Chapter 5
Criminal negligence:
"a degree of carelessness amounting to a culpable disregard of rights and safety of others" Example: Drunk driver drives wrong way down highway and kills a person in an accident
Entrapment
(Law enforcement sets a trap to lure someone into committing a crime he/she had no intention of committing ¥ This can be a little tricky as a defense.
Securities Fraud:
Different kinds o Insider trading gets a lot of press o Market rigging o Theft from accounts of clients of securities firms o See chapter on Securities Regulation covers all kinds of crimes regarding stocks, including insider trading, market rigging, and theft from accounts of clients of securities firms.
Constitutional Right: 5th Amendment
Miranda Rights must be read if a person is accused of or held in suspicion of a crime ~~Right to remain silent ~~Statements made can be used as evidence against you in court ~~Right to be represented by counsel ~~If accused cannot afford an attorney, one will be provided by the court
Crime
Positive or negative action that violates a penal law
Violent crimes
murder, manslaughter, forcible rape, aggravated assault are _____
Pasquantino v. U.S.:
o American bought liquor in U.S. and smuggled it into Canada for resale, avoiding high Canadian taxes. ♣ Since electronic communications were used that originated in the U.S., two people sent to prison for 5 years each.
Wire Fraud:
o Any electronic communication involved in illegal activities (much like mail fraud & telephone/internet fraud) o Traditionally would have been subject only to state prosecution o Now basis for federal prosecution o There is a sweeping nature to the statutes seen in cases o Includes "a scheme or artifice to deprive another of the right to honest services" ♣ Refers to bribery or kickbacks, not rather vague failure to provide "honest services." o is ANYTIME you use anything over any wire - telephone, internet, etc.
Telephone & Telemarketing Fraud:
o Any scheme to defraud using the telephone as means of communication with victims o Trying to persuade them to send money to scheme o Solicits people to buy goods and services, invest money or donate to bogus charitable causes
Computer and Internet Fraud:
o Credit card fraud involving a computer/internet o Unauthorized access to financial accounts o Unauthorized use of computers and computer files o Sabotage of computers
Tax Evasion:
o Failure to file tax returns o Failure to report income o Overstatement of expenses o Not reporting illegal income o IRS devotes significant resources to track down violators (jurisdiction can be international, i.e. Swiss bank accounts)
Government Fraud:
o Governs contracts with public agencies o Billing for goods not delivered o Double billing o Inferior goods o Government payment programs ♣ Farm subsidies ♣ Public housing ♣ Educational programs
Money Laundering:
o Hiding the truth about the origins of money, especially illegal activities. o Obligation to report income even from illegal income for tax purposes. o Then know an example such as: A man sells illegal drugs to the tune of about $2.5 million a year. He has a company, WW Construction Company, and transfers any drug money into the company checking accounts as if the money were from construction contracts. He pays taxes on the money he makes each year, and deducts any expenses of his drug business (such as travel expenses, transportation costs of getting the drugs to distributors, telephone and internet uses, body guards, etc.).
Insurance Fraud:
o Insurance companies commit fraud, charging higher rates than allowed by state regulators. o Policy holders lie about condition of property to get lower rates. o Policy holders pad their claims to get more money. o Insurance fraud usually comes in two ways - by insurance companies and by policy holders. Know the examples of these two ways so that you can define them on the exam with the answer that they are insurance fraud.
Fraud on the Internet:
o Is essentially the same as telephone & telemarketing fraud o Chat rooms, e-mail, message boards or Web sites presenting fraudulent solicitations to victims
Internal Fraud:
o Many small businesses don't know they are defrauded o Study shows1/4 of companies with fewer than 100 employees suffered from check tampering ♣ Company checks used for improper purposes o 21% suffered from skimming ♣ When cash is taken before it is recorded on the books o Rigging Payroll/Falsifying Reimbursement Expenses (i.e. travel ) are common
Victimless crimes
possession of illegal drugs is a
salami technique:
cut out small portion out of sales and kept for themselves
Non-violent victim crimes
vehicle theft, burglaries are ________
Embezzlement:
• Person in position of trust takes money or property for his/her own use. ¥ salami technique: cut out small portion out of sales and kept for themselves
Financial Fraud:
Regulation of banks and financial institutions o Firms and employees subject to criminal liability o Fraud in loans, financial documents, mortgages, etc.
