The number of white-collar crimes could jump significantly this year as economic and financial-market turmoil lead many to deviate from moral and proper activities to keep up a revenue stream or make a quick buck, a new study says.

"It's a different world out there, and fraudsters know it," New York-based risk consultancy Kroll Inc. says in its Global Fraud Report, set to be released Wednesday.

Kroll warns, among other things, about an unscrupulous form of short-selling in which brokers and traders form "loosely organized cartels" to start negative rumors about companies whose shares they are betting against. Such actions could become more prominent, especially in countries with lax regulations, as stock markets continue to reel from the credit crunch and economic crisis.

Kroll specifically tells investors to be wary of emerging markets, where "undeclared" risks may be present. And the report tells financial companies to prepare for a coming "storm" of fraud-related lawsuits by investors seeking to blame someone for their shrinking portfolios.

The global market downturn has already revealed some of the fraud and other crimes that took place during the boom years - including the alleged $50 billion Ponzi scheme undertaken by Bernie Madoff. A handful of other schemes involving smaller, though not insignificant, amounts of money have come to light in recent weeks.

But the ongoing bear market may be even more rife with fraud.

"The tumble in global stock prices has changed the fraud environment, with fraudsters now pursuing scams intended to exploit the new realities," said Niren Shah, one of the authors of the Kroll report.

Despite all the fraud that has come to light in recent months, Kroll warns that people will always be vulnerable to "false-hope schemes."

Richard Abbey, managing director in Kroll's Business Intelligence and Investigations practice, said comprehensive due diligence is essential for managing exposure to threats in the current environment. "Companies should not think that they are safer in certain country markets - this is a global concern that spans all industries," he said.

Particular caution may be warranted when investing in emerging-market countries, which have so far avoided the economic recession that has hit the U.S. and Europe. Kroll warns in its report that anti-corruption legislation, even where it exists in certain countries, may be breached.

"Emerging economies, with possibilities for real growth, may well provide highly attractive investment opportunities in the near term compared to those of the developed world," says Matteo Bigazzi, another author of the report. "Without due diligence and sensible risk management, however, the dangers could outweigh the possible gains."

Lurking in both developed and emerging economies alike, the Kroll report warned, are specific scams involving short-selling, a legitimate trading strategy in which investors profit when prices decline. The strategy turns illegal, however, if fraudsters begin to spread false rumors about a company to weaken its share price.

"Invented bad news is spread about the company to bring down the price," the report states. "Cellphone and text message and Internet-based instant message, rather than blogs and emails, are used...since it is more difficult to identify who sent the former."

Blake Coppotelli, senior managing director in the New York office of Kroll's Business Intelligence and Investigations division, said fraud is likely to continue to ramp up in 2009 and beyond.

"Essentially, you can just pick a type of fraud, you'll see it rise," he said. "Just pick an industry, and within that industry you'll see that the fraud most commonly associated with that industry is going to increase."

Kroll is a unit of Marsh & McLennan Cos. (MMC).

-By Dan Molinski, Dow Jones Newswires; 201-938-2245; dan.molinski@dowjones.com

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