Types of Fraud in the Economic Sphere. White-Collar Crime. Учебное пособие

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ФЕДЕРАЛЬНОЕ ГОСУДАРСТВЕННОЕ КАЗЕННОЕ ОБРАЗОВАТЕЛЬНОЕ УЧРЕЖДЕНИЕ ВЫСШЕГО ОБРАЗОВАНИЯ «МОСКОВСКИЙ УНИВЕРСИТЕТ МВД РОССИИ ИМЕНИ В.Я. КИКОТЯ» Кафедра иностранных языков

Учебное пособие «Types of Fraud in the Economic Sphere. White-Collar Crime» по дисциплине «Иностранный язык» для курсантов 2 курса (2Ж) факультета подготовки сотрудников для подразделений экономической безопасности и противодействия коррупции, обучающихся по специальности 38.05.01 «Экономическая безопасность» (специализация экономико-правовое обеспечение экономической безопасности)

Составлено:

Королевой Е.В., доцентом кафедры Сенченко Е.А., ст. преподавателем кафедры

МОСКВА 2017

Structure of the guide.

1. 2. 3. 4.

Text 1. General information. Text 2. Defenition of white-collar crime. Text 3. Common characteristics. Text 4. Types of white-collar crimes.  Illegal Insider Trading  Securities Fraud  Antitrust Violations  Bribery  Environment Law Violations  Economic Espionage and Trade Secret Theft  Bankruptcy Fraud  Insurance Fraud  Credit Card Fraud  Internet/Computer Fraud  Counterfeiting 5. Text 5. Cost to society. Punishment. 6. Text 6. Famous cases.

Sources.

1) https://www.buzzle.com/articles/white-collar-crimes-definition-types-and-examples.html 2) https://studfiles.net/preview/1790777/page:10/ 3) https://www.britannica.com/topic/white-collar-crime

TEXT 1. GENERAL INFORMATION.

"The world is full of obvious things which nobody by any chance ever observes." Arthur Conan Doyle

Sir

1. Vocabulary. Match the columns. 1. to unearth 2. bizarre 3. enormously 4. gruesome 5. to nab 6. idubitably 7. repercussion 8. diverse 9. hefty 10. deceit

a) b) c) d) e) f) g) h) i) j)

бесспорно арестовать обман отвратительный, страшный весьма массивный последствие странный, эксцентричный разнообразный раскрывать, обнаруживать

2. Translate the following word combinations into Russian. white-collar crime, economic problem, high-profile suit, to be aware of, fraudulent schem, punishable by law, serious repercussion, unnerving deceits, financial gain, on one's toes, nonviolent, unlawful, diverse sector. 3. Read and translate the text. It always comes as a major shock to the whole world whenever a white-collar crime is unearthed. People lose their jobs, homes, security, and even their dreams. These kinds of frauds are one of 21st century's major economic problems. Greed, jealousy, competition, shame, or simply fun! What leads some of the most highprofile suits into committing some of the most complex crimes in modern times, has had psychologists scratching their heads over quite a few decades now. White-collar crime is a grey area. The motivations are bizarre, and the scale is enormously huge. The Industrial Revolution indubitably changed the world in many ways for the better. Moreover, it fetched hefty currency for the business minded. But the other side of this coin has never been as gruesome. Massive frauds, unnerving deceits, and disgraceful tactics has had the whole world in shock over the past few decades. The types and forms of white-collar crimes are numerous, and government agencies like the FBI, SEC, and IRS have to be constantly on their toes to nab these law-breakers before too much damage is done. Investors need to be very aware of the nature of whitecollar crimes, and stay protected from fraudulent schemes. White-collar crimes are punishable by law, and can lead to very serious repercussions for those who commit them.

Simply put, a white-collar crime is an offense that is committed for some kind of financial gain. Although the crime is nonviolent, it involves many unlawful and unethical practices. Though the white-collar crime definition is a topic of debate among criminologists because of its influence in diverse sectors. 4. True or False. 1) White-collar crime is a serious economic problem all over the world. 2) Psychologists can explain the reasons that impact law-breakers to commit whitecollar crimes. 3) White-collar crime are not punishable by law. 4) White-collar crime is commited for finantial gain. 5. Complete the following sentences. 1) White-collar crimes is … . 2) Investors need to … … … of the nature of white-collar crimes. 3) White-collar crime involves many … and … practices. 6. Translate the following sentences into English. 1) Беловоротничковая преступность является одной из главных проблем во всем мире. 2) Типы и формы беловоротничковых преступлений многочислены и разнообразны. 3) Беловоротничковое преступление совершается в целях получения финансовой прибыли и включает в себя незаконные и неэтичные действия. 4) Государственные органы должны быть всегда готовы задержать правонарушителей прежде, чем они нанесут слишком большой ущерб.

