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WHITE COLLAR
CRIME
Sebi S Raj
Govt Law College
Ernakulam.
INTRODUCTION
 White-collar crime refers to financially motivated,
nonviolent crime committed by businesses and
government professionals.
 It was first defined by the sociologist Edwin
Sutherland in 1939 as "a crime committed by a person
of respectability and high social status in the course of
their occupation".
2
MEANING OF WHITE COLLAR CRIMES.
▧ White collar crime denotes a display of fraudulent
scheme, corruption and commercial offences
committed by businessman and public official alike.
▧ Its current usage include broad range of non-
violent offence where cheating, dishonesty and
corruption are the central elements of the crime.
3
DEFINITIONS OF WHITE COLLAR CRIME.
SUTHERLAND
A crime committed by a person of respectability and high social
status in the course of his occupation.
The definition of White collar crime has following attributes,
namely:
It is a crime.
Committed by a person of respectability.
Of high social status.
In the course of occupation.
4
DEFINITION- HARTUNG
▧ White-collar offence is defined as a
violation of law regulating business, which
is committed for a firm by the firm or its
agents in the conduct of its business.
5
CAUSES OF WHITE COLLAR CRIMES
FINANCIAL PROBLEMS:
 Most people do not start out as criminals.
 Most white-collar crimes involve normal
people who are struggling financially.
 It is just as common in bigger corporations
as stealing is in a poor community.
6
GREED
 Greed is another influence on this crime.
 Many people with high ranking jobs tend to
desire wealth and will do anything to obtain it.
7
 People are beginning to think that committing
these crimes is acceptable because they have
been around the corruption for long periods of
time.
RARE CONVICTION
 Many people get away with white-collar crime
more than regular street crimes.
 It is a fact that almost no police efforts goes
into stopping it and people are rarely convicted.
8
 People may have power because they have
friends in politics, they have money to get the
best lawyer, or they usually have friends in the
law-enforcement agencies.
 When a crime is discovered, suspects usually
get a light punishment because violence wasn’t
used.
9
 Wage theft.
 Fraud.
 Bribery.
 Ponzi schemes.
 Insider trading.
 Labour racketeering.
 Embezzlement.
 Cybercrime.
 Copyright
infringement.
 Money laundering.
 Identity theft.
 Forgery.
TYPES OF WHITE-COLLAR CRIMES.
10
SIGNIFICANCE OF WHITE COLLAR CRIMES
▧ It is not associated with poverty or with the social
and personal pathologies of the individual criminal
as in case of traditional and conventional crimes.
▧ Victims often suffer the effect of white collar
crime without even meeting the perpetrator.
▧ Offenders are at work at the scene while victims
are present and unaware of offending.
11
.
▧ There are two essential elements that must be
proved beyond reasonable doubt in every criminal
case: the criminal act (known as the actus reus) and
the criminal intent (known as the mens rea).
▧ Criminal acts are typically defined by statute and can
be proven by direct or circumstantial evidence.
▧ But even if criminal acts can be proven, there can be
no conviction when you don't have the requisite
criminal intent.
12
MENS REA IN WHITE COLLAR CRIMES
▧ Prosecutors generally have an easy time
proving the "what happened" of a case, but
the same cannot be said of proving criminal
intent.
▧ Intent plays a central role in white collar
criminal prosecutions.
13
MENS REA IN WHITE COLLAR CRIMES
▧ In fact, it is usually a key element of the charged
white collar offence - whether it is conspiracy, mail
fraud, wire fraud, securities fraud, health care fraud,
falsifying books and records, insider trading, money
laundering, or racketeering.
▧ Since charges related to white collar crimes do not
require proof that you acted with force or threats of
violence, prosecutors rely on proving your liability
through criminal intent.
14
MENS REA IN WHITE COLLAR CRIMES
▧ The intent to commit white collar crimes that must
be proven by the government is generally that the act
was committed in order to obtain money, property,
services, or some personal benefit or business
advantage.
▧ Criminal intent for white collar crimes can also stem
from the fear of losing money or covering illegal acts
to escape criminal liability.
15
MENS REA IN WHITE COLLAR CRIMES
▧ If there is a legitimate reason that can be
proven in your defence for why the criminal
act was committed, thereby negating mens
rea, no crime has been committed.
16
NOTABLE WHITE COLLAR CRIMES
1. CHARLES PONZI’S SCHEMES.
 The term "Ponzi Scheme" was coined after a swindler
named Charles Ponzi in 1919.
 A Ponzi scheme is a fraudulent investing scam promising
high rates of return with little risk to investors.
 A Ponzi scheme is a fraudulent investing scam which
generates returns for earlier investors with money
taken from later investors.
17
 Charles Ponzi's original scheme in 1919 was focused on the
US Postal Service.
 The postal service, at that time, had developed international
reply coupons that allowed a sender to pre-purchase postage
and include it in their correspondence.
 The receiver would take the coupon to a local post office and
exchange it for the priority airmail postage stamps needed
to send a reply.
18
▧ He promised returns of 50% in 45 days or 100% in 90
days.
▧ Due to his success in the postage stamp scheme, investors
were immediately attracted.
▧ Instead of actually investing the money, Ponzi just
redistributed it and told the investors they made a profit.
19
▧ The scheme lasted until August of 1920 when
The Boston Post began investigating the
Securities Exchange Company.
▧ 
As a result of the newspaper's investigation,
Ponzi was arrested by federal authorities on
August 12, 1920, and charged with several
counts of mail fraud.
20
2.BERNIE MADOFF
▧ Madoff launched his investment company in
1960.