Arraignment
- court appearance of the accused (either before a judge or magistrate).
Mens rea
- criminal intent
Actus reus
- the guilty act
many crimes
1 action can constitute ________. For instance often wire fraud, internet fraud and computer fraud can be 3 different crimes for one wrongdoing.
Affirmative Defenses
A ________ to a civil lawsuit or criminal charge is a fact or set of facts other than those alleged by the plaintiff or prosecutor which, if proven by the defendant, defeats or mitigates the legal consequences of the defendant's otherwise unlawful conduct. Even if prosecution's claims are true, other facts prevent the claims from constituting the crime. ¥ Intoxication and insanity may be used ( but rarely successful).
nolo contendere (no contest)
Accused may plead guilty, _________ or innocent.
Elonis v. U.S.
After wife left him, man used Facebook to post rap lyrics, Contained violent language. ¥ He was fired for threats to co-workers. Wife was granted a "protection-from-abuse" order ¥ Grand jury had indicted him. ¥ Defense by man: Indictment failed to allege he intended to threaten anyone. ¥ District Court denied motion. ¥ Court said: Defendant must be "blameworthy in his mind." Such as scienter or mens rea Must consider defendant's mental state "Wrongdoing must be conscious to be criminal. . . ." HELD: Conviction cannot stand.
Anti-money Laundering Measures
Consequences for Non-Compliance with _________ ′ Failure to File suspicious activity report ′ Civil/criminal penalties, or both ′ Civil penalties - willful violation of reporting requirements ′ Civil penalties can be up to the greater of the amount involved in a transaction ′ Willful violations may lead to criminal penalties Fines up to $250,000 or 5 years in prison
Counterfeiting:
Copying of genuine items without authorization - money, designer clothing, other products.
5th
Defendant in criminal case has no obligation to disclose to prosecution evidence showing guilt ______ Amendment protects defendants
"beyond a reasonable doubt".
Defendant must be found guilty ___________- If jury finds defendant innocent - end of matter.
Bridge v. Phoenix Bond & Indemnity Co.
HELD: Judgment of Court of Appeals affirmed in plaintiff's favor. Plaintiff asserting RICO claim based on mail fraud need not show that it relied on defendants alleged misrepresentations. ′ RICO is strictly construed. ′ Congress must make changes, but Court will not make interpretations to the statute and change RICO's strict outcome. Plaintiff may assert RICO claims. It's important to know the outcome, that is, that defendent and the others in this case fall under the RICO claim since mail was used to perpetuate the scam which caused harm to company and others.
guilty
If defendent is ______ there may be: ¥ Jail time: Jail is local ¥ Prison time: Prison is statewide, large, extended sentences ¥ Probation ¥ Fines ¥ Restitution to victim
indictment
If grand jury determines probable cause, usually it will issue an ______ against the accused.
the exclusionary rule
If improperly obtained or presented, evidence is excluded (under procedural due process) May be referred to as "fruit of the poisonous tree" Called _____________, 4th Amendment protection
mistrial
If jury can't agree on verdict, there is a ________, and prosecutor will decide whether to proceed again.
prosecution's
If matter goes to trial, government attorney (often district attorney) presents _______ case.
Crime
Not civil law Act against a state or federal government or even local government Congress and state legislatures decide the criminality of actions - mostly statutory Governments determine punishments Seen more and more in the business context Computer and technology have created new versions of old criminal laws e.g. Unauthorized entry into computer systems is the new version of the old "breaking and entering" laws
Bribery:
Offer or taking of money, goods, services, etc. to influence official actions or decisions. ¥ has to be to a government official
Criminal Law
Purpose of __________. Parties do their own investigations Disclose only subset of what is found to the other side prior to trial
Allmendinger's longer sentence was upheld
Reasons why _________ . refused to accept responsibility for his actions Anticipating his indictment, sought to squirrel away cash with his father Continued to live a lavish lifestyle with the money Hid money in violation of the restraining order Attempted to flee just days before the trial Completely failed to accept responsibility
United States v. Allmendinger
Ringleaders were indicted by grand jury: Mail Fraud, Money Laundering & Securities Fraud Court ordered them to freeze all accounts. ¥ Appeals Court will first consider whether district court committed significant procedural error in calculating guideline range or explaining sentence imposed. ¥ If it did, sentence will be vacated and remanded for resentencing. ¥ If it did not, then appeals court will consider if sentence imposed was "substantively reasonable" under the "abuse of discretion" standard. ¥ Know the outcome, that is, that the sentence that Allmendinger received was much greater than Oncale, although they committed the same crime. See the reasons why, on appeal,
plea bargain
Sometimes defendants __________ - allows matter to be settled under court supervision.
