From the entrepreneur’s corner (17): white collar crimes

They can happen in any business, and frequently in politicians’ actions; and they’re non-violent. In our region and most of the times, perpetrators are not caught before any real damage could be done, and not even after.

Small businesses, like family ventures or politicians’ offices, are running, for example, a common scam in the form of non-existent paid employees; the ghost employee receives paychecks but doesn’t actually work there. The top perpetrators are politicians, and then professionals from management, accounting, operations and sales.

Larger businesses see different kinds of fraud. A common/frequent one, in my region, is the non-payment of employees’ social security taxes. Imagine yourself reaching the retirement age and discovering that a portion of your employment history is not fully covered in terms of taxes paid, so your seniority in work is highly affected, as is your pension.

Even the VC-backed ventures enter this scene, and we’ve seen plenty of cases were founders are formally charged with frauds and other criminal activities, after their revolutionary practices attracted capital just to be shut down few years down the line after damning evidence that proved that operations weren’t quite what they were supposed to be and yielding negative returns. Well, this happened in the more evolved societies.

Politicians?… they’re famous for bribery, extortion of funds, document forgeries, misappropriation of EU funds… and many others, even election manipulation. These activities are often associated with unusually intricate financial transactions with third parties, unusually rapid revenue and/or profit growth for their family-associated firms, secretive attitude regarding corporate documents and financial information, and the list does not end here. Media has documented cases where the mayors steal and don’t get any time, and go on to make their cities “great” on the backs of the taxpayers. I’ve seen cases where some reputed advisors contributed to the frauds. Btw, don’t imagine that getting accused and, at best, officially charged with a white collar crime might be upsetting for their individual reputation and career. No way, they’ll keep on saying they did nothing, and carry on.

The landscape is filled also with rats, like big league advisors pouring info into the information agencies’ or prosecutors’ ears, or advising fiscal entities on passing laws to undermine targeted entrepreneurial ecosystems, and insiders. Or a larger scale, we have sectors where company tax payments are minimal due to low tax rates while the government provides companies with generous incentives and tax holdings (advisories know better.) Even if their “crimes” are more on the moral side, they do exist.

At this point and as an intriguing moment, I recall a roundtable I attended some time ago; we had entrepreneurs, academics, some public policymakers and officials in the room. At the end of the three hours, the person nearby me, who introduced himself as working for a top-tier local intelligence agency, took up his bag to open the Champagne inside, when suddenly I noticed a greeting card, with the logo of a Big4 consultancy, attached to the bottle. He took it out immediately. Observing my smile, he mumbled “It’s one of their partners.” “You both meet often?” I asked. The answer got me by surprise. “Almost every other week, and he keeps updating me on the trends, persons, facts and wrongdoings.” No comment here. Rat partner or sort of fat-fingers vigilante, there’s always somebody “watching” for the white collars.

Some companies are also able to avoid paying taxes by their use of tax havens. If someone is trying to find more about their organization’s policies, don’t be surprised to get an answer like “we’re a private company” or a “private foundation”; so not transparent at all. But they’re great at sucking the wealth out of the country and maybe paying a fraction back via tax deductible “philanthropy”. Tax evasion can be done in numerous ways. Immoral is also to profit from vulnerable nations.

Other types of frauds or crimes include securities fraud (includes insider trading and false public statements), insurance fraud, “doctoring”/”cooking” the financial statements, mishandling of the company funds or property, Ponzi schemes, embezzlement (a politician’s favorite), or money laundering. In this context, it’s now a common practice for the behemoths to settle the tax fraud investigations for some millions/peanuts.

I’ve just scratched the surface… imagine the inequities in the justice system. Definitely, proving white collar crimes is a difficult task. These crimes are capable to take a complete business down, leading the hard-working employees to lose their jobs and pensions, so they must be taken quite seriously.

My today’s preferred: Healthy.io — turning everyday smartphone cameras into clinical-grade medical devices (home-based urinalysis.)