1. Crime and the Business Community
Chapter 7
Chapter 7: Crime and the Business Community
Crime and the Business Community
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

2. Overview LO7-1: What are the basic elements of a crime?
LO7-2: What are some of the common crimes affecting businesses, and how do we prove them?
LO7-3: When a crime is committed to benefit a corporation, who can be held liable ?
LO7-4: What are the basic constitutional safeguards for a person accused of a crime?
LO7-5: What are the basic steps of a criminal proceeding?
LO7-6: How can we prevent white-collar crimes?

3. Chapter 7 Hypothetical Case 1
George Barringer sat restlessly in his living room recliner in the wee hours of the morning. For the third night in a row, Barringer's neighbor, Eddie Young, had been playing his stereo system so loud that Barringer could hear every word of every song. On the first night of the auditory violation, Barringer had politely asked Young to turn the sound down and was ignored. On the second night, Barringer's request was still civil but more demanding and insistent. Both requests had "fallen on deaf ears," as they say. Barringer's wife, Patricia, found him in the living room that morning in his distressed state. When Barringer saw his wife, he immediately said, "Can you believe Eddie is disturbing us like this? I am going to kill that jerk!" Alarmed by her husband's statement, Patricia Barringer called the police and reported the threat on Young's life.
Has Barringer committed a crime justifying his arrest and prosecution? Explain your response.
Chapter 7 Hypothetical Case 1: George Barringer sat restlessly in his living room recliner in the wee hours of the morning. For the third night in a row, Barringer's neighbor, Eddie Young, had been playing his stereo system so loud that Barringer could hear every word of every song. On the first night of the auditory violation, Barringer had politely asked Young to turn the sound down and was ignored. On the second night, Barringer's request was still civil but more demanding and insistent. Both requests had "fallen on deaf ears," as they say. Barringer's wife, Patricia, found him in the living room that morning in his distressed state. When Barringer saw his wife, he immediately said, "Can you believe Eddie is disturbing us like this? I am going to kill that jerk!" Alarmed by her husband's statement, Patricia Barringer called the police and reported the threat on Young's life.
Has Barringer committed a crime justifying his arrest and prosecution? Explain your response.
[Instructor: See Elements of a Crime and Defenses to Crimes in Chapter 7]

4. Chapter 7 Hypothetical Case 2
Warren Delaney believed that his home was his castle, and during the summer months every year, his castle was a tiny cabin nestled in the woods of upstate New York. For several consecutive years, Delaney's cabin had been vandalized or burglarized during the winter months. During the winter of 2013, several windows had been shattered. In the winter of 2014, several pieces of furniture had been stolen. At some point during the winter of 2015, the bedroom mattress had been ripped apart, with foam and fabric scattered about the bedroom floor. On each of these occasions, the perpetrator had forced the front door lock open. Delaney envisioned a way to stop the criminal(s) responsible for these violations. He spring-loaded a shotgun in the living room of the cabin, and pointed it directly at the front door. The shotgun was configured so that if someone opened the front door while he was away, it would fire at the intruder.
Chapter 7 Hypothetical Case 2: Warren Delaney believed that his home was his castle, and during the summer months every year, his castle was a tiny cabin nestled in the woods of upstate New York. For several consecutive years, Delaney's cabin had been vandalized or burglarized during the winter months. During the winter of 2013, several windows had been shattered. In the winter of 2014, several pieces of furniture had been stolen. At some point during the winter of 2015, the bedroom mattress had been ripped apart, with foam and fabric scattered about the bedroom floor. On each of these occasions, the perpetrator had forced the front door lock open. Delaney envisioned a way to stop the criminal(s) responsible for these violations. He spring-loaded a shotgun in the living room of the cabin, and pointed it directly at the front door. The shotgun was configured so that if someone opened the front door while he was away, it would fire at the intruder.
[Instructor: See Defenses to Crimes in Chapter 7]

5. Chapter 7 Hypothetical Case 2 (cont'd)
Delaney returned to his cabin in May 2016 and came upon a grisly scene. The front door had been opened, and at the threshold was the partially decomposed body of what appeared to be a middle-aged man, dead of a shotgun blast to the chest. Delaney immediately called the local sheriff, Officer Brian Mulholland. Upon arriving at the scene and briefly questioning Delaney, Mulholland arrested him.
Was the arrest valid? Did Delaney commit first-degree murder? Did he use justifiable force in this situation?
Chapter 7 Hypothetical Case 2 (cont'd): Delaney returned to his cabin in May 2016 and came upon a grisly scene. The front door had been opened, and at the threshold was the partially decomposed body of what appeared to be a middle-aged man, dead of a shotgun blast to the chest. Delaney immediately called the local sheriff, Officer Brian Mulholland. Upon arriving at the scene and briefly questioning Delaney, Mulholland arrested him.
Was the arrest valid? Did Delaney commit first-degree murder? Did he use justifiable force in this situation?
[Instructor: See Defenses to Crimes in Chapter 7]

6. Elements of a Crime Actus reus—Wrongful behavior (guilty act)
Mens rea—Wrongful state of mind, such as purpose, knowledge, recklessness, or negligence (guilty mind)
In order to prove criminal liability, two elements of crime must be established. The first element is actus reus, which represents wrongful behavior or a guilty act. The second element is mens rea, which demonstrates a wrongful or guilty state of mind, such as purpose, knowledge, recklessness, or negligence.

7. Classification of Crimes
Felonies—Serious crimes punishable by imprisonment for greater than one year, or 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
Crimes can be classified as felonies, misdemeanors, or petty offenses. Felonies are serious crimes punishable by imprisonment for greater than one year, or death. Misdemeanors are less serious crimes punishable by fines, or imprisonment for less than one year. Petty offenses are minor misdemeanors punishable by small fines or short jail sentences.

8. Crimes Affecting Business: Property Crimes
Robbery
Burglary
Larceny
Arson
Property crimes represent wrongs against property interests. Such crimes include robbery, burglary, larceny, and arson.

9. Crimes Affecting Business: White-Collar Crimes
Bribery
Extortion
Fraud
Embezzlement
Computer crimes
White-collar crimes are typically nonviolent offenses that have cheating as their central element. Examples of white-collar crimes include bribery, extortion, fraud, embezzlement, and computer crimes.

10. Selected Types of Fraudulent Crimes
Forgery
Defalcation
False entry
False token
False pretenses
Fraudulent concealment
Mail fraud
Health care fraud
Telemarketing fraud
Ponzi schemes
Check kiting
Pretexting
Mortgage and real estate fraud
Fraud-based crimes involve fraud as an essential element of the crime. Crimes involving fraud include forgery, defalcation, false entry, false token, false pretenses, fraudulent concealment, mail fraud, health care fraud, telemarketing fraud, Ponzi schemes, check kiting, pretexting, and mortgage and real estate fraud.

11. Liability in Corporate Crimes
Corporations can be held criminally accountable for almost any crime except those punishable only by a prison sentence.
Corporate executives may be personally liable for business crime.
Vicarious crime is when employers are liable for wrongful acts of employees in some instances.
Corporations can be held criminally accountable for almost any crime except those punishable only by a prison sentence. Corporate executives may be personally liable for business crime. Vicarious crime is when employers are liable for wrongful acts of employees in some instances.

12. Defenses to Crimes Infancy Mistake-of-fact Involuntary intoxication
Duress
Insanity
Entrapment
Necessity
Justifiