Ethics Final

Business Ethics
Project Report - Whistle Blowing and White Collar Crimes
Submitted to: Prof Bharat Dalal

Date of Submission : March 31, 2011 Submitted by : Ankit Kalkar (008 A) Apoorva Sharma (011 A) Arvind Menon (012 A) Era Bali (019 A) Jayati Somani (023 A) Ranaji Deb (045 A) Sania Narulkar (050 A) Siddharth Raman (058 A) Varun Kore (071 A)
Business Ethics Report - White Collar Crimes and Whistle Blowing 2011
Even though the two ethical issues of White Collar Crimes and Whistle Blowing are interlinked in a lot of ways, the study group members decided to research on them separately and present the observations in this project report. The report is thus, divided into two sections catering to the two issues in context. Hence, the structure and the flow of the report is as follows:
Part I
1. White Collar Crimes 1.1. Introduction 1.2 The Indian version of White collar crimes 1.3 Famous Cases of White Collar crimes 1.4 Laws and Regulations regarding the various white collar crimes in India 1.5 Research, recent trends and developments 1.6 Conclusion Part II 2. Whistle Blowing 2.1. Introduction 2.2 Famous Cases of Whistle Blowing and results 2.3 Laws and Regulations regarding whistle blowing in India 2.4 Research, recent trends and developments 2.5 Conclusion
References
Mudra Institute of Communications
1. White Collar Crimes 1.1 Introduction

Edwin Sutherland for first time coined the term White-Collar crime in his address to the American Sociological society in 1939. The whole address was aimed to shatter the conventional and stereotyped images of the criminals as grown and brought up on the dark side of a town, and the belief that the epicenter of the overall Crime problem was that of the lower Strata of the society. He defined white-collar crime as crimes committed by a person of respectability and high social status into the course of his occupation . Subsequently he modified his earlier definition of white-collar crime as crimes committed by a person of the upper socio-economic class who violates the criminal law in the course of his occupational activities and Professional activities and in his work he challenged the traditional image of the criminals and the predominant etiological theories of crimes of his days. White Collar Crimes may be divided into Occupational Crime and Organizational Crime but in common parlance there exist 10 popular types of White Collar Crimes as : 1. Bank Fraud. To engage in an act or pattern of activity where the purpose is to defraud a bank of funds. 2. Blackmail. A demand for money under threat to do bodily harm, to injure property or to expose secrets. 3. Bribery. When money, goods, services or any information is offered with intent to influence the actions, opinions and decisions of the taker, constitutes bribery. 4. Cellular Phone Fraud. phone services. Unauthorized use or tampering or manipulating cellular
5. Embezzlement. When a person who has been entrusted with the money or property, appropriates it for his or her own purpose. 6. Counterfeiting. so. Copies or imitates an item without having been authorized to do
7. Forgery. When a person passes false or worthless instruments such as cheque or counterfeit security with intent to defraud.
8. Tax-Evasion. money. 9. Adulteration.
Frequently used by the middle
class to have extra-unaccounted
Adulteration of foods and drugs.
10. Professional crime. Crimes committed by medical practitioners, lawyers in course of their Occupation.
1.2 The Indian version of White collar crimes

If there is an industry in which India has surpassed the developed west then it is the field of White Collar crimes. White collar crimes in India is not in total based on the theory propounded by Prof. Sutherland but partially on the concept by Prof. Hugh Barlow as Crimes committed by the people of lower strata in their occupational status . In India White Collar crime means and includes manipulation of funds or in stock exchanges or misrepresentation in advertising or in financial statements of a corporation or violations of labour laws, copyright, patent laws etc. which is mainly job oriented i.e. which occurs during the course of one s occupation but assaulting a personal secretary by her boss will not constitute as White Collar crime.
In the course of their research Prof. Hugh Barlow and Sutherland repeatedly pointed out that White Collar crime was more dangerous than any ordinary street crime because the financial loss to the society from White Collar crimes is probably greater than the financial loss from ordinary burglary, theft or robberies. It was very much advent from their opinion that they were more concerned on the economic welfare of a country.
While computing the quantum of loss in India it was estimated that the average loss per theft or burglary is less than Rs. 5000/- or so is rare and the same amounted to lakh is unknown. But on the other hand embezzlement and frauds of lakhs and millions of rupees are very much advent. Indian scholars took the after effect of loss happened from White Collar crimes very seriously as according to them without economic stability a country cannot stand up and for proper functioning of a state economic prosperity is very much necessary.
According to V. R. Krishna Iyer, J. economic offences often are subtle murders practised on the community or sabotage of the national economy. So it may be termed as the White Collar Economic Offences .
