An insured acts as if his has been seriously injured as a result of an accident in order to claim from his insurance company. A businessman refuses to pay the correct taxes to the government by not properly declaring his income. A group of businessmen with the use of schemes and tactics calls and convinces their clients to purchase stocks and securities from them. These acts appear to be harmless activities. No one was seriously injured by committing any of these activities. No one was killed and no property was destroyed and damaged.
The common misconception is that these acts are not crimes thus, nobody should be punished. If ever there is a punishment, the same should not be serious. These activities may appear to be harmless but the perpetrators of this crime may derive thousands of dollars if not millions from these operations. These acts are classified as White-collar crimes. The Department of Justice defined white collar crimes as ¦those classes of non-violent illegal activities which principally involve traditional notions of deceit, deception, concealment, manipulation, breach of trust, subterfuge or illegal circumvention. (John S. Baker Jr. p. 1)
Research on the origin of the term white-collar crime shows that it was coined in 1939 by Edwin Sutherland. In a speech he delivered to the American Sociological Society, he defined the term as a crime committed by a person of respectability and high social status in the course of his occupation. (White-collar crime) Then, white-collar crimes are those crimes associated with those people who work in corporations and commit the crimes in close association with his job. For example, embezzlement, tax fraud, health care fraud, and insurance fraud.
Today, the term has expanded to include those crimes that may be committed by people who are not of high social status. It now extends to a wide variety of non-violent crimes such as bank fraud, blackmailing, and extortion. Boiler Room One notable example of a white-collar crime that has gained a lot of attention in the past years because of the sheer number of people who have been victimized by this crime is the Boiler Room Operations. The Boiler Room Operation is a fraudulent and manipulative device employed relative to the purchase and sale of securities.
It perpetrator of the crime engages in an intensive selling campaign through numerous salesmen by telephone or through direct mail offerings for securities. The would-be investors are induced to purchase securities through hard-sell techniques based on unfounded predictions and misleading market letters. The movie entitled Boiler Room provides a relatively accurate representation of what this operation is all about. In the movie Boiler Room, this illegal operation takes place inside a room. Inside the room are telephones and telemarketers.
The main responsibility of the telemarketers is to make several calls to different people everyday and convince these people to purchase securities and stocks from them. It bears stressing that the people who perform this kind of operation employ different high pressure tactics to induce the would-be clients to make a sale of the securities they offer. This is how it got its name Boiler Room There are actually two known kinds of Boiler Room Operations. The first are the licensed firms that engage in the sale of unlisted securities.
Here, the most common type of securities being sold are those unlisted securities since they require minimum regulation by the government. The second are those run by unlicensed firms that sell totally fictitious securities. It may be asked why people can be lured by telemarketers to purchase from them securities which are actually fictitious. Firstly, these people who engage in this operation are trained professionals who employ high pressure tactics in such a way that the client does not have enough time to think coherently. The second was clearly explained in the movie.
In Boiler Room, one of the spiels or scripts which the telemarketers say to their clients is that this investment will help them with their childrens college fund. The third is ignorance. Most people who purchase securities from these people are those who have little understanding of the way the stock market works and lack knowledge of the risks involved in trading. The typical Boiler Room Operation consists of five (5) stages. (Michael Hubley p. 4) The first belongs to the telemarketers whose main task is to make anonymous calls to potential investors, known as the sucker lists. They reveal the name of the company and the nature of their business.
In order to convince the investors that they are legitimate they also give to them their website. It is in the second stage where the salespersons come in to make an offer to the potential investor. Their task is to convince them that there is a particular situation which the investor should take advantage of. The salesperson tells the investor that there are certain indicators that the value of a particular stock will rise in the coming days.
The investors are then encouraged to act quickly and make the purchase since the opportunity may never come again in the future. The investor is then asked to monitor a particular type of stocks since he is sure that there will be an increase in the value of the said stock. Once the clients are persuaded that they will make money from purchasing stocks, the salespersons will still convince them to invest more since the more money they invest in this business the higher is the return. Once the investor makes his purchase, the investor will eventually realize that the security he bought is not performing as he was promised.
In this stage, efforts are made so that the client will not be able to resell the security sold to them. Afterwards, when enough time has passed, the same people will contact the same investor to encourage them to replace the losing stock they purchase with a better kind of security with a promise that this will perform better in the market. The investor will however have to pay an amount as recovery room advance fee for the exchange. Research shows that in this simple operation the Australians have lost $400 million to telephone investment fraud.
Studies also show that in US and in Canada, $40 Billion dollar per year is being lost to this kind of operation. (US and Canada Label Telemarketing Fraud Serious Economic Crime and Propose Recommendations to Fight Growing Problem. ) Despite however of the immensity of this problem, no decisive action has been done to stop these kinds of operation. There are several reasons for this. Technology and Globalization have made it difficult for the law enforcement officers to track down the operators of this crime which mostly operate in a country different from that of their victims.
With the use of sophisticated technology, these people can make it appear as if they are calling from Beijing when in fact their actual location is Sydney. Further even if they are actually able to determine the actual location of these operators, the law enforcement officers of Ontario cannot make an arrest if the crime was committed in Manila. The second difficulty is that the operation of this crime may fall into different countries which make it more difficult to track them down.
For example, the call may have been made from Bangkok to a client who is in Los Angeles involving Philippine Stocks. The check used in payment for the sale of fictitious securities may have been paid to a bank account in New Zealand. Conclusion It is clear that white-collar crimes, particularly Boiler Room Operations, are very difficult to stop and control. The extent of this problem for one country is even magnified by globalization and the improvements in technology.
Indeed, this crime can be committed from one border to another. The operators of this crime may also easily transfer from one country to another. The search for the solution to this crime is a concern for the entire international community. It becomes the task of the international community to join together so that the operation of this criminal activity may finally be controlled and stopped. Treatise and International Agreements must be made so as to facilitate the tracking and arrest by law enforcement officers of those who commit this crime.