"Beyond a reasonable doubt"
Standard for conviction:
Requirements for prosecution
The ________ are: Actus reus - the guilty act Mens rea - criminal intent
Credit Card Fraud:
Unauthorized use of a credit card.
exculpatory evidence
Under Constitution, prosecution must disclose any ________. Evidence which might show defendant is not guilty The choice to disclose left up to prosecutions lawyers
Antitrust:
Violation under the Sherman Act and Clayton Act. ¥ Prison terms involved in price fixing and anti-competitive practices
Warrant
_____ issued by a judge or magistrate o There is a "hot pursuit" exception. o Law enforcement officials must show probable cause to a judge to obtain a ______.
Felonies, misdemeanors
_______ more serious than ________ Classifications (Class A, Class B) and degrees (first degree, second degree) denote seriousness of criminal charge
Insurance companies
________ commit fraud by charging higher rates than allowed by state regulators.
Policy holders
________ commit fraud by: lying about condition of property to get lower rates or pad their claims to get more money.
Warrants
_________ are usually needed for search of property, persons, or seizure of property.
Double jeopardy
_________ prevents a defendant from being tried a 2nd time for same crime.
Prosecutors
_________ receive reports of alleged crime, & results of investigation. then decide whether or not to bring charges.
Corporations
__________ can't be sent to prison ′ May have to pay fines to various controls where culpability is assigned
Civil Law
__________ purpose: To reduce surprises Both sides must turn over anything requested by other side
Prosecution Process
______________ occurs when prosecuting attorney has enough evidence to make criminal charges ¥ Will be either a misdemeanor or felony ¥ In some cases, a grand jury will review a potential felony case.
Punishment
depends on the category under which a person is convicted Some crimes punished by death Most crimes: Imprisonment/Fines Unable to own a firearm Removal from public office Disqualified from holding office or voting
White collar crimes
embezzlement, bribery, fraud
Racketeer Influenced and Corrupt Organizations (RICO) Act
o Originally an extra weapon against organized crime, esp. Mafia. o Racketeering originally meant activities, such as bribery or extortion. o Modern meaning: broadened the term to include activities such as mail fraud, etc. o Successful RICO claim receives triple actual damages + attorneys' fees through civil claims o Now mail and wire fraud included as crimes under RICO o Government can seek injunction seizing defendant's assets, preventing their transfer or require defendant to post a performance bond. o Government may press for imprisonment for criminal violations. o Complicated and unpredictable area of the law o Rarely applied to Mafia o Is now used in suits against persons, businesses, political protest groups and terrorist organizations
Healthcare Fraud:
o Over-billing and scams by hospitals, doctors ambulance services, laboratories, pharmacies, extended care facilities
Insider Trading:
o Person trades a security while in possession of material, non-public information.
Authorities may
o Search property o Seize documents and other physical items
Mail Fraud:
o Sending of fraudulent materials through U.S. Postal Service or using the U.S. Postal Service to communicate fraudulent activities. o essentially that it is sending of fraudulent materials through U.S. Postal Service OR using the U.S. Postal Service to communicate fraudulent activities.
WHITE COLLAR CRIME
¥ 1939 reputed origination of term: "Crime committed by a person of respectability and high social status in the course of his occupation." ¥ Criminal activity for financial advantage occurring in business. ¥ FBI estimates such crimes create 1/3 of a trillion dollars in losses each year. ¥ Most cases are against individuals; corporations may also be prosecuted.
