Understand Corporate Fraud

Corporate Frauds are crimes committed by a profit-making corporation or an individual in the corporation. These are crimes which involve activities which not only harm the corporate culture, and hit against the values of proper corporate governance, but also cause substantial damage to the investors, both big and small, in a large way and for a very long term.

Corporate crimes also overlap with the following crimes:

  • White-collar crimes: This is because most of the individuals are employees of large corporations and are professionals of a much higher social standing
  • Organized crimes: Sometimes criminals get together to set up corporations with the purpose of laundering money which has been obtained through criminal means. This has become very big business to utilize illegal money.
  • State-corporate crimes: In certain contexts, the fraud is a crime against the state too as there is a legal relationship between them and the corporations.

Though corporate frauds have been committed for a very long time, the most notable ones were being the Enron scandal. It was known as the biggest corporate fraud in the corporate world and it rocked the corporate world in late 2001. The fraud committed was that of manipulating company accounts to show a very large profit when actually they were in very huge debts.

It is essential that small investors spend a substantial amount of time in understanding corporate frauds.

Essentials of Corporate Fraud

The companies are finding it important that in order to continue with their success they have to implement certain measures to protect themselves from corporate fraud.

Knowing the frauds and classifying them also helps in many ways. Any activity which violates a law of the land, ground rules for the corporate, or is a direct threat in the interest of the public, and even corruption can be classified as fraud.

Preparing for handling such a situation is the key to making a company ready for a stint of good corporate governance.


Sometimes a person may feel that the activities of a corporation are incorrect and not conducive to good corporate governance. This could be a conscience call to raises a doubt about the possible wrongdoings in his organization or maybe a group of people in his company. He may opt to reveal this organization misconduct to the concerned regulators and law enforcement authorities. This revelation is usually done discreetly.