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Chapter 12— Criminal Law and Business REED SHEDD REED SHEDD PAGNATTARO PAGNATTARO MOREHEAD MOREHEAD F I F T E E N T H E D I T I O N F I F T E E N T H E D I T I O N The The Legal & Legal & Regulatory Regulatory Environment of of Business Business McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

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Page 1: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

Chapter 12—Criminal Law and Business

REED SHEDDREED SHEDD PAGNATTARO PAGNATTARO MOREHEAD MOREHEAD

F I F T E E N T H E D I T I O NF I F T E E N T H E D I T I O N

TheThe Legal & Legal & RegulatoryRegulatory Environment of of BusinessBusiness

McGraw-Hill/IrwinCopyright © 2010 by The McGraw-Hill Companies, Inc. All rights

reserved.

Page 2: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-2

Introduction Criminal law provides a

means to punish wrongdoers who affect ownership of property.

A crime is a wrong against society.

Federal & state penal codes

Page 3: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-3

Learning Objectives To recognize the kind of acts that constitute

white-collar crimes. To explain Fourth, Fifth and Sixth Amendment

rights. To identify the elements of specific crimes. To understand how the same acts can give rise

to both civil and criminal liability. To realize the far-reaching impact of criminal

behavior on corporations and individuals.

Page 4: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-4

CrimeInherently Wrong

Malum In SeMalum In SeDeemed Wrong By Legislature, e.g. –. –

White-collar crime White-collar crime committed by:committed by:

•Business entitiesBusiness entities•OfficersOfficers•AccountantsAccountants•AttorneysAttorneys•Desk workersDesk workers

Page 5: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-5

Crime Classifications

Felony

IndictmentGrand Jury

Fine Or

Imprisonment

Misdemeanor

Information

Gov’t Charge

Fine Or

Jail<1 yr.

Page 6: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-6

Underlying Concepts

Crime

IntentWillfully Willfully

Or Or KnowinglyKnowingly

Page 7: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-7

Pleas in Criminal Cases

Guilty

Not Guilty

Nolo Contendere(“no contest”)

Criminal conviction may be basis for civil damages suit.

Page 8: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-8

Grand Jury Constitution- 5th

Amendment 23 Citizens

Determine Probable Cause Presumption Of Innocence

No Defense Counsel Subpoena Power

Secret Proceedings

Page 9: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-9

pop

QUIZpop

QUIZpoppop

QUIZQUIZCrimes punishable by one year or moreCrimes punishable by one year or moreimprisonment are called _________.imprisonment are called _________.

a.a. MisdemeanorsMisdemeanorsb.b. Criminal indiscretionsCriminal indiscretionsc.c. FeloniesFeloniesd.d. IndictmentsIndictments

Page 10: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-10

Constitutional ProtectionsThe Bill of Rights of the

U.S. Constitutionprovide civil liberties that

protect persons from the power of from the power of governmentgovernment, including persons accused of crimes and protect

businesses from excessive regulation.

Page 11: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-11

Unreasonable search & Unreasonable search & seizure - privacyseizure - privacy

Extends to certain civil Extends to certain civil mattersmatters

Expectation of privacyExpectation of privacy

Generally assumedGenerally assumed

Not for some businessesNot for some businesses

Unreasonable search & Unreasonable search & seizure - privacyseizure - privacy

Extends to certain civil Extends to certain civil mattersmatters

Expectation of privacyExpectation of privacy

Generally assumedGenerally assumed

Not for some businessesNot for some businesses

Fourth Amendment

Page 12: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-12

Self-IncriminationSelf-Incrimination• Protects accused from testifying Protects accused from testifying

against selfagainst self• Does not protect against being Does not protect against being

required to produce evidencerequired to produce evidence• Business records can be obtainedBusiness records can be obtained• Only protects sole Only protects sole proprietorship entityproprietorship entity

Double JeopardyDouble Jeopardy

Self-IncriminationSelf-Incrimination• Protects accused from testifying Protects accused from testifying

against selfagainst self• Does not protect against being Does not protect against being

required to produce evidencerequired to produce evidence• Business records can be obtainedBusiness records can be obtained• Only protects sole Only protects sole proprietorship entityproprietorship entity

Double JeopardyDouble Jeopardy

Fifth Amendment

Page 13: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-13

Provides Protections To: Speedy/Public Trial

Trial By Jury Be Informed Of Charge

Confront Accuser Subpoena Witnesses

Assistance Of Attorney

Sixth Amendment

Page 14: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-14

Specific Business Crimes

Fraud Larceny

Conspiracy RICO

Obstruction of Justice Cyber Crime

False

Statement

Endangering Workers

Fraud Larceny

Conspiracy RICO

Obstruction of Justice Cyber Crime

False

Statement

Endangering Workers

Page 15: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-15

think

TANKthink

TANKthinkthink

TANKTANKGenerally, when corporations are chargedGenerally, when corporations are charged

with crime, corporate officers can with crime, corporate officers can also be criminally charged.also be criminally charged.

a.a. TrueTrueb.b. FalseFalse

Page 16: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-16

think

TANKthink

TANKthinkthink

TANKTANKEmployees of some business do not Employees of some business do not

have 4have 4thth amendment protections amendment protections because of public policy considerations.because of public policy considerations.