ARRAIGNMENT
¥ Accused is placed under arrest based on a warrant. ¥ In non-violent matters, accused must turn herself in, rather than be taken into custody by the police. ¥ Suspect is booked at police station, photographed, finger printed and searched. ¥ Chance given to the accused to contact an attorney. ¥ Accused may plead guilty, nolo contendere (no contest) or innocent. ¥ Judge may release accused or require bail, and will set a court date. ¥ Violent criminals, or those who court fears might flee before trial are held without bail, or bail is set very, very high. ¥ Sometimes defendants plea bargain - allows matter to be settled under court supervision. ¥ Defendant pleas guilty to charges or lesser charge or pleads no contest in exchange for agreed punishment.
Environmental Law Violations:
¥ Federal (EPA) and state laws o Data fraud cases, e.g. private laboratories submit false environmental data o Hazardous waste dumping o Ocean dumping by cruise ships o Oil spills o International smuggling of CFC's o Illegal handling of hazardous substances (pesticides, asbestos, etc.) o EPA averages 300 criminal prosecutions per year--150-200 years of prison and jail time. o Midnight dumping: dispose of hazardous waste illegally
Bankruptcy Fraud:
¥ Person or corporation hides or lies about assets in bankruptcy proceeding (also applies to creditors giving false information or illegal pressure to bankruptcy petitioners).
DEFENSES
¥ Raise doubts in jurors' minds through alibi ¥ Presents other evidence that crime was not committed ¥ Affirmative Defenses ¥ Improper procedure in the criminal prosecution ¥ Statute of Limitations runs (time varies by crime) ¥ Unsolved murders - statute of limitations may never end ¥ Statute of limitations can "toll", to stop the running of time (e.g. if criminal flees country to avoid prosecution) ¥ Action was justifiable, i.e. self defense with reasonable force ¥ Self-defense in violent crimes cases (use of force justifiable to protect oneself against another) ¥ Entrapment
Economic Espionage:
¥ Theft or misappropriation of valuable business information, such as a trade secret. ¥ is the theft or misappropriation of valuable business information. Theft or misappropriation of a trade secret is a good example of it, although this may not be on the exam.
"They Think Big In Chicago"
′ Chicago zoning inspector was convicted for taking two $600 bribes ′ In exchange he issued certificates of occupancy for new houses. ′ Convictions was overturned on appeal ′ Court noted that under the law in question - bribe must be a minimum of $5,000 for a violation ′ Small bribes were not enough ′ Chicago Mayer Emanuel disbanded city's ethics board ′ In its 25-year history it never found a city alderman doing anything wrong - ′ Even though 20 of them were convicted of felonies during that time!!!
Business Implications From Money Laundering
′ Example of obligations created in normal business operations ′ $1 to $2 trillion laundered worldwide each year ′ Money laundering is taking proceeds of criminal activities (i.e. drug smuggling) & transforming cash in the appearance of legitimate business. ′ Doesn't attract law enforcement attention Tony Soprano Example Tony Soprano earns $1 million from loan sharking and drug dealing He creates Soprano Coin Laundry, Inc. Deposits cash into corporate bank account as income from laundry Pays himself a salary Looks like legitimate income
Crimes & Elements of Crimes
′ Government agencies decide who will be charged with a crime. ′ Prosecutors receive reports of alleged crime, & results of investigation. ′ Prosecutors then decide whether or not to bring charges. ′ Not all claims of criminal activity are investigated. ′ Politics & personal preference may come into play in decisions by prosecutors. Process is not perfect.
"That Wasn't Me!"
′ Phyllis Stevens' employer confronted her with evidence that she had embezzled $6 million. ′ She didn't deny that she ended up with the money. ′ She & Hubby had a great time spending the money ′ Her defense was the crime was committed by "hundreds" of personalities created by her dissociative identity disorder ′ One of the persons - "Robin" - took off for Las Vegas to spend more money right after being confronted. ′ Judge was not impressed. ′ Gave her 6 years in prison.
Anti-money Laundering Measures ("AML Measures")
′ Regulations making money laundering more difficult Soprano's banks must comply with federal regulations, reporting, etc. Require financial organizations to use Know Your Customer (KYC) or Customer Due Diligence (CDD) Programs Track It Down: Tracing asset flows - large cash transactions are suspect Who Is Up to What?: Reporting suspicious transactions - cash deposited over certain amounts ($10,000)
Evidence
′Strict standards for gathering and presentation at trial Evidence was handled properly Called "chain of custody"