A criminal activity that occurs in a business setting is considered a business crime, also called a white-collar crime. This designation comes from the traditional white button-down shirt with a white collar that salaried business professionals often wear.
These types of crimes are typically committed by professionals who are either employed by legitimate businesses or who are enterprises that are posing as legitimate businesses. The conduct involved in these crimes is rarely violent.
These types of crimes, instead, are usually committed using a series of deceitful or fraudulent behaviors. They can, however, still be extremely destructive and, in some cases, result in the theft of millions of dollars.
What Are Some Examples of Common Business Crimes?
There are numerous different types of business crimes, including, but not limited to:
- Embezzlement: The criminal offense of embezzlement involves an individual taking money that was entrusted to them for a legitimate purpose. For example, an individual may set up an account that their money manager has access to in order to pay their legitimate expenses, but that money manager may use those funds to pay their own expenses, embezzling the money;
- Ponzi scheme: In Ponzi schemes, initial investors are lured into investing through fraudulent promises. These individuals are later paid profits from the money that is invested by new investors into the scheme and not from any true profits made from legitimate investing of their money;
- These schemes involve false promises of returns on investment or company growth which sustain investor interest in the scheme, although no such returns actually exist;
- Any money that is paid to existing investors is only from new investors;
- Pyramid scheme: Pyramid schemes are similar to Ponzi schemes because legitimate returns are never realized. In pyramid schemes, the founder of the scheme recruits initial investors with the promise of large returns in a short period of time if they can recruit additional investors;
- Each of the new recruits are promised a return for bringing in additional individuals;
- There is no legitimate investment underlying the scheme and producing legitimate income or profits;
- Kickbacks: These are types of negotiated bribers in which two parties agree that one of the parties will pay the other a fee for some type of service, and the individual who is paid will return a percentage to the one who paid the fee;
- For example, a public official may award a contract to build a road to a specific 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;
- 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 restrain 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 the bribe may be an individual associated with a business or a business that desires to get a public contract or to influence an elected official’s vote on a certain item of legislation;
- A bribe is a type of both business and political corruption. Typically, there is no written documentation of the corrupt transactions. This is because individuals who are 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; and
- Extortion: Extortion is a criminal offense that uses threats of violence or other negative acts. For example, exposing unfavorable information about an individual, that is used to force them to comply with some demand of the extortionist.
Is a Pyramid Scheme Legal?
A pyramid scheme is a fraudulent system of making money. The aspect that distinguishes these schemes from other types of fraud is the importance of finding new recruits to participate in the scheme.
For example, one individual may ask another individual to pay $100 for admission into a business. That individual who paid admission would then have to enlist more individuals to pay $100 to become part of the same business.
The higher the number of individuals who are added onto the pyramid scheme, the more profit will be made. These are different from Ponzi schemes, which can be easier to identify and only require a case investment.
Pyramid schemes, on the other hand, may require fees or purchasing products or services to participate and earn income.
Are Pyramid Schemes Successful?
Pyramid schemes may be successful, but usually only for the first few groups of consumers. A pyramid scheme only benefits the individuals at the top and, as a result, usually ends quickly.
At some point, too many individuals become aware of the extent of the scheme and opt not to participate. When individuals stop participating, the scheme will start to dwindle.
What Steps Can a Victim Take?
Individuals should be aware that pyramid schemes are a form of fraud. Because of this, it is a criminal offense to participate in a pyramid scheme knowingly.
There are steps victims may be able to take, including:
- Contacting law enforcement: A pyramid scheme constitutes fraud, which means local law enforcement officials may be able to track down the perpetrators of the scheme and, if available, return the money to the rightful owners;
- Contacting the Federal Trade Commission (FTC): The FTC regularly helps the Justice Department to prosecute pyramid schemes. If a pyramid scheme has crossed state lines, the federal government will have jurisdiction to investigate and prosecute the perpetrators;
- Filing a civil suit: A civil lawsuit may be filed against the individuals who created and operated the scheme.
What Should I Do if I Suspect a Proposed Business Is a Pyramid Scheme?
An individual should be aware that pyramid schemes may arise in many different areas of business. However, they all function in a similar way, with the individuals who are at the top of the pyramid realizing almost all of the profits.
An individual can ask questions about how the business works and determine whether or not the proposed business is a pyramid scheme. Individuals should consider whether the promise of fast cash and a great return is possible or even feasible.
Should I Consult an Attorney?
A pyramid scheme, as noted above, is a form of fraud. If you believe you have been a victim of a pyramid scheme or would like to report one, it is important to consult with a fraud lawyer.
Your lawyer can help you determine whether it was, in fact, a pyramid scheme and the best action to take going forward. Your attorney can help you make any necessary reports or file a civil lawsuit if needed.
In addition, your attorney may be able to help you to recover money damages, or monetary compensation, from the pyramid scheme operators.