These economic offences can devastate an entire community rather than robbing a lone victim. Their impact can last for years, stealing crucial services or a lifetime s savings through crimes invisible to their victims. 1.3 Famous cases of white collar crimes: The following are a few famous white collar crime cases from the recent past: 1. Bernard L. Madoff s Multi-Billion Dollar Ponzi Scheme The Ponzi Scheme run by Bernard Madoff swindled investors to a tune of 64.8 billion dollars which was brought to light in November 2008. This fraud is the largest investor fraud ever committed by an individual. Bernard Madoff started Madoff Investment Securities LLC in 1960 with a working capital of only 5000$. He started off as a penny stock trader and later grew into what many people referred to at a certain point of time as the market maker at the NASDAQ. His firm also pioneered the adoption of a computer technology to disseminate stock prices to buyers, which later evolved into the NASDAQ. Madoff was active in the National Association of Securities Dealers (NASD), a selfregulatory securities industry organization, serving as the Chairman of the Board of Directors and was also a member of its Board of Governors. In the 1980s, Madoff's market-maker division traded up to 5% of the total volume made on the New York Stock Exchange. Madoff was "the first prominent practitioner" who paid a broker to execute a customer's order through his brokerage, called a "legal kickback", which gave Madoff the reputation of being the largest dealer in NYSE-listed stocks in the U.S., trading about 15% of transaction volume. Modus Operandi: In 1992, Bernard Madoff explained his purported strategy to The Wall Street Journal. He said the returns were really nothing special, given that the Standard & Poors 500-stock index generated an average annual return of 16.3% between November 1982 and November 1992. The majority of money managers actually trailed the S&P 500 during the 1980s. He was secretive about the firm s business, and kept his financial statements closely guarded. The New York Post reported that Madoff "worked the so-called 'Jewish circuit' of wellheeled Jews he met at country clubs on Long Island and in Palm Beach". The New York
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Times reported that Madoff courted many prominent Jewish executives and organizations; according to the Associated Press, they "trusted Madoff because he is Jewish". One of the most prominent promoters was J. Ezra Merkin, whose fund Ascot Partners steered $1.8 billion towards Madoff's firm. A scheme that targets members of a particular religious or ethnic community is a type of affinity fraud, and a Newsweek article thus identified Madoff's scheme as "an affinity Ponzi". Madoff Investments mysteriously garnered 10% of NYSE-listed volume through a legal "kickback" scheme that permitted brokers to increase personal revenues without obtaining the consent of their clients. Fallout: The scheme began to unravel in December 2008, when the general market downturn accelerated. As the market's decline accelerated, investors tried to withdraw $7 billion from the firm. To pay off those investors, Madoff needed new money from other investors. In the weeks prior to his arrest, Madoff struggled to keep the scheme afloat. In November 2008, Madoff Securities International (MSIL) in London, made two fund transfers to Bernard Madoff Investment Securities of approximately $164 million. MSIL had neither customers nor clients, and there is no evidence that it conducted any trades on behalf of third parties. Madoff received $250 million around December 1 from Carl J. Shapiro, a 95-year-old Boston philanthropist and entrepreneur who was one of Madoff's oldest friends and biggest financial backers. On December 5, he accepted $10 million from Martin Rosenman, president of Rosenman Family LLC, who wanted to recover a never-invested $10 million, deposited in a Madoff account at JPMorgan, wired six days before Madoff's arrest. Madoff asked others for money in the final weeks before his arrest, including Wall Street financier Kenneth Langone, whose office was sent a 19-page pitch book, allegedly created by the staff at the Fairfield Greenwich Group. Madoff said he was raising money for a new investment vehicle, between $500 million and $1 billion for exclusive clients, was moving quickly on the venture, and wanted an answer by the following week. Langone declined.
On December 10, 2008, he suggested to his sons, Mark and Andrew, that the firm pay out over 170 million dollars in bonuses two months ahead of schedule, from $200 million in assets that the firm still had. According to the complaint, Mark and Andrew, reportedly unaware of the firm's pending insolvency, confronted their father, asking him how the firm could pay bonuses to employees if it could not pay investors. Madoff then admitted that he was "finished," and that the asset management arm of the firm was in fact a Ponzi scheme--as he put it, "one big lie." Mark and Andrew then reported him to the authorities. 