▧ It began after the Black Monday crash of 1987
in an attempt to recover losses.
▧ By the time he was arrested on December 11,
2008, Madoff is said to have stolen $20 billion
in principal funds and falsified $65 billion in
account statements.
21
22
▧ In the end, Madoff pleaded guilty to securities fraud,
investment adviser fraud, mail fraud, wire fraud,
three counts of money laundering, false statements,
perjury, false filings with the SEC, and theft from an
employee benefit plan.
▧ He was sentenced to 150 years in federal prison.
▧ Victims of this scheme are still attempting to recover
major losses.
3. ENRON CORPORATION
▧ Enron was a seemingly untouchable energy corporation
before its fall in 2001.
▧ Praised for its unparalleled growth, it was named
"America's Most Innovative Company" six years in a row.
▧ Enron eventually faced the backlash from years of
hiding debt and inflating profit to keep stock prices
high and investors happy.
▧ To pull off this scheme, Enron would immediately claim
projected profits even though they hadn't actually
earned the money.
23
▧ And, if the projections were not met, Enron would
transfer the loss to one of their subsidiaries and
therefore avoid reporting negatively on Enron itself.
▧ By the end of 2000, the corporation had losses of $591
million and debt of $690 million.
▧ They cost shareholders $74 billion in the four years
leading up to their bankruptcy on December 2, 2001.
24
▧ At the time, Enron's collapse was the biggest corporate
bankruptcy to hit the financial market.
▧ Several executives were charged with conspiracy, insider
trading, securities fraud, bank fraud, and wire fraud.
▧ Enron’s accounting firm was found guilty of obstructing
justice for shredding Enron files, though the conviction
was later overturned.
▧ Though Enron’s deception was devastating, their example
did lead to many new regulations increasing transparency
in publicly held companies.
25
▧ The Sarbanes-Oxley Act expanded the
consequences of destroying or fabricating financial
statements.
▧ The Financial Accounting Standards Board
(FASB) raised its levels of ethical conduct,
and many boards of directors became more
independent to better monitor auditing companies
and quickly replace unethical executives.
26
WHITE COLLAR CRIME IN INDIAN SOCIETY.
▧ The reason for the recent enormous increase in white
collar crime in India is the fast developing economy
and industrial growth of the country.
▧ The post-independence period in India led to an era
of welfare activities which needed regulatory
measures on the part of government.
▧ It is the contravention of such regulatory measures
which generally give rise to a white collar crime.
27
28
▧ Corruption, fraud, and bribery are some of the most
common white collar crimes in India as well as all over
the world.
▧ In 2014, India was ranked 85th which subsequently
improved to 76th position in 2015 because of several
measures to tackle white collar crimes.
▧ In 2018, as per the report of The Economic Times,
India was placed at 78th position, showing an
improvement of three points from 2017, out of the
list of 180 countries.
29
▧ India is a developing country and white collar crimes
are becoming a major cause for its under
development along with poverty, health, etc.
▧ The trend of white collar crimes in India poses a
threat to the economic development of the country.
▧ These crimes require immediate intervention by the
government by not only making strict laws but also
ensuring its proper implementation.
30
▧ The Santhanam Committee Report showed a
picture of white collar crimes committed by
persons belonging to high status.
▧ The report of the committee stated that the
big industrialists, businessmen, government
officers are responsible for white collar crime
in India.
.
TAX CRIMES.
▧ An illegal practice where a person, organization,
corporation intentionally avoids paying
his/her/its true tax liability.
▧ Those caught evading taxes are generally
subjected to criminal charges and substantial
penalties.
31
REASONS FOR TAX CRIMES.
▧ Weak surveillance system.
▧ Rampant corruption in tax department.
▧ Complicated tax laws and filing mechanism.
▧ Tax deductions offering loopholes to tax evaders.
▧ Absence of social security system.
▧ Tax rates are too high.
▧ Lack of transparency in government expenditure.
32
TAX EVASION PRACTICE
▧ Under-reporting.
▧ Bribery of tax officials.
▧ Refusal to pay.
▧ Lobbying of Government to reduce tax liability or
effective incidence of Tax system.
▧ Lobbying via international institutions(IMF, World
Bank, World Trade Organization) to achieve effects.
33
TAX AVOIDANCE.
▧ Tax avoidance is the legal utilization of the tax regime to
one’s own advantage, to reduce the amount of tax that is
payable by means that are within the law.
▧ The use of legal methods to modify an individual’s
financial situation in order to lower the amount of income
tax owed. This is generally accomplished by claiming the
permissible deductions and credits.
34
TAX AVOIDANCE PRACTICE.
▧ Tax planning that may result in tax
postponement and avoidance in legal
manners.
▧ Tax deductions(80 CC).
▧ Charitable contributions.
35
TAX EVASION v. TAX AVOIDANCE
▧ Tax evasion: The reduction of tax liabilities by not
informing the Revenue of all relevant facts.
▧ Tax evasion is illegal and criminal penalties apply, hence, if
caught evading tax, director/s of the company will be
fined and even imprisoned.
▧ Tax avoidance: The reduction of tax liabilities within the
framework of the law.
▧ Tax avoidance may not always succeed, but is legal; tax
evasion is never legal.
36
ADULTERATION OF FOODSTUFFS, DRINKS AND
DRUGS.
▧ Adulteration has become common phenomenon in the
business community.
▧ It is so rampant and the evil has become so widespread
and persistent, that it is difficult to get even air, water
and light unpolluted.
▧ With the rise in price and cost of living consumers have
become cost conscious.
