LES 305 Exam 2
Amendment V
"I plead the fifth..."
Constitutional Protection: - " " -
- "Pleading the Fifth" - Miranda warnings
Penalties: Individuals - Corporations - Alternative Fines Act - Dodd-Frank -
- $250K and 5 years prison - $2M - 2 times the benefit that the bribe attempted to gain (EX. $10K bribe to secure a $100M contract - penalty would be $200M) - whistleblowers receive 10-30% of fine recovered by the government
"Foreign Public Official"
- 1998 FCPA was amended conform to the OECD Convention by EXPANDING the definition of "foreign public official" - "Foreign public official" NOW includes... political candidates, political parties, officials of some NGOs (IMF, Olympics, World Bank)
The sufficient nexus test is used to...
determine whether a business operating within a state can be taxed by that state and how much of its property and income is subject to taxation
Guidance on Gifts
- Can not be for corrupt purposes - Permissible if customary or show esteem - Must be reasonable and bona fide - Open - Transparent - Properly recorded - Look at size and how transmitted - Can't violate local law
Mitigating (AKA lessening) Factors: Corporate Sentencing Guidelines
- Code of ethics+ training - (Anonymous) hotline + compliance officer - Protect whistleblowers vs. retaliation - Investigate all tips - Immediate and voluntary reporting vs. cover up - Restitution to victims - Cooperate with regulators and investigators (ex. Fastow) - Admit mistakes - Report to public and employees
Mens Rea
- FCPA prohibits giving a corrupt inducement to "any person" while "knowing" that any portion of that inducement may be used for a purpose prohibited by the FCPA - Knowledge can be shown by... -- actual knowledge of prohibited conduct, -- awareness or a "firm belief" that prohibited conduct is "substantially likely to occur" or -- awareness of a "high probability" of prohibited conduct -- FCPA can penalize willful ignorance
Federal Offenses: Sarbanes-Oxley
- Financial statement certification - CEO/CFO - Increased penalties - Ethics training required
Defamation: What if the statement is true? What if the statement is an opinion?
- If true, can not be liable for defamation because that would be a defense - If an opinion, can not be liable for defamation because you're allowed to make a statement
Bribery in General
- Increased costs of doing business - Companies avoid doing business in corrupt countries - Never-ending cycle of ever-increasing payments
Board: Criminal Culpability
- LIABLE FOR FRAUD for failing to implement and monitor adequate internal controls - Directors can be held PERSONALLY LIABLE for fraud and resulting SH losses for inadequate crime prevention and detection processes
Cost of Compliance
- Large multinational corporations spend an average of $1 million a year on anti-bribery programs - Northrop Grumman is in an industry prone to corruption -- spends $2 million on outside anti-corruption counsel, -- also employs 2 in-house anti-corruption lawyers, 2 paralegals and 17 staffers
Preemption Analysis
- Legislative history - intent and SCOPE of federal regulation - Amount of DETAIL in federal regulation - BENEFITS of federal regulation (uniformity) - How much do federal and state laws CONFLICT?
Federal Offenses: Dodd-Frank
- Misrepresentation in financial transactions - Covers brokers, insurers, mortgage lenders, investment firms, banks, consumer financial services companies - Disclosures required - Whistleblowers
Grease Payments
- Payments made to secure the performance of routine, non-discretionary government action -- routine government action is not the award of new business or continuing a business relationship - Example: obtaining permits, licenses or other official documents to qualify a person to do business in a foreign country - Congress intended exception to be narrow in scope
Categories of Speech
- Protected (political) - Partially Protected (commercial, offensive) - Unprotected (dangerous, obscene)
Federal Offenses: RICO
- Punishes "ORGANIZED CRIMINAL ENTERPRISES" - Must establish a "PATTERN OF RACKETEERING ACTIVITY" -- At least 2 racketeering crimes within 10 years (bribery, kidnapping, extortion, counterfeiting, mail fraud, wire fraud, securities fraud, obstruction of justice, etc.) - Criminal and civil applications
Use of Agents or Consultants
- Punishes people who transmit $ (consultants, etc.) - 90% of FCPA actions involve 3rd parties - DEFENSE - due diligence (investigation of agents and consultants) MUST assess risk and investigate for all 3rd parties - The company is liable if the payments are high, odd payment arrangements occur, or the company has reason to know of a potential or actual violation
2010 - UK Bribery Act "Toughest Anti-Corruption Legislation in the World"
- Text of Act - Application - either committing a crime inside the UK, or acted outside of the UK in a way which would have constituted a crime had it happened in the UK if the person has a "close connection" to the UK, which includes being a British citizen, resident or protected person, a company incorporated in the UK, etc. - Strict Liability - intent of corporation to bribe but not necessary to prove - Defense - business can show that it had "adequate procedures designed to prevent persons associated with (the organization) from undertaking such conduct"; burden of proof is on the organization
Which actions require due process, or the right to be heard before taken away?
