Criminal activities that occur in a business setting are considered business crimes or commonly referred to as “white collar crimes.” The phrase “white collar” refers to the traditional white, button-down shirt with a white collar worn by salaried business professionals.
Such crimes are usually committed by a professional either employed by a legitimate business or an enterprise posing as legitimate. Thus, the actions involved are rarely violent and instead are committed through a series of fraudulent or deceitful behaviors. They can be very destructive, nonetheless, sometimes resulting in the theft of millions of dollars.
What Is Fraud?
Fraud is a kind of deception meant to trick or deceive the targeted person or entity into handing over something they would not otherwise hand over absent the deception. Fraud can be a civil wrong or in some cases a criminal act. Fraudulent acts can involve:
- An impostor, or a person pretending to have credentials they do not have or access to something to which they do not have access;
- A promise to do something even though the promisor has no intention of following through with the promise.
- Creation of fake documents showing a transaction or other misrepresentations of fact and using them to obtain financial gain. Accounting fraud is an example of this type of fraud.
What Are Some Examples of Common Business Crimes?
- Embezzlement: The crime of embezzlement involves a person taking money that has been entrusted to them for a legitimate purpose. For example, a person might set up an account to which their money manager has access for the purpose of paying their legitimate expenses, but the money manager uses the funds to pay their own expenses.
- Ponzi Scheme: In a Ponzi scheme, initial investors are lured into an investment through fraudulent promises. They are later paid profits from the money invested by new investors in the scheme and not in true profits made from legitimate investing of their money. False promises of returns on investment or company growth sustain the investor interest in the scheme even though no such returns exist; any money paid to existing investors comes from new investors only.
- Pyramid Scheme: A pyramid scheme is similar to a Ponzi scheme, in that legitimate returns are never realized. In a pyramid scheme, a founder recruits initial investors with promises of large returns in a short period of time if they can recruit more investors. Each new recruit is promised a return for bringing in additional recruits. The only money that is paid to existing investors is money collected from new recruits. There is no legitimate investment underlying the scheme and producing legitimate income or profits;
- Kickbacks: is a negotiated bribe of sorts in which two parties agree that one of them will pay the other a fee for some kind of service and the person paid returns a percentage to the one who paid the fee. For example, a public official might award a contract to build a road to a certain contractor. The contractor then pays 10% of the amount awarded to the contractor back to the public official as a kind of gratuity to the official for throwing the contract to the contractor;
- Bankruptcy Fraud: hiding business assets from creditors or federal bankruptcy court in order to avoid having to liquidate them to pay creditors or to m or paying the debt owed. This type of offense is often referred to as “fraudulent transfers”;
- Healthcare Fraud: Healthcare fraud usually involves a medical service provider billing an insurance company or Medicare for medical services that were not provided. Or, it may take the form of inflating the bill for some service was in fact provided;
- Insider Trading: Insiders are people in a company who have access to confidential information about a company’s performance or finances. They may sell that information to others to use for trading in stocks or use it themselves for trading in stocks;
- Antitrust Violations: Federal antitrust laws prohibit practices that stifle free competition in the marketplace. Forbidden are activities such as establishing a monopoly, i.e., serving as the sole source of a product or service, lockup agreements, certain types of mergers, and price-fixing. Companies violate federal antitrust prohibitions by jointly participating in efforts to control the market in an industry market and fix prices.
- Bribery: Bribes are payments made to public officials with the intent of influencing their actions. The entity paying a bribe may be a business or someone aligned with a business who wants to get a public contract or wants to influence an elected official’s vote on a certain item of legislation. Bribes are a form of both business and political corruption. There is usually no written documentation of corrupt transactions. Of course, people engaged in bribery do not want to leave a trail of evidence of their crime. Both the person who offers the bribe and the person accepting it can be charged.
- Extortion: Extortion is a crime in which threats of violence or other negative acts, such as exposing unfavorable information about a person are used to force the person to comply with some demand of the extortionist.
Are Computer or Internet-Based Crimes Considered Business Crimes?
In today’s business world, money transactions are frequently conducted online, via wire transactions or through paper instruments such as checks. As a result, many criminals set up fake websites or advertise on legitimate sites to attract potential victims promising jobs, business services, or an opportunity to invest. All may turn out to be fraudulent and set up for the sole purpose of parting the investor from their money.
The telephone is another instrument of fraud in the current environment, because a perpetrator of fraud can call a person up and convince them to provide them with a credit card number and other personal information that can be used to steal their money. So frauds, Ponzi schemes, insider trading and many other types of crimes can be internet-based or otherwise involve the use of computers and electronic transactions.
What Are the Penalties If I Am Convicted of a Business Crime?
The penalty for any particular crime depends on the crime and the penalty established by the government of the state in which it is committed. Or, if a crime violates federal law, e.g. insider trading, federal law establishes the exact penalty. Often, the amount of money taken from the victim and the number of criminal acts or the length of time for which the fraudulent scheme went on are factors in sentencing.
If a scheme has multiple victims, each transaction that took place could support a criminal charge, so there may be hundreds of counts, or criminal charges, for one scheme. All of the crimes listed above are serious crimes that would probably be felonies punishable by sentences of years in prison and significant fines, including the following:
- Terms of incarceration in a federal or state prison;
- Parole or probation;
- Fines of thousands of dollars;
- Restitution or repayment of the money taken.
Conviction of any of these crimes would probably result in a person having difficulty obtaining a job in the future. A person would have to disclose their criminal record on job applications or have it discovered during a background check.
If a person was in a position that required a license at the time of the offense, such as a financial advisor license, a certified public accountant license or a license to practice law, then the person is likely to lose their professional license and be prevented from acquiring one even after they have served their sentence.
Are There Defenses to a Business Crime Charge?
Each of these crimes has its defenses. These types of crimes usually require the state to prove that the perpetrator had a specific intent, thus anything negating that intent can be a defense.
Other defenses might be available, such as:
- Lack of Knowledge: The perpetrator was acting at the direction of a supervisor and had no knowledge or reason to know that they were contributing to a criminal scheme;
- Duress: The perpetrator or their family members were threatened and the perpetrator was forced to participate in the scheme;
- Entrapment: Law enforcement agents unlawfully lured the perpetrator into committing the crime and absent the enticement of law enforcement, the perpetrator would not have done it;.
- Not Illegal: A perpetrator can argue that the alleged activity was not illegal. Rather, it was a legitimate investing opportunity that simply did not perform. An investment opportunity is not illegal just because it does not produce a return.
Ultimately, if a person can prove that they were not aware of the crime and that their superiors hid the truth from them, then a person has a chance of successfully defending a charge of one of the more common business crimes.
Do I Need Help from a Lawyer for a Business Crime?
You should hire a criminal defense lawyer if you have been charged with a business crime. They can investigate the claim, advise you of your rights, and represent you in court.
If you have been a victim of a business crime, a civil lawyer can help you file a lawsuit against the fraudulent person or assist you in obtaining the evidence of the fraudulent actions so that the case can be prosecuted by the state. Or, a criminal defense lawyer may help you work with the prosecutor to make a case for restitution.