Editor’s note: This article was first published in March 2018, and calls Cynk Technology the most recent case, which refers to 2014 rather than to the date of publication.
It is a mystery what drives a person to become a white-collar criminal, although many psychologists who have spent decades studying the profile of people who commit these crimes point to greed, or to the thrill of playing in this sort of legal grey area. But first of all, let’s define what white-collar crimes are and what types there are.
White-collar crime
These are crimes that bring the criminal a financial gain, where the offence is non-violent and involves a range of illegal practices, although sometimes those practices are merely unethical and are protected by the legal framework.
The scale of the damage these crimes cause has made this kind of crime one of the main economic problems of our century.
People lose their homes, their jobs, their security and their dreams. In fact, a single corporate crime can do more harm than hundreds of street crimes. Yet in some countries the risk-reward balance works out for the white-collar criminal and even encourages it.
There are many types of white-collar crime, so let’s look at some of the most important
1. Bribery
One of the most common today. It consists of offering money or gifts to influence an individual’s actions. Those actions usually benefit both the briber and the person bribed, and may in turn cause problems for many other people or companies.
Example: a company might bribe a politician with money to make sure the politician hires that company’s services rather than another’s. This crime is sometimes hard to detect because the bribe is paid in a legal way, such as a donation to a political party. As a rule, though, it is done with envelopes or briefcases full of cash.
2. Insider trading
This is one of the most common crimes in financial markets, but also the hardest to prove. Having any information about a listed company that is not available to other investors and using it for your own benefit is a crime.
But this kind of information is not always illegal to use.
That is, employees and directors of a company obviously have information about it well before other investors, and they can in fact use that information to their own advantage. They can legally buy and sell based on that inside information, but they must report their trades to the CNMV (the stock market regulator) in Spain and to the SEC in the United States.
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Examples of when inside information is illegal
- An employee learns about a possible merger that will send the company’s shares sharply higher. He decides to invest on the strength of that information and does not report it to the CNMV.
- This employee learns about the merger and tells several friends, who decide to buy shares to profit from it. All of them are committing a crime: one for passing on the information, and the others for investing on the basis of inside information (though it will be very hard to prove).
That is why investors keep a close eye on the trades of “insiders”, meaning the stock market moves of a listed company’s executives.
3. Securities fraud
This is the type of fraud that really worries investors, since it usually consists of giving investors false information so that they buy shares on the basis of results that are not real.
Examples: without looking any further, what Jordan Belfort (The Wolf of Wall Street) did falls under securities fraud. He held shares in penny stocks and pushed them on his clients to drive the share price up. Then he sold at a profit and let the shares collapse, leaving his clients holding worthless paper.
Gowex would also count as securities fraud, for showing investors false information in order to attract more of them; those investors will now lose a lot of money (or all of it) if the company turns out to be worth nothing.
And the most serious form of this fraud is creating a fictitious company and getting investors to put money into it. The most recent case: Cynk Technology, a shell company that reached a market value of 5 billion and saw its shares rise by as much as 25,000%. Not bad for a company with no employees, no revenue and no business.
4. Antitrust violations
This kind of corporate crime also sits in a very grey area. Suppose a company completely dominates a particular sector and uses its leading, monopoly position in the industry to force consumers to pay for, buy or sign up for certain other products or services, knowing that customers will have to toe the line no matter what, because there is no alternative.
At other times, companies simply use their monopoly position to stop other firms from entering the sector.
Example: suppose Google (the search engine most people use) removed from its results every company or product that competed with Google’s own products. That would count as an antitrust violation.
5. Bankruptcy fraud
Declaring bankruptcy is another very common white-collar crime. Sometimes a company may claim to be bankrupt for the sole purpose of getting part of its debts written off. On other occasions, after losing a multimillion lawsuit, companies look for a way to file for bankruptcy so they do not have to pay.
To pull this off, certain documents have to be manipulated, hidden or destroyed so that nobody can get to the company’s real accounts.
Example: Robert Kiyosaki declared his company bankrupt after being ordered to pay 23 million dollars. So far he has not been accused of fraud, despite how blatant it looked.
6. Industrial espionage
Accessing confidential information and stealing information from a company in order to use it for the benefit of our own company is also a more common crime than we imagine, and not only among US companies.
Example: a company decides to plant a worker inside a competitor in order to get hold of its client list or its supplier terms, or simply to anticipate its moves or obtain the formula for one of its products.
The planted worker does not need to be an executive. It could be the cleaner or an ordinary office clerk: anyone who might, at some point, have access to the information they are after.
These would be the most profitable cases of white-collar crime, although insurance fraud and counterfeiting money would also fall under this definition.
What is the difference between white-collar and blue-collar crime?
The concept of blue-collar crime is used to describe someone who can commit a crime because they hold a position that is ideal for committing it, a crime they could not commit if they were not in that position.
And we are not only talking about politicians. Some doctors would, by definition, be blue-collar criminals if they profited from prescribing a drug they had been paid to prescribe instead of another that might be somewhat more effective but for which they received no compensation.
In reality, though, there is no difference between white collar and blue collar, because in the case of the doctor we mentioned, it is really a kind of bribery, just as when a politician is bribed because of his position.
Which countries are the most and least lenient with white-collar crime?
Without a doubt, the least lenient country with this type of crime is China, where it carries the death penalty. In fact, China is the only place where bankers have been executed for practices that would make them look like amateur criminals in most Western countries.
In many cases, China shows favouritism when the white-collar criminals come from politics. They are not always sentenced to death, and in some cases the sentence is reduced to life imprisonment (dying in prison).
China also confiscates all the assets of the criminal and of his family. Clearly, the risk-reward equation of committing a white-collar crime in China does not add up.
As for the countries most lenient with white-collar crime, with little risk of being wrong, they would be Brazil and Spain, not necessarily in that order.
In fact, in Spain, if you have been a good white-collar criminal, the other blue-collar and white-collar criminals may hand you the chairmanship of a bank or an important public post.
Even the United States, the main producer of the biggest white-collar criminals, has tougher policies on this type of crime than Spain and Brazil.
As the writer Alberto Vázquez put it (an interesting read):
“The worst thing about these criminals is not what they steal, but that what they steal is a hundredth of the damage they have caused. It is as if, to steal a 100-euro watch, you smashed a 10,000-euro shop window. In other words, for a politician to pocket a 50-million-euro commission, an airport costing 1 billion has been built where no plane will ever land.”
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