- The government taking away a business license. - Evicting a tenant by the sheriff. - Expelling a student from a public school
Offenses: Computer Crimes
- Unauthorized access - Stored Communications Act - Stored info (email and social media) - Electronic Communication Privacy Act - intercepting live messages (texts)
Convention on Combating Bribery of Foreign Public Officials in International Business Transactions
- organization for Economic Cooperation and Development (OECD) ADOPTED the Convention - 35 countries signed - All signatures must... criminalize bribery of foreign officials, include all citizens conducting business abroad, outline appropriate sanctions for violations, and agree to extradite those charged with a bribery offense
Constitutional Protection: Search Warrant
- probable cause requirement - reasonable expectations of privacy - business records? - exceptions?
When a corporation commits a crime, who could be held criminally liable for the conduct that amounted to a crime?
- the employees who actually did the work that constituted a crime - the corporation - the officers of the corporation
Elements of the U.S. Constitution: Bill of Rights
1st 10 Amendments
How many miners died in the explosion at Massey Energy's Upper Branch mine?
29
Constitution vs. state or federal regulation... who wins?
CONSTITUTION!!!
IT PAYS DIVIDENDS TO...
COOPERATE (Andy Fastow w/ Enron!)
unjust law
a code that is out of harmony with the moral law (any law that DEGRADES human personality)
just law
a manmade code that squares with the moral law or the law of God (any law that UPLIFTS human personality)
Commercial Speech and the First Amendment: Commercial speech is used to further the economic interests of the speaker. a. b. c.
a. Govt. can regulate advertising BUT b. SUBSTANTIAL GOVERNMENT INTEREST must be furthered c. must use LEAST RESTRICTIVE MEANS to accomplish the interest
exceptions to a search warrant
consent, hot pursuit, plain view, search incident to arrest
Supremacy Clause - Article Six
constitution and the laws of the U.S. shall be the supreme Law of the Land
Article II of the U.S. Constitution...
creates the executive branch and defines its authority
Elements of the U.S. Constitution: Article I - Legislative Branch
creates the laws
a bouncer in a bar is...
someone who keeps the riff-raff out
If there is intrastate commerce, the ____________ government can regulate.
state (whichever state intrastate commerce occurs in a given situation)
Can the federal government override the state police power to regulate interstate commerce? Balance these...
state's interest vs. Burden on interstate commerce (NOTE: usually in favor of uniformity, ex. mud flaps)
Your company's response in the media to allegations of illegal or unethical conduct raises which constitutional issue?
the First Amendment and freedom of speech
Offenses: Financing Terrorism
the act of providing funds to terrorists or terrorist organizations in order for them to carry out terrorist acts or to benefit any terrorist or terrorist organization
assault is...
the fear that someone feels when a battery takes place
Palsgraf sued the security guard because...
the fireworks guy was gone and she wanted to recover her injuries somehow
Scienter
the intent to deceive or fraud
Offenses: Money Laundering
the process of hiding the source of money obtained from illegal sources and converting it to a clean source, thereby avoiding prosecution, conviction, and confiscation of the criminal funds. It is an illegal exercise that converts black money into white money
slander
the spoken form of defamation (includes false statements that injure someone's reputation and are PUBLISHED - someone over heard it or read it)
What is mens rea?
the state of mind or intent
libel
the written form of defamation (includes false statements that injure someone's reputation and are PUBLISHED - someone over heard it or read it)
Why did so many of Massey's managers routinely violate mine safety laws?
they believed that following the laws would decrease coal production
Why were investigators suspicious that Massey Energy had altered mine safety documentation?
they discovered multiple sets of records
A bribe is designed...
to obtain business
Interrogate means...
to question
grease payments (facilitation payments) are designed...
to speed up the process and are routine (usually everyone has the choice of paying it) - for example, expedited passport or a fast pass at Disneyland
What did Massey Energy's managers order employees to do in the mines that violated federal mining regulations?
violate airflow and coal-dust standards
Proximate Cause
was a reasonable foreseeable appropriate?
for example, assault with no battery is...
when you fear someone is going to hit you up, but you duck
HIPAA explains...
who can see your medical records
Which type of corporate speech can be fully regulated?
Advertising
Criminal Law Business Tip 1
Do not ever try to withhold a violation or restructure paperwork to cover it up. The truth comes out. Concealment is an additional crime.
Employees: Criminal Culpability
Employees: fines, prison if they are INVOLVED in the criminal activity - Actus reus - Mens rea -- Scienter?
Bribes Prohibited
Intent to INFLUENCE official - to act or make a decision in his official capacity - act or refrain from acting in violation of official duty or - secure some wrongful advantage (improper advantage over competitors) *payments to obtain, retain or direct business *evade taxes, custom duties or penalties *influence outcome of lawsuits or regulatory action *circumventing regulations *influence action to exclude competitiors *access nonpublic bid information
Constitutional Law Business Tip
Know state taxation laws before you decide where to locate a plant, office, or warehouse. For example, Nevada does not have an inventory tax, so many manufacturers have large warehouse facilities there, including Spiegel and Levi Strauss. Other states have no sales tax but have high property tax rates. Still other states have high sales tax and low income tax rates. Structuring a nationwide business requires an understanding of intrastate as well as interstate taxes.
