Most people know about the “white collar” crimes of fraud, embezzlement and bribery. You might also hear the term “tunneling,” which is often referred to as “corporate looting.”
This can involve one or more of these other offenses. It’s generally more subtle than outright theft. It typically involves a high-level executive or majority shareholder steering assets or business that is intended for the company toward themselves. This can be done in a number of ways, including:
- Selling company assets for personal gain
- Guaranteeing a personal loan
- Diluting share measures
- Selling assets at less than their actual value
- Voting for excessive executive compensation
Actions like these can minimize the value of the business and the shares owned by other shareholders.
Although tunneling is more common in countries and industries where there aren’t numerous regulations, it occurs everywhere. Sometimes, it involves agreements between executives and board members.
While tunneling is recognized throughout the U.S. as unethical, legal penalties vary throughout the country depending on state law. In some cases, it’s considered a civil violation that can be grounds for a lawsuit by those harmed.
Tunneling can be more difficult to prosecute than outright theft
Tunneling often exists in a gray area when it comes to the law. However, corporate executives have been prosecuted for taking excessive compensation and served prison time.
It can be all too easy for those in positions of power to get involved in a transaction that may not seem illegal when they’re used to being able to bend the rules.
If there’s even a question about the legality of something, it’s better to get legal guidance before taking action. If you’re already under investigation, it’s crucial to have experienced representation to protect your rights.