a.a. TrueTrueb.b. FalseFalse

Page 17: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-17

Fraud Larceny

Conspiracy RICO

Obstruction of Justice Cyber Crime

False

Statement

Endangering Workers

•Must be Scheme to Defraud

•Elements – • Intent To Mislead• Misstatement Of Fraud• Justifiable Reliance• Injury

•Mail & Wire Fraud•Securities Fraud•Health Care Fraud•Counterfeiting•Bankruptcy Fraud

FraudFraud

Specific Business Crimes

Page 18: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-18

Interstate communicationInterstate communication Scheme to defraud- course of Scheme to defraud- course of

action to deceive othersaction to deceive others Legal aspects- statement Legal aspects- statement

(material fact) known to be (material fact) known to be untrue or disregards truthuntrue or disregards truth

• Intent to defraud- act knowinglyIntent to defraud- act knowingly

• Good faithGood faith

Interstate communicationInterstate communication Scheme to defraud- course of Scheme to defraud- course of

action to deceive othersaction to deceive others Legal aspects- statement Legal aspects- statement

(material fact) known to be (material fact) known to be untrue or disregards truthuntrue or disregards truth

• Intent to defraud- act knowinglyIntent to defraud- act knowingly

• Good faithGood faith

Mail and Wire Fraud

Page 19: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-19

Fraud Larceny

Conspiracy RICO

Obstruction of Justice Cyber Crime

False

Statement

Endangering Workers

More than 1 person agrees More than 1 person agrees to carrying out criminal to carrying out criminal offenseoffense

Each member is agent/Each member is agent/ Partner of other members- Partner of other members- willful memberwillful member

Commit overt act- not Commit overt act- not required to know detailsrequired to know details

ConspiracyConspiracy

Specific Business Crimes

Page 20: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-20

Fraud Larceny

Conspiracy RICO

Obstruction of Justice Cyber Crime

False

Statement

Endangering Workers

•Act committed with Act committed with intentintent to obstruct legislative orto obstruct legislative or judicial processjudicial process• Integrity of proceedingsIntegrity of proceedings• Examples:Examples:

•Clean up filesClean up files•Changing record ofChanging record of phone conversationphone conversation•Shredding documents Shredding documents during pending during pending investigationinvestigation

Obstruction of Obstruction of

JusticeJustice

Specific Business Crimes

Page 21: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-21

Fraud Larceny

Conspiracy RICO

Obstruction of Justice Cyber Crime

False

Statement

Endangering Workers

• To BankTo Bank•Financial statementsFinancial statements•Relate to material factRelate to material fact

•To Federal AgencyTo Federal Agency•Willfully and Willfully and knowinglyknowingly•Relate to material Relate to material mattermatter•““Exculpatory no”Exculpatory no”False False

StatementStatement

Specific Business Crimes

Page 22: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-22

Fraud Larceny

Conspiracy RICO

Obstruction of Justice Cyber Crime

False

Statement

Endangering Workers

• Larceny – unlawful Larceny – unlawful taking of propertytaking of property

•RobberyRobbery•BurglaryBurglary•EmbezzlementEmbezzlement

•Examples:Examples:•Use of companyUse of company property withoutproperty without permissionpermission•Padding expensePadding expense accountsaccounts•Falsifying timeFalsifying time recordsrecords

LarcenyLarceny

Specific Business Crimes

Page 23: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-23

Fraud Larceny

Conspiracy RICO

Obstruction of Justice Cyber Crime

False

Statement

Endangering Workers

LiabilityLiability•Use/invest income fromUse/invest income from prohibited activitiesprohibited activities

•Acquire/maintain interest Acquire/maintain interest in prohibited enterprisein prohibited enterprise

•Conducts/participates in Conducts/participates in prohibited enterpriseprohibited enterprise

Prohibited activityProhibited activity•Pattern of racketeeringPattern of racketeering

•Collection of unlawful Collection of unlawful debtdebt

RICORICO

Specific Business Crimes

Page 24: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-24

Fraud Larceny

Conspiracy RICO

Obstruction of Justice Cyber Crime

False

Statement

Endangering Workers

• Hacker (cracker) –Hacker (cracker) – unlawful access to electronic information

• Id theftId theft

• Electronic theftElectronic theft•Trade secrets•Personnel records•Customer lists

Cyber CrimeCyber Crime

Specific Business Crimes

Page 25: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-25

Fraud Larceny

Conspiracy RICO

Obstruction of Justice Cyber Crime

False

Statement

Endangering Workers

• Assault & BatteryAssault & Battery

• Accidental HomicideAccidental Homicide

• Safety PrecautionsSafety Precautions

• Occupational SafetyOccupational Safety And Health ActAnd Health Act Endangering Endangering

WorkersWorkers

Specific Business Crimes

Page 26: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-26

Aiding And Abetting

Federal charge Assist in criminal act Participating in conspiracy State charge = accessory

Before crime After the fact

Page 27: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-27

Sentencing Guidelines

JudgesJudges

•Loss of controlLoss of control

•ComplexityComplexity

Supreme court made advisorySupreme court made advisory

Reversed if unreasonableReversed if unreasonable

Page 28: Chapter 12— Criminal Law and Business REED SHEDD PAGNATTARO MOREHEAD F I F T E E N T H E D I T I O N McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill

12-28

Trends Sarbanes-Oxley Act

Plea bargain with mid-level employees in exchange for testimony against top-level employees

Forfeiture of assets


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