TEXT 2. DEFENITION OF WHITE-COLLAR CRIME. 1. Answer the questions. o What is white-collar crime? o What types of white-collar crime can you name? 2. Can you explain the meaning of the following terms? If not, use Abbyy Lingvo. Write down these terms into your exercise books. o Fraud, bribery,insider trading, embezzlement, environmental/ health/ safety law violations, forgery, corporate crime, tax evasion, insurance fraud, money laundering, investment fraud, securities broker. 3. Vocabulary. Study the following words and word combinations. 1) in the course of – в ходе 2) as a result of – в результате 3) deception – обман, иллюзия 4) overtly - открыто, публично 5) perpetrator/wrongdoer - преступник; правонарушитель 6) prior to - прежде чем 7) substantial - значительный, существенный 8) misconception - ошибочное представление 9) leniency – снисходительность 10) to hand down - официально объявлять 11) to file - представлять, подавать какой-л. документ

4. Read and translate the text. White-collar crime has been defined as “a crime committed by a person of respectability and high social status in the course of his occupation." White-collar crime therefore with corporate crime because the opportunity for fraud, bribery, insider trading, embezzlement, computer crime, environmental and health and safety law violations and forgery is more available to white-collar employees. White-collar crime refers to those offenses that are designed to produce financial gain using some form of deception. This type of crime is usually committed by people in the business world who, as a result of their job position, are able to gain access to large amounts of other people’s money. White-collar crime does not involve violent, drug-related, or overtly illegal activities. In fact, perpetrators are typically involved in otherwise lawful businesses and may hold respectable positions in the community prior to the discovery of their fraudulent schemes. Most white-collar crimes are investigated and prosecuted by federal authorities. This is not good news for the accused, as federal conviction rates are high, and U.S. District Attorney’s offices have substantial resources available to pursue wrongdoers. There is a common misconception among the public that defendants convicted of white collar crimes will be treated with leniency. In reality, sentences handed down for purely financial crimes can be as long or longer than sentences handed down in cases involving violence or drugs. A broad range of white-collar crime is committed each day in the United States, the variety of these crimes being limited only by the imagination of those who commit them. Some offenses are committed on a small scale, like when individuals filing for liquidation bankruptcy fail to

disclose personal assets on their petition. Other times, a single fraud can affect the lives of hundreds or thousands of people, such as investment frauds committed by securities brokers. Laurie L. Levenson

5. True or False. 1. White-collar crime differs from corporate crime. 2. Bribery and embezzlement are economic crimes that involve violent illegal activity. 3. The punishment for white-collar crime is strict. 4. Frauds committed by securities brokers affect the lives of few people.

6. Make word combinations from the words below. Give their Russian equivalents. lawful

fail

securities

resources

federal

businesses

substantial

conviction

financial

schemes

fraudulent

assets

bankruptcy

brokers

personal

gain

violence

activities

7. Answer the following questions. 1) Who has the best opportunity to committ such economic crimes as insider trading or bribery? 2) In the USA defendants convicted of white collar crimes are treated with leniency, are they? If not, why? 3) Why is it not good for accused that the most of white-collar crimes are investigated and prosecuted by federal authorities?

8. Give key information of the text.

TEXT 3. COMMON CHARACTERISTICS OF WCC. 9. 1) 2) 3) 4) 5) 6) 7) 8)

Vocabulary. Study the words below. deceit – обман concealment - утаивание cover-up - хитрость, уловка coconspirator - соучастник преступного сговора perjury - лжесвидетельство tampering - фальсификация; подделка to interfere - мешать; препятствовать purveyor - поставщик

