Case Study On White Collar Fraud

2. Project Report
(Submitted for the Degree of B.Com. Honours in Accounting & Finance under the University of Calcutta)
Title of the Project
A STUDY ON -
WHITE COLLAR FRAUD
(CASE STUDIES ON):- (SATYSM COMPUTERS FRAUD CASE)
(VIJAY MALLYA LOAN FRAUD CASE)
Submitted by
Name of the Candidate : AYUSH MUKHERJEE
Registration No. : 017-1121-2194-14
Calcutta University Roll No. : 1017-61-0353
Name of the College : THE BHAWANIPUR EDUCATION
SOCIETY COLLEGE
College Roll No. : 0103142587
Supervised by
Name of the Supervisor: Prof. DIPANKAR BHATTACHARYA
Name of the College: THE BHAWANIPUR EDUCATION
SOCIETY COLLEGE

3. Supervisor's Certificate
This is to certify that Mr. AYUSH MUKHERJEE a student of B.Com. (Honours) in
Accounting & Finance of THE BHAWANIPUR EDUCATION SOCIETY
COLLEGE under the University of Calcutta has worked under my supervision and
guidance for his Project Work and prepared a Project Report with the title A STUDY ON
WHITE COLLAR FRAUD which he is submitting, is his genuine and original work to
the best of my knowledge.
Signature:..........................................................
Place: KOLKATA
Name: Prof. DIPANKAR BHATTACHARYA
Date: 07/02/2017
Designation:
Name of the College:
THE BHAWANIPUR EDUCATION
SOCIETY COLLEGE

4. Student's Declaration
I hereby declare that the Project Work with the title (in block letters)
A STUDY ON WHITE COLLAR FRAUD submitted by me for the partial
fulfilment of the degree of B.Com. (Honours) in Accounting & Finance under the
University of Calcutta is my original work and has not been submitted earlier to any
other University /Institution for the fulfilment of the requirement for any course of study.
I also declare that no chapter of this manuscript in whole or in part has been incorporated
in this report from any earlier work done by others or by me. However, extracts of any
literature which has been used for this report has been duly acknowledged providing
details of such literature in the references.
Signature:....................................................
Name: AYUSH MUKHERJEE
Address: 522,JODHPUR PARK,
Place: KOLKATA-700068
Registration No. : 017-1121-2194-14
ROLL NO.; 1017-61-0350
Date: - 07/02/2017

5. ACKNOWLEDGEMENT
At the successful completion of this project, I would like to express my sincere gratitude to all people
without whose support this project would not be completed.
At the onset I would like to thank my institute The Bhawanipur Education Society College, Kolkata for
giving us this opportunity to undergo this research project at graduation level.
I would also like to acknowledge the constant help, guidance and encouragement of my mentor, Prof.
Dipankar Bhattacharya, who regularly gave is valuable inputs and suggestions and support in the making
of this project.
I would like to thank all those who directly or indirectly helped me in this report.
AYUSHMUKHERJEE

6. CONTENTS
CHAPTER: 1 - Page Nos.
1. INTRODUCTION:-
• Abstract 1
• Objective Of The Study 2
• Limitations Of The Study 3
• Research Methodology 4
• Literature Review 5
• Chapter Planning 6
•CHAPTER: 2 –
• CONCEPTUAL FRAMEWORK:-
• Definition Of White Collar Fraud 7-8
• Various Types Of White Collar Fraud 9-28
• Impact Of White Collar Fraud On The Global World 29-31
• Factors Contributing to the Increase 32
• Preventive Measures For White Collar Fraud 32-34
• National Scenario 35-37
• International Scenario 38-42
•CHAPTER: 3 –
• DATAANALYSIS & FINDINGS:-
• Case Study 1 {Satyam Computer Services Fraud Case} 43-48
• Case Study 2 {Vijay Mallya Bank Loan Fraud Case } 49-53
•CHAPTER: 4 –
• CONCLUSION & RECOMMENDATIONS:-
• Conclusion 54
Recommendation 55
BIBLIOGRAPHY & WEBOLOGY 56

7. INTRODUCTION
ABSTRACT
This paper provides a detailed understanding behind the motives of people committing
crimes. Researchers have named ―the people committing crime, where the crimes were
minimal and confined to a particular area of administration as Grass Eaters. People
involved in white collar crimes and which has spread in almost all fields of business are
termed as Meat Eaters. With the advent of technology and growth of education, white collar
crimes are on the rise, being protected by professionals finding loopholes in the judiciary
and support from the government indirectly. This has created a nexus where people from
almost all walks of life have started forming group to do white collar crimes and being
protected by professionals in law. This has lead to a situation where the small timers have
become white collar criminals. Talking about the prevalence of white collar crimes in India,
they are spreading like a rapid fire in every sphere of society. Though corruption, one of the
species of white collar crimes, has been the most talked about issue in all spheres-social,
economic and political, not much stringent steps/actions have been taken to curb this
menace. Therefore the concern of this paper is to define white collar crime, study its
historical development and formulate tentative solutions for eradicating the problem.
KEYWORDS:-
White Collar Fraud - The term ‘fraud’ commonly includes activities such as theft,
corruption, conspiracy, embezzlement, money laundering, bribery and extortion in an
organization.
Government- Here the role of government and its support towards the victims is referred
to.
Education - Through education people are gaining knowledge about the corporate world
and using this knowledge for sabotaging the corporate sector.

8. Objectives of the study :-
Since 1939, the term white-collar crime is now synonymous with the full range of
frauds committed by business and government professionals. These crimes are
characterized by deceit, concealment, or violation of trust and are not dependent
on the application or threat of physical force or violence. The motivation behind
these crimes is financial—to obtain or avoid losing money, property, or services or
to secure a personal or business advantage.
These are not victimless crimes. A single scam can destroy a company, devastate
families by wiping out their life savings, or cost investors billions of dollars (or
even all three). Today’s fraud schemes are more sophisticated than ever.
The reason behind this study is –
To understand the volume of corporate crimes that is committed in
India and abroad.
To know its effects on the Indian economy and the world as a whole.
To know the various roles of the governments throughout the world to
prevent this kind of fraud.
 To know the amount of expenditure that is incurred by the government,
for the prevention and for creating awareness of such fraud.