Fraud vs. Misrepresentation
Note that the difference is the intent. The difference between the two is that to prove fraud, you must show an intent to give false information, so as a legal matter, it is more difficult to prove.
Assault vs. Battery
Note that you can have an assault without a battery and a battery without an assault. These are the generally accepted legal definitions. However, some criminal statutes use these interchangeably. Some states refer to sexual assault, when they are punishing a battery.
Criminal Law Business Tip 2
One of the areas of focus for consultants and education programs on FCPA compliance is this question: How can we know if we have FCPA violations in our international operations? Below is a list of tips for staying on top of FCPA issues. - Have frequent audits of international offices with tight controls over the disbursement of funds. Who? When? How? How much? Why? - Screen any agents, advisers, translators, and others hired to help with negotiations. - Monitor payments made to individuals, foreign entities, and even companies, such as travel agencies, to determine the purpose for those relationships. - Listen when employees raise questions. GSK was warned by an employee before the Chinese government acted but had not followed up quickly enough on the allegations. - If a foreign office is awarded a large contract, make a visit and trace the path of the contract and how it was won.
Another Defense
Payments permitted under the written laws of the country in which they are made.
What is the analysis when state and federal laws collide?
Preemption (federal law supersedes state law)
ECPA (Electronic Communications Privacy Act)
punishes the intersection of live messages
The doctrine of preemption goes with which clause in the U.S. Constitution?
The Supremacy Clause
Which provision in the United States Constitution applies when a federal or state law conflicts with the Constitution?
The Supremacy Clause (CONSTITUTION WINS)
What are the constitutional requirements for a city to take private property from a citizen?
There must be a public purpose and just compensation.
Why was the Violence Against Women Act (VAWA) declared to be unconstitutional?
VAWA was unconstitutional because Congress can regulate only economic activities, not non-economic activities that have an effect on interstate commerce
Conspiracy
all the parties of a conspiracy to commit a crime are punished!
a reasonable amount of time to detain someone is...
as long as it takes to pick up the phone call the police immediately to have them show up
CRIME: homicide in criminal case, burden of proof is...
beyond a reasonable doubt
Stored Communications Act
punishes the intersection of writing through mail
Actual or but-for causation
setting the wheels in motion for the injury (if the security guard hadn't pushed the man, the fireworks wouldn't have gone off... so yes there is but-for causation but it was unforeseeable)
Whistleblowers
employees who report problems to the company and if the company doesn't take action then they go to the government; retaliation prohibited and rewards granted under state and federal laws
Elements of the U.S. Constitution: Article II - Executive Branch
enforces/carries out the laws
Plain View
exception to the search warrant requirement if something wrong can be seen right in front of you
If there is interstate commerce, the ____________ government can regulate.
federal
Obstruction of Justice: Federal law (SOX)
felony if related to a federal investigation - Remember U.S. v. Yates - Audit work papers must be retained for 5 years (felony and 10 years max in prison)
Amendment I
freedom of speech
The U.S. Sentencing Commission...
has developed guidelines for sentences and factors that can limit liability
What defense did Mr. Stover plead when he was charged with destroying Massey Energy's mine records?
he claimed that he did not have the required mens rea
You are the CEO of a telemarketing company. One of your employees posts political ads in his cubicle. The company has a policy prohibiting this practice. The employee believes that you are violating his First Amendment rights. He is
incorrect, because your firm is not a governmental entity.
Elements of the U.S. Constitution: Article III - Judicial Branch
interprets the laws; decides what the law is supposed to be
Managers: Criminal Culpability Managers in corporations are liable if they are ____________ or... a. b. c.
involved; a. KNEW but did nothing b. FAILED TO ACT REASONABLE in their supervisory positions c. AUTHORIZED conduct
Fraud
lying to someone to get them to pay money
mispresentation
making false statements
fraud
making intentional false statements
Obstruction of Justice: State law
may or may not be a felony - destroying or altering documents subject to subpoena or related to a pending investigation - encouraging others to destroy or alter evidence - encouraging or giving false testimony
Are employees who were involved in criminal activity required by law to speak with investigators?
no. they are NOT required by law to testify.
Lying to federal investigators is...
obstruction of justice
CPR is protected by ____________, however not protected by ____________ (such as jumping on someone during CPR)
ordinary negligence; gross negligence
In Martin Luther King: A Letter from a Birmingham Jail, MLK was arrested for...
parading/protesting illegally/without a permit
TORT: wrongful death in civil case, burden of proof is...
preponderance of the evidence by at least 51%
What is the FCPA? (Foreign Corrupt Practices Act)
prohibits bribery of foreign public officials to secure an improper business advantage and requires businesses to maintain accurate records and have the proper internal controls to prevent bribery - prohibits making direct or indirect payments to foreign public officials to secure an improper business advantage - requires companies to keep accurate financial records and maintain proper internal controls -- failing to keep accurate records of transactions where bribery could have occurred, such as secret slush funds for bribes or -- not implementing proper internal controls to ensure bribes weren't being paid