When most people hear the term “white collar” criminal offenses, they think of bribery, embezzlement and fraud. There’s another offense that’s often referred to as “tunneling” or “corporate looting.”
Tunneling, which sometimes includes other white collar crimes, generally involves a high-level corporate executive or majority shareholder in a company steering assets or business meant for the company to themselves for personal gain. Meanwhile, it lessens the value of the company and/or shares in the company.
Examples of tunneling
Tunneling can be done in a number of ways. It can involve, for example:
- Selling company assets
- Selling assets at less than their actual value
- Voting for excessive executive compensation
- Guaranteeing a personal loan
- Diluting share measures
Tunneling is more likely to occur in an overseas company in a country or industry where the regulations aren’t as stringent as they are in the U.S. That’s why companies that do business overseas should be aware of what tunneling is and recognize the possibility that it could be occurring.
While tunneling is illegal and certainly considered unethical in the U.S., it’s not always easy for prosecutors to make a case against someone since it doesn’t involve actual theft. One type of tunneling that has landed company executives behind bars involves getting excessive compensation.
Because, as noted, tunneling is a more subtle form of corporate theft than other types of white collar crime and is not uncommon in some other countries, it can be too easy for executives and other power players to engage in it without realizing the potential legal ramifications of their actions.
Anyone who has questions about the legality of an action or who’s already under investigation or facing criminal charges should get experienced legal guidance as soon as possible.