Chapter 10 Criminal Law

Minimizing Corporate Criminal Liability and Losses

-Code of ethics -Ethics training -Leadership the presents a positive role model for employees -Ethics hotline -Federal sentencing guidelines for organizations provide that organizations that maintain a rigorous compliance program to detect and report violations of the law, and voluntarily disclose those violations when they occur, are eligible for reduced sentences and fines.

publicity campaign for Yates Memo

-New York Times which ran an article entitled "Justice Department Sets Sights on Wall Street Executives" issued on the same day the Yates memo was issued -September 10th Deputy Attorney general Yates delivered a policy speech entitled "Individual Accountability for Corporate Wrongdoing" at NYU Law School billed weeks in advance as a major Justice Department policy announcement -September 22, 2015 with a speech by Assistant Attorney General Leslie Caldwell, meant to not only reinforce the policy announced in the Yates Memo, but to address and mitigate the dire warnings that the AAG said were being conveyed through the myriad of law firm advisory memos. Judging by the comments made after her speech, the AAG failed at her goal.

The Yates Memo

-September 9, 2015 (7 years and 9 months after the 2008 financial crisis) -A policy memo entitled "Individual Accountability for Corporate Wrongdoing" authored by Deputy Attorney General Sally -offers guidance to federal prosecutors, not policy, on the steps that should be taken in any investigation of corporate misconduct

Corporate Fraud

-one of the FBI's highest criminal priorities. -causes significant financial losses to investors -has the potential to cause immeasurable damage to the U.S. economy and investor confidence. -The FBI's corporate fraud investigations primarily focus on the following activities: 1) Falsification of financial information 2) False accounting entries and/or misrepresentations of financial condition 3)Fraudulent trades designed to inflate profits or hide losses

United States v. Newman

-overturned convictions of two hedge fund managers, who received corporate earnings information through a chain of analysts, never dealing directly with the insiders who made the disclosures -when the violation is based on friendship between tipper and tippee, then the government must show "a meaningfully close personal relationship that generates an exchange that is objective, consequential, and represents at least a potential gain of a pecuniary or similarly valuable nature."

Fruit of the Poisonous Tree doctrine

A companion to the exclusionary rule; Under this doctrine, a court may exclude from trial any evidence derived from the results of an illegal search EXAMPLE, assume that an illegal search has garnered evidence of illegal explosives. This evidence is then used to obtain a warrant to search the suspect's home. The exclusionary rule excludes the evidence initially used to obtain the search warrant, and the fruit of the poisonous tree doctrine excludes any evidence obtained in a search of the home.

exclusionary rule

A means to suppress evidence that was obtained illegally. If the government violated a defendant's constitutional rights in gathering evidence, this evidence cannot be used against the defendant at trial. The Supreme Court has referred to this evidence as the" fruit of the poisonous tree."

Criminal vs Civil law

Criminal: Injury to the public Prosecuted by government Attorney provided, if defendant cannot afford one Burden of proof is beyond a reasonable doubt Conviction may result in civil disabilities or loss of liberty Penalties potentially include loss of liberty Civil: Private injury or wrong Plaintiff sues defendant Parties must provide their own attorneys Burden of proof is preponderance of the evidence No civil disabilities and no loss of liberty Penalties are typically monetary

How big of a problem is insider trading

FRONTLINE article: U.S. Attorney for the Southern District of new York: "Insider Trading Is 'Rampant' on Wall Street." "What we have seen for the first time ... [are] people who are parts of vast networks of insider trading, and they have in some cases not just one person to tip them at a company, but they have a backup tipper, and they have another backup tipper behind that backup tipper. You get the sense that it's a pretty pervasive and serious problem." 5 big cases: Martha Stewart, Michael Milkin, R. Foster Winans, Jeff Skilling (See movie: "The Smartest guys in the Room"), and SAC Capital

Examples of insider trading cases that have been brought by the SEC are cases against

Friends, business associates, family members, and other "tippees" of such officers, directors, and employees, who traded the securities after receiving such information;

insider trading

Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security

Preview of the Government's Supreme Court Argument in Salman

Salman opinion, Judge Rakoff pointed out that if the evidence of the benefit in Mr. Salman's case was insufficient, "then a corporate insider or other person in possession of confidential and proprietary information would be free to disclose that information to her relatives, and they would be free to trade on it, provided only that she asked for no tangible compensation in return."

United States v. Salman

Salman was convicted of insider trading, rejected argument that Newman case required showing a tangible benefit beyond the close familial relationship. "To the extent Newman can be read to go so far, we decline to follow it," Judge Rakoff wrote. The opinion concluded there was sufficient evidence that the information "was intended as a gift" to meet the requirements of the Supreme Court's analysis in the Dirks case

Dirks v. United States (1983)

The Supreme Court announced the test for proving an act of illegal tipping: "the test is whether the insider personally will benefit, directly or indirectly, from his disclosure." That benefit can be tangible, like money or services, or "when an insider makes a gift of confidential information to a trading relative or friend."

United States v. Leon

The application of the exclusionary rule has been significantly limited by a Good Faith Exception created by Supreme Court in United States v. Leon. Under the good faith exception, evidence obtained in violation of a person's Fourth Amendment rights will not be excluded from trial if the law enforcement officer, though mistaken, acts reasonably. For example, if an officer reasonably conducts a search relying on information that is later proved to be false, any evidence seized in the search will not be excluded if the officer acted in good faith, with a reasonable reliance on the information. The Supreme Court has carved out this exception to the exclusionary rule because, according to a majority of the court, the rule was designed to deter police misconduct, and excluding evidence when the police did not misbehave would not deter police misconduct.

