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McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All Right Reserved

The Legal & Regulatory

Environment of Business 16e

Chapter 13

Criminal Law and

BusinessReed Pagnattaro Cahoy Shedd Moorhead

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Learning Objectives

To recognize the basic terms and procedures relevant to criminal conduct.

To explain Fourth, Fifth and Sixth Amendment rights.

To identify the elements of specific crimes.

To realize the far-reaching impact of criminal behavior as the same acts can give rise to both civil and criminal liability.

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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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CrimeInherently Wrong

Malum In Se

Deemed Wrong By Legislature

Malum ProhibitumExamples

White-collar crime committed by:

•Business entities

•Desk workers

•Accountants

•Attorneys

•Officers13-5

Crime Classifications

Felony

Indictment

Grand Jury

Fine Or

Imprisonment

Misdemeanor

Information

Gov’t Charge

Fine Or

Jail<1 yr.

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Underlying Concepts

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Crime

IntentWillfully

Or Knowingly

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 Proceedings13-9

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pop

QUIZpop

QUIZpop

QUIZCrimes punishable by one year or more

imprisonment are called _________.

a. Misdemeanors

b. Criminal indiscretions

c. Felonies

d. Indictments

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Constitutional Protections

The Bill of Rights of the

U.S. Constitution

provide civil liberties that

protect persons from the power of

government, including persons

accused of crimes. It also

protects businesses

from excessive regulation.

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Unreasonable search & seizure - privacy

Extends to certain civil matters

Expectation of privacy

Generally assumed

Not for some businesses

Fourth Amendment

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Food for thought…

The word privacy is not contained in

the U.S. Constitution. Our rights to

privacy arose from common law

decisions rendered by judges as they

interpreted our rights.

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Self-Incrimination• Protects accused from testifying

against self• Does not protect against being

required to produce evidence• Business records can be obtained• Only protects sole

proprietorship entity

Double 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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think

TANKthink

TANKthink

TANKGenerally, when corporations are charged

with crime, corporate officers can

also be criminally charged.

a. True

b. False

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think

TANKthink

TANKthink

TANKEmployees of some business do not

have 4th amendment protections

because of public policy considerations.

a. True

b. False

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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

Fraud

Specific Business Crimes

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Interstate communication

Scheme to defraud- course of

action to deceive others

Legal aspects- statement

(material fact) known to be

untrue or disregards truth

• Intent to defraud- act knowingly

• Good 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

to carrying out criminal

offense

Each member is agent/

Partner of other members-

willful member

Commit overt act- not

required to know details

Conspiracy

Specific Business Crimes

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Fraud Larceny

Conspiracy RICO

Obstruction of Justice Cyber Crime

False

Statement

Endangering Workers

•Act committed with intent

to obstruct legislative or

judicial process

• Integrity of proceedings

• Examples:

•Clean up files

•Changing record of

phone conversation

•Shredding documents

during pending

investigation

Obstruction of

Justice

Specific Business Crimes

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Fraud Larceny

Conspiracy RICO

Obstruction of Justice Cyber Crime

False

Statement

Endangering Workers

• To Bank•Financial statements•Relate to material fact

•To Federal Agency•Willfully and knowingly

•Relate to material matter

•“Exculpatory no”False

Statement

Specific Business Crimes

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Fraud Larceny

Conspiracy RICO

Obstruction of Justice Cyber Crime

False

Statement

Endangering Workers

• Larceny – unlawful taking of property

•Robbery•Burglary•Embezzlement

•Examples:•Use of companyproperty withoutpermission

•Padding expenseaccounts

•Falsifying timerecords

Larceny

Specific Business Crimes

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Fraud Larceny

Conspiracy RICO

Obstruction of Justice Cyber Crime

False

Statement

Endangering Workers

Liability•Use/invest income from

prohibited activities

•Acquire/maintain interest

in prohibited enterprise

•Conducts/participates in

prohibited enterprise

Prohibited activity•Pattern of racketeering

•Collection of unlawful

debt

RICO

Specific Business Crimes

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Fraud Larceny

Conspiracy RICO

Obstruction of Justice Cyber Crime

False

Statement

Endangering Workers

• Hacker (cracker) –unlawful access to electronic information

• Id theft

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

Cyber Crime

Specific Business Crimes

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Fraud Larceny

Conspiracy RICO

Obstruction of Justice Cyber Crime

False

Statement

Endangering Workers

• Assault & Battery

• Accidental Homicide

• Safety Precautions

• Occupational SafetyAnd Health Act

Endangering

Workers

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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Bribery and Kickbacks

Of a public official = Federal charge

Illegal both domestically and internationally

Foreign Corrupt Practices Act

“Fixing” a college or professional sporting

event

FBI Sports Bribery Program

Giving money back to someone

who made a decision that

benefited you or your company.13-29

Sentencing Guidelines

Judges

•Loss of control

•Complexity

Supreme court made advisory

Reversed if unreasonable

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Trends

Sarbanes-Oxley Act

Plea bargaining with mid-level

employees in exchange for

testimony against top-level

employees

Forfeiture of assets

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