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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.
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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
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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.
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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
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Crime Classifications
Felony
IndictmentGrand Jury
Fine Or
Imprisonment
Misdemeanor
Information
Gov’t Charge
Fine Or
Jail<1 yr.
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Underlying Concepts
Crime
IntentWillfully Willfully
Or Or KnowinglyKnowingly
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Pleas in Criminal Cases
Guilty
Not Guilty
Nolo Contendere(“no contest”)
Criminal conviction may be basis for civil damages suit.
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Grand Jury Constitution- 5th
Amendment 23 Citizens
Determine Probable Cause Presumption Of Innocence
No Defense Counsel Subpoena Power
Secret Proceedings
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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
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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.
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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
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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
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Provides Protections To: Speedy/Public Trial
Trial By Jury Be Informed Of Charge
Confront Accuser Subpoena Witnesses
Assistance Of Attorney
Sixth Amendment
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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Aiding And Abetting
Federal charge Assist in criminal act Participating in conspiracy State charge = accessory
Before crime After the fact
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Sentencing Guidelines
JudgesJudges
•Loss of controlLoss of control
•ComplexityComplexity
Supreme court made advisorySupreme court made advisory
Reversed if unreasonableReversed if unreasonable
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12-28
Trends Sarbanes-Oxley Act
Plea bargain with mid-level employees in exchange for testimony against top-level employees
Forfeiture of assets