▧ The unscrupulous traders take undue advantage of such
situations by providing adulterated articles at a
comparatively cheaper rate and make huge profits.
37
38
▧ They resort to various ways of adulteration starting
from the stage of manufacture to that of sale of the
articles, even at the risk of the consumer’s health,
happiness and life.
▧ It is shocking to know that poisonous constituents are
often added to articles of food and drinks.
▧ A number of deaths are reported every year on
account of food poisoning.
▧ In the field of drugs and patent medicines the markets
are flooded with quite useless and often injurious
medicines.
▧ Fake and misleading advertisements are made and
published in newspapers, magazines, radio and television,
etc. about the quality and effect of drugs and medicines;
false assurances are given regarding the treatment,
causing incalculable harm and irreparable damage.
39
40
▧ It is of common day occurrence that a
number of patients die all over India even in
prestigious medical colleges, and institutes,
such as All India Medical Institute, Delhi,
Lucknow, Kanpur and other medical colleges,
etc. because of contamination in glucose
saline water which is administered to the
patients.
41
▧ The Criminal Law of adulteration of foodstuffs and drugs
are contained in the Indian Penal Code, 1860, the Food
Adulteration Act, 1954, the Dangerous Drugs Act, 1930,
and the Opium Act, 1857.
▧ Nevertheless, the law has not been successful in
eradicating or minimising the impact of such evils, which
effect the health, happiness and well-being of the public.
▧ There can be no greater treason than to weaken a nation
by under-mining the health of its people.
PROFITEERING, BLACK-MARKETING
AND HOARDING.
▧ It has become common that the business community in India earn huge
profits by selling articles at much higher prices than that are reasonable.
▧ Unscrupulous traders take advantage of the rise in prices of essential
commodities, shortage of articles of daily needs, inflation and non-
availability of particular commodities in market; they create an artificial
scarcity in order to indulge in the so-called business of profiteering and
black-marketing.
▧ The existing provisions of the criminal law have failed to eradicate or
minimize such crimes and have not been able to bring the desired results
as yet.
42
MISUSE OF PUBLIC POSITION BY PUBLIC
SERVANTS AND POLITICIANS.
▧ Bribery and corruption in Indian society have reached
at saturation point.
▧ They have penetrated deeply almost in every walks of
life.
▧ There is hardly any department of Government,
Central or State, public or private enterprise where
the evils of corruption have not taken hold.
43
NOTABLE WHITE COLLAR CRIMES IN INDIA
44
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.
45
HARSHAD MEHTA SECURITIES
FRAUD
▧ He misused his status and manipulated the
stock prices for his gain.
▧ This resulted in unnatural pumping of money
in the stock markets causing an abnormal
rise in the price of his shares.
▧ This act of Harshad Mehta though being
immoral was not illegal.
46
47
▧ The problem arose when Mehta obtained capital to invest in
the stock market by misappropriating bank’s money.
▧ This misappropriation of money falls in the purview of
money laundering.
▧ He earned approximately ₹ 5000 crores.
▧ The then renowned journalist Sucheta Dalal exposed this
scam.
▧ This was the biggest ever crash which the Indian stock
market had ever experienced.
▧ To curtail such transaction various changes were brought in
SEBI rules and regulations.
SATYAM SCANDAL: BIGGEST EVER CORPORATE
ACCOUNTING FRAUD
▧ This scam came into light on 7th January, 2009 by way of
confession letter written by B. Ramalingam Raju (Founder and
chairman of Satyam Computers Services Limited) published in
Times of India.
▧ The letter confessed about 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.
48
49
▧ Accounts books were manipulated to cheat investors and
shareholders.
▧ The whole scam cost approximately ₹14,000 crores 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 accused to pay approximately ₹3000 crores within
45 days and also 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.
SARADHA CHIT FUND CASE
▧ Saradha Group financial Scandal was a major financial scam and alleged
political scandal caused by the collapse of Ponzi scheme run by Saradha
Group, a consortium of 200 private companies that were believed to be
running collective investment schemes.
▧ This group collected around ₹200 to ₹300 billion from over 1.7 million
depositors, promising a multiplied hefty sum in return in the form of cash or
real estate and other assets.
▧ At least 10 Saradha group entities were alleged for committing fraud
through public money-pooling activities.
▧ Amidst continuing public protest against the group’s alleged fraudulent
activities, SEBI barred Saradha Realty India and its managing director
Sudipta Sen from the securities market till it winds up all the Collective
Investment Schemes (CIS).
50
51
▧ The central government through income tax
department and Enforcement Directorate launched a
multi-agency probe to investigate the Saradha Scam
and similar Ponzi scheme.
▧ Later, in May 2014 Supreme Court of India, referred
this case to CBI, India’s federal investigation agency.
▧ Many prominent personalities were arrested for their
involvement in the scam including two Members of
Parliament.
CODIFICATION OF WHITE COLLAR, SOCIAL
AND ECONOMIC CRIMES.
▧ Crimes may be classified in two parts, viz., first,
conventional and traditional crimes against the person,
property and the state etc., which are punishable under
the general criminal law of the land.
▧ Secondly, white collar crimes and social and economic
crimes which are not usually punishable under the general
criminal law of the land but under the regulatory
legislations enacted by the legislature from time to time.
52
53
▧ The offences falling under the second
category may be codified under the headings
White Collar and Socio-economic Crimes
punishable under a Central Act.
MODIFICATION OF THE DOCTRINE OF MENS REA.
▧ The time has come when the century old common law doctrines
of actus non facit reum, nisi mens sit rea, (viz., there can be no
crime without a guilty mind) should be excluded so as to
preserve and protect social and economic interest of the
community, which require strict adherence to such laws.