Mapp v. Ohio

The exclusionary rule was constitutionally required only in federal court until Mapp v. Ohio. In Mapp, the Court held that the exclusionary rule applied to state criminal proceedings through the Due Process Clause of the Fourteenth Amendment. Before the Mapp ruling, not all states excluded evidence obtained in violation of the Fourth Amendment. After Mapp, a defendant's claim of unreasonable search and seizure became commonplace in state criminal prosecutions.

probation

a common penalty for committing crime, which means that the criminal is under the supervision of the court but is not confined

misdemeanor

a criminal offense that is less serious than a felony but more serious than an infraction

infraction

a criminal offense, which is less serious than a misdemeanor

entrapment

a defense that may be raised by a criminal defendant. Occurs when the government induces someone to commit a crime that he or she had no previous propensity to commit

burden of proof

a duty to prove, the burden of proof in criminal cases is beyond a reasonable doubt

indictment

a formal document in which the government accuses a legal person of a crime

mens rea

a guilty mind, or criminal state of mind

infancy

a lack of capacity defense that may be used by persons who have not yet reached the age of majority, typically eighteen years of age

insanity

a lack of capacity defense, specifically applicable when the defendant did not understand that his or her actions were wrong

criminal

a legal person convicted of a crime

felon

a legal person convicted of a felony

fine

a monetary penalty

crime

a public injury or an offense to the public

felony

a serious criminal offense, punishable with a prison sentence of more than one year or, in some circumstances, death

White-collar crime

a term used to describe nonviolent crimes committed by people in their professional capacity or by organizations. Individual and corporation can be punished

consent

an exception to the warrant requirement, in which a person with valid authority permits a search to proceed without a warrant

stop and frisk

an exception to the warrant requirement, specifically permitted when a person is stopped for some permissible purpose by law enforcement officers. Allows a pat-down search for "frisk"

lawful arrest

an exception to the warrant requirement, specifically referring to a pat-down search permitted when someone is lawfully arrested

exigent circumstances

an exception to the warrant requirement, specifically when an emergency exists, such as a hot pursuit

automobile exception

an exception to the warrant requirement, specifically when the vehicle is detained pursuant to a lawful stop

Federal Sentencing Guidelines

created by the U.S. Sentencing Commission to provide advisory guidelines to federal judges when sentencing criminals

Sixth Amendment

gives criminal defendants the right to an attorney at any phase of a criminal case that could result in incarceration. If a defendant cannot afford an attorney, one will be provided.

Fifth Amendment

guarantees the right against self-incrimination. The government cannot coerce a defendant's confession.

presumption of innocence

in a criminal case, the defendant is presumed innocent until the prosecution proves its case

Civil disabilities

in some states a felon may be prohibited from possessing firearms, running for public office, sitting on a jury, holding a professional license, or voting. A felon may be subject to deportation if he or she is an illegal immigrant

Forfeiture

involuntarily losing ownership of property that was used in criminal activities

due process

is a constitutional guarantee that all legal proceedings will be fair and that one will be given notice of the proceedings and an opportunity to be heard before the government acts to take away one's life, liberty, or property

Incorporation Doctrine

many provisions of the Bill of Rights have been held to be applicable to the states

plain view doctrine

no warrant required if the police can see the evidence

custodial interrogation

occurs when a suspect is in custody, which means the suspect can't leave, and is subject to interrogation

Restitution

penalty levied to repy to damages

whistleblowers

people who report the illegal activity of their employers or of their organization to authorities

Seventh Amendment

primarily designed to preserve and protect the rights of Americans to have a trial by jury in ordinary civil law suits

Eighth Amendment

prohibits cruel and unusual punishment. Supreme Court cases limit the death penalty only to cases where the defendant has been convicted of murder, and only where the defendant was an adult and not mentally incompetent at the time of the murder.

Fourth Amendment

prohibits illegal search and seizures

Miranda warnings

read to persons in custody, so that they are made aware of some of their constitutional rights "You have the right to remain silent. Anything that you say can and will be used against you in a court of law. You have the right to an attorney. If you cannot afford an attorney, one will be provided to you by the state. Do you understand your rights?" if the person is not in custody or is not being interrogated, the warnings do not apply

actus reus

the guilty or criminal action

The Holder Doctrine

the name given to a June 1999 memorandum written by Eric H. Holder Jr., then the deputy attorney general of the United States -Said big financial institutions are "too big to jail" because the potential for "collateral consequences" from prosecutions — including corporate instability or collapse — had to be considered when deciding whether to bring a case against them -The reason there have been no criminal prosecutions of any of the Wall Street companies from the 2008 crisis. -The reason not a single individual who engaged in fraudulent behavior in the years leading up the financial crisis has been prosecuted successfully

Warrant exceptions

the plain view doctrine exigent circumstances consent the automobile exception lawful arrest stop and frisk

preponderance of the evidence

the standard of proof in a civil trial. It means that the claims is more likely than not

beyond a reasonable doubt

the standard of proof in a criminal trial. It means that the evidence must be so compelling that there is no reasonable doubt as to the defendant's guilt

probable cause

the standard required for a search warrant to be issued. It arises when there is enough evidence, such as through corroborating evidence, to reasonably lead to the belief that someone has committed a crime

double jeopardy

this means that the government may not prosecute someone twice for the same offense. It is prohibited by the fifth amendment

acquitted

to be found not guilty of a crime