9. Limitations of the Study
There are certain obstacles that are faced by every person who is making
the project on “White Collar Fraud”, in every step of the project. Some of
the problems that are faced by me are as given below -
All research projects cost money. Conducting a project like “White
Collar Fraud” is an expensive affair.
Lack of resources or sharing of the same resource for multiple projects
can create trouble while conducting a project.
Time is always a factor to be considered. It usually takes a lot of time to
prepare a good project.
Administrative supervision is necessary for making a project on White
Collar Fraud, for supervision over the project and guidance.
Very important topics may not be considered feasible unit, unless it is in
accordance with ethical guideline.

10. RESEARCH METHODOLOGY
This chapter shall discusses the research method available and used for the study and what
is applicable for it. This entire project is based on secondary data, inclusion of quantitative
and qualitative data which is collected from various sources. The process by which research
go about their work of describing, explaining and predicting phenomenon is called
methodology. There are two types of methodology :-
Primary Data : The data collected from firsthand experience and from the source itself, is
called Primary data.
Secondary Data :The data which is extracted from the primary information and which is
used by the public for study is known as Secondary Data.
AREA OF STUDY:-
This project is directed towards the study of white collar fraud. It's main aim is to study the
frauds committed by the three corporations, of which the two are private sector
corporations and one is a public sector corporation.
SAMPLE :-
This entire project is based on data collected from various books of various authors and as
well as from the World Wide Web (WWW).
TOOLS OF DATA COLLECTION:-
For this research study secondary data has been adopted from various sources, such as
from, Books, News Papers, and various websites.
METHOD OFANALYSIS:-
For this study, descriptive research method was utilised. It could also suggest unanticipated
hypotheses. Nonetheless, it would be very hard to rule out alternative explanations and
especially infer causations. Thus this study used descriptive approach.

11. LITERATURE REVIEW
oIn 1939, Edwin H. Sutherland (Founder of White Collar Fraud), a Criminologist and Sociologist
forwarded: He defined the concept as crime by an individual of high social status and respect in their area
of occupation. Edwin also incorporated that crimes were committed by legal firms and corporations as
well.
oGerhard Blickle,(2006). University of Bonn, Germany, Some Personality Correlates of Business - White-
Collar Crime: He explained that, Psychological variables do discriminate between white-collar offenders
and non-offenders. It can be speculated that in addition to high hedonism, low integrity and high
conscientiousness are important features.
oJohn D. Gill, J.D., CFE and Mark Scott, J.D. The Legal Environment and White Collar Crime (2008):
White collar crime is a phrase used to refer to and encompass a complicated web of numerous interrelated
and overlapping areas of the law. They said white collar crime is not an autonomous discipline; instead,
white collar crime is most assuredly interdisciplinary — combining individuals from multiple disciplines
and professions, such as accountants, auditors, attorneys, & investigators.
oDavid O. Friedrichs, (2009). Trusted criminals: White collar crime in contemporary society- David O.
Friedrichs explained white-collar crime as a non-violent crime committed through dishonesty or deception
by people professional occupational status, for financial benefits by offenders of technical business and
government knowledge.
oR F Meier ; J F Short (2012) White-Collar Crime - An Agenda for Research : They have recently defined
White Collar Crime as the use of a significant position of power for illegal gain that results in damage or
harm to victims as measured by financial loss, physical harm, and damage to the community's moral
climate. The economic impact of white-collar crime is far more costly than ordinary crime.

12. CHAPTER PLANNING
This project explains the study of White Collar Fraud.
The first chapter gives us an overview on the topic of White Collar Fraud. A brief
review of literature is provided to develop the objectives of this project. A
particular methodology is adopted to address the research agenda is mentioned in
brief, though there remain certain limitations to which this project is subjected to.
In the second chapter briefly defines the topic of White Collar Fraud. Here the
various types of fraud is also mentioned. We get a picture of the national and
international scenario. The impact of White Collar Fraud on the Global World is
discussed here. Further precautionary measures that are adopted to prevent
White Collar Fraud is also mentioned in this chapter.
In chapter three, we get an insight into various case studies. Here two case studies
have been conducted, namely, Satyam Computer Services' Fraud case and Vijay
Mallya Bank Loan Fraud Case .
In chapter four, a conclusion has been drawn on the basis of the three case studies.
It basically states the outcome of these frauds that has been committed and the
precautions that should be taken.
In the final chapter, the bibliography and webology has been drafted. This states
the sources from where the information and statistical diagrams has been taken.

13. WHITE COLLAR FRAUD
DEFINITION
Fraud is defined as any intentional act committed to secure an unfair or unlawful gain but
“Fraudulent Practice” means any action or omission, including misrepresentation, that
Knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial
benefit or to avoid an obligation .Corrupt Practice means the offering, giving, receiving or
soliciting, directly or indirectly, of anything of value to influence improperly the actions of
another party.
This thought of “WHITE COLLAR FRAUD” evolved with the Criminologist and
Sociologist Edwin H. Sutherland, in the year 1939, who popularized the term white collar
crimes‘ by defining such a crime as one, committed by a person of respectability and high
social status in the course of his occupation. Sutherland also included crimes committed by
corporations and other legal entities within his definition.
Sutherland‘s study of white collar crime was prompted by the view that criminology had
incorrectly focused on social and economic determinants of crime, such as family
background and level of wealth. There have been crooks and unethical persons in business,
various other professions, who tend to become unscrupulous because of no reason apart
from the thirst of gaining more and more for themselves. These deviants have least regard
for ethical and moral human values.
Therefore, they carry on their illegal activities with impunity without the fear of loss of
respect and prestige. These crimes are of the nature of white collar crimes’ which is the
essential outcome of the development of the competent economy of the twenty-first century.