▧ The criminal liability for socio-economic offences should be
made absolute. In other words, if a person has violated a
provision of the law and caused injury, he should be held liable
for that wrong whether the act was intentional or not.
54
BURDEN OF PROOF.
▧ The law of evidence should also be modified
so as to shift the burden of proof of
innocence is cases of white collar, social and
economic crimes from the prosecution to
that of the accused.
▧ The accused should be held liable for the
violations of such laws, unless he proves his
innocence.
55
PUBLIC CENSURE.
▧ A provision should be made of public censure
by publishing the names of white collar and
social and economic offenders in local as well
as national newspapers, etc.
▧ This will have an added advantage over the
sentence of imprisonment and fine.
56
OTHER CRIMES v. WHITE COLLAR CRIMES.
▧ White collar crime is not a new phenomenon and has been in
existence from many centuries. It can be found in all types of
business, profession and industries.
State of Gujarat v. Mohanlal Jitamalji Porwal and Anr
▧ The Supreme Court of India has differentiated between the
general crimes and white collar crimes.
▧ In the above-mentioned judgement, Justice Thakker had
stated that murder can be committed in the heat of moment
but these economic offences are committed with a cool
calculation and planned strategy to gain personal profits.
57
WHITE COLLAR CRIME IN DIFFERENT
PROFESSION.
▧ Medical profession:
White Collar crimes which are commonly committed by
persons belonging to medical profession include issuance
of false medical certificates, helping illegal abortion,
secret service to dacoits by giving expert opinion leading
to their acquittal and selling sample drugs and medicines
to patients and chemists with a view to extracting huge
sum from them.
58
ENGINEERING.
▧ In the engineering profession underhand dealing with
contractors and suppliers, passing of sub-standard
works and materials and maintenance of bogus
records of work-charged labour are some of the
common examples of white collar crime.
59
EDUCATIONAL INSTITUTIONS.
▧ Another field where white collar criminals operate with impunity
are the privately run educational institutions in this country.
▧ The governing bodies of those institutions manage to secure large
sums by way of government grants of financial aid by submitting
fictitious and fake details about their institutions.
▧ The teachers and other staff working in these institutions receive
a meagre salary far less than what they actually sign for, thus
allowing a big margin for the management to grab huge amount in
this illegal manner.
60
LEGAL PROFESSION.
▧ The instances of fabricating false evidence, engaging
professional witness, violating ethical standards of
legal profession and dilatory tactics in collusion with
the ministerial staff of the courts are some of the
common practices which are, truly speaking, the white
collar crimes quite often practiced by the legal
practitioners.
61
NATURE OF PUNISHMENT.
▧ The purpose of punishment besides being reformative is
deterrent as well, so that it may deter the accused from
repeating the crime in future and may be a warning to these who
are like-minded.
▧ The law should not take a lenient attitude in fixing punishment to
a white collar or a socio-economic criminal.
▧ The law would fail in its objective and duty, if it gives shelter or
shows a soft attitude to such criminals.
62
63
▧ The penalty imposed for white collar, social and
economic criminals should be more punitive and be
determined according to the gravity of the offence
committed and the social harm caused.
▧ The harsh punishments till now reserved for a man
committing traditional and conventional offences
prescribed in the Indian Penal Code should be
extended to a white collar and economic criminals as
well.
64
▧ For instance, in case of offences like adulteration of
food, drinks and drugs, of offences which affect the
economy of the state, such as smuggling, evasion of
taxes, hoarding, black-marketing, etc., the quantum
of penalty should be deterrent enough to stop such
grave offences.
▧ The penalty might be extended up to sentence of
death or life imprisonment, if the circumstances so
demand.
REMEDIES
▧ Creating public awareness through the media and press and other audio
visual aids.
▧ Special tribunal should be constituted with power to award a serious
sentence.
▧ Stringent regulatory laws and drastic punishment for white collar
criminals, may help in reducing these crimes.
▧ Fast track courts/tribunals should be arranged by appointing more judges.
▧ The tribunals should be given power to impose fine and award sentence of
anyone if found guilty for the said offence.
▧ Separate chapter should be inserted in the Indian Penal Code, 1860
relating to white collar crime.
65
CRITICAL ANALYSIS
▧ It is evident that ‘white collar crimes’ and socio economic crimes have
spread in Indian society at an alarming rate in every walk of life.
▧ The result of such crimes is that besides causing huge financial loss to
the exchequer and the public in general compared with the traditional
and conventional crimes, they cause more injury to the public health.
▧ It create a general apathy to the law and enforcement machinery of the
state.
▧ People involved in these crimes are neither treated as ordinary
criminals nor punished adequately, instead they move about in society
freely as respectable and good citizens.
66
67
It may be because of
▧ Some defects in the procedural as well as substantive
law and the enforcement machinery.
▧ Lack of social consciousness towards such types of
crimes and
▧ Class bias of the judicial tribunals.
68
The effect is that
 It has shattered the nation’s economy,
 Retarded its development,
 Adversely affected the nation’s health and happiness,
demoralised people, and has created disrespect
towards the law and the enforcement machinery.
69
▧ It is high time to modify our traditional and
conventional concept of crime.
▧ The definition of crime should no longer be limited to
offences against the human body, property and
State, generally committed by the persons of lower
socio-economic class, but should be wide enough to
include: all those anti-social and illegal acts which are
committed by persons of middle and upper socio-
economic class irrespective of whether the penalty is
criminal, civil or administrative.
