Corporate Crime in Criminal Law: Analysis, Case Studies & Impacts

This essay provides an overview of corporate crime, defining it as crimes committed by organizations or individuals acting on their behalf. It highlights the overlap with white-collar crime, organized crime, and state-corporate crime, emphasizing the significant impact on society. The analysis covers various aspects such as corruption, exemplified by IBM's bribery case in South Korea and China, and fraud, as seen in the Wells Fargo scandal involving unauthorized accounts and discriminatory lending practices. The essay also addresses human rights violations, citing Caterpillar's involvement in providing bulldozers to Israel, and labor rights abuses, referencing Coca-Cola's alleged mistreatment of workers and environmental damage in India. It concludes by discussing the pros and cons of corporate crime, the roles and responsibilities of a CEO, and the need for stricter regulations and ethical practices to prevent such crimes.

Criminal Law

Table of Contents
Introduction................................................................................................................................2
Main Context..............................................................................................................................2
Analysis..................................................................................................................................2
Corruption...........................................................................................................................3
Fraud...................................................................................................................................4
Human Rights.....................................................................................................................4
Right of workers.................................................................................................................5
Pros.....................................................................................................................................6
Cons....................................................................................................................................6
Roles and responsibilities of a CEO.......................................................................................7
Conclusion..................................................................................................................................8
References................................................................................................................................10
1

Introduction
The corporate crime is referred to the crimes that are being committed either by an
organization or individuals who act on behalf of the organization. Some of the negative act
carried out by an organization may not actually be considered a crime because the laws and
regulations vary. For example, insider trading is being allowed by some jurisdictions. The
corporate crime is considered to be overlapping with white collar crime, organized crime and
state corporate crime. In white-collar crime, the majority of individuals represent the interest
of the organization or act is considered to be the white collar professionals1. In organized
crime, criminals can establish organizations either for laundering activities or for the purpose
of criminal activities. In state-corporate crime, the opportunity for committing crime begins
from the relationship between the state and the corporation. The corporate law regulates the
activities carried out by a corporation. It is very much important to address the illegal
activities of the organizations because it imposes a significant impact on society. The
common laws make an organization liable for the activities of its employees. The acts of a
corporation affect people both indirectly and directly2. The stakeholders or consumers are the
affected as they are at the maximum risk and main beneficiaries. The employees can be the
victims or carry out criminal activities. The state receives economic benefit and also incurs a
loss due to the illegal activities carries out by the corporations. The illegal acts that are being
carried by a corporation are bribing an international or national government or public servant
for attaining business, monetary frauds, drug or human trafficking, involving in money
laundering, dumping toxic wastes into water resources. The most common crimes that can be
seen are tax frauds and monetary frauds.
Main Context
Analysis
The life of individuals and society are getting affected at large by the criminal activities of
multinational corporations and it has become a new phenomenon in the world. Corporations
1 Jessie Chella, 'The Complicity Of Multinational Corporations In International Crimes: An
Examination' (Pure.bond.edu.au, 2012)
<https://pure.bond.edu.au/ws/portalfiles/portal/18264556/The_Complicity_of_Multinational_Corp
orations_in_International_Crimes.pdf> accessed 28 January 2019.
2 Roger LeRoy Miller, Frank B Cross and Gaylord A Jentz, Business Law (9th edn, South-
Western Cengage Learning 2013).
2

