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 Companies, Inc. All rights reserved.

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

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.

12-4 Crime Inherently Wrong  Malum In Se. – Deemed Wrong By Legislature, e.g. –  White-collar crime committed by: Business entities Business entities Officers Officers Accountants Accountants Attorneys Attorneys Desk workers Desk workers

12-5 Crime Classifications Felony Indictment Grand Jury Fine Or Imprisonment Misdemeanor Information Gov’t Charge Fine Or Jail<1 yr.

12-6 Underlying Concepts Crime Intent WillfullyOrKnowingly

12-7 Pleas in Criminal Cases Guilty Not Guilty Nolo Contendere (“no contest”) Criminal conviction may be basis for civil damages suit.

12-8 Grand Jury  Constitution- 5 th Amendment  23 Citizens  Determine Probable Cause  Presumption Of Innocence  No Defense Counsel  Subpoena Power  Secret Proceedings

12-9 pop QUIZ pop QUIZpop Crimes punishable by one year or more imprisonment are called _________. a. Misdemeanors b. Criminal indiscretions c. Felonies d. Indictments

12-10 Constitutional Protections The Bill of Rights of the U.S. Constitution provide civil liberties that from the power of government protect persons from the power of government, including persons accused of crimes and protect businesses from excessive regulation.

12-11  Unreasonable search & seizure - privacy  Extends to certain civil matters  Expectation of privacy  Generally assumed  Not for some businesses  Unreasonable search & seizure - privacy  Extends to certain civil matters  Expectation of privacy  Generally assumed  Not for some businesses Fourth Amendment

12-12  Self-Incrimination Protects accused from testifying against self Protects accused from testifying against self Does not protect against being required to produce evidence Does not protect against being required to produce evidence Business records can be obtained Business records can be obtained Only protects sole Only protects sole proprietorship entity proprietorship entity  Double Jeopardy  Self-Incrimination Protects accused from testifying against self Protects accused from testifying against self Does not protect against being required to produce evidence Does not protect against being required to produce evidence Business records can be obtained Business records can be obtained Only protects sole Only protects sole proprietorship entity proprietorship entity  Double Jeopardy Fifth Amendment

12-13  Provides Protections To: Speedy/Public Trial Trial By Jury Be Informed Of Charge Confront Accuser Subpoena Witnesses Assistance Of Attorney Sixth Amendment

12-14 Specific Business Crimes FraudLarceny ConspiracyRICO Obstruction of JusticeCyber Crime False Statement Endangering Workers FraudLarceny ConspiracyRICO Obstruction of JusticeCyber Crime False Statement Endangering Workers

12-15 think TANK think TANKthink Generally, when corporations are charged with crime, corporate officers can also be criminally charged. a. True b. False

12-16 think TANK think TANKthink Employees of some business do not have 4 th amendment protections because of public policy considerations. a. True b. False

12-17 FraudLarceny ConspiracyRICO Obstruction of JusticeCyber 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 FraudFraud Specific Business Crimes

12-18  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 Intent to defraud- act knowingly Good faith Good faith  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 Intent to defraud- act knowingly Good faith Good faith Mail and Wire Fraud

12-19 FraudLarceny ConspiracyRICO Obstruction of JusticeCyber Crime False Statement Endangering Workers  More than 1 person agrees to carrying out criminal to carrying out criminal offense offense  Each member is agent/ Partner of other members- Partner of other members- willful member willful member  Commit overt act- not required to know details required to know details Conspiracy Specific Business Crimes

12-20 FraudLarceny ConspiracyRICO Obstruction of JusticeCyber Crime False Statement Endangering Workers Act committed with intentAct committed with intent to obstruct legislative or to obstruct legislative or judicial process judicial process Integrity of proceedings Integrity of proceedings Examples: Examples: Clean up filesClean up files Changing record ofChanging record of phone conversation phone conversation Shredding documentsShredding documents during pending during pending investigation investigation Obstruction of Justice Specific Business Crimes

12-21 FraudLarceny ConspiracyRICO Obstruction of JusticeCyber Crime False Statement Endangering Workers To Bank To Bank Financial statementsFinancial statements Relate to material factRelate to material fact To Federal AgencyTo Federal Agency Willfully andWillfully and knowingly knowingly Relate to materialRelate to material matter matter “Exculpatory no”“Exculpatory no” FalseStatement Specific Business Crimes

12-22 FraudLarceny ConspiracyRICO Obstruction of JusticeCyber Crime False Statement Endangering Workers Larceny – unlawful Larceny – unlawful taking of property taking of property RobberyRobbery BurglaryBurglary EmbezzlementEmbezzlement Examples:Examples: Use of companyUse of company property without property without permission permission Padding expensePadding expense accounts accounts Falsifying timeFalsifying time records recordsLarceny Specific Business Crimes

12-23 FraudLarceny ConspiracyRICO Obstruction of JusticeCyber Crime False Statement Endangering Workers  Liability Use/invest income from Use/invest income from prohibited activities prohibited activities Acquire/maintain interest Acquire/maintain interest in prohibited enterprise in prohibited enterprise Conducts/participates in Conducts/participates in prohibited enterprise prohibited enterprise  Prohibited activity Pattern of racketeering Pattern of racketeering Collection of unlawful Collection of unlawful debt debt RICO Specific Business Crimes

12-24 FraudLarceny ConspiracyRICO Obstruction of JusticeCyber Crime False Statement Endangering Workers Hacker (cracker) – Hacker (cracker) – unlawful access to electronic information Id theft Electronic theft Electronic theft Trade secrets Personnel records Customer lists Cyber Crime Specific Business Crimes

12-25 FraudLarceny ConspiracyRICO Obstruction of JusticeCyber Crime False Statement Endangering Workers Assault & Battery Assault & Battery Accidental Homicide Accidental Homicide Safety Precautions Safety Precautions Occupational Safety Occupational Safety And Health Act And Health Act EndangeringWorkers Specific Business Crimes

12-26 Aiding And Abetting  Federal charge  Assist in criminal act  Participating in conspiracy  State charge = accessory Before crime After the fact

12-27 Sentencing Guidelines Judges  Judges Loss of controlLoss of control ComplexityComplexity  Supreme court made advisory  Reversed if unreasonable

12-28 Trends  Sarbanes-Oxley Act  Plea bargain with mid-level employees in exchange for testimony against top-level employees  Forfeiture of assets