2. Enron Energy giant Enron was the seventh largest company in the country before its 2002 demise. Its fall seems like the stuff of fiction suspicious resignations, anonymous memos, shredding documents but it turned out to be all too true. In March 2001, weeks after Kenneth Lay resigned as CEO and Jeffrey Skilling took over, a Fortune magazine article questioned Enron's worth and its secrecy. In August, Skilling resigned and Lay returned to his former post. Soon after, Lay got an anonymous memo warning him about Enron's business practices. In October, Enron's accounting firm was found shredding documents; after Enron reported large losses, the company became the subject of a Securities and Exchange Commission (SEC) investigation. The SEC eventually learned that Enron executives had hidden billions in debt and falsely represented revenue. Enron filed for bankruptcy by December 2001; thousands of employees lost their jobs and savings. In May 2006, Lay and Skilling were convicted on fraud and conspiracy charges. Lay died two months later, but Skilling received a $45 million fine and a 24-year prison sentence. In March 2010, the U.S. Supreme Court heard arguments in Skilling's appeal; his attorney claimed among other things that he did not and could not have received a fair trial in Enron's home base of Houston, Texas. Enron was a giant corporation (some say the largest energy company in the world), who depended on outside credit sources to finance its daily operations. In turn its creditworthiness depended on its performance as reflected in the Enron's share prices. When the price of Enron's shares collapsed, so did its' credit rating. Consequently cash credit to the company became either prohibitively expensive or outright unavailable. Without ready infusions of cash, Enron became unable to meet its earlier credit obligations. This
depressed Enron's stock even deeper, which in turn let to the further decline in already low share prices. Being unable to pay its' creditors, with no forthcoming offers of merger from its competitors, and with no foreseeable rescue attempt by the government, Enron was forced into bankruptcy. In the purely abstract form, merely for illustrative purposes, we can compare Enron's debacle with an imaginary individual whose life or at least lifestyle depended much on borrowing - let's say, it became dependant on loans from credit card companies. Without sufficient income to repay interest on these loans, this hypothetical individual is forced to apply for new credit cards, with which he is paying off his creditors. At some point, when the individual's credit rating worsens and he or she is no longer able to get more financing from the credit card issuers, the finale becomes inevitable, and usually it is the bankruptcy. We can also compare Enron's disaster to a pyramid scheme. In the classic pyramid scheme, fraudsters (here Enron's executives, accounting firms, corporate lawyers and their clique in the government) have to keep their victims happy (in the case of Enron the victims were investors, shareholders, suppliers and the general public) by paying off unrealistic rates of return on victims' investments (inflated price of Enron's shares). Pyramid schemes go always bust when a crisis of trust suddenly erupts among creditors or when there are no more victims left to be duped in forking out more money for running the pyramidal operation (i.e., source of credit dries up and the scheme inevitably collapses). Enron was not a banal investment scheme, it was a strategic company, tightly linked to the US government and to the US energy policy (or lack thereof); a company that was extremely active in the domestic politics of the United States, in the political finance of the country's two major parties, a company that was an unhesitant player in foreign markets and a bold participant in the international energy politics. Enron was a corporate equivalent of superpower. One of the reasons why people invested in Enron was that the company was considered too big to fail (the blue chip kind of stock, the deceptive safe haven) and was engaged in supposedly safe business of buying and selling energy.
Enron's collapse also raised painful questions about supposed benefits of the deregulation of the public utilities sector as well as of the role of the free market in the operation of deregulated public utilities and energy suppliers. The obvious problem with the idea of letting free market forces control the fate of the utilities and public energy is the reality of the energy marketplace, which - unlike other sectors of the economy - is dominated by a few very large companies, whose control of the market is almost absolute, oscillating from the state of to that of monopoly. In each instance a failure of such an entity, whether induced by market forces or by corporate mismanagement, or alternately by a combination of both factors, could cause a catastrophic impact on the society. 1.4 The Legal Framework for dealing with White Collar Crimes Within the Indian Constitution, there is no clear definition of white collar crimes per se. In 1963, The Santhanam Committee Report made the first attempt to bring white collar crimes under the purview of the Indian Constitution. The Santhanam Committee Report in its finding presented a clear picturesque description that in India the white collar crimes so defined, are mostly rampant among then businessmen, industrialists as well as corrupt officials and private practitioners. Highlighting the magnitude of the crimes in India, the Commission on Prevention of Corruption in its report quoted, The advancement of technological and scientific development is contributing to the emergence of mass society with a large rank of file and a small controlling elite, encouraging growth of monopolies, the rise of the managerial class and intricate institutional mechanisms. Strict adherence to high standard of ethical behaviour is necessary for the even and honest functioning of the new social, political and economic processes. The inability of all sections to appreciate this need in full results in the emergence and growth of white collar and economic crimes renders enforcement of all laws, themselves not sufficiently deterrent, more-difficult. Tax evasion and avoidance, share-pushing, malpractices in the share market and administration of companies, monopolistic control, usury, under-voicing or over-voicing, hoarding, profiteering, substandard performance of contracts of constructions and supply, evasion of economic laws, bribery and corruption, election offences and malpractices are some examples of white collar crime.
