC Bank: An employment fraud by a consulting firm on HDFC Bank was recently unveiled pursuant to an internal investigation conducted by the Bank. The consultancy agency had pulled off the fraud by puffing up resumes of candidates through forged documents, along with falsified salary slips, forged certificates and documents, as well as non-existent references. FAMOUS CASES ON WHITE COLLAR CRIME Sahara v. SEBI:- It was a case of issuing misleading information and clause in prospectus of company. The question of private placement of shares can be treated as offer was raised? In this case , Securities Exchange Board of India( SEBI) failed to check fraudulent practices of the plantation company. In this case, Sahara Offers the option of fully convertible debentures(OFCD’s) to the more than million investors and termed their issued debentures as private placement, with a defense that the company did not intend to get their OFCD,s listed because the security which that have issued is a hybrid security. The case was referred to Supreme Court of India as many of the investors made a complaint to SEBI that the company is issuing bonds without following regulations of SEBI. Supreme Court made a decision that Sahara has to refund the amount of Rs.5120 Crore to its investors. Court also ruled that SEBI has myriad powers to invest listed and unlisted companies functioning regarding the issue of securities in order to secure the interest of investors. This was a landmark judgment in field Indian Corporate Law. Harshad Mehta Scam Case : The scandal done by Harshad Mehta shocked the Indian economy. He fooled many investors by taking the advantage of loop holes of the system. Harshad Mehta with his associates had initiated a securities scam of Rs. 5000 Crore by diverting funds from banks to stockholders. When the scam was exposed, the stock market of the India crashed and he was arrested. The court banned him from trading in the stock market. This scam can be called as white collar crime. The case was mainly regarding the manipulation of the accounts and providing misleading information. Bihar Fodder Scam:
national legislations for the prevention of money laundering37. The present Act has been passed to implement the resolution of United Nations. The main aim of the guidelines is: To safeguard banks from acting as a chain in money laundering activities or in the process of money laundering. To help banks to know more about the clients and customer and to keep a check on them thus to protect them from the losses. Prevention of Corruption Act,1988: In context with white collar crime, The Prevention of Corruption Act, 1988 is very important Corruption erodes the authority of state and promotes crime. The issue of corruption is very dangerous to nation. The Santhanam Committee Report of 1964 defines the problem of corruption as a complex problem having its roots and ramification in the society itself as a whole. The Act came into force because of increasing cases of bribery and corruption among the public authorities. The Act consolidated the provisions of IPC, CrPc and Criminal Act, 1952. The act has provided the definition of “public duty”, “public authority”, “public servant”. The provided definitions are very important in determining the criminal liability of a public officer. Companies Act, 2013: The act also deals with the white collar crimes. The Companies Act, 2013 contains special provisions for offences , penalties and their Compounding in many of its sections. The provisions of Companies Act , 2013 also provides provisions to deal with effective penalty, mechanism, speedy trials according to the gravity of offences committed under the Act. The Companies Act , 2013 in Sec. 447 provides list of offences and punishment for fraud where- as Sec. 212 deals with investigation into the affairs of the Company by Serious Fraud Investigation Office. The Act states that notwithstanding anything in CrPc, 1973, every offence under the act expect to offence mentioned under sub- section (6) of Sec 212 shall be deemed to be non- cognizable offence. Section 435- 438 of the Act provides establishment of special courts for the purpose of providing speedy trials for offence committed which is punishable under the Act. Sec.447 of the Act provides punishment for fraud and Sec 448 provides punishment for producing or providing any false statement. Thus, the act tried to cover every aspect to deal with the white collar crime or corporate criminal liability of the corporate houses. Essential Commodity Act,1955 : It is an another act, which is enacted with an legislative intent to prevent the socio – economic offences or white collar crime. The main object of this Act is to control the production, supply and the distribution of certain commodities in the market. The act tries to protect the interest of general public in order to secure equitable distribution of essential commodity at a reasonable distribution. The act itself gives the definition of essential commodity. The items and commodity declared as “essential commodity” under the Act are reviewed from time to time in the light of liberalized economic policies in the consultation and particularly with regard to their production, demand and supply. Section 6 of the Act imposes penalties and punishment for cognizable offences. The punishment impose under section 6 of the Act is non –bailable offence. The Act provides that mens rea is an essential element of the offence punishable under the Act. The Act expressly that no Civil Court can
grant any injunction or make any order for any other relief against the Central or State Government or any public officer, in respect of any act done, or purporting to be done. Thus, the Act does not give any privilege to high authorities or to high officers of the Government. The act intended to impose criminal liability upon the offender(s). Industrial (Development and Regulation ) Act, 1951: As earlier mentioned, the increasing rate of white collar crime has started with era of industrialization in India. With the growth of industrial sector at high rate and on sustained basis forced the Govt. of India to issue industrial policies in order to avoid any kind of malpractices in this sector. Thus, the Industrial Policies Resolution of 1948 provided a legal support and aid to enact the Industrial (Development and Regulation) Act, 1951. The main objective of the act is to empower the Govt. to take necessary steps for the growth and development of the industry. It also empowers the Govt. to take necessary steps: to regulate the pattern and direction of industrial development, to control the activities, performance of industrial knowledge in the public interest. The acts also give power to Central Govt. to take over the industrial undertakings without going for any kind of investigation under the certain circumstances. Sec. 24 of the Act imposes penalties for the contravention or attempt to contravene or abetment of the contravention, by any person. Sec 24A of the Act provides that if any person when required by the Act or by an order publish or made under the Act, makes or furnishes any information which is false or misleading and he knows or has a reasonable cause to believe that the produced information or statement is false or misleading shall be punished under the Act with the fine of Rs 2000 or imprisonment of three months or both. Misleading information may include the misrepresentation of accounts, records or any declaration or any document. Thus, the policies made under the act and a provision tries to prevent the occurrence of white collar crime at a very high rate in the country. Information Technology Act , 2002 : In order to tackle with computer- related crimes , Information Technology Act , 2000 has enacted to provide legal recognition to authentication of information exchanged on social media websites or any ECommerce networking sites. The act contains certain provisions that deal with white collar crimes. Some of the section also deals with the awareness of crimes. The Act in its Section 43 and 44 of Information Technology provides penalty for offences committed as prescribed by the Act. Some of the following such offences are as follows:- Unauthorized copying of an extract form any kind of the data Unauthorized access and downloading files illegally. Causing any damage to computer system or computer networking system. Providing any kind of assistance in any form to any unauthorized person who can access to the other person’s computer without his or her permission.