15. TYPES OF FRAUD AND ITS
STATISTICAL DATA –
There are numerous types of white collar crime. The types of white collar crime includes
and certainly is not limited to: identity theft, mail fraud, blackmail, bank fraud, computer
fraud, counterfeiting, credit card fraud, embezzlement, forgery, insider trading, insurance
fraud, investment schemes, kickbacks, racketeering, securities fraud, income tax evasion,
telephone marketing fraud, property fraud, and pyramid investment schemes. This is by no
means a comprehensive list of the types of white collar crimes committed. The type and
scope of white crimes committed is always evolving and the list continues to grow.
Here are some types of frauds that we come across often-
Financial Institution Fraud:
Financial institution fraud (FIF) is the class of criminal schemes targeting traditional retail
banks, credit unions, and other federally-insured financial institutions. Many FIF schemes
involve the compromise of customers’ accounts or personal identifying information (PII);
when identities are stolen, both the financial institution and customers are considered
victims.FIF can be categorized as either external—when perpetrators have no affiliation
with the victim institution—or internal—when bank employees use their access to accounts
and systems and knowledge of policies to commit fraud. Commonly investigated external
FIF schemes include stolen or counterfeit checks, account holder impersonation, access
device fraud, credit card scams, and email hacking leading to loss. Unfortunately, as
technology creates increased convenience and accessibility for customers, it also creates
opportunity for criminal actors.

17. Mortgage Fraud:
Mortgage fraud is a sub-category of FIF. It is crime characterized by some type of
material misstatement, misrepresentation, or omission in relation to a mortgage
loan which is then relied upon by a lender. A lie that influences a bank’s decision—
about whether, for example, to approve a loan, accept a reduced payoff amount, or
agree to certain repayment terms—is mortgage fraud. The officials have charged
with investigating mortgage fraud, particularly in the wake of the housing market
collapse, have broadened the definition to include frauds targeting distressed
homeowners.
There are two distinct areas of mortgage fraud—fraud for profit and fraud for
housing.
•Fraud for profit: Those who commit this type of mortgage fraud are often industry
insiders using their specialized knowledge or authority to commit or facilitate the
fraud. Fraud for profit aims not to secure housing, but rather to misuse the
mortgage lending process to steal cash and equity from lenders or homeowners.
•Fraud for housing: This type of fraud is typically represented by illegal actions
taken by a borrower motivated to acquire or maintain ownership of a house. The
borrower may, for example, misrepresent income and asset information on a loan
application or entice an appraiser to manipulate a property’s appraised value.

19. Health Care Fraud:
Healthcare fraud is a process by which criminals exploit flaws a
healthcare system to defraud health care programs, the government and
individuals of money. Healthcare fraud unfortunately is not limited to
criminals outside the healthcare profession; medical professionals also on
occasion act to steal funds from healthcare systems, individual and
governments. The crimes committed by industry professional include over
billing, creating false bills for services and patients who were never seen
or treated, and ordering tests and procedures which are not necessary. It
is estimated that health care fraud generates more than $100 billion
annually in the United States (National Fraud Centre, 2000).

20. New Study Says Over 2 Million
Americans Are Victims of Medical
Identity Theft -

22. Identity Theft:
Identity theft is the deliberate use of
someone else's identity, usually as a
method to gain a financial advantage or
obtain credit and other benefits in the
other person's name, and perhaps to the
other person's disadvantage or loss. The
person whose identity has been assumed
may suffer adverse consequences if they
are held responsible for the
perpetrator's actions. Identity theft
occurs when someone uses another's
personally identifying information, like
their name, identifying number, or
credit card number, without their
permission, to commit fraud or other
crimes. The term identity theft was
coined in 1964. A stolen identity is a
powerful cloak of anonymity for
criminals and terrorists and a danger to
national security and private citizens
alike.

25. Intellectual Property Theft/Piracy:
Intellectual property theft involves robbing people or companies of their ideas,
inventions, and creative expressions—known as “intellectual property”—which
can include everything from trade secrets and proprietary products and parts to
movies, music, and software.
It is a growing threat—especially with the rise of digital technologies and Internet
file sharing networks. And much of the theft takes place overseas, where laws are
often lax and enforcement is more difficult. All told, intellectual property theft
costs U.S. businesses billions of dollars a year and robs the nation of jobs and tax
revenues.
2013 STATISTICS OFCYBER CRIME ACROSS
THE WORLD -

27. Money Laundering:
Money laundering is the process by which criminals conceal or disguise their proceeds and
make them appear to have come from legitimate sources. Money laundering allows
criminals to hide and accumulate wealth, avoid prosecution, evade taxes, increase profits
through reinvestment, and fund further criminal activity. While many definitions for money
laundering exist, it can be defined very simply as turning “dirty” money into “clean” money.
And it’s a significant crime—money laundering can undermine the integrity and stability of
financial institutions and systems, discourage foreign investment, and distort international
capital flows. Money laundering is usually associated with crimes that provide a financial
gain, and criminals who engage in money laundering derive their proceeds in many ways.
Some of their crimes include:
•Complex financial crimes
•Human trafficking
•International and domestic public corruption
•Narcotics trafficking
•Terrorism
There are variety of methods used by criminals to launder money, here are a few of the ways
through which criminals launder their illicit proceeds:
•Financial institutions
•International trade
•Real estate
•Third party service providers

29. Insider Trading:
Insider trading is the trading of a public company's stock or other securities (such
as bonds or stock options) by individuals with access to non-public information
about the company. In various countries, some kinds of trading based on insider
information are illegal. This is because it is seen as unfair to other investors who
do not have access to the information, as the investor with insider information
could potentially make far larger profits that a typical investor could not make.
Trading by specific insiders, such as employees, is commonly permitted as long as
it does not rely on material information not in the public domain. Many
jurisdictions require that such trading be reported so that the transactions can be
monitored.

30. Weekly chart of the Selling & Purchasing 500 between 1997 and 2003. Numbers below price
correspond to periods of low insider selling (high buying) and numbers above the price chart to
periods of high insider selling in figure.

31. Pink lines are the 30-day highs and red lines, the 30-day lows.
Insurance Fraud:
Insurance fraud is any act committed with the intent to obtain a fraudulent outcome from
an insurance process. This may occur when a claimant attempts to obtain some benefit or
advantage to which they are not otherwise entitled, or when an insurer knowingly denies
some benefit that is due. To engage in an act or pattern of activity wherein one obtains
proceeds from an insurance company through deception.
Insurance fraud has existed since the beginning of insurance as a commercial enterprise.
Fraudulent claims account for a significant portion of all claims received by insurers, and
cost billions of dollars annually. Types of insurance fraud are diverse, and occur in all areas
of insurance. Insurance crimes also range in severity, from slightly exaggerating claims to
deliberately causing accidents or damage.

32. Source: Frontier analysis of Data monitor Data for the claims (deflated to 2014
prices) And Euro stat for transport insurance price inflation data.

