WHITE COLLAR CRIME IN CONTEMPORARY SOCIETY

Introduction

White collar criminality has become a worldwide phenomenon with the advance of commerce
and technology and like any other country; India is in no way immune to white collar
criminality. The growing receptiveness towards the need for criminalizing white collar crimes in
India arises from the staggering economic and social costs that are associated with white collar
criminal activity. The evolution of the study of white collar crime may be traced back to the
landmark work of professor Edwin Sutherland in the late 1930‘s that resulted in the recognition
of the harms cause by society‘s elite which consequentially became worthy of criminal
recognition. He defined white collar crime as one ‘committed by a person of respectability and
high social status in the course of his occupation’. The unique practical and theoretical
challenges associated with the criminalization of white collar crimes springs from the fact that a
corporation is a fictitious entity have a separate legal personality from that of its members. As a
result, the prosecution of organizations is obstructed due to the ambiguity and complications
regarding the application of traditional penal justifications such as retribution, deterrence and
incapacitation. The rationale behind the imposition of punishment for white collar crimes is
another aspect which needs to be considered prior to the criminalization of such offences.

White Collar Crime and its impact on Contemporary Society

White-collar crime has been defined recently 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. Contemporary society, according to social and
political scientists, is characterised by at least three fundamental directions:

 increasing human interconnection through a network of relationships that is

progressively covering the whole planet;

 the pace and depth of the evolution of human ways of life determined by technological
innovation represent an absolute novelty in human history;
  the scale of anthropological and ecological transformation due to the interaction
between evolutionary factors (social, cultural, economic, and technological) has no
historical precedent.

These presentations are the result of a number of fundamental changes that are irreversibly
transforming our daily lives, our way of thinking and perceiving the world and our way of living
together. Among these fundamental changes are: improvements in life conditions, life
expectancy, literacy and gender equality; changes in domestic and international political
institutions; and the breakdown of natural equilibria.

Most experts agree that the economic impact of white-collar crime is far more costly than
ordinary crime. White-collar crime can endanger employees through unsafe working conditions,
injure consumers because of dangerous products, and cause pollution problems for a community.
Sociologists have emphasized that white-collar crimes are particularly harmful to society
because they are committed by persons in power who are expected to set a moral example and
behave responsibly. A conventional viewpoint expressed in Government reports and professional
articles has maintained that the public does not view white-collar crime as serious, but few
empirical studies have actually supported this opinion. In contrast, most research on perceived
crime seriousness suggests that the public generally ranks white-collar violations as serious,
especially embezzlement and activities which result in death or injury to individuals. In addition,
researchers have left virtually unexamined the damage to social morals and structures caused by
white-collar crimes. Areas which warrant investigation include alienation from society, with
consequent feelings of normlessness and powerlessness, and public confidence in major
institutions.

Advancement of White Collar Crimes and the Need for its Criminalization under the
Indian Penal Code in Contemporary Society

White collar crime embodies offences perpetrated within the scope of legitimate business.
Although white collar crime normally occurs at the corporate level, it is not necessarily limited to
large businesses. For instance, cashiers who take money from registers and sales persons who
file false reports of inventory loss are both considered white collar criminals. Most of such
offenders, however, are not prosecuted under typical white collar laws but rather with theft state
codes. Technological advancement has increased the prevalence and scope of white collar
crime.1 Most white collar crimes however go undetected. Identity theft and credit card fraud are
relatively new offences that are problematic to detect, investigate and prosecute. Moreover,
white collar crimes has become an international endeavour, with offenders around the world
often perpetrating massive schemes involving credit card theft and exchange stolen identities.

White collar criminality has become a worldwide phenomenon with the advance of commerce
and technology like any other country; India is equally in the clasp of white collar criminality.
White collar crime in India is growing every day in new forms. The problem of white collar
crime is very serious in India. Business communities of this country of large and small merchants
are basically dishonest in most. Nowhere in the world businessmen get rich quickly as they do in
India. Harding, profiteering and black marketing of essential commodities by traders has become
a chronic problem for the Government. The inhibitions which prevent a person from committing
crime may have their origin in several factors which contributed to the emergence of conscience
and the creation of a sense of guilt.2

The Santhanam committee Report in its findings gave a vivid picture of white collar crimes
committed by persons of respectability such as businessman, industrialist‘s contractors and
suppliers as also the corrupt public officials. The problem of white collar crimes receives
considerable importance in recent times. White-collar crimes have been defined approximately
as a crime committed by a person of respectability and high social status in the course of his
occupation.3 There exists the need for changing the social attitude of the people towards such
antisocial behavior.