10. Translate the following words and word combinations into Russian. escrow officer, obstruction of justice, force or violence, , appraiser, position of trust and power, sophisticated schemes, concerted criminal activity, personal gain, to obtain money or services. 11. Read the text. Although white-collar crimes are quite varied, most have several characteristics in common. First, they involve the use of deceit and concealment, rather than the application of force or violence, for the illegitimate gain of money, property, or services. A defendant convicted of making false statements in order to obtain a government contract, for example, is considered a white-collar criminal. Next, white-collar crimes typically involve abuse of the persons of respectability and high social status.. Public officials who solicit and accept bribes, or corporate officers who fix prices to drive competitors out of business, are engaging in such abuse of their positions. White-collar crime is also often more difficult to detect than other types of crime, in part because losses may not be immediately apparent to victims but also because the crimes can involve sophisticated schemes and cover-ups. Many white-collar crimes require concerted criminal activity by coconspirators. For example, a case of real-estate fraud may involve the knowing participation of an escrow officer, a buyer, an appraiser, and a bank officer, all of whom were willing to sign false documents to perpetrate a fraud for personal gain. Fraud, the most common type of white-collar crime, involves obtaining money or services by making false representations or promises. The key question in these cases is ordinarily whether the defendant intended to deceive the victims or merely failed in an honest business venture. Perjury, obstruction of justice, false statements, and witness tampering are also considered whitecollar crimes. Although the goal is not necessarily to obtain money or services, these crimes are illegal because they interfere with the proper functioning of the justice system. Money laundering is a relatively new type of white-collar crime that is utilized by criminals wishing to conceal profits gained through illegal activities. Drug dealers and purveyors of counterfeit goods and currencies will create money-laundering schemes to hide the source of their earnings.

12. True or False. 1) All white-collar crimes involve the application of force or violence to obtain illegal gain. 2) Most white-collar crimes are commited by persons of respectability and high social status. 3) Perpetrators in bussines always use sophisticated schemes and cover-ups to conceal profits gained through their illegal activities. 4) Obstruction of justice and witness tampering are not white-collar crimes. 13. Complete the following sentences. 1) White-collar crimes involve the use of … and … . 2) A … convicted of making false statements in order to obtain a government contract is a …-… … . 3) White-collar crime is more … to detect than other … of crime. 4) The most common type of white-collar crime is … . 14. Give key information of the text.

TEXT 4. TYPES OF WHITE-COLLAR CRIMES 1. Match the columns. 2. Illegal Insider Trading 3. Securities Fraud 4. Antitrust Violations 5. Bribery and Extortion 6. Environment Law Violation 7. Economic Espionage and Trade Secret Theft 8. Bankruptcy Fraud 9. Insurance Fraud 10. Credit Card Fraud 11. Internet/Computer Fraud 12. Counterfeiting

a) подкуп, взяточничество b) мошенничество в сфере банкротства c) подделка; фальшивомонетчество d) мошенничество с кредитными картами e) мошенничество с использованием Интернета и компьютера f) незаконные операции с ценными бумагами на основе внутренней информации о деятельности компании g) мошенничество с ценными бумагами h) экономический шпионаж и кража коммерческой тайны i) нарушение антитрестовского законодательства j) нарушение закона по охране окружающей среды k) мошенничество при страховании

2. Vocabulary. 1) 2) 3) 4) 5) 6) 7) 8) 9)

to bias - предвзятость merger - слияние misleading - ложный fraudster - мошенник dummy – фиктивный lure – приманка to comply – соблюдать indulge – потворствовать

Read the text. Though it is difficult to limit the number of types, the following are some in broad spectrum. Illegal Insider Trading This is the trading of a company's non-public information by someone who has access to related files. It is illegal because it is unfair to the investors who don't have such access. The act of insider trading leads to bias towards investors, resulting in selected investors making large profits, while the rest sit dangling around with little to gain. Insider trading has both legal and illegal versions. It is legal for corporate insiders (company officers, employees, or directors) to buy and sell stock in their own company, but they must report their trades to the U.S. Securities and Exchange Commission. Example: A high-profile employee of a corporation learns about a merger that is going to bring in profits for the company, and buys shares before it is made public.

Securities Fraud This is the deception of investors by providing them false information that is required to make in investment. It may be committed by a person or a company. Any form of misleading or false information about companies or schemes is a security fraud. So, it basically includes almost all other types of white-collar crimes. Example: Fraudsters create dummy corporations and mislead investors into buying shares in this corporation. Antitrust Violations This kind occurs when a corporation, which dominates the market in a certain sector, uses this position to the disadvantage of the buyers, like hiking the prices of its products. Example: A company that makes computers and holds a majority of the market share, forcefully attaches a particular product with theirs, forcing the buyers to purchase both. Bribery Offering gifts or money to influence the actions of an individual is bribery. This is carried out to lure someone into committing an act of crime. -

Bribery and extortion are more general, in that they constitute illegal means of influencing persons in power in public or private institutions. Bribery involves the giving of something of value in exchange for an official’s exercise of power.