It was on the basis of the report of this Commission that a new chapter was suggested to include into the Indian Penal Code, 1860 by making amendments to the Act. The motive behind such suggestion was to bring white collar crimes under the purview of the criminal law and at the same time broadly classify the offences that can come under the purview of white collar crimes. The matter was referred to the Law Commission by the Government of India for considering it. However, the Law Commission disagreed with the proposal and observed that such offences which are put under the banner of white collar crimes are to be left to be dealt with by special and self-contained enactments which act as supplement to the basic criminal law. The reason behind that was, as discussed earlier, there have been a lot of debates regarding criminalising acts constituting white collar crimes. However, in the Report of the Vivian Bose Commission of Inquiry highlighted how the industries indulge into white collar crimes such as fraud, falsification of accounts, tampering of records for personal gains, tax evasion, so on and so forth. Control policies to be undertaken in eradicating white collar crimes:As has been studied so far, white collar crimes are not consequences of any drive of necessity. It is simply greed for multiplying wealth and to retain so called meaningless status in the society by pursuing rivalry with the competitors. These people indulging themselves in these activities are to be considered to the leeches, sucking blood of the society and in turn creating grave hindrances to the progress of the society. Since their acts rarely affect an individual directly, these are often ignored of by a common mass and thereby no single individual takes the pain of prosecuting against the offender. But it must not be forgotten that these crimes and criminals are slowly and steadily spreading their wings towards the society at large and much wrong has already done by now. Therefore, there is an immense need to curb it making no waste of time; otherwise it might totally paralyze and ultimate ruin the society. The biggest hindrance that lays in the prevention of white collar crimes is the lack of public awareness. Since the individuals involved in these acts, do not generally affect a single individual, an urge of eradicating them, do not usher. Moreover, white collar crimes are yet not considered to be as grave as that of traditional crimes, so to it s certain characteristics as mentioned earlier. Though they are likely to take shape of heinous crimes in times to come, yet there lie certain obstacles in considering them at
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par with traditional crimes. The acts coming under the purview of white collar crimes cannot be termed as crimes in the strict sense of term. Therefore apart from having the stringent penal or regulatory laws for deterring the persons involved in them, there is a first and foremost need of raising public awareness regarding the issues. The government has a comprehensive role to play in doing so through media or by initiating task forces who would act as watch dogs. Proper and methodical string action should be used randomly so as to catch the individuals involved in the white collar crimes redhanded. In one of the recent developments, Gujarat High Court in its judgment over the case, Noormohmed Jamalbhai Latiwala vs State Of Gujarat on 25 March, 2004, made the following recommendations: The cause of the community deserves better treatment at the hands of the Court in the discharge of its judicial functions. The Community or the State is not a persona non grata whose cause may be treated with disdain. The entire community is aggrieved if economic offenders who ruin the economy of the state are not brought to book; A murder may be committed in the heat of moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the Community. A disregard for the interest of the community can be manifested only at the cost of forfeiting the trust and faith of the community in the system to administer justice in an even handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage: done to the National Economy and National Interest, as was aptly stated in State of Gujarat v. Mohanlal Jitamalji Porwal and another. (AIR 1987 1321)." The investigation for the white collar crimes must be conducted by highly trained Investigating Officer, who are well conversant with the system and the field in which the crime has been committed. In the present case, it is the banking in cooperative field. Not only that, but for detection of while collar crimes, it is expected for the State to undertake the investigation through ultra modern machineries like lie detector test, narco test etc. Not only that, but normally in the matter of investigation of while collar crimes running into crores of rupees, it would be expected for the Investigating Officer to immediately intimate the concerned Airport Authorities, so that the accused may not fly away, outside the territory of the country. In the same manner, the I.O. conducting
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the investigation for white collar crimes running into crores of rupees has to take immediate steps for intimating the concerned bankers, so that the accused may not withdraw and convert the money in such a manner which makes the things irreversible, even if subsequently found that on the date of the complaint, the money realized out of the white collar crime should be made available to the victims of such crimes as an outcome of the trial. Since the aforesaid actions appears to have not been taken in the investigations of the present case, which is also a white collar crime running into crores of rupees of the public and as a result thereof, the main persons, who are pioneer of the modus operandi are reported have left the country and are staying in the U.S.A. Even the monies of loans which are involved in white collar crimes are not traced. This Court is conscious of the facts that it is for the State to take necessary steps for proper investigations of such white collar crimes running into crores of rupees of the public, but at the same time, if the proper evidence is not produced to the Court by the Investigating Machinery of the State, the offenders may not have the deterrent effect for commission of the crimes and consequently it may have serious repercussions in the society at large. If, in the system of administration of justice, the real offenders are not booked and are not punished by the Court on account of non-availability of proper material or laxity of the Investigating Agency in procuring and producing necessary material before the Court to attract conviction, and as a consequence thereof, if the real offenders are acquitted or discharged, the same in my view, would shake the confidence of the citizen of the country in the rule of law in democracy and the law may lose its efficacy in curbing and abolishing such white collar crimes which in the words of the Apex Court "affects the fibre of the country's economic structure", and if not whole of the country, but certainly of the State's economic structure. If offenders of white collar crimes get scot free, it will be for the State to take necessary steps in this regard and, therefore, the Chief Secretary of the State as well as the Secretary, Home Department of the State are directed to look into the matter and to report to this Court within a period of four months from the date of receipt of the order regarding the steps taken in this regard and the steps to be taken in this regard for proper investigations of "white-collar crimes" running into crores of rupees of the public.