THANK YOU
70

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White Collar Crimes

  • 1. WHITE COLLAR CRIME Sebi S Raj Govt Law College Ernakulam.
  • 2. INTRODUCTION  White-collar crime refers to financially motivated, nonviolent crime committed by businesses and government professionals.  It was first defined by the sociologist Edwin Sutherland in 1939 as "a crime committed by a person of respectability and high social status in the course of their occupation". 2
  • 3. MEANING OF WHITE COLLAR CRIMES. ▧ White collar crime denotes a display of fraudulent scheme, corruption and commercial offences committed by businessman and public official alike. ▧ Its current usage include broad range of non- violent offence where cheating, dishonesty and corruption are the central elements of the crime. 3
  • 4. DEFINITIONS OF WHITE COLLAR CRIME. SUTHERLAND A crime committed by a person of respectability and high social status in the course of his occupation. The definition of White collar crime has following attributes, namely: It is a crime. Committed by a person of respectability. Of high social status. In the course of occupation. 4
  • 5. DEFINITION- HARTUNG ▧ White-collar offence is defined as a violation of law regulating business, which is committed for a firm by the firm or its agents in the conduct of its business. 5
  • 6. CAUSES OF WHITE COLLAR CRIMES FINANCIAL PROBLEMS:  Most people do not start out as criminals.  Most white-collar crimes involve normal people who are struggling financially.  It is just as common in bigger corporations as stealing is in a poor community. 6
  • 7. GREED  Greed is another influence on this crime.  Many people with high ranking jobs tend to desire wealth and will do anything to obtain it. 7
  • 8.  People are beginning to think that committing these crimes is acceptable because they have been around the corruption for long periods of time. RARE CONVICTION  Many people get away with white-collar crime more than regular street crimes.  It is a fact that almost no police efforts goes into stopping it and people are rarely convicted. 8
  • 9.  People may have power because they have friends in politics, they have money to get the best lawyer, or they usually have friends in the law-enforcement agencies.  When a crime is discovered, suspects usually get a light punishment because violence wasn’t used. 9
  • 10.  Wage theft.  Fraud.  Bribery.  Ponzi schemes.  Insider trading.  Labour racketeering.  Embezzlement.  Cybercrime.  Copyright infringement.  Money laundering.  Identity theft.  Forgery. TYPES OF WHITE-COLLAR CRIMES. 10
  • 11. SIGNIFICANCE OF WHITE COLLAR CRIMES ▧ It is not associated with poverty or with the social and personal pathologies of the individual criminal as in case of traditional and conventional crimes. ▧ Victims often suffer the effect of white collar crime without even meeting the perpetrator. ▧ Offenders are at work at the scene while victims are present and unaware of offending. 11
  • 12. . ▧ There are two essential elements that must be proved beyond reasonable doubt in every criminal case: the criminal act (known as the actus reus) and the criminal intent (known as the mens rea). ▧ Criminal acts are typically defined by statute and can be proven by direct or circumstantial evidence. ▧ But even if criminal acts can be proven, there can be no conviction when you don't have the requisite criminal intent. 12
  • 13. MENS REA IN WHITE COLLAR CRIMES ▧ Prosecutors generally have an easy time proving the "what happened" of a case, but the same cannot be said of proving criminal intent. ▧ Intent plays a central role in white collar criminal prosecutions. 13
  • 14. MENS REA IN WHITE COLLAR CRIMES ▧ In fact, it is usually a key element of the charged white collar offence - whether it is conspiracy, mail fraud, wire fraud, securities fraud, health care fraud, falsifying books and records, insider trading, money laundering, or racketeering. ▧ Since charges related to white collar crimes do not require proof that you acted with force or threats of violence, prosecutors rely on proving your liability through criminal intent. 14
  • 15. MENS REA IN WHITE COLLAR CRIMES ▧ The intent to commit white collar crimes that must be proven by the government is generally that the act was committed in order to obtain money, property, services, or some personal benefit or business advantage. ▧ Criminal intent for white collar crimes can also stem from the fear of losing money or covering illegal acts to escape criminal liability. 15
  • 16. MENS REA IN WHITE COLLAR CRIMES ▧ If there is a legitimate reason that can be proven in your defence for why the criminal act was committed, thereby negating mens rea, no crime has been committed. 16
  • 17. NOTABLE WHITE COLLAR CRIMES 1. CHARLES PONZI’S SCHEMES.  The term "Ponzi Scheme" was coined after a swindler named Charles Ponzi in 1919.  A Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors.  A Ponzi scheme is a fraudulent investing scam which generates returns for earlier investors with money taken from later investors. 17
  • 18.  Charles Ponzi's original scheme in 1919 was focused on the US Postal Service.  The postal service, at that time, had developed international reply coupons that allowed a sender to pre-purchase postage and include it in their correspondence.  The receiver would take the coupon to a local post office and exchange it for the priority airmail postage stamps needed to send a reply. 18
  • 19. ▧ He promised returns of 50% in 45 days or 100% in 90 days. ▧ Due to his success in the postage stamp scheme, investors were immediately attracted. ▧ Instead of actually investing the money, Ponzi just redistributed it and told the investors they made a profit. 19
  • 20. ▧ The scheme lasted until August of 1920 when The Boston Post began investigating the Securities Exchange Company. ▧  As a result of the newspaper's investigation, Ponzi was arrested by federal authorities on August 12, 1920, and charged with several counts of mail fraud. 20
  • 21. 2.BERNIE MADOFF ▧ Madoff launched his investment company in 1960. ▧ It began after the Black Monday crash of 1987 in an attempt to recover losses. ▧ By the time he was arrested on December 11, 2008, Madoff is said to have stolen $20 billion in principal funds and falsified $65 billion in account statements. 21
  • 22. 22 ▧ In the end, Madoff pleaded guilty to securities fraud, investment adviser fraud, mail fraud, wire fraud, three counts of money laundering, false statements, perjury, false filings with the SEC, and theft from an employee benefit plan. ▧ He was sentenced to 150 years in federal prison. ▧ Victims of this scheme are still attempting to recover major losses.
