Chapter 6- Criminal Law & Business

White-collar crimes include

1. Bribery 2. Extortion 3. Fraud 4. Embezzlement 5. Computer Crimes (destruction of computer data, unlawful appropriation of date or services)

Health Care fraud (FRAUD)

Any fraudulent act committed in the provision of health care products or services Ex: submission of false claims to insurance plans such as Medicare and medicaid

A defendant is negligent if...

he or she does not meet a standard of care that the reasonable person would use in the context that led to the criminal act Ex: A parent leaving his children in a hot car while the parent is having a good time at a bar would be criminally negligent

Difference between criminal trials and civil proceedings

in criminal trial society is seen as the victim, but in civil trial it involves an individual victim or victims

nolo contendere

the defendant does not admit guild but agrees not to contest the charges

liability without fault or strict liability

when liability is assessed without establishing the guilty-mind criterion involves actions that, regardless of care taken (negligence), are deemed illegal ex: if a business were to sell cigarettes or alcohol to a minor. Although the business might not have intended to sell cigarettes or alcohol to a minor (thus lacking a guilty mind), the statutory violation still allows liability to be imposed

bench trial

when a judge I the fact finder in a case

Bankruptcy Fraud (FRAUD)

when an individual files for bankruptcy to be relieved of oppressive debt, but they are hiding some assets or part of their income, etc.

Ponzi scheme (FRAUD)

when the operator, and individual or organization, pays return to its investors from new capital paid to the operators by new investors rather than from profit earned by the operator

Tipee Liability

when the tipper's (tipping information to someone/passing it on) disclosure breaches a fiduciary duty, which occurs when the tipper discloses information for a personal benefit

Insider Trading

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

In a criminal proceeding, the ____________ files the charges against the defendant

government

Fraud (white-collar crime)- 3 elements

(1.) A material false representation made with intent to deceive, (2.) a victim's reasonable reliance on the false representation, and (3.) damages.

To demonstrate bribery (of a public official --> statutory offense), the gov. must show 3 elements:

(1.) Something of value was offered, given, or promised to (2.) a federal public official with (3.) intent to influence that person's judgement or conduct.

Red Flags Suggesting Possible Fraud

- No independent proof or profitability - Control by a single person - No audited financial statements and no evidence of internal controls - Unusually high rates of return - New investor's reliance primary on existing investors in deciding to invest

For a corporation to be held criminally liable for the acts of an employee, the prosecutor must show that:

1. the employee was acting within the scope of her or his employment 2. the employee was acting with the purpose of benefiting the corporation 3. the act was imputed to the corporation

False Pretense (FRAUD)

A designed misrepresentation of existing facts or conditions by which a person obtains another's money or goods, such as the writing of a worthless check Ex: Jim goes door to door selling vacuum cleaners. Customers have to pay immediately and he says the vacuums will come in three to five business days, but he actually has no vacuums cleaners.

False Token (FRAUD)

A false document or sign of existence of existing facts or conditions by which a person obtains another's money or goods, such as the writing of a worthless check

White-Collar Crime

A variety of non-violent illegal acts against society that occur most frequently in the business context. They also occur more frequently than you might think Ex: mail fraud, bribery, etc.

The elements of a crime are: (to punish an individual for criminal behavior the government must demonstrate these two elements)

Actus reus: Wrongful behavior (guilty act) - gov must prove a prohibited act resulted because of defendant's behavior Mens rea: Wrongful state of mind or intent (guilty mind) - gov must prove that the defendant acted with the state of mind required by law defining the relevant offense (the type of state helps determine seriousness of punishment for the crime)

False Claims Act

Allows employees to sue employers on behalf of the federal government for fraud against the government. Th employee retains a share of the recovery as a reward for his or her efforts.