33. IMPACT OF WHITE COLLAR FRAUD ON
THE GLOBAL WORLD
While white collar crime, generally is non-violent, there are significant adverse
consequences. Counterfeiting, for example, can undermine public confidence in a
nation’s currency. This can certainly lead to a decrease in the willingness of
businesses, and individuals who are willing to do business in a specific currency.
The most significant and obvious consequence of white collar crime is the
enormous loss of revenue.
Organizational Effectiveness:
Organizational effectiveness is a critical component in the assessment and
evaluation of the impact of white collar crime. The international community relies
heavily on various types of organizations to accomplish their global social,
economic and political objectives.
The ever present and constantly evolving threat of theft and various forms of
crime and criminal activity directed at public, private and non profit
organizations have a profound impact on the way these organizations conduct
business. White collar criminal activity can and often does weaken public and
private institutions.

34. Social Implications:
White collar crimes, while generally non violent, do contribute to adverse social conditions
particularly in poor and developing countries. The reason for this relationship is due in part
to the limited opportunities for upward social and economic mobility for many people
around the world. Sociologists assert that people are products of their environment. In some
regions of the world white collar crime is pervasive and often tolerated if not altogether
accepted. In these cases young people often view criminal activity as a means and vehicle to a
better life for both themselves and their families. It’s also difficult to convince a young
people that a life of crime is not a good career path when many of their peers are involved in
white collar crimes.
White collar crime also contributes to adverse social conditions by reducing the available
resources. Nations which have made a decision to aggressively combat white collar crime
have to fund these activities. By funding deterrence, detection and prosecution efforts
against white collar criminals, governments often reduce funding for various social
programs. This eventually adversely impacts the adoption and implementation of effective
social programs.
Economic Implications:
White collar crime can adversely impact economic growth and development. An institution,
for example, which has experienced a widely publicized breach of security in their computer
system, may find it difficult to regain the trust of their clients. This decline in trust may be
compounded when the security breach involves the loss of client personal financial
information. In cases where a corporation is a major employer in a city or region the
economic impact can be enormous.

35. Political Implications:
Government computer networks are often the target of attacks. This decreases
the ability of international organizations investing resources in smaller countries.
An increase
in white collar criminal activity can lead to an increase in funding for warlords
and anti government regimes. This makes it possible for criminal organizations to
be better equipped than police and government forces.
National and Regional Stability:
White collar crime influences the extent to which national and regional stability
can be achieved. Poor and developing nations rely on public and private
organizations to invest and grow their economies. This creates jobs and tax
revenue. When white collar crime increases and is directed, particularly, at private
organizations, these organization reduce investments, hire fewer people, generate
less tax revenue. In some cases businesses that become targets of white collar
crime are forced out of business. This decreases the likelihood that similar
businesses will invest in the region. This in turn gives greater power and influence
to warlords and criminal elements as they become the primary source of
employment opportunities (United Nations Report, March 2007).

36. Factors Contributing To The Increase:
There are a multitude of factors which make it easier for criminals to illegally and quickly
exploit individuals, businesses, companies and governments for personal gain. In recent
decades advances in technology which were initially designed and implemented to help
individuals, businesses and governments transfer data, funds and information faster and
more efficiently have provided opportunities for white collar criminals to engage in various
criminal activities. These new technologies have also made it possible for white collar
criminals to engage in the exploitation of public and private sector financial databases from
anywhere in the world.
PREVENTIVE MEASURES FOR WHITE
COLLAR FRAUD
The first and most significant step which can be taken to reduce or eliminate white collar
crime against major companies and corporations deals with accounting systems. Major
companies have complex financial reporting systems. The problem with this is that these
complex reporting systems which are often designed to ensure that no major financial
transaction can take place without multiple approvals by managers at various levels within
the organization. The problem is that employees within these major corporations, in some
cases over a period of many years will learn how the system works and identify critical
weaknesses and flaws in the system.

37. A second problem is that major companies and corporations have to purchase many goods
and services. In many instances, if the price of a good or service is relatively small, there are
fewer steps and little oversight for these transactions. As such, white collar criminals find
ways to create false invoices for relatively small items which are not monitored closely by the
corporation. While this may not be a major problem when very few false invoices are
created, it can be a major problem when thousands of false invoices, in some cases up to
$10,000 can add up to millions of dollars over many years.
Major companies and corporations are vulnerable and have to take appropriate action or
they will continue to be exploited. Major companies and corporations must implement more
stringent accounting controls which effectively track the dissemination of funds for smaller
purchase. Companies and corporations must implement the same system of checks and
balances for the purchase of lower priced goods and services as they do for the larger
financial transactions. The level of approval may change, obviously, a board or president of
a corporation cannot be expected to sign off on every low priced good or service. That would
clearly be an inefficient and ineffective use of time and resources. However, a company can
have the same number of people be involved in the approval process. Companies and
corporations can also limit the number of vendors they purchase goods and services from.
This will make it possible for these corporations to purchase goods and services from
vendors who are well established, have a tremendous track record, who have stringent
control over the invoices they produce making it more difficult for false invoices to enter the
approval system of the targeted corporations. Major corporations can also implement
electronic invoice approval systems. These data obviously would have to encrypted and
accessible only to those who are part of the invoice review and approval process. Companies
and corporations must conduct both internal and external audits of their financial reporting
and resource allocation process.

38. Study shows, consistent with the previous study conducted two years ago, that:
The typical organization loses 5% of revenues every year due to fraud. (About $895 billion was lost
in the U.S. last year.)
For every $1 million of revenues your business earned last year, a starting point estimate for how
much you might have lost to occupational fraud is $50,000 (5% of $1 million).
To capitalize most effectively on antifraud spending, we can consider these preventive measures:
•Strong internal controls- You need to strengthen any weak internal controls to cut any chances
criminals have to steal your assets. Weak internal controls are cited by Association of Certified
Fraud Examiners (ACFE) as the leading cause of white collar crimes.
•Training- Without proper training, your employees will not know how to detect fraud from within
or outside the company. By educating your staff on some common red flags associated with fraud,
you will be able to better detect and prevent fraud.
•Management’s help- Management must be heavily involved in the fight against white collar crime.
Taking the time to review controls and correct weaknesses is essential to the betterment of your
fraud detection system. We don’t want to send messages that we don’t care, or that committing a
crime in the organization is simple.
•Hotline- Many businesses have set up anonymous fraud reporting hotlines. Though the cost and
maintenance of such a system has deterred many businesses from adopting one, it can help to
uncover fraud, which can, in turn, save the business from the hefty losses involved in such crimes.
The key to warding off fraudsters in the organization is to maintain a vigilant “Anti-Fraud” stance
that everyone in the business is aware of and supports. If we do suspect fraud within the company,
the financial and legal advisors can help reinforce the internal controls and investigate any
suspicious activity.