Example: The CEO of a corporation may bribe an employee and indulge in insider trading through him/her. Environment Law Violations Corporations that cause harm to the environment or a habitat directly or indirectly are in violation of the Environmental Law. They have to comply with the norms stated by the government, failing to which they are fined or even prosecuted, depending upon the extent and seriousness of the violation. Example: A company producing toxic waste may decide to dump this waste in rivers or oceans, so as to avoid paying for its chemical treatment. Economic Espionage and Trade Secret Theft This is the unlawful gathering of confidential trade secrets or intellectual property of another corporation. The process of gaining these include bribery, theft, blackmail, etc. Rival corporations may indulge in such acts to overpower their competitors. Example: A soft drink corporation unlawfully obtains the formula for a secret ingredient of its rival soft drink company. Bankruptcy Fraud Bankruptcy fraud occurs when a company or person claims to be bankrupt, even though its/his/her financial situation is not as bad as portrayed. Filing for bankruptcy may cause partial pardoning of the debt, saving the company or person from paying up at least some amount. This is usually done by concealing or destroying certain documents that may lead up to actual records.

Example: A man with assets worth $20,000 shows its worth to be $10,000, and later files for bankruptcy. This is committing a bankruptcy fraud by concealing the remaining $10,000 in assets. Insurance Fraud This occurs when a person claims for the advantages of an insurance scheme under false circumstances, or by staging events that lead up to it. The opposite is also true in this case, wherein someone knowingly denies the person his benefits under the insurance scheme. Insurance frauds are spread across various sectors, and in large numbers. Example: A man whose house or property was damaged in a fire claims for payment of a value that is more than the value of the actual damaged property. This is a case of property insurance fraud. Credit Card Fraud This is basically the use of credit card (or any other payment card) for false payments or theft. It can also be used to steal another person's identity by using his credit card details. Example: A person may use lost/stolen credit cards to make purchases on the actual card holder's name. Internet/Computer Fraud This is done by gaining access to someone's computer or online bank account by hacking, or other attacks like phishing which involves sending a fake link to the user. Internet fraud also includes e-mail fraud, which is the sending of fraudulent e-mails and seeking personal details under false offers or schemes. It is therefore essential to authenticate such e-mails before responding. Computer crimes represent one means by which white-collar criminals exploit technology. Common examples cover a wide variety of criminal activity, including using a computer as a mechanism for committing securities fraud, credit-card fraud, and identity theft. Computer crimes also may involve illegally accessing and tampering with other users’ computer files. Example: When a person gets a link to a page that is similar to his business transactions page, and enters his PIN and other personal details, he/she is directed to the fraudster who uses this information for theft or other wrongdoings. Counterfeiting Counterfeiting means imitating a valuable item and passing it off as real. It includes currency, bond papers, brand-name products, etc. The quality of the duplicate item is not up to par, causing harm to the value of original item in the market. Example: A wrist watch belonging to a particular brand is not available in a particular region. But wrist watches with almost similar design (although not at par with the quality) are still available with a brand name that sounds almost similar to the original one.