  • 23. 3. ENRON CORPORATION ▧ Enron was a seemingly untouchable energy corporation before its fall in 2001. ▧ Praised for its unparalleled growth, it was named "America's Most Innovative Company" six years in a row. ▧ Enron eventually faced the backlash from years of hiding debt and inflating profit to keep stock prices high and investors happy. ▧ To pull off this scheme, Enron would immediately claim projected profits even though they hadn't actually earned the money. 23
  • 24. ▧ And, if the projections were not met, Enron would transfer the loss to one of their subsidiaries and therefore avoid reporting negatively on Enron itself. ▧ By the end of 2000, the corporation had losses of $591 million and debt of $690 million. ▧ They cost shareholders $74 billion in the four years leading up to their bankruptcy on December 2, 2001. 24
  • 25. ▧ At the time, Enron's collapse was the biggest corporate bankruptcy to hit the financial market. ▧ Several executives were charged with conspiracy, insider trading, securities fraud, bank fraud, and wire fraud. ▧ Enron’s accounting firm was found guilty of obstructing justice for shredding Enron files, though the conviction was later overturned. ▧ Though Enron’s deception was devastating, their example did lead to many new regulations increasing transparency in publicly held companies. 25
  • 26. ▧ The Sarbanes-Oxley Act expanded the consequences of destroying or fabricating financial statements. ▧ The Financial Accounting Standards Board (FASB) raised its levels of ethical conduct, and many boards of directors became more independent to better monitor auditing companies and quickly replace unethical executives. 26
  • 27. WHITE COLLAR CRIME IN INDIAN SOCIETY. ▧ The reason for the recent enormous increase in white collar crime in India is the fast developing economy and industrial growth of the country. ▧ The post-independence period in India led to an era of welfare activities which needed regulatory measures on the part of government. ▧ It is the contravention of such regulatory measures which generally give rise to a white collar crime. 27
  • 28. 28 ▧ Corruption, fraud, and bribery are some of the most common white collar crimes in India as well as all over the world. ▧ In 2014, India was ranked 85th which subsequently improved to 76th position in 2015 because of several measures to tackle white collar crimes. ▧ In 2018, as per the report of The Economic Times, India was placed at 78th position, showing an improvement of three points from 2017, out of the list of 180 countries.
  • 29. 29 ▧ India is a developing country and white collar crimes are becoming a major cause for its under development along with poverty, health, etc. ▧ The trend of white collar crimes in India poses a threat to the economic development of the country. ▧ These crimes require immediate intervention by the government by not only making strict laws but also ensuring its proper implementation.
  • 30. 30 ▧ The Santhanam Committee Report showed a picture of white collar crimes committed by persons belonging to high status. ▧ The report of the committee stated that the big industrialists, businessmen, government officers are responsible for white collar crime in India. .
  • 31. TAX CRIMES. ▧ An illegal practice where a person, organization, corporation intentionally avoids paying his/her/its true tax liability. ▧ Those caught evading taxes are generally subjected to criminal charges and substantial penalties. 31
  • 32. REASONS FOR TAX CRIMES. ▧ Weak surveillance system. ▧ Rampant corruption in tax department. ▧ Complicated tax laws and filing mechanism. ▧ Tax deductions offering loopholes to tax evaders. ▧ Absence of social security system. ▧ Tax rates are too high. ▧ Lack of transparency in government expenditure. 32
  • 33. TAX EVASION PRACTICE ▧ Under-reporting. ▧ Bribery of tax officials. ▧ Refusal to pay. ▧ Lobbying of Government to reduce tax liability or effective incidence of Tax system. ▧ Lobbying via international institutions(IMF, World Bank, World Trade Organization) to achieve effects. 33
  • 34. TAX AVOIDANCE. ▧ Tax avoidance is the legal utilization of the tax regime to one’s own advantage, to reduce the amount of tax that is payable by means that are within the law. ▧ The use of legal methods to modify an individual’s financial situation in order to lower the amount of income tax owed. This is generally accomplished by claiming the permissible deductions and credits. 34
  • 35. TAX AVOIDANCE PRACTICE. ▧ Tax planning that may result in tax postponement and avoidance in legal manners. ▧ Tax deductions(80 CC). ▧ Charitable contributions. 35
  • 36. TAX EVASION v. TAX AVOIDANCE ▧ Tax evasion: The reduction of tax liabilities by not informing the Revenue of all relevant facts. ▧ Tax evasion is illegal and criminal penalties apply, hence, if caught evading tax, director/s of the company will be fined and even imprisoned. ▧ Tax avoidance: The reduction of tax liabilities within the framework of the law. ▧ Tax avoidance may not always succeed, but is legal; tax evasion is never legal. 36
  • 37. ADULTERATION OF FOODSTUFFS, DRINKS AND DRUGS. ▧ Adulteration has become common phenomenon in the business community. ▧ It is so rampant and the evil has become so widespread and persistent, that it is difficult to get even air, water and light unpolluted. ▧ With the rise in price and cost of living consumers have become cost conscious. ▧ The unscrupulous traders take undue advantage of such situations by providing adulterated articles at a comparatively cheaper rate and make huge profits. 37
  • 38. 38 ▧ They resort to various ways of adulteration starting from the stage of manufacture to that of sale of the articles, even at the risk of the consumer’s health, happiness and life. ▧ It is shocking to know that poisonous constituents are often added to articles of food and drinks. ▧ A number of deaths are reported every year on account of food poisoning.
