White collar crime is a category of criminal financial offenses that typically occur in businesses, corporations or government agencies. These crimes are committed through apparently legitimate businesses activity.
White collar crimes are non-violent in nature. Most involve some form or element of fraud or dishonesty.
Sometimes the principals of the business are involved in the crime, while on other occasions the crime is committed by an individual or employee within a business, without the knowledge of anyone else.
Common examples of white collar crimes include:
Antitrust Violations: Violation of laws that are intended to prevent businesses from engaging in conduct or collaboration that is deemed harmful to fair competition.
Computer Crime: The misuse of computers and networks to improperly obtain money or information, or to engage in identity theft.
Securities Fraud: Violating securities laws in order to make a profit, including such actions as soliciting investment in a company by providing investors with false or materially misleading information about the company or terms of the investment, or the making of false or misleading statements by a publicly traded company that are intended to mislead the public about the company's value or financial health.
Insider Trading: The misuse of material non-public information about a publicly traded corporation to make a profit by trading its stock. This is technically another form of securities fraud.
Money Laundering: Engaging in acts or transactions that make money earned through illegal or illegitimate activities appear to have been earned through lawful activities.
Tax Evasion: Violation of tax law in order to avoid tax obligations, including providing false information on tax returns or improperly transferring assets to avoid taxes on those assets.
Embezzlement: The misappropriation of assets entrusted to a person or employee, such as misappropriation of an employer's assets or of client funds.
Mail Fraud and Wire Fraud: The use of the mail or an interstate wire service in order to further a scheme to defraud another person of money or property.
Racketeering: A pattern of illegal business activity over a defined period of time, that results in an organization being deemed to be a criminal enterprise.
White collar crimes may be committed by individuals within a business without the awareness of anybody else within the business, but may also be committed by groups of people within a business enterprise, or with the knowledge of or participation by the principals of the business.
Individuals may be prosecuted for white collar crimes, just as they may be prosecuted for other crimes.
Even if it is not possible to determine who within the business is responsible for the conduct, when a business has been found to have engaged in illegal conduct the business may potentially be pursued under civil laws and, at times, criminal laws.
Any time a business appears to have engaged in activities prohibited by antitrust laws, or to have engaged in racketeering conduct, having failed to keep required records, having failed to comply with laws requiring certain financial transactions to be reported to the government, or in a broad range of other illegal activities, it may face a civil suit for its offense.
In recent years within the financial sector, some financial institutions have paid enormous fines to end the investigation of their practices, and in some cases the fines appear motivated by a desire to end investigation and possible criminal charges against corporate officers.
Criminal Prosecution of a Business
Circumstances may arise in which a business or corporation appears to be so heavily involved in criminal activity that a criminal charge is filed against the business itself. This usually happens when it appears that the managers and directors of the business were so involved in, or so indifferent to, the illegality that the entire business appears to have actively or tacitly condoned or committed the crimes.
The concept of corporate criminality grew considerably in the late 1980's, when deregulation left many businesses unchecked by the government, and many businesses took advantage of the lack of regulation or inspection by committing criminal acts - such as having their employees work under exceptionally dangerous and illegal conditions, or by engaging in rampant fraud or money laundering activities.
This area has cooled down considerably, as the federal government has returned to enforcement of its regulations in the wake of serious crises, such as the savings and loan disaster. Another reason why businesses are normally pursued through civil actions is that a business can ordinarily be punished only in financial terms.
Responsibility of Corporate Officers
Under responsible corporate officer doctrine, also known as responsible relation doctrine, a presumption arises that a high-ranking corporate officer is aware of criminal activity within the corporation. The doctrine raises the possibility that a corporate officer could be charged with criminal activity of which the officer was unaware, and even convicted of that activity, based upon presumed knowledge.
A prosecution of corporate officers is most likely to occur when a corporation engages in serious misconduct that affects the public health or safety while the executives who should have been exercising oversight did nothing.
Punishing a Business for Unlawful Conduct
Businesses that are found to have engaged in unlawful conduct are normally punished through the imposition of financial penalties.
In a sense, it is possible to impose a "corporate death penalty" by imposing fines so large that the business is forced to shut down. It is also possible for a business to agree to what amounts to a term of probation, or for such a condition to be imposed by a court, during which the business can be carefully monitored by a court or regulatory agency.
Businesses can impose safeguards to prevent or limit criminal conduct, including checks on the conduct of even trusted employees. For example,
- Businesses can audit banking activities to ensure that employees are not engaging in unauthorized transactions. Even if the books appear to balance, there may be hidden transactions that upon examination would reveal questionable or criminal activities by an employee.
- Businesses may also quickly respond to rumors or allegations of wrongdoing by launching an internal investigation, and by making sure that records are preserved.
A business that does not respond appropriately to criminal activity, or to allegations of criminal activity, may appear to be involved in that activity.
Particularly if a business is subject to state or federal regulation, it is important that the business maintain appropriate compliance, reporting and investigatory mechanisms in order to properly handle any rumors or reports of illegalities by employees.
If a business wants to avoid the potential of being held responsible for illegal conduct, or wants to diminish its responsibility, the best means of doing so is usually to cooperate with any investigation of the wrongful conduct. A business under investigation for its employees' alleged criminal conduct should enlist the help of a qualified lawyer to prepare and coordinate its defense.