of any country can be considered more powerful than the state because they have huge
capital. They can even control the government and use their power to fulfil their object that is
getting a boost in the profit level3. The corporations focus only on increasing their profit at
any cost and often discard their ethics, moral values and laws in order to get it. The powers of
corporations are not limited to a particular territory; being a multinational corporation it
operates in multiple countries and spread crime all over the world. This has become a global
problem and it is mandatory to monitor the activities of these corporations as corporate
crimes have become harmful to society. Corporate crimes cannot be detected easily as it is
different from ordinary crimes4. And also the punishment for corporate crime is a big
challenge for the government. The developing countries are suffering more because they are
more unsafe and affected by corporate crime.
Corruption
IBM found engaged in delivering cash as bribe in shopping bags to win the business of
computer with the government of South Korea. IBM won the Korean contract for millions of
dollars with the help of bribes. The agency was charged and also IBM for creating a slush
fund to give gifts like laptop, camera and for visiting government officials in China. The
involvement of two managers and more than 100 employees of China-IBM were being found
for misconduct in China5. IBM never admitted nor denied wrongdoing but paid $10 million in
order to settle down the civil charges. As per the SEC, the misconduct came into the role
from 1998 to 2003 in South Korea and in China from 2004 to 2009. The agency said that the
total bribe which was given to Korea was $207,000. IBM was also charged for making
improper payments as legitimate business expenses and violates the requirements that are for
maintaining accurate records and books. SEC also include that IBM was paying government-
related clients to get approved the "unapproved sightseeing itineraries" in China. The
employees of IBM were creating fake invoices with the help of local travel agency.
Bribery is one of the largest threats to society as corruption is a serious problem and making
an impact on all societies. Corruption is a barrier to democracy and to the rule of law. It
destroys the allocation of resources, slow down productivity and economic growth. Bribery is
3 Hazel Croall, Corporate Crime (8th edn, SAGE 2009).
4 Michael R Czinkota, Ilkka A Ronkainen and Michael H Moffett, International Business (8th
edn, Wiley 2011).
5 Frederick Guy, The Global Environment Of Business (7th edn, Oxford University Press 2010).
3

also a reputational threat of an organization6. The spokesperson of IBM Douglas O. Shelton
expressed his view and said that the business must be conducted as per the highest ethical
standards and all the employees must follow its standards and policies.
Fraud
Wells Fargo was the world’s largest bank by its capitalization. In September 2016 news
broke out that 1.5 million savings and checking accounts had been opened and 500,000 credit
cards had been acquired by the employees of Wells Fargo bank without any authorization.
The controversy did not stop here and go beyond of it when a suit was being filed by the state
of Illinois in 2019 for steering African American and Latinos in the high value of loans7.
After that Well Fargo has been sued and bound to pay for hosting illegal operations as
punishment. It also includes overdraft practices for their "gouging" customers. Wells Fargo
bank is also forced to pay for their inappropriate accounting, for discrimination racially while
handling their foreclosures, overqualified loans fraud with the Federal Administrative and
setting upan immoderate overdraft fees on customers checking account. Wells Fargo bank
said that the scandal of 2016 was happened because of the program of high-pressure
incentive-compensation and it forced the employees of the bank to create new accounts.
Wells Fargo bank was fined an amount of $185 million by the Consumer Financial Protection
Bureau, Office of Comptroller of the Currency and the country of Los Angeles. Somewhat
around 5,300 employees had been fired8. It did not stop here, as per the New York Times the
bank was charging more than 800,000 of its customers for auto insurance as they had taken
car loan from the bank, as a result, more than 274,000 customers have been forced to
delinquency and 25,000 to unjustified automobile repossessions. In August 2016 a suit had
been filed claiming that the customer is being overcharged by the bank9.
The Well Fargo bank was doing fraud with their customer which is unethical. The reputation
of any country can be affected with a fraud done by any of its corporations and can also
impact the well-being and health of customers. Here, in this case, Wells Fargo has to take the
6 Laura L. Hansen, 'Corporate Financial Crime: Social Diagnosis And Treatment' (2009) 16
Journal of Financial Crime.
7 Shelley Horan, Corporate Crime (9th edn, Bloomsbury Professional 2011).
8 Mike W Peng, Global Business (11th edn, Cengage Learning 2017).
9 David John Harris and Sandesh Sivakumaran, Cases And Materials On International
Law (12th edn, Sweet & Maxwell 2015).
4