39. National Scenario
FRAUD SCENARIO IN INDIA –
White collar crimes are to be considered as a global phenomenon to which India is no
exception. As discussed earlier, white collar crimes emerged in India with the advent of the
British colonization during the period of industrial capitalism. Prior to that, instances of
men working with the District treasury embezzling with the money kept under his safe
custody or bribing practiced among the officials were found.
The chart below compares the top six fraud categories at global level with India. In most of
the cases, India is doing much worse than its global counterparts are. Worldwide
management conflict of interest, internal financial fraud, corruption and bribery and vendor
procurement related frauds have increased. Physical theft of assets and information theft
decreased. Indian business crucial pain points are corruption and bribery, information
theft, internal financial fraud, financial mismanagement and vendor procurement
No. Types of Fraud Global
2011(%)
Global
2010(%)
India
2011(%)
1. Management conflict of interest 21 19 19
2. Internal financial fraud 19 13 23
3. Corruptions & bribery 19 10 31
4. Vendor procurement 20 15 22
5. Physical theft of assets 25 27 23
6. Information theft 23 27 27

40. 2010-2011 Annual Global Fraud Survey report, conducted by Economist
Intelligence Unit gives expected results. Fraud continues to be a big problem
worldwide and more so in India. Of the companies surveyed, globally 75% reported
experiencing fraud during the year. Though the figure has reduced in comparison to
previous year‘s 88%, the situation is still dismal.
In India, the situation is disastrous, with 84% organizations reporting that they
suffered from fraud during the year. It is wake-up call for India, as it is ranked second
worldwide after Africa and shares the position with China
INCREACE IN INCIDENCE OF FRAUD IN INDIA

41. All information of statistical data has been
collected from -

42. International Scenario-
A rising awareness of ongoing corruption ,fraud and bribery and has reached boards of
directors and senior management of companies in multiple countries, but pressure to
generate growth, especially in rapid-growth markets, keeps many managers from addressing
problems.
The world's developing countries lost a total of $946.7 billion to corruption, trade
misinvoicing and tax evasion in 2011, according to the research. And to make matters worse,
the amount that gets spirited away is growing larger with each passing year. Money lost to
corruption in developing nations was 13.7 percent greater in 2011 than was lost the year
before; illicit outflows total $832.4 billion in 2010.
The total figures are staggering: between 2002 and 2011, developing countries lost about
$5.9 trillion to illicit outflows (Illicit Outflows from Developing Countries 2002-2011,” was
released by Global Financial Integrity, a research and advocacy organization based in
Washington, D.C. ). Especially Tax Justice Network in the index was launched on November
7, 2013.estimated $21 to $32 trillion of private financial wealth is located, untaxed or lightly
taxed, in secrecy jurisdictions around the world. Illicit cross-border financial flows add up to
an estimated $1-1.6 trillion each year. By the year 2017, the estimated amount would add up
close to $40 trillion.
All fraud research increasing alarm is just reminded fraud should not happen, but it does. It
can happen from the highest to lowest levels in an organization.
Recent surveys by PricewaterhouseCoopers and Ernst & Young show that incidents of
fraud have increased globally by 22% over the past two years and here in the UK the
average corporate fraud costs a company some £200,000. The government estimates the
annual cost of fraud to the UK economy is in the region of £14bn. There is a special note
informed, move to a more global business model that relies on a network of suppliers and
partners is leading to a higher risk of fraud.

44. FRAUD SCENARIO IN UNITED STATES OF
AMERICA
The United States has an incidence of fraud below the overall average – 66% of
companies were hit by one fraud in the last year compared to 70% globally – and
a rate of loss that is also slightly under the norm – 1.2% compared to 1.4% for the
survey as a whole.
Moreover, significant increases in the past year have taken place in the prevalence
of management conflict of interest (21% of respondents’ companies were affected
compared to 16% in the 2012 survey), regulatory and compliance fraud (17% up
from 7%), IP theft (12% up from 8%), and money laundering (5% up from 1%).
Even some of this year’s good news might not last. Although the incidence of
information theft declined from 26% in the 2012 survey to 20% this year, 23% of
respondents say that they are highly vulnerable to this crime, up from just 7% last
year, perhaps because IT complexity is the leading cause of increased exposure to
fraud risk, affecting 44% of respondents’ companies.
Companies in the United States will need to be more active if they want to keep
fraud levels as low as in the past.

45. FRAUD SCENARIO IN CANADA-
In previous years, Canadian survey respondents have often reported
overall fraud incidence well below the global average. This time around
the news is more negative: 69% of Canadian companies were affected by
at least one fraud in the last year – very close to the survey average (70%).
Canada’s fraud picture, however, differs markedly from the global norm.
In some areas – such as vendor or procurement fraud, internal financial
fraud and market collusion – those surveyed report incidences well below
that in other parts of the world. For two frauds, though, Canadian
companies have much larger problems than their peers: the country’s
incidence of management conflict of interest (29%) was the second highest
of any geography in the survey and that for information theft (29%) was
also one of the highest and well above the survey average (22%). These
types of fraud tend to be expensive and it shows, as Canadian
respondents’ companies lost 1.7% of revenues to fraud last year,
compared to a global average of 1.4%.
Moreover, as the ongoing Quebec corruption inquiry demonstrates, the
country is not immune to this fraud. Its reported incidence this year
(14%) was the same as that for the overall survey.

46. Money laundering in Canada, 2009
Of those companies which experienced fraud in the last year and where the perpetrator is
known, senior or middle managers played a leading role at 43%, well above the survey
average of 32%.Surprisingly, Canadian companies are less active than most, in protecting
themselves against their biggest fraud problems like, only 63% are putting money into new
IT security software in the next 12 months, compared to 68% on average.
More striking, just 29% have tested an information security incident preparedness plan in
the last six months, compared to 48% on average. Similarly, only 40% are investing further
in management controls, compared to 43% for the survey as a whole. Finally, just 34% are
putting money into staff training and whistle- blower hotlines, compared to 43% on average.
Canadian firms will have to try harder in order to address their big problems better.

