Corporate scams: a comparative learning from India and USA

Abstract

The 21st century has greeted mankind with innumerable delicacies. At the same time, it has shown the extent to which individual or group benefits, when given a veil in the form of a Corporate Fraud, as defined in its raw form, is the use of false representations to secure an unjust & undue advantage leading to a criminal deception. When such an act is done with the sole goal of financial benefits, it takes the form of a scam. A more sophisticated explanation explains a corporate scam or fraud to be “a violation of the Internal Revenue Code and related statutes committed by large, publicly traded corporations and/or by their senior executives”. Corporate scams usually encompass a mix of criminal and civil violations. In addition, these scams have gradually become very complex in nature with the passage of time. Corporate scams can be typically classified into: 1. financial reporting scams; 2. misappropriation of tangible assets, intangible assets or proprietary business opportunities; and 3. corruption, including bribery, gratuities, money laundering and embezzlement. Taking cues from the Fraud Triangle, we can use a Tripod Ideology to see the chain that is common to most corporate scams. The first leg is termed as the Opportunity, which denotes the perceived chance that a person or an entity has that sparks the motive for undertaking the fraudulent activity. Then comes the Motivation which instills the need or pressure for something, which isn’t practically and/or legally feasible. Rationalisation forms the third leg of the tripod wherein the individual(s) gather enough understanding to morally and legally justify his course of action and then goes on to conduct it.