White collar crime is most dangerous to society than crimes committed by members of the lower
class, first because the financial losses were higher and secondly because of the damage it
inflicted on the public morals. One of the reasons for the differential implementation of the law
in the area in the area of white collar crimes is the relatively unorganized resentment of the
4
public towards such crime. The problem of white collar crimes was first focused in England
and USA after the First World War when it was realized that losses resulting from business

1
Cressey, Principles of Criminology, (1960)
2
Taft and England, Criminology (1964) page 275.
3
Sutherland, White-Collar Crime, (1949), page 9.
4
Sutherland, White-Collar Crime, page 49.
frauds exceed those from the offences against property that were punishable under orthodox
notions of crime. It was the financier and not the gangster, who was the public enemy. 5White
collar crime goes unnoticed because it exceeds the perceptibility of ordinary cheating practices
of small merchants and also due to the fact that a corporation is a fictitious entity and it is
therefore difficult to accord criminal liability to such an artificial entity. White collar crime is
convictable behavior and therefore need to be interdicted under the Indian Penal laws as well.
However, it is generally regarded by courts and by sections of the general public that as much
less unbearable as crimes falling under the category of blue collar crimes. In India, the first to
formally recognize the growing problem of white collar crimes and the need to criminalize such
crimes was the Santhanam Committee in the report submitted by it in 1972.6 The Santhanam
Committee report broadly categorized the offences constituting white collar crimes in India as
offences calculated to hinder the economic development of the country, tax evasion, misuse of
position by public servants in the making of contracts and disposal of public property,
individuals and money-making undertakings delivering goods not in accordance to the contracts
entered into with public authorities, profiteering, black marketing and hoarding, adulteration of
foodstuffs and drugs, theft and misappropriation of public property and funds, and trafficking in
licenses, permits, etc. Malpractices in the medical profession include the illegal sale of narcotics,
abortion, etc.

Taxation frauds have been regarded as an important kind of white collar crime and the
Legislature in India has been left with no other option but to go on adding more stringent
provisions in the law relating to taxation, so as to bring within their net transactions that which
under the pre-existing law, was not taxable. The difference between “tax evasion” and “tax
avoidance” assumes importance. The former is a breach of the law, while the latter raises only
ethical questions.

Sutherland examined criminal activities of seventy of the biggest corporations in America and
focused attention on restraint of trade, misrepresentation in advertising infringement of patents,
trademarks and copyrights, unfair labor practices and frauds in business. The main crimes that
have attracted criminalization in the US however are frauds in business in relation to bonds,

5
Thurman Arnold, Folklore of Capitalism, page 276.
6
29th Law Commission of India Report
adulteration of food or drugs and misleading advertisements, malpractices in the medical
profession, crimes by lawyers and trusts, cartels, syndicates etc and bribery and graft by public
officers.

False advertising lures consumers into purchasing goods and services at excessive costs.
Businesses use a variety of such methods including knowing advertising sale prices on goods not
in stock, increasing regular prices to advertise an inflated ―sale‖ price, and using surreptitious
placement of ―on sale‖ tags near goods near goods which are regularly priced. The prosecution
of this offence must require the victim to only show proof of dissemination to the public and
does not require any proof of purchase based on the false advertisement.

Harmful products are not a rare occurrence as it is not uncommon to see product recall notices in
newspapers, on television or through other media. This may seem odd considering that most
products undergo training for consumer safety. Manufacturers do everything in their power to
abide by consumer product laws.

The Food and Drug Administration (FDA) is responsible for regulating all activities including
food and drug consumption in the United States. Most food and drug offences involve
adulteration or misbranding. Adulteration refers to adding or removing a substance, compound or
other ingredient from a product. Misbranding is manipulating, destroying or removing any
misbranded or adulterer food, drug or cosmetic. Such misbranding and adulteration are required
to come under statute prohibiting the same.

Environmental crimes are within the scope of white collar crimes. Over the past several years,
the government of several countries in particular has dramatically increased resources dedicated
to the criminal investigation and prosecution of environmental crimes. In the case United States
v. Weitzenhoff7, affirming the defendant‘s felony convictions, and prison terms, for knowingly
violating the Federal Clean Water Act. More common however, are reckless or negligent acts
that result in harm to the environment, also the subject of criminal enforcement. The case United
States v. Hanousek8, underscores the seriousness with which the government approaches even
such non-intentional acts.

7
United States v. Weitzenhoff , 35 F.3d 1275 (9th Cir.1993)
8
United States v. Hanousek , 176 F.3d 1116, (9th Cir. 1999).
Corporate Liability is also covered within the scope of white collar crimes. The main challenge
in imposing liability on the corporate entity itself arises from fairness concerns relating to the use
of vicarious liability. For corporate liability to arise, several requirements need to be met. First
and foremost, the employee committing the illegal act must be within the ’scope’ of his or her
employment. A second requirement is that the agent‘s behavior must benefit the corporation in
some manner. Special problems can arise when the substantive crime the corporation is alleged
to have committed involves some form of mental culpability.

Although the criminal law usually targets the fictional corporate entity for liability, it is
important to recognize that punishment is also imposed on individual corporate actors. The case
United States v. Parks9 illustrates the practical difficulties involved in imposing individual
liability in response to corporate misbehaviors.

Fraud ranges from telemarketing scams that cheat the unwary of their funds, to fraudulent billing
in the health care industry, to deceptive practices in the sale and offering of stocks. Mail fraud
and wire fraud are two types of fraud which have been growing over recent times and are
included with the scope of white collar crimes. Mail fraud refers to any deceptive, fraudulent or
otherwise illegal activity occurring conjunction with delivery or receipt of the mail. The elements
of wire fraud are similar to that of mail fraud, however communication must travel across state
lines. Wire fraud can occur via telephone, radio, television, cable or other electronic means of
communication. Wire fraud is already in certain countries such as the United States where it is
codified under 18 U.S.C sections 1343 and is punishable by a fine and up to 20 years
imprisonment.

