White collar crimes are non-violent acts in which perpetrators use deceptive practices to cheat victims out of money for their own benefit, often resulting in significant financial gain. This brand of criminal is typically an astute business professional employed in a high-ranking position and with whom the victim placed their trust in, such as an accountant, business manager, financial adviser, or trustee. White collar crimes are estimated to cost the United States anywhere from $300-600 billion per year. Three common types of white collar crime often reported are Corporate Embezzlement, Investment and Accounting Fraud and Insider Trading.
Embezzlement is defined as the fraudulent obtainment and misappropriation of funds which were entrusted to an individual. In other words, the perpetrator first steals the funds and converts those monies into their own, or a third-party account. Examples of such action at the corporate level might include a money manager or financial planner stealing funds from company accounts, or a corporate trustee tapping funds from a corporate trust fund. Embezzlers often attempt to conceal their crimes through deceptive practices, such as falsifying financial records, creating false vendors to which companies send bills to and receive payment, thinking those entities are legitimate clients and through Ponzi-like schemes in which criminals scheme investors out of large sums of money by promising them large future returns.
Investment And Accounting Fraud
Investment fraud, also known as Securities Fraud occurs when perpetrators deceive victims by luring them into purchasing high-risk stocks and promising them significant returns. These criminals often target inexperienced investors who are also unfamiliar with financial markets. Victims often lose large sums of money. Another example by which criminals commit securities fraud is by setting up and having victims purchase stock from what are known as “dummy corporations,” which are phone establishments that are given the appearance of being closely associated to a specific legitimate corporation.
A very common White Collar crime is accounting fraud where perpetrators employ deceptive tactics like falsifying accounting statements, or by deliberately underestimating expense reports.
Insider trading is, arguably, the textbook definition of a white collar crime. This type of offense is carried out in two specific ways. The more commonly practiced method of insider trading involves a perpetrator obtaining specialized information about a particular company or stock, often referred to as a “tip,” which they turn around and offer to various individuals in the hopes of inducing them into making investments based on the knowledge they received. Insider trading can also be committed by persons holding fiduciary responsibility roles towards another individual, such as an accountant, trustee, financial adviser or attorney who buys or sells stock based upon insider information.
Why White Collar Criminals Get Away?
Arguably, the main reason white collar criminals go unpunished is because their crimes take a long time to be discovered and, in some cases, never are. Certain crimes like simple accounting frauds can be detected through financial audits. However, quite often, white collar criminals are highly intelligent, extremely careful and exceptionally clever individuals who understand the nuances and complexities of the systems they are defrauding and, moreover, know how to earn and maintain the trust of their victims.
How Can A Business Owner Avoid Being A Victim Of White Collar Crime?
Experts suggest the most important action any business owner can take is to keep a watchful eye out over employees in accounting or other financial departments. It also recommended that business owners carefully review banking statements and other financial records and, if they suspect any impropriety, to immediately contact a business attorney.
In a case investigated by the Federal Bureau of Investigation, a Mansfield, Texas man was sentenced by a U.S. District Judge to 48 months in federal prison. Jeffre Francis Halas was also ordered to pay monetary restitution in the amount of $523,622. He pled guilty to a single count of mail fraud that was connected to his investment fraud scheme.
Halas operated a company under the name of Halco Capital Management. He solicited potential investors under the guise of promising to combine their money in a “limited partnership”. Halas was to invest the money in stock and currency exchange markets; however, most of the initial investment was lost on the stock market quickly after joining. The investors continued providing funding to Halas because Halas reported false earnings on monthly letters, instead of reporting losses.
Two years after their initial investments, those that vested money in Halco Capital Management were notified by Halas that Halco Capital Management was insolvent. U.S. District Judge Terry R. Means ordered Halas to enter the Bureau of Prisons by July 16, 2012 for his involvement in fraud.