TEXT 5. COST TO SOCIETY. https://www.britannica.com/topic/white-collar-crime White-collar crime represents one of the fastest-growing types of crime in the world. Nearly every category of white-collar crime has increased in incidence in recent years. For example, over the course of two years in the early 21st century, annual losses from fraudulent use of identity rose by more than $300 million in the United States. (See Identity theft and invasion of privacy.) Likewise, while the number of almost every other type of civil lawsuit in the United States decreased around the turn of the 21st century, the number of government and private lawsuits for white-collar crimes more than doubled during the same time period. This represented a trend, begun in the late 20th century, of a number of highly visible whitecollar prosecutions in the United States. They included the prosecution of financiers Ivan Boesky (1986) and Michael Milken (1990) for billions of dollars in securities fraud, the convictions of banker Charles Keating (1992 and 1993) for having looted his own savings and loan (S&L), ultimately touching off what became known as the “S&L Crisis,” and the guilty plea entered by Enron Corp.’s chief financial officer, Andrew Fastow (2004), on charges of having manipulated off-balance-sheet transactions (in this case, of having concealed the company’s debt obligations by transferring them to offshore partnerships), which led to Enron’s collapse. In an associated case, Enron’s accounting firm, Arthur Andersen LLP, was convicted of obstruction of justice (2002; overturned in 2005), which caused the firm to go out of business. Similar cases have occurred throughout the world. In February 1995, Barings Bank in London collapsed as a result of deceptions practiced over three years by one of its futures traders. In Canada, two people pleaded guilty in 2001 to having bilked financial institutions, including the Royal Bank, out of $92 million by creating 52 fake leases for nonexistent medical equipment. Although white-collar crime has traditionally been viewed as less serious than other types of crime (largely because it does not involve physical violence), by the late 20th century there was a growing recognition of the significant harm it causes. In a single year, for example, nearly $500 million in restitution was awarded to victims of white-collar crimes. The cost of corporate crime to society is many times that of organized crime or the more common street crime. Moreover, it cannot be measured in monetary damages alone, because corporate crimes can also pose health risks, compromise safety, cause injuries or fatalities, bring harm to wildlife and the environment, and lead to organizational failures and associated job losses. Owing to the concealed nature of many frauds and the fact that few are reported even when discovered, their cost is impossible to estimate precisely, but in the United States it is thought to be at least 10 times the combined cost of thefts, burglaries, and robberies. When compared with crimes committed by juveniles or the poor, corporate crimes are very rarely prosecuted in the criminal courts, and, despite many well-publicized convictions of corporate leaders found guilty of wrongdoing, executives rarely go to jail, though some companies may pay large fines.

PUNISHMENT https://www.buzzle.com/articles/white-collar-crimes-definition-types-and-examples.html

The punishment for white-collar crimes includes imprisonment, fines, restitution, probation, besides other methods. With the scale of scandals and frauds uncovered increasing rapidly in recent times, government agencies like the FBI and SEC are adopting stricter laws related to such crimes. After the breaking out of major scandals in the year 2000, the Sarbanes-Oxley Act was passed in 2002, which focused on the shareholders and their rights. The punishments for white-collar crime is a debated topic across various governments. In some nations like China, offenders of white-collar crime can also be given the death penalty. White-collar crimes, although not violent, do affect their victims in substantial ways.

Text 6. FAMOUS CASES Read the texts about famous white-collar criminal cases. Prepare the report according to the plan below. o o o o

The name of the perpetrator/ perpetrators; a crime that was commited; cost to society; punishment.

ENRON CASE Former energy giant Enron Corporation was exposed in late 2001 to be a part of one of the biggest and highly coordinated accounting frauds in history. The revenues generated by the corporation were manipulated in the account audit books to show larger amounts of profits. The executives were highly pressurized to find ways to hide the company's debts. The financial statements were so complex and confusing that the shareholders and analysts were unable to make out the misrepresented earnings. The Enron scandal cost almost 4,000 employees their jobs, and many of them their life savings. Investors lost millions of dollars, making it one of the most gruesome white-collar crimes ever. Many of Enron's executives, including the major perpetrators, founder and chairman Kenneth Lay, and COO Jeffery Skilling, were later convicted and incarcerated. WORLDCOM CASE Shortly after Enron's collapse, another company that followed the path of corruption and accounting fraud was Worldcom. With the telecommunications industry in decline in the year 2000, Worldcom CEO Bernard Ebbers used fraudulent methods to deceive investors into thinking that the company was unaffected by the decline, drawing in huge amounts of money from investors. Bernard Ebbers was sentenced to 25 years in prison, in 2005. BERNIE MADOFF CASE Bernard 'Bernie' Madoff founded a firm called 'Bernard L. Madoff Investment Securities LLC' in 1960. Madoff committed the largest financial fraud in the history of the United States, admitting the firm he ran for more than 40 years to be a massive Ponzi scheme (a fake investment operation). He generated false trading reports and went on to build a multi-billion dollar firm. He was exposed after one of his sons, Mark, reported his misdeeds. In 2009, a few months after his arrest, Bernard Madoff admitted to a wide range of crimes, which included securities fraud and money laundering. The losses incurred by investors were more than $18 billion. His son, Mark Madoff, committed suicide two years after his father's arrest, and Madoff was sentenced to 150 years in prison, and asked to forfeit $170 million in assets.

It is difficult to track down white-collar crimes before they cause substantial damage with the level of sophistication involved. What is useful in this scenario is the right knowledge and awareness of your rights and laws, whether you are an investor or a business person starting out your own company.