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(Source: http://www.indiankanoon.org/doc/937615/) Many believe that technology will come to the rescue in face of the white collar crimes. The introduction of Aadhar: The Unique Identity Cards, will help in curbing the white collar crimes to a great extent. Another move that can help us combat the white collar crimes it the introduction of E-governace. The following points illustrate how egovernace can help us deal with white collar crimes: Legal System in India: e-Governance will enhance the working of judiciary as the status of the cases pending in High courts and Supreme Court can be checked online, also the dates for next hearing and many more. Election ID and e-Governance: There must be a single citizen ID card for all govt schemes. There should be integration of IT based government services and their edelivery. E.g. Gyandoot in Madhya Pradesh, e-Seva in AP, Friends in Kerala, in Maharashtra, Rajasthan, and Tamil Nadu now provides online registration of property transactions. In Mumbai there is registration of births and deaths by BMC. In Karnataka, totally computerized land records under Bhoomi project. There should be computerized transactions of treasury in all districts and Taluka. There should be monitoring of public grievances and disaster mgmt systems under control of Chief Minister. E-documents: Forgery is major part of white collar crime which takes place by bribing corrupt official, with partnership. Forgery can be avoided by matching the documents with original by means of PKI. Moreover, many employees, in an organization, know about the corrupt practices and want to complain but do not do so due to the fear of wrath from senior officers. For the fear of disclosing their identity, they do not report it to the vigilance department. E-Governance renders golden opportunity to such people to alert concerned officials through Email, E-forms, and Ecomplaints. Right to Information: The right to information envisaged by electronic governance presupposes decentralization in power structure and decision-making. E-governance is a tool for connecting E-Governance in Practice people and sharing information. It will result in improved transparency, speedy information dissemination, higher administrative efficiency and improved public services in sectors such as transportation, power, healthcare and local administration 1.5. Latest developments
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Understanding white collar crimes is the area of understanding the role and personality of a white collar offender and use these pointers in the appointment of people in positions of responsibility and power. White-collar crime scholars have long argued that there is a difference between 'street' and 'suite' offenders. Prior to the 1980s, this argument was based primarily on qualitative accounts of egregious misconducts by high-ranking businessmen (Benson, 2002). Quantitative data collected on convicted white-collar offenders in federal US courts began to shed additional light on this assumption. First, Weisburd and his colleagues (1991, p. 73) found that white-collar and common street offenders were 'drawn from distinctly different sectors of the American population'. Second, these offenders convicted of white-collar crimes were not depicting the stereotypical image of the white-collar offender, 'as a person of wealth, power, and high social status who has led an upstanding and otherwise impeccable life' (Piquero & Benson, 2004, p. 155). These two conclusions lead to questioning the importance of offender differences, not only the difference between offenders and nonoffenders, but on understanding the differences between different type of offenders, primarily the distinctions between common street and white-collar offenders. Until relatively recently, few studies have examined individual characteristics, including personality, to explain the decision-making processes of white-collar offenders. (2) One particular line of inquiry that focuses on the integration of individual differences into explanations of both general and white-collar forms of criminality is Gottfredson and Hirschi's (1990) general theory of crime. Their hypothesis of low self-control has garnered much research attention and support in explaining general criminality (see Pratt & Cullen, 2000) but has not fared as well in explaining white-collar crime. The white-collar offenders had fewer prior arrests and more conventional lifestyles. Simpson and Piquero (2002) investigated the theory's ability to predict intentions to engage in corporate crime by administering a vignette survey to a sample of MBA students and found that organisational theories of offending were better predictors of corporate offending intentions than were behavioural indicators of low self-control. In examining a sample of tax offenders, Murphy and Harris (2007) tested the hypothesis that stigmatising experiences with enforcement efforts would increase rates of recidivism, while experiences that were perceived as reintegrative would reduce future offending. Consistent with the theory, they found those who believed they were treated
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with dignity and respect (e.g., a reintegrative experience) were less likely to report evading taxes in the following two years. Other researchers have applied a variety of different personality measures to try to unravel the relationship between personality and white-collar criminality. Alalehto (2003) utilised the Big Five Model of personality (John & Srivastava, 1999) to identify three personality types, the positive extrovert, the disagreeable and the neurotic, which exhibited a distinct tendency toward white-collar criminality. Shelley Johnson Listwan, Nicole Leeper Piquero, Patricia Van Voorhis published a research paper in March 2010 titled, Recidivism among a white-collar sample: does personality matter? . The paper aims establish if a relationship exists between personality and white collar crimes and if personality can be used as a predictor for the likely hood of committing a white collar crime. The current study utilised a longitudinal design that examined recidivism rates for a cohort of federal prison inmates over a period of 10 to 12 years. The participants were selected as part of a NIJ-funded classification study conducted in federal prison facilities in Terre Haute, Indiana (see Van Voorhis, 1994). (3) The original sample comprised inmates admitted to either a Federal Penitentiary or a Federal Prison Camp between September 1986 and July 1988. (4) While many of the previous studies linking personality to criminality follow youth only into their early twenties, the average participant in the current study was 30 when the follow-up period began. Therefore, this study provided an opportunity to study the adult offender during the later stages of their criminal career. Investigation of this group is important for two reasons. First, the older sample is in line with white-collar crime research that suggests that age of onset occurs substantially later in life, generally well into the 20s and 30s (see Weisburd & Waring, 2001; Piquero & Benson, 2004). Second, some have argued that personality acts differently across age groups with extroversion higher in adolescent groups in contrast to neuroticism in older adults (see Eysenck, 1983). The relationship between personality and white-collar crime is especially intriguing since little is understood about the relationship of personality with these types of offenders. The model predicting any new arrest among the white-collar sample illustrated that personality was a salient predictor of outcome across time while controlling for other
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important risk factors. In total, they found evidence to support that both personality and sociological variables (i.e., race, employment, SES) are important in predicting recidivism among our sample. As expected with a white-collar sample, this group included individuals who were more likely to be Caucasian, married, fathers and with some education. They were also more likely to be employed, less likely to be in abject poverty and more likely to be considered low risk. With regard to the personality variable, the model findings indicate that the neurotic type were more likely to be arrested. The neurotic type had the highest rate of recidivism and was significantly different from all three other personality types.
2. Whistle Blowing 2.1. Introduction To blow the whistle on someone is to alert a third party that that person has done, or is doing, something wrong. So, literally, whistle-blowing means that one makes a noise to alert others to misconduct. By blowing the whistle on misconduct in an organization, one alerts the organization to the fact that its stakeholders are being wrongfully harmed, or that they are at risk of harm. It takes a great deal of courage for an individual to raise concerns about poor practice or abuse within an organisation. Where organisational culture tolerates bad practice an individual challenging this can become the focus of attention (Dadswell, 2000). They may be labelled with negative words and seen as the wrongdoer. Members within the organisation may see the whistleblower as a traitor (Greene, 2004). Fear of legal action and compensation claims can deter organisations from acknowledging and dealing with whistleblowers disclosures. As Martin (Martin, 1999) points out: the organisation has all the advantages. It has far more money, unlimited time and usually little individual responsibility. It can stall, resist giving information, hire expensive lawyers and mount attacks. But there are many cases where people have chosen not to blow the whistle with disastrous results. For example, witnesses in the Bristol heart scandal said they had been afraid to come
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forward even though they knew there was something wrong (BBC, 1999). Investigations into cases of abuse invariably lead to calls for the implementation of whistleblowing policies. It is vital that whistleblowers are supported and protected and that enabling whistleblowers to come forward is seen as an aspect of excellence within organisations. Attitudes towards whistleblowers are changing (Benn, 2000), but a lot still needs to be done to ensure that workers feel safe enough to air concerns. For organisations there are clear advantages to supporting whistleblowers these can include safeguarding the safety of staff and the people using the service as well as the organisation s reputation (Holihead, 2000). Failure to implement appropriate policies will lead to lack of public confidence. New members of staff are often in a position to be more objective than existing staff members, who may have become accustomed to certain practices over a period of time (Dadswell, 2000). It is therefore important to ensure that new employees are supported to feed back on what they observe and that whistle-blowing is covered during induction. If whistleblowers are protected and viewed in a positive rather than negative light, then more people will be willing to disclose concerns about poor practice. The consequence of this will undoubtedly be better protection for vulnerable people. Where there is no threat of immediate danger, whistleblowers should protect themselves by ensuring they prepare carefully to make a disclosure. It may help to gather evidence (for example, record dates, times and the names of any witnesses), seek support and take external advice, possibly from a voluntary advice service or union. 2.2 Famous Cases of Whistle Blowing and results The term `whistle-blowing' is a relatively recent entry into the vocabulary of public and corporate affairs, although the phenomenon itself is not new. It refers to the process by which insiders go public with their claims of malpractices by, or within, organisations usually after failing to remedy the matters from the inside, and often at great personal risk to themselves. Sometimes the cost of such valiant efforts is just too high to pay.
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1. Satyendra Dubey, was one of those rare young men who was completely and uncomplicatedly honest. An engineer from Indian Institute of Technology, Kanpur and working for National Highway Authority of India probably never knew the word but died for simply doing the right thing. Gunned down by the mafia in Gaya on early November 27 morning, nearly a year after he had complained of corruption on the Golden Quadilateral project to the Prime Minister's office. Knowing the dangers that surround honest people bucking the whole corrupt system, in his letter, Dubey had requested that his name be kept secret, a request that wasn't honoured-the letter was sent from the PMO to the Ministry of Road, Transport and Highways and then to the National Highway Authority of India, with which Dubey was working as Deputy General Manager. His death speaks volumes about the growing nexus between politicians and mafia and also highlights the illegal procedures/ways involved in awarding contracts and also the allegedly fraudulent pre-qualification bids in connection to big development projects. 2. Lalit Kumar Mehta, an activist in Jharkhand, was murdered May 2008. He had exposed corruption in the local jobs-for-work scheme. 3. Kameshwar Yadav was gunned down by unknown persons in Jharkhand in June 2008. He had used the right to information law to expose a nexus between officers, politicians, contractors and middlemen in siphoning off government funds meant for irrigation work. 4. Venkatesh, a right to information activist from southern Karnataka state whose questions had exposed encroachments on government land, was murdered on 12 April 2009. A local criminal leader was arrested in connection with the killing. 5. Satish Shetty, a right to information activist from the western city of Pune, was killed by unidentified men while on a morning walk on 13 January 2010. His questions had exposed land scandals in the area. 6. Vishram Laxman Dodiya, a roadside vendor and prolific right to information activist, was hacked to death by three men near his home in Surat in western
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Gujarat state on 11 February 2010. Three men have been held in connection with the murder. 7. Shashidhar Mishra, an activist from Begusarai in the eastern state of Bihar, was shot dead by unknown men as he returned home on 14 February 2010. He had exposed alleged scams in welfare schemes in village councils. 8. Sola Ranga Rao, a right to information activist from southern Andhra Pradesh state, was murdered near his home on 11 April 2010. 9. Vitthal Gite, an activist from the western state of Maharashtra, was murdered on 18 April 2010, after exposing alleged irregularities in a village school. 10. Dattatreya Patil, another activist from Maharashtra, was murdered on 22 May 2010 because of his "right to information activities". 11. Amit Jethwa, an environmentalist working in Gujarat's Fir forest, was shot dead on 20 July 2010. His applications had revealed illegal mining in the protected forest. A number of people, including a relative of a powerful local MP, have been arrested. 12. Ramdas Patil Ghadegaonkar, a milk seller from Maharasthra, was murdered on 27 August 2010. He was using the right to information law to unearth information about illegal dredging of sand from the local Godavari river. 2.3 Laws and Regulations regarding whistle blowing in India Whistle-blowing as a legitimate activity is little known in India even though in less corrupt jurisdictions it is routinely given legal legitimacy and protection. India does not have a whistleblowers protection law yet. However since the Public Interest Disclosure and Protection of Informers Bill, 2002 is still being examined, the centre agreed to make the Central Vigilance Commission, the sole authority in protecting future whistleblowers. The Law Commission of India was moved to draft a Whistleblowers Act, which was ultimately called the Public Disclosure (Protection of
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Whistleblowers) Bill. However, since 2002, this bill is pending as the government has not yet made a decision. India passed a federal Freedom of Information Bill in 2003 however it does not have a Whistleblowers Act recommended by the Constitution Review Commission in 2002. Moreover a draft bill on public disclosures recommended by the Law Commission lies in cold storage A properly implemented whistleblowers act would make a dent in the wall of corruption that surrounds us if a law was passed that ensured the safety of people wanting to tell on others who were being wicked. Given the judicial system we have, and the everyday instances of the wicked succeeding in all walks of life if nothing else a whistleblowers act would provide a wee bit more space to the good and lift their spirits. Like a whistle-blowing law, a properly implemented witness protection program would also help get at powerful evil doers. Evidence of subversion of justice abound but we need go no further than the now famous Best Bakery case to see the naked aggression with which wrong doers can intimidate, with - as the transfer of cases out of Gujarat implies the complicity of the authorities. India neither has any witness protection programme like the one in the USA nor does our criminal penal code carry any provision concerning this. The need and urgency of a whistleblowing act cannot be overemphasized even as Satyendra Dubey's death sparked off widespread public protest. Both in unlettered societies with meager resources as also in the developed world, there is an urgent need both for access to information by the public along with an act that would provide protection to all those who blew the whistle. It is time that the authorities took cognizance of the fact that money associated with development works that usually comes from the tax payers pocket lands up in corrupt hands. In the process development takes the back seat. India cannot afford to lose its money nor its resources. The real heroes of today's world are honest people. They are few and far between. They are the ones society is longing to follow. But everywhere it sees them fail. Yet the world, and developing countries especially cannot afford to loseits honest officers who stand up against all odds and risk their lives. It is time the government thinks about
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cleaning its system by providing protection to all those ordinary people who dares to bare open facts and has a stake at country's future. Mere assurance from the Prime Minister that the guilty wouldn't be spared is not enough---either to the citizens or to Dubey's family. If the government really means business it has to go about demonstrating that there are systems in place for good people to rely on. We need a fast and efficient judiciary to handover judgments in fair and impartial manner with or without political and social pressure, and a clean and unbiased police that will come to the aid of those working on the right side of the law; we also need public knowledge about the constitution and rule of law; and laws that will encourage people in both urban and rural areas to come forward without any fear to usher in an era of transparency, accountability and participation in the governance of the country. We need a system, a society where a person can do its duty without fear and the head held high. If the government really intends to deliver such a nation, then it is time the government pulled up its sleeves and makes concrete efforts to pass a whistleblowers act. It follows that no measure to curb government and corporate transgressions in India or elsewhere will bear fruit unless legal immunity and protection against retaliation is given to responsible and conscientious whistleblowing. 2.4 Research, recent trends and developments The seventh biennial fraud survey, conducted by audit and consulting firm KPMG India, reveals that 42% of companies in India have experienced fraud committed by top management officials such as board members, directors and even managing directors. The findings of the report, released on Tuesday, suggest that the inherent responsibilities and trust associated with senior positions and their ability to access classified company information create the risk of fraudulent acts. FRAUD METER
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The survey, carried out by KPMG s forensic wing in India, covered leading Indian firms from the public and private sectors. The respondents included chief executive officers, chief financial officers, internal auditors, chief compliance officers and other senior management officials. Indian companies, according to the study, remain highly vulnerable to fraud in the absence of effective internal control mechanism that can identify and deal with such crimes. The report suggests that 75% cases of fraud remain undetected and that more than 60% of Indian firms have inadequate anti-fraud measures. KPMG finds the reluctance of companies to report incidence of fraud in spite of whistle blowing also alarming. Almost 80% of Indian firms don t take legal action in order to protect their reputation. The frauds covered in the survey also include anti-bribery compliance. Almost 84% of the companies strongly believed that businesses in India pay bribes to facilitate work.
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India scores poorly on corruption and bribe payments in the list of organizations such as Transparency International, which ranks countries based on corruption and propensity to demand bribe. India s corruption perception index score was 3.5 in 2007 on a scale of 0-10, and the bribe-payers index score was the lowest. In spite of the fact that a large number of economic offences have been unearthed due to whistle blowing in our country in the last five years - Securities Scam, Hawala Scam, Urea Scam, Sugar Scam, Banking Scam, Tele-Communication Scam, Fodder Scam, Stamp scam etc. and an effort from the government of appointing numerious Commissions as Vivian Bose Commission, Bakshi Tek Chand Committee, parliamentary committee on the jeep scandal, Railway corruption Inquiry Commission, Sadasivam committee of enquiry, S. R. Ray Commission of Inquiry, S. R. Das Commission, M.C. Chagla Committee and many more in which thousands of crores of rupees were involved, surprisingly no offenders have been convicted so far and the whistle blowers have been scared beyond life altogether. Apart from Satyendranath Dubey, the few times public actions have been taken to honour whistle blowers include a web based petition drive demanding for a full inquiry and justice in the murder of Manjuanth, an IIM graduate who gave his life to the country while trying to expose the corruption in petroleum marketing, got a total signature of 14200 till the first week of Oct, 2006. Many who signed have suggested that to honor Manjunath in real sense of the word, we need to get rid of the current rotten pricing system. Otherwise his sacrifice would have been in vain. The government should seriously consider implementing recommendations made by the planning commission to streamline the pricing and remove all incentives to adulterate petroleum products. They should also get rid of multi tier pricing of LPG (LPG is sold at three different prices in residential, commercial and automotive markets). LPG marketing is another activity where corruption is rampant. The only lasting way we can honor Manjunath is to start the process of unwinding kerosene subsidies and reduce corruption. Similar measures are needed in every single domain of every industry to ensure the safety of honest whistle blowers.
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Recommendations There are some points that a whistleblower in an organization must keep in mind while doing the same. y Staff need to be made aware that they should report concerns and that they will be offered protection if they make a disclosure in good faith. y Organisations should implement a whistleblowing policy. y The whistleblowing policy should give special consideration to staff who are in their probationary period. y Whistleblowing awareness should be included in induction. y Staff should be given information on external means of support (such as PCaW). y Potential whistleblowers should prepare by gathering evidence, seeking support and taking external advice.
References
y http://www.csi-sigegov.org/egovernance_pdf/17_137-144.pdf y Benson, M.L., & Moore, E. (1992). Are white-collar and common offenders the same? An empirical and theoretical critique of a recently proposed general theory of crime. Journal of Research in Crime and Delinquency, 29, 251-272. y Eysenck, H. (1977). Crime and personality. London: Routledge and Paul. y Piquero, N.L., Exum, M.L., & Simpson, S. (2005). Integrating the desire for control and rational choice in a corporate crime context. Justice Quarterly, 22, 252-280. y Weisburd, D., & Waring, E.J. (2001). White-collar crime and criminal careers. Cambridge, UK: Cambridge University Press. y http://www.hinduonnet.com/op/2003/03/25/stories/2003032500110200.htm y http://www.indianexpress.com/full_story.php?content_id=36191 y http://www.indianexpress.com/full_story.php?content_id=36659 y Dubey Murder: Full coverage: http://www.indianexpress.com/full_coverage.php?coverage_id=33 y M. Ponnian, Criminology and Penology, Pioneer Books, Third edition, 2003. y David Weisburd, Elin Waring with Ellen F. Chay. White Collar Crime and Criminal Careers. Cambridge University Press, 2001. y Rohinton Mehta, Crime and Criminology A socio legal Analysis of the phenomenon of Crime, Snow White, First edition, 1999.
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y Ahmad Siddique, Criminology Problems perspectives, Eastern Book Co., Fourth edition. y Ram Ahuja, Criminology, Rawat Publications, 2000. y J. P. Sirohi, Criminology and Criminal Administration, Allahabad Law Agency. y KPMG India Fraud Report 2010 y S. S. Srivastava, Criminology and Criminal Administration, Central Law Agency, Second edition, 2002. y http://airwebworld.com/articles/index.php?article=1104 ______________________________________________________________
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Business Ethics

Project Report - Whistle Blowing and White Collar Crimes

Submitted to: Prof Bharat Dalal

Mudra Institute of Communications

1. White Collar Crimes 1.1 Introduction

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8. Tax-Evasion. money. 9. Adulteration.

Frequently used by the middle

class to have extra-unaccounted

Adulteration of foods and drugs.

1.2 The Indian version of White collar crimes

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