47. CASE STUDY - 1
THE SATYAM SCANDAL
INTRODUCTION
Satyam Computer Services Limited was a “rising-star” in the Indian “outsourced” IT-services
industry. The company was formed in 1987 in Hyderabad (India) by Mr. Ramalinga Raju. The firm began
with 20 employees and grew rapidly as a “global” business. It offered IT and business process outsourcing
services spanning various sectors. Satyam was as an example of “India’s growing success”. By 2003,
Satyam’s IT services businesses included 13,120 technical associates servicing over 300 customers
worldwide. At that time, the world-wide IT services market was estimated at nearly $400 billion, with an
estimated annual compound growth rate of 6.4%. “The markets major drivers at that point in time were
the in- creased importance of IT services to businesses worldwide; the impact of the Internet on e-
Business; the emergence of a high‐quality IT services industry in India and their methodologies; and, the
growing need of IT services providers who could provide a range of services”. To effectively compete,
both against domestic and global competitors, the company embarked on a variety of multi‐pronged
business growth strategies. “In 2007, Ernst & Young awarded Mr. Raju with the ‘Entrepreneur of the
Year’ award. On April 14, 2008, Satyam won awards from MZ Consult’s for being a ‘leader in India in
CG and accountability’. In September 2008, the World Council for Corporate Governance awarded
Satyam with the ‘Global Peacock Award’ for global excellence in corporate accountability”. From 2003-
2008, in nearly all financial metrics of interest to investors, the company grew measurably. Satyam
generated USD $467 million in total sales. By March 2008, the company had grown to USD $2.1 billion.
The company demonstrated an annual compound growth rate of 35% over that period. Operating profits
averaged 21%. Earnings per share similarly grew, from $0.12 to $0.62, at a compound annual growth rate
of 40%. Over the same period (2003‐2009), the company was trading at an average trailing EBITDA
multiple of 15.36. Finally, beginning in January 2003, at a share price of 138.08 INR, Satyam’s stock
would peak at 526.25 INR—a 300% improvement in share price after nearly five years. Satyam clearly
generated significant corporate growth and shareholder value. The company was a leading star and a
recognizable name in a global IT marketplace. The external environment in which Satyam operated was
indeed beneficial to the company’s growth. But, the numbers did not represent the full picture. The case of
Satyam accounting fraud has been dubbed as “India’s Enron”. Satyam became the centerpiece of a
“massive” accounting fraud.

48. S.W.O.T. ANALYSIS
Strengths
•Global presence
•Broad range of research and development Services
Broad services portfolio
•Strategic alliances
•Strong financial position, company has revenue of US $ 1.8 billion and employee strength of
33,353
Weaknesses
•Low operating margin of other group of companies
•Inefficient and ineffective internal auditor structure.
•Incompetent Chief Executive Officer and Chief Financial Officer.
Opportunities
•New Brand Identity and synergy with the parent company
•Launching BPO services
•Huge potential in domestic market
•Increasing in Global IT spending
Threats
•Fluctuations in currency exchange
•Process Non-compliance
Increasing cost of Human capital
•Risk due to increasing IT complexity

49. SATYAM COMPUTER SCAM
On January 7, 2009, Mr. Raju disclosed in a letter to Satyam Computers Limited Board of
Directors that he had been manipulating the company’s accounting numbers for years. Mr.
Raju claimed that he overstated assets on Satyam’s balance sheet by $1.47 billion. Nearly
$1.04 billion in bank loans and cash that the company claimed to own was non-existent.
Satyam also underreported liabilities on its balance sheet. Satyam overstated income nearly
every quarter over the course of several years in order to meet analyst expectations. For
example, the results announced on October 17, 2009 overstated quarterly revenues by 75
percent and profits by 97 percent. Mr. Raju and the company’s global head of internal audit
used a number of different techniques to perpetrate the fraud. “Using his personal
computer, Mr. Raju created numerous bank statements to advance the fraud. Mr. Raju
falsified the bank accounts to inflate the balance sheet with balances that did not exist. He
inflated the income statement by claiming interest income from the fake bank accounts. Mr.
Raju also revealed that he created 6000 fake salary accounts over the past few years and
appropriated the money after the company deposited it. The company’s global head of
internal audit created fake customer identities and generated fake invoices against their
names to inflate revenue. The global head of internal audit also forged board resolutions and
illegally obtained loans for the company”. It also appeared that the cash that the company
raised through American Depository Receipts in the United States never made it to the
balance sheets.

50. Fabricated balance sheet and income statement of Satyam: as of
September 30, 2008.
Items Rs. in crore Actual Reported Difference
Cash and Bank Balances 321 5361 5040
Accrued Interest on Bank
Fixed Deposits
Nil 376.5 376
Understated Liability 1230 None 1230
Overstated Debtors 2161 2651 490
Total Nil Nil 7136
Revenues (Q2 FY 2009) 2112 2700 588
Operating Profits 61 649 588

51. Promoter’s shareholding pattern in Satyam Computers from
2001 to 2009.
YEAR %
2001 26%
2002 22.26%
2003 20.76%
2004 17.35%
2005 15.67%
2006 14.02%
2007 8.79%
2008 8.74%
2009 2.18%
Percentage %
0%
5%
10%
15%
20%
25%
30%
2001 2002 2003 2004 2005 2006 2007 2008 2009
Percentage %
Percentage %

52. Stock Charting of Satyam from December 2008 to January 2009
Amt.$(Cr.)
0
100
200
300
Amt.$(Cr.)
Amt.$(Cr.)
Date (Yr) Amt.$(Cr.)
16/12/2008 226.55
17/12/2008 157.1
18/12/2008 169.5
22/12/2008 162.45
23/12/2008 140.7
26/12/2008 135.65
29/12/2008 148.1
30/12/2008 160.7
2/1/2009 177.2
5/1/2009 167.15
6/1/2009 178.95
7/1/2009 39.95