The statutes of certain countries specifically address offences related to bad cheques. There are
three basic types of cheque related offences, writing worthless cheques and cheque kitting. Some
states do not differentiate forgery from worthless cheques. Under common law, a forged cheque
could be prosecuted as uttering or forgery. Recognizing the fact that many individuals may
bounce a cheque unintentionally, statutes normally mandate a time period in which the individual

9
United States v. Parks ,421 U.S. 658 (1975)
can remit payment to the bank, business or person to whom the cheque was issued. Cheque
kitting refers to the use of multiple businesses, banks or other institutions in conjunction with
issuing worthless cheques. Securities fraud is another growing problem in recent times and falls
within the scope of white collar crimes. Fraud in the securities industry causes enormous harm to
individual investors and creates an atmosphere of distrust that hinders investor confidence in the
fairness and integrity of the financial markets. To combat these threats, there exists the need to
enact laws and regulations originating in the concerted effort to clean up industries .

White collar crimes have been in existence for ages however due to its alarming growth over the
past few decades, these offences have been criminalized in countries like USA and the need for
its criminalization in India under the IPC still subsists. The Santhanam Committee provided a
report on white collar crimes in India which instrumental in according importance to the
emergence of white collar crimes in India. This report was acknowledged by the 29th Law
Commission of India in its report in 1972. The Santhanam Committee report recognised the
emergence of ‘’mass society’’ with small controlling elite, promoting the growth of monopolies
and the deviance from ethical behaviour which led to growth of white-collar and economic
crimes. The report expressed its concern towards such crimes by opining that this crime was
more dangerous, not only because the financial stakes were higher but also they caused
irreparable damage to public morals.

Certain offences constituting white collar crimes are already covered under certain existing Acts
of legislation in India, such as tax evasion covered by the Income Tax Act 1961, evasion of
excise duty under the Central Excise and Salt Act 1944, money laundering under the Foreign
Exchange Regulations Act 1973, fraudulent bankruptcy under Banking Regulation Act 1949,
computer crime, software piracy or cyber-crimes under the Copyright Act, 1957 and the I.T. Act
2000, etc. However, there exists the need to solidify the law on such offences, by bringing
together such offences as well as other offences relating to white collar crime under a separate
head in the Indian Penal Code.

Conclusion and Suggestions

The economic and social structure of India has transformed to an enormous extent over the past
few decades, however the Penal Code does not adequately deal with acts which may be
described as economic or social offences which have now become a dominant feature of certain
powerful and affluent sections of modern society, having regard to the special circumstances
under which they are committed. Today we live in an era where crimes occur not only in the
poorer sections of society but in the affluent sections as well, as crimes emanate from business
organizations and often involve a financial motive. There are a plethora of crimes perpetrated
within the scope of legitimate business such as a company executive breaching his fiduciary
relationship between his clients and the company or by misappropriating information or
embezzling funds. While offenders involved in typical crimes such as robbery, burglary or
narcotics offences tend to prevail among the lower class, white collar criminals are typically
middle to upper class persons endowed with positions of authority. Although most media tend to
focus on white collar crime, criminal justice scholars tend to agree that most white collar crimes
go unnoticed among the public. Given that law enforcement agencies constantly deal with
offences which visibly affect communities, for example murder, burglary and assault, it is not
surprising that white collar crime receives relatively less attention. Additionally, many industrial
white collar offences are punished through administrative means in a civil court. As such, those
perpetrators are often never charged with a crime. Thus, the true extent of white collar crime is
far larger than estimates provided by sources. Furthermore, many white collar crime victims are
corporations themselves, which further diminishes public attention and sympathy. The fact that
India fails to criminalize white collar crime by transferring to the India Penal Code the relevant
provisions already existing under special enactments as well as new provisions sanctioning
offences relating to white collar crime hints that we under rate the gravity of white collar crime.
The transfer to the Indian Penal Code of the provisions of other special enactments under this
category does not seem to be feasible, as the provisions are a part of the integrated schemes of
the particular enactments, however the addition of new provisions to the Indian Penal Code in
this matter does not serve as an obstruction. To conclude, the problem of checking white collar
crime is a complex one as it is wider than the form and content of the penal law, or the placing of
its provisions. The inhibitions which prevent a person from committing crime may have their
origin in several factors which contributed to the emergence of conscience and the creation of a
sense of guilt. The sanctions imposed by the penal constitute only one species of those
inhibitions. The Indian Penal Code is an extensive compilation of substantive criminal law, and
most of its provisions are suitable today as they were when they were formulated. However, the
economic and social structure of India has changed in recent times and therefore the Code fails to
reflect the need of present day India. Therefore, the Indian Penal Code needs to satisfactorily
deal with the growing problem of white collar crime in India

by means of its criminalization.