Telemarketing fraud (FRAUD)

Any scheme, including cramming (when companies bill consumers for optional services that the consumer did not order) and slamming (consumers are tricked into changing their phone service to another carrier without their consent), using the telephone to commit a fraudulent act

Corporate Criminal Liability

Both corporations, as legal entities, and the corporate officers and managers can be held liable for crimes committed on behalf of the corporation

Pretrial Procedure

Criminal proceedings begin when an individual is arrested for a crime Need an arrest warrant, and need to prove a probable cause to do so Officer must tell them their Miranda rights

Check kiting (FRAUD)

Drawing checks on an account in one bank and depositing them in an account in a second bank when neither account has sufficient funds to cover the amounts drawn. Just before the checks are returned for payment to the first bank, and kiter covers them by depositing checks drawn on the account in the second bank. Due to the delay created by the collection of funds by now bank from the other, known as float time, and artificial balance is created

Tools for Fighting Business Crime: False Claims Act

False Claims Act: Allows employees to sue employers on behalf of the federal government for fraud against the government The employee retains a share of the recovery as a reward for his or her efforts

Crimes are classified into three categories: (CLASSIFIED BY SERIOUSNESS OF OFFENSE)

Felonies: SERIOUS CRIMES punishable by imprisonment for more than one year or by death Misdemeanors: LESS SERIOUS CRIMES punishable by fines or imprisonment for less than one year Petty offenses: MINOR MISDEMEANORS punishable by small fines or short jail sentences

Different ways to punish white-collar crimes:

Fines, incarceration, community service, judges can disqualify the individual from employment, and house arrest

The consequences of white-collar crime are far-reaching:

First, the cost of white-collar crimes can be tremendous Second, when company employees commit the crime, many companies fail to report the crime to avoid publicity Third, white-collar crimes can be costly to the environment

Extortion (white-collar crime)

Otherwise known as blackmail, is the making of threats for the purpose of obtaining money or property

Criminal Procedure

Pretrial Procedure: the arrest, booking, first appearance, indictment, and arraignment Trial Procedure: Jury selection, trial with burden of proof on prosecution, jury deliberations, jury verdict, and (if guilty) sentencing hearing Posttrial Procedure: Appeal

Tools for Fighting Business Crime: Racketeer Influenced and Corrupt Organizations (RICO) Act

RICO: Prohibits persons employed by or associated with an enterprise from engaging in a pattern of racketeering activity. Anyone whose business or property has been damaged by this pattern of activity can sue under RICO to recover treble damages and attorney fees in a civil action

Computer Crime

Refers broadly to any wrongful act that: 1. is directed against computers 2. uses computers to commit a crime 3. involves computers cyber terrorist: a hacker whose intention is the exploitation of a target computer or network to create a serious impact

Tools for Fighting Business Crime: Sarbanes-Oxley Act

Sarbanes-Oxley Act: Criminalizes specific non audit (accounting) services when provided by a registered accounting firm to an audit client, also increases the punishment for a number of white-collar offenses

Forgery (FRAUD)

The fraudulent making or altering of any writing in a way that changes the legal rights and liabilities of another Ex: write your colleague's name to the back of a check made out to your colleague

False Entries (FRAUD)

The making of an entry into the books of a bank or corporation that is designed to represent the existence of funds that do not exist

Defalcation (FRAUD)

The misappropriation of trust funds or money held in a fiduciary (being held bound to act ethically and legally to act in the others best interest) capacity

Fraudulent Concealment (FRAUD)

The suppression of a material fact that a person is legally bound to disclose

Mail Fraud (FRAUD)

The use of mails to defraud the public To prove mail fraud the government must prove: (1.) an intent to defraud and (2.) the use of or causing the use of mails to further the fraudulent scheme

Pretexting (FRAUD)

Using fraudulent means to obtain information about someone's phone use

Commercial Bribery

a bribe in exchange for new information or payoffs

plea bargain

an agreement in which the prosecutor agrees to reduce charges, drop charges, or recommend a certain sentence if the defendant pleads guilty

Vicarious liability

liability imposed on one person for the acts of another; most commonly used in relation to employment

strict-liabilty offenses

offense for which no Mens rea is required

Bribery of foreign officials

payments to foreign officials to influence an official act or decision corruptly or to influence a foreign government Foreign Corrupt Practices Act (FCPA) was created to combat this type of bribery

The purpose of criminal law is to..

punish an offender for causing harm to public health, safety, or morals

burden of proof

the obligation to present evidence to support one's claim 2 elements: the burden of production of evidence, and the burden of persuasion

Bribery (white collar crime)

the offering, giving, soliciting, or receiving of money or any object of value for the purpose of influencing the judgement or conduct of a person in a position of trust.

Embezzlement (white-collar crime)

the wrongful conversion of another's property by one who is lawfully in possession of that property Ex: An employee steals money