53. CASE STUDY - 2
VIJAY MALLYA’s
MONEY LAUNDERING FRAUD
INTRODUCTION
Vijay Mallya is an Indian businessman and politician. The son of businessman Vittal Mallya, he
is the ex-chairman of United Spirits Ltd, the largest spirits company in India and continues to
serve as Chairman of UB Group, an Indian conglomerate with interests in beverage alcohol,
aviation infrastructure, real estate and fertilizer among others. He has been the Chairman of Sanofi
India (previously Hoechst AG and Aventis) as well as the Chairman of Bayer CropScience in India
for over 20 years, in addition to being the Chairman of several other companies. Mallya also co-
owns the Formula One team Sahara Force India. His companies own Indian Premier League team
Royal Challengers Bangalore, the I-League teams Mohun Bagan AC and East Bengal FC. He is
also a member of the World Motor Sport Council representing India in the FIA. He is also known
for having launched Kingfisher Airlines, an airline established as a major business venture in 2005
that later became insolvent and was shut down in 2012. United Breweries Holdings Limited
(UBHL) or UB Group is an Indian conglomerate company headquartered in UB City, Bangalore
in the state of Karnataka, India.[1] Its core business includes beverages, aviation and investments
in various sectors. The company markets beer under the Kingfisher brand, and owns various other
brands of alcoholic beverages. It also launched Kingfisher Airlines, an airline in India whose
operation has been halted after problems in 2014 that led to its license being revoked by the
DGCA. The company chairman, Vijay Mallya, left India on 2 March 2016, allegedly to escape
legal action by Indian banks to whom he owes some ₹9,000 crore (US$1.3 billion) in loans. It now
has greater than a 40% share of the Indian brewing market with 79 distilleries and bottling units
across the world.

54. S.W.O.T. ANALYSIS OF KINGFISHER AIRLINES
The SWOT of Kingfisher airlines discusses the strengths, weaknesses, opportunities and threats of one of the
leading Indian airline companies. Kingfisher airlines have been involved in several controversies.
STRENGTHS of Kingfisher Airlines
•Strong brand value and reputation in the minds of the consumer
•UB group as the parent company
•First Indian airline to have a new fleet of planes
•Quality service and innovation
•More than 80 destinations
•Less than 100 people (employees) per aircraft
WEAKNESSES of Kingfisher Airlines
•Still in RED (Still to Break Even)
(An outstanding of 950crs only to oil marketing cost till may end )
•High ticket pricing (KF First & Class)
•Tough competition from Indian as well as international players
OPPORTUNITIES of Kingfisher Airlines
•If able to survive for a couple of years, then can have a big market share
•Untapped International Markets
•Untapped cargo market
•Expanding tourism business
THREATS of Kingfisher Airlines
•Falling demand
•Over capacity in the skies
•ATF prices
•Economic slowdown
•Infrastructure issues

55. THE FRAUD COMMITTED
BY VIJAY MALLYA
In the year 2006, IDBI Bank got a proposal from Kingfisher Airlines, seeking funds to acquire
aircraft. Vijay Mallya had launched the airline the previous year, in May 2005. He strikes a deal
with the British beer maker Scottish and Newcastle, which had bought a 37.5 per cent stake in
Mallya’s United Breweries Ltd for Rs 940 crore. However, when the Kingfisher proposal came up
at a meeting of the credit committee of the IDBI, the aircraft acquisition plan wasn’t permitted to
fly.
As oil prices started to climb (an average of $72.68 a dollar between 2005 and 2010) and the
company struggled to run a business that included a full-service airline and a low-cost carrier, its
finances floundered and its debt burden and losses surged. But by the end of March 2008,
Kingfisher’s debt had mounted to Rs 934 crore. A year later, it had multiplied to Rs 5,665 crore.
Its net losses widened from Rs 188 crore in 2007-08 to Rs 1,608 crore the following financial
year.
But a few years later, in 2009, when Kingfisher Airlines was the second largest airline in India in
terms of the number of passengers it carried, the bank provided a loan of Rs 900 crore to
Kingfisher, a decision that has come to hurt top officials of the bank, who are now being put on
the wringer by the Central Bureau of Investigation (CBI) and other agencies with Mallya being
declared a ‘willful defaulter’
By 2009-10, Kingfisher Airlines had accumulated a debt of over Rs 7,000 crore. It continued to
pile up losses and had already turned net-worth negative the previous financial year. In November
2010, banks for the first time restructured Kingfisher’s debt. State Bank of India converted Rs
1,355 crore of debt into equity at a 61.6 per cent premium to the market price of the Kingfisher
Airlines stock. Besides, the bankers stretched the period of repayment of loans to nine years with
a two-year moratorium, cut the interest rates, and sanctioned a fresh loan. However, a breather
on loan repayment wasn’t enough to revive Kingfisher Airlines, which continued to bleed with
every passing year.

56. Kingfisher Airlines had pledged its brand to banks for an estimated Rs 4,100 crore. Mallya had given a personal
guarantee of Rs 248.97 crore while United Breweries Holdings has provided a corporate guarantee of Rs
1,601.43 crore. In addition, Kingfisher has provided a pooled collateral security of Rs 5,238.59 crore, which
includes Kingfisher House in Mumbai, Kingfisher Villa in Goa, and hypothecation of helicopters. Besides, the
pledged securities include ground support and other equipment (Rs 101.58 crore), computers (Rs 22.43 crore),
office equipment (Rs 13.39 crore), furniture and fixtures (Rs 33.35 crore) and an aircraft (Rs 107.77 crore).
In short, Mallya had pledged all of Kingfisher’s movable assets.
In the years 2011 & 2012, Mallya withdrew huge salaries from Kingfisher of Rs 33.46 crore each month. But in
the end of 2012, Kingfisher Airlines was grounded, leaving its employees with unpaid salaries. The company
had allegedly not deposited its employees’ provident fund to the government and had run losses in excess of Rs
4,000 crore in 2012-13. In February 2013, the airline’s flying permits were withdrawn. . Its accumulated losses
ran into Rs 16,023 crore, while its net worth fell to a negative Rs 12,919 crore at the end of March 2013. Later
that year when a consortium of 14 banks led by the SBI approached UBHL for payment of what was then an
outstanding of Rs 6,493 crore in loans to Kingfisher Airlines, Mallya wrote back saying a significant amount
would be settled when British alcoholic beverages giant Diageo Plc buys stake worth nearly Rs 5,000 crore from
UBHL and others in the Diageo-Mallya owned United Spirits Limited (USL).
In April 2015, Mumbai International Airport Private Limited (MIAL) sold Mallya’s personal aircraft (its
registration number, VT-VJM, matches his initials) for Rs 22 lakhs to recover airport dues of the grounded
airline. As trouble mounted, Kingfisher Airlines was chased by the service tax department over non-payment of
service tax of over Rs 115 crore. The airlines had also defaulted on crediting over Rs 372 crore of Income Tax.
The matter is now before the Supreme Court, and Diageo, Mallya’s companies and their lenders agreed in
November 2015 for the dozens of petitions in the matter to be heard in April 2016.
Currently Vijay Mallya has been charged with at least 27 cases in various courts. Out of these, at least 22
are related to loan default by KingfisherAirlines — an amount that stood at Rs 9,091.40 crore at the end
of November 2015, according to Union Finance Minister Arun Jaitley, who spoke in Parliament.