full responsibility and needs to pay the compensation for the damages and crime done by
them10.
Human Rights
Caterpillar is a bulldozer company used to provide Israel with bulldozers to destroy the
homes of Palestine. Even after worldwide condemnation for selling bulldozers to Israel which
was being used to destroy the innocent lives of Palestinian, Caterpillar denied to end its
corporate relationship with Israel and refused to cut down the sale of modified D9 and D10
bulldozers to the military of Israel11. The office of the High Commissioner had sent a letter to
the CEO of Caterpillar James Owens which states that providing the bulldozers to the Israeli
army knowing that the bulldozers are being used to destroy the lives of Palestine can be
considered as the violation of human rights.
Rachel Corrie was a peace activist and she was killed by the military bulldozer of Caterpillar
D9 in 2003. She died while trying to protect a family's home from demolition in Gaza. A suit
was filed against Caterpillar by her family in 200512. The charger was Caterpillar sold
machines to Israel even after knowing that the machines are being used violate human rights.
After the death of Rachel three more death of Palestinians in their home has been reported by
the bulldozer of Israel.
Here Caterpillar is liable for human right abuse related to the liability of unlawful conduct by
a business that smashes human rights. This type of unlawful activity must be criminalized in
international law. All the states must create such a law that can help in protecting people from
the abuse of human rights and assured remedy. All the companies must be bound by its
obligations and not breach the law.
Right of workers
Coca-Cola is a world-renowned company and most identified brand on the planet. Abuse of
workers', water privatization assassinations and worker discrimination has been reported in
the company. Eight union leaders who were working in Coca-Cola bottling plant had been
killed between 1989 and 2002. These leaders were protesting against the labour practices of
10 Barry Rider, 'Bribery And Corporate Responsibility' (2009) 16 Journal of Financial Crime.
11 Tariq Bin Sarwar, 'Corporate Criminality' (Ijhsss.com, 2015)
<https://www.ijhsss.com/files/Tariq-Bin_mw481529.pdf> accessed 28 January 2019.
12 John J Kirton and Jelena Madunic, Global Law (11th edn, Ashgate 2009).
5

the company. More than hundreds of workers have been tortured and kidnapped for joining
or even considered being a part of Colombian union SINALTRAINAL13. Coca-Cola has
hired paramilitaries who were preventing the workers from joining any union. The company
was also involved in racism; it was being sued by two thousand African American employees
for the race-based discrepancy in promotions and pay.
The local agriculture of India had been destroyed by Coca-Cola as all the water resources had
been privatized. Coca-Cola was selling bottled water under the names of Dasani and
BonAqua in Plachimada and Kerela. Somewhat around 1.5 million litres of deep well water
had been extracted for this business. This step leads to a shortage of water and thousands of
communities get affected from it as it was destroying agricultural activity. The remaining
water had become toxic after contamination of bacteria and high chloride. The local
populations were facing eye problems and stomach aches.
In this case, Coca-Cola is violating the right of workers. The workers were facing multiple
issues while working with the company and to get these issues resolved they were protesting
peacefully. These protesters had been killed for asking for their rights and not only that the
company was also preventing the employees from joining any union so that they cannot go
against the company which is a complete abuse of labour right. The company was also
affecting the environment as the agricultural land of India had been destroyed for making a
profit by selling bottled water14.
Pros
The corporate crime benefits the organization as a whole that includes individuals and
investors are in a high position. It depicts high benefits with very efforts which are not
considered to be legal and ethical. The acts can be carried out by the employees for their own
personal benefits and the organization also benefits from the act15. The corporation will be
able to generate huge profits and also grow in the current business environment. Thus, the
financial benefit can be easily achieved with the help of corporate crime. The corporation
13 Peter Cleary Yeager, 'The Elusive Deterrence Of Corporate Crime' (2016) 15 Criminology &
Public Policy.
14 Michael Booker, The Business (6th edn, MaxCrime 2010).
15 Shodhganga, 'Corporate Crimes' (http://shodhganga.inflibnet.ac.in, 2009)
<http://shodhganga.inflibnet.ac.in/bitstream/10603/200004/11/11_chapter%205.pdf> accessed 28
January 2019.
6