  • 39. ▧ In the field of drugs and patent medicines the markets are flooded with quite useless and often injurious medicines. ▧ Fake and misleading advertisements are made and published in newspapers, magazines, radio and television, etc. about the quality and effect of drugs and medicines; false assurances are given regarding the treatment, causing incalculable harm and irreparable damage. 39
  • 40. 40 ▧ It is of common day occurrence that a number of patients die all over India even in prestigious medical colleges, and institutes, such as All India Medical Institute, Delhi, Lucknow, Kanpur and other medical colleges, etc. because of contamination in glucose saline water which is administered to the patients.
  • 41. 41 ▧ The Criminal Law of adulteration of foodstuffs and drugs are contained in the Indian Penal Code, 1860, the Food Adulteration Act, 1954, the Dangerous Drugs Act, 1930, and the Opium Act, 1857. ▧ Nevertheless, the law has not been successful in eradicating or minimising the impact of such evils, which effect the health, happiness and well-being of the public. ▧ There can be no greater treason than to weaken a nation by under-mining the health of its people.
  • 42. PROFITEERING, BLACK-MARKETING AND HOARDING. ▧ It has become common that the business community in India earn huge profits by selling articles at much higher prices than that are reasonable. ▧ Unscrupulous traders take advantage of the rise in prices of essential commodities, shortage of articles of daily needs, inflation and non- availability of particular commodities in market; they create an artificial scarcity in order to indulge in the so-called business of profiteering and black-marketing. ▧ The existing provisions of the criminal law have failed to eradicate or minimize such crimes and have not been able to bring the desired results as yet. 42
  • 43. MISUSE OF PUBLIC POSITION BY PUBLIC SERVANTS AND POLITICIANS. ▧ Bribery and corruption in Indian society have reached at saturation point. ▧ They have penetrated deeply almost in every walks of life. ▧ There is hardly any department of Government, Central or State, public or private enterprise where the evils of corruption have not taken hold. 43
  • 44. NOTABLE WHITE COLLAR CRIMES IN INDIA 44
  • 45. 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. 45
  • 46. HARSHAD MEHTA SECURITIES FRAUD ▧ He misused his status and manipulated the stock prices for his gain. ▧ This resulted in unnatural pumping of money in the stock markets causing an abnormal rise in the price of his shares. ▧ This act of Harshad Mehta though being immoral was not illegal. 46
  • 47. 47 ▧ The problem arose when Mehta obtained capital to invest in the stock market by misappropriating bank’s money. ▧ This misappropriation of money falls in the purview of money laundering. ▧ He earned approximately ₹ 5000 crores. ▧ The then renowned journalist Sucheta Dalal exposed this scam. ▧ This was the biggest ever crash which the Indian stock market had ever experienced. ▧ To curtail such transaction various changes were brought in SEBI rules and regulations.
  • 48. SATYAM SCANDAL: BIGGEST EVER CORPORATE ACCOUNTING FRAUD ▧ This scam came into light on 7th January, 2009 by way of confession letter written by B. Ramalingam Raju (Founder and chairman of Satyam Computers Services Limited) published in Times of India. ▧ The letter confessed about 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. 48
  • 49. 49 ▧ Accounts books were manipulated to cheat investors and shareholders. ▧ The whole scam cost approximately ₹14,000 crores 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 accused to pay approximately ₹3000 crores within 45 days and also 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.
  • 50. SARADHA CHIT FUND CASE ▧ Saradha Group financial Scandal was a major financial scam and alleged political scandal caused by the collapse of Ponzi scheme run by Saradha Group, a consortium of 200 private companies that were believed to be running collective investment schemes. ▧ This group collected around ₹200 to ₹300 billion from over 1.7 million depositors, promising a multiplied hefty sum in return in the form of cash or real estate and other assets. ▧ At least 10 Saradha group entities were alleged for committing fraud through public money-pooling activities. ▧ Amidst continuing public protest against the group’s alleged fraudulent activities, SEBI barred Saradha Realty India and its managing director Sudipta Sen from the securities market till it winds up all the Collective Investment Schemes (CIS). 50
  • 51. 51 ▧ The central government through income tax department and Enforcement Directorate launched a multi-agency probe to investigate the Saradha Scam and similar Ponzi scheme. ▧ Later, in May 2014 Supreme Court of India, referred this case to CBI, India’s federal investigation agency. ▧ Many prominent personalities were arrested for their involvement in the scam including two Members of Parliament.
  • 52. CODIFICATION OF WHITE COLLAR, SOCIAL AND ECONOMIC CRIMES. ▧ Crimes may be classified in two parts, viz., first, conventional and traditional crimes against the person, property and the state etc., which are punishable under the general criminal law of the land. ▧ Secondly, white collar crimes and social and economic crimes which are not usually punishable under the general criminal law of the land but under the regulatory legislations enacted by the legislature from time to time. 52
  • 53. 53 ▧ The offences falling under the second category may be codified under the headings White Collar and Socio-economic Crimes punishable under a Central Act.
  • 54. MODIFICATION OF THE DOCTRINE OF MENS REA. ▧ The time has come when the century old common law doctrines of actus non facit reum, nisi mens sit rea, (viz., there can be no crime without a guilty mind) should be excluded so as to preserve and protect social and economic interest of the community, which require strict adherence to such laws. ▧ The criminal liability for socio-economic offences should be made absolute. In other words, if a person has violated a provision of the law and caused injury, he should be held liable for that wrong whether the act was intentional or not. 54
  • 55. BURDEN OF PROOF. ▧ The law of evidence should also be modified so as to shift the burden of proof of innocence is cases of white collar, social and economic crimes from the prosecution to that of the accused. ▧ The accused should be held liable for the violations of such laws, unless he proves his innocence. 55
  • 56. PUBLIC CENSURE. ▧ A provision should be made of public censure by publishing the names of white collar and social and economic offenders in local as well as national newspapers, etc. ▧ This will have an added advantage over the sentence of imprisonment and fine. 56
  • 57. OTHER CRIMES v. WHITE COLLAR CRIMES. ▧ White collar crime is not a new phenomenon and has been in existence from many centuries. It can be found in all types of business, profession and industries. State of Gujarat v. Mohanlal Jitamalji Porwal and Anr ▧ The Supreme Court of India has differentiated between the general crimes and white collar crimes. ▧ In the above-mentioned judgement, Justice Thakker had stated that murder can be committed in the heat of moment but these economic offences are committed with a cool calculation and planned strategy to gain personal profits. 57
  • 58. WHITE COLLAR CRIME IN DIFFERENT PROFESSION. ▧ Medical profession: White Collar crimes which are commonly committed by persons belonging to medical profession include issuance of false medical certificates, helping illegal abortion, secret service to dacoits by giving expert opinion leading to their acquittal and selling sample drugs and medicines to patients and chemists with a view to extracting huge sum from them. 58
  • 59. ENGINEERING. ▧ In the engineering profession underhand dealing with contractors and suppliers, passing of sub-standard works and materials and maintenance of bogus records of work-charged labour are some of the common examples of white collar crime. 59
  • 60. EDUCATIONAL INSTITUTIONS. ▧ Another field where white collar criminals operate with impunity are the privately run educational institutions in this country. ▧ The governing bodies of those institutions manage to secure large sums by way of government grants of financial aid by submitting fictitious and fake details about their institutions. ▧ The teachers and other staff working in these institutions receive a meagre salary far less than what they actually sign for, thus allowing a big margin for the management to grab huge amount in this illegal manner. 60
  • 61. LEGAL PROFESSION. ▧ The instances of fabricating false evidence, engaging professional witness, violating ethical standards of legal profession and dilatory tactics in collusion with the ministerial staff of the courts are some of the common practices which are, truly speaking, the white collar crimes quite often practiced by the legal practitioners. 61
  • 62. NATURE OF PUNISHMENT. ▧ The purpose of punishment besides being reformative is deterrent as well, so that it may deter the accused from repeating the crime in future and may be a warning to these who are like-minded. ▧ The law should not take a lenient attitude in fixing punishment to a white collar or a socio-economic criminal. ▧ The law would fail in its objective and duty, if it gives shelter or shows a soft attitude to such criminals. 62
  • 63. 63 ▧ The penalty imposed for white collar, social and economic criminals should be more punitive and be determined according to the gravity of the offence committed and the social harm caused. ▧ The harsh punishments till now reserved for a man committing traditional and conventional offences prescribed in the Indian Penal Code should be extended to a white collar and economic criminals as well.
  • 64. 64 ▧ For instance, in case of offences like adulteration of food, drinks and drugs, of offences which affect the economy of the state, such as smuggling, evasion of taxes, hoarding, black-marketing, etc., the quantum of penalty should be deterrent enough to stop such grave offences. ▧ The penalty might be extended up to sentence of death or life imprisonment, if the circumstances so demand.
  • 65. REMEDIES ▧ Creating public awareness through the media and press and other audio visual aids. ▧ Special tribunal should be constituted with power to award a serious sentence. ▧ Stringent regulatory laws and drastic punishment for white collar criminals, may help in reducing these crimes. ▧ Fast track courts/tribunals should be arranged by appointing more judges. ▧ The tribunals should be given power to impose fine and award sentence of anyone if found guilty for the said offence. ▧ Separate chapter should be inserted in the Indian Penal Code, 1860 relating to white collar crime. 65
  • 66. CRITICAL ANALYSIS ▧ It is evident that ‘white collar crimes’ and socio economic crimes have spread in Indian society at an alarming rate in every walk of life. ▧ The result of such crimes is that besides causing huge financial loss to the exchequer and the public in general compared with the traditional and conventional crimes, they cause more injury to the public health. ▧ It create a general apathy to the law and enforcement machinery of the state. ▧ People involved in these crimes are neither treated as ordinary criminals nor punished adequately, instead they move about in society freely as respectable and good citizens. 66
  • 67. 67 It may be because of ▧ Some defects in the procedural as well as substantive law and the enforcement machinery. ▧ Lack of social consciousness towards such types of crimes and ▧ Class bias of the judicial tribunals.
  • 68. 68 The effect is that  It has shattered the nation’s economy,  Retarded its development,  Adversely affected the nation’s health and happiness, demoralised people, and has created disrespect towards the law and the enforcement machinery.
  • 69. 69 ▧ It is high time to modify our traditional and conventional concept of crime. ▧ The definition of crime should no longer be limited to offences against the human body, property and State, generally committed by the persons of lower socio-economic class, but should be wide enough to include: all those anti-social and illegal acts which are committed by persons of middle and upper socio- economic class irrespective of whether the penalty is criminal, civil or administrative.