58. THE AMOUNT OF LOAN FRAUD COMMITTED BY
VIJAY MALLY 2008-2015(Yrs.)
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
2008-09 2009-10 2010-11
2011-12
2012-13
2014-15
2015-16
Amount of Loan (in Crore)
Amount of Loan (in
Crore)
Years Amount
2008-09 943
2009-10 5667
2010-11 7000
2011-12 2900
2012-13 6493
2014-15 9091
2015-16 9400

59. CONCLUSIONS
Recent corporate frauds and the outcry for transparency and honesty in reporting have given rise
to two outcomes. First, forensic accounting skills have become very crucial in untangling the
complicated accounting manoeuvres that has unclear financial statements. Second, public demand
for change and subsequent regulatory action has transformed Corporate Governance's scenario
across the globe. In fact, both these trends have the common goal of addressing the investors’
concerns about the transparent financial re- porting system. The failure of the corporate
communication structure, therefore, has made the financial community realize that “there is a
great need for skilled professionals that can identify, expose, and prevent structural weaknesses in
three key areas: poor corporate governance, flawed internal controls, and fraudulent financial
statements. Hence Corporate Governance's framework needs to be first of all strengthened and
then implemented.
A careful study of the fraud cases suggests:
• Difficult to detect collusion: Another point of concern is the increasing collusion between the
employees of organizations and external parties. Collusion can be difficult to detect, and this
makes it easier for external parties to steal large amounts quickly.
• Banks the most vulnerable: Increasing cases of fraud against banks is a worrying sign for
organizations and the regulator.
• Need for investors to be vigilant: The large value of fraud committed against investors is
alarming. Although the regulator is constantly mandating regulations to safeguard investors, it is
an investor’s duty to closely screen advisers and companies offering abnormally high returns.
Legal systems around the world must treat white collar criminals, regardless of their
socioeconomic status, affluence, education level or wealth, the same as any other criminal charged
with a criminal act. Governments must take action to detect, deter and prosecute these offenses as
aggressively as they would prosecute crimes committed by regular street criminals, otherwise it
will only grow and continue to have an ever greater adverse impact on society.

60. RECOMMENDATIONS
The first and most significant step which can be taken to reduce or eliminate white collar crime against
major companies and corporations deals with accounting systems. Major companies have complex
financial reporting systems. The problem is that employees within these major corporations, in some cases
over a period of many years will learn how the system works and identify critical weaknesses and flaws in
the system. A second problem is that major companies and corporations have to purchase many goods and
services. In many instances, if the price of a good or service is relatively small, there are fewer steps and
little oversight for these transactions.
Major companies and corporations must implement more stringent accounting controls which effectively
track the dissemination of funds for smaller purchase. Companies and corporations must implement the
same system of checks and balances for the purchase of lower priced goods and services as they do for the
larger financial transactions. The level of approval may change, obviously, a board or president of a
corporation cannot be expected to sign off on every low priced good or service. That would clearly be an
inefficient and ineffective use of time and resources. However, a company can have the same number of
people be involved in the approval process. Companies and corporations can also limit the number of
vendors they purchase goods and services from. This will make it possible for these corporations to
purchase goods and services from vendors who are well established, have a tremendous track record, who
have stringent control over the invoices they produce making it more difficult for false invoices to enter
the approval system of the targeted corporations.
Governments around the world certainly cannot address the ever increasing problem of white collar
crime alone. They do, however, have the responsibility to do everything their limited resources will permit
to address this threat. At a minimum governments must accomplish the following in order to build and
strengthen the essential infrastructure needed to combat white collar crime;
1) Identify the Threat; 2) Understand the White Collar Crime Environment; 3) Adopt Stringent
Penalties; 4) Strengthen Computer Security Systems; 5) Strengthen Employee Screening;
6) Educate the Public; 7) Adopt best Accounting Practices; 8) Require Multiple Verification for
Monetary Transfers.

61. BIBLIOGRAPHY & WEBOLOGY
BOOKS REFERED TO -
The Study Of White Collar Crime: Toward A Reorientation In Theory And Research - (1964)-
Earl R. Quinney
The Legal Environment and White Collar Crime - (2008) (Preventive Measures Taken)-
John D. Gill,
Mark Scott
White Collar Crimes In India - (2012) (White Collar Crimes In India )-
G. Nagarajan,
Dr. J. Khaja Sheriff
Some Personality Correlates of Business White-Collar Crime - (2006) ( Definition Of White Collar Fraud)-
Gerhard Blickle University of Bonn, Germany ,
Alexander Schlegel University of Mainz, Germany ,
Pantaleon Fassbender &Uwe Klein KPMG Frankfurt, Germany
WEBSITES / LINKS REFERED TO-
https://www.google.co.in/
https://www.google.co.in/
https://www.researchgate.net/publication/274793696-Corporate-Corrupt Corporate Fraud-By-Gholam-
Hossein-Davani
http://www.kahnlitwin.com/blogs/business-blog/the-effects-of-white-collar-crime-on-business-today
http://www.huffingtonpost.in/devangshu-datta/ramalinga-raju-and-the-incredible-story-of-indias-greatest-whit/
http://timesofindia.indiatimes.com/business/india-business/Mallya-bank-loan-fraud-case-ED-registers-fresh-
case/articleshow/53830147.cms
http://indianexpress.com/article/india/india-news-india/sunday-story-once-upon-a-time-there-was-a-king-
vijay-mallya/