creates an environment for encouraging agents, officers and employees for paying bribes in
order to secure the business.
Cons
Corporate crime has many disadvantages as it not only affects the business operations but
also the society. This kind of crimes is devastating the process of the environment because it
affects the dignity and respect of the consumers, morals and ethics in society and produces
corruption and inequity all over the world. These offences are serious extremely as it causes
large injuries or financial losses to consumers, to the general public or to the workers16. The
activities focusing only on making money are devaluing the educational and ethical values.
Destruction of the environment has been increasing day by day which is creating an
imbalance within the ecology. It is also being seen that corporations are violating
occupational health and safety regulations and environmental pollution standards17. The
corporations are depicting irregularities and errors during their production process which is
mainly concerned with avoiding losses and best method of investing to expand the business.
The activities of the corporations are posing a significant threat to the human welfare and
integrity. Thus, corporate crime is being more damaging, prejudicial, injurious, detrimental
and harmful to society. The corporations are breaking the laws which are considered to be
illegal.
Roles and responsibilities of a CEO
If I would have been a CEO then I will control all the activities which is going within the
organization. A CEO should have influence over both illegal and legal actions carried out by
the corporation. The decision making power is considered to be very much important which
can assist to prevent any complex offences such as antitrust violations and financial fraud18.
The top management can contribute to the overall behaviour and failure or success of the
organization through standards modelled and put in place by the CEO. Easy and clear
16 Jaime Hernández Palacios, 'Corporate Crime – Its Underestimation And Breaching To Ethics
And Humanity From A Criminological Perspective' (Cienciasjuridicas.javeriana.edu.co, 2014)
<https://cienciasjuridicas.javeriana.edu.co/documents/3722972/6187126/7+Hernandez.pdf/
0c8700ec-216f-4dbb-8761-23e8a4022f6b> accessed 28 January 2019.
17 Carole Gibbs, 'Corporate Citizenship And Corporate Environmental Performance' (2012) 57
Crime, Law and Social Change.
18 David W Conklin, The Global Environment Of Business (SAGE 2011).
7

standards need to be established from top to down. A manual should be prepared which will
direct the employees clearly about the rules, regulations and standards. I will check
backgrounds and references that consist of credit, employment, criminal history and
licensing. I would have access to significant data and information and monitor all the
financial transactions19. The roles and responsibilities should be allocated in an appropriate
manner so that the employees would not have much control over duty or area. Important
account payable and accounting functions need to be separated. For example, if an individual
collects checks would have the authority to sign. Each and every individual would be held
responsible for the jobs allocated to them.
I would ensure appropriate authorization of the financial transactions in order to manage the
process in an efficient manner. Independent and surprise performance checkups can be
carried out consisting of audits and other procedures for verifying compliance with
procedures and policies. All the general ledger balances and account reconciliations should
be examined by an individual such as an external auditor20. It will help me to review the
accounts in a better way and determining any fraudulent activities. Annual audits need to be
carried out for ensuring true and fair preparation of the financial statements. The CEO of the
corporation should ensure zero percent tolerance to tax evasion and bribery. All the staff
members need to report their day to day activities in front of their managers. Properly
resourcing, appointing, compliance and legal personal would be responsible to lead the
monitoring and coordination of the processes under the supervision of the CEO.
A CEO of the corporation can play a significant role in determining and preventing corporate
crimes. I can prepare a framework within which the activities can be carried out in an
appropriate manner. The legal rules and regulations should be followed by each and every
member of the corporation21. Apart from this, I can take strict actions against the employees
who carry out illegal activities. A secure system needs to be developed that assist to manage
19 Andrea Schoepfer, 'Ceos And The Roles They Play In Corporate Misconduct'
(Ufdcimages.uflib.ufl.edu, 2007)
<http://ufdcimages.uflib.ufl.edu/UF/E0/02/13/61/00001/schoepfer_a.pdf> accessed 28 January
2019.
20 Michael R Czinkota, Ilkka A Ronkainen and Michael H Moffett, International Business (8th
edn, Wiley 2011).
21 Michel Dion, 'Corporate Crime And The Dysfunction Of Value Networks' (2009) 16 Journal of
Financial Crime.
8

confidential information and data. An appropriate flow of communication should also be
there to ensure that all the processes are being processing in the right direction.
Conclusion
Corporate crime is considered to be a huge threat to society. It is being committed to harming
any other individual or for corporate gain. The corporate crimes are blameworthy acts or
socially injurious that causes environmental, physical or financial damage or damage caused
to the general public and workers. In past, many corporations have carried out the corporate
crime which imposed a significant impact on the society. The corporate criminal behaviour is
believed to be the outcome of the learning process carried out within the corporation22. The
behaviour is also being attributed to moral and social change. The unlawful means are being
adopted for meeting goals or targets. The lack of adequate control can also lead to the
creation of criminal behaviour. There are factors such as socio-economic development,
climatologic market, cost-benefit consideration and organizational structure that can support
the corporate criminal aspects. However, the CEO can play a significant role in determining
and preventing corporate crime by implementing appropriate rules, regulations and
frameworks.
22 Jonathan P Doh and Fred Luthans, International Management (10th edn, McGraw-Hill
Education 2018).
9

References
Jessie Chella, 'The Complicity Of Multinational Corporations In International Crimes: An
Examination' (Pure.bond.edu.au, 2012)
<https://pure.bond.edu.au/ws/portalfiles/portal/18264556/The_Complicity_of_Multinati
onal_Corporations_in_International_Crimes.pdf> accessed 28 January 2019
David W Conklin, The Global Environment Of Business (SAGE 2011)
Hazel Croall, Corporate Crime (8th edn, SAGE 2009)
Michael R Czinkota, Ilkka A Ronkainen and Michael H Moffett, International Business (8th
edn, Wiley 2011)
Michel Dion, 'Corporate Crime And The Dysfunction Of Value Networks' (2009) 16 Journal
of Financial Crime
Michael Booker, The Business (6th edn, MaxCrime 2010)
Andrea Filippetti, 'The Global Environment Of Business' (2011) 2 Global Policy
Carole Gibbs, 'Corporate Citizenship And Corporate Environmental Performance' (2012) 57
Crime, Law and Social Change
Michael R Czinkota, Ilkka A Ronkainen and Michael H Moffett, International Business (8th
edn, Wiley 2011)
Laura L. Hansen, 'Corporate Financial Crime: Social Diagnosis And Treatment' (2009) 16
Journal of Financial Crime
David John Harris and Sandesh Sivakumaran, Cases And Materials On International
Law (12th edn, Sweet & Maxwell 2015)
Roger LeRoy Miller, Frank B Cross and Gaylord A Jentz, Business Law (9th edn, South-
Western Cengage Learning 2013)
Shelley Horan, Corporate Crime (9th edn, Bloomsbury Professional 2011)
John J Kirton and Jelena Madunic, Global Law (11th edn, Ashgate 2009)
10

Jonathan P Doh and Fred Luthans, International Management (10th edn, McGraw-Hill
Education 2018)
Jaime Hernández Palacios, 'Corporate Crime – Its Underestimation And Breaching To Ethics
And Humanity From A Criminological Perspective'
(Cienciasjuridicas.javeriana.edu.co, 2014)
<https://cienciasjuridicas.javeriana.edu.co/documents/3722972/6187126/7+Hernandez.p
df/0c8700ec-216f-4dbb-8761-23e8a4022f6b> accessed 28 January 2019
Mike W Peng, Global Business (11th edn, Cengage Learning 2017)
Barry Rider, 'Bribery And Corporate Responsibility' (2009) 16 Journal of Financial Crime
Tariq Bin Sarwar, 'Corporate Criminality' (Ijhsss.com, 2015)
<https://www.ijhsss.com/files/Tariq-Bin_mw481529.pdf> accessed 28 January 2019
Shodhganga, 'Corporate Crimes' (http://shodhganga.inflibnet.ac.in, 2009)
<http://shodhganga.inflibnet.ac.in/bitstream/10603/200004/11/11_chapter%205.pdf>
accessed 28 January 2019
Marshall B Clinard and Peter C Yeager, 'The Elusive Deterrence Of Corporate Crime' (2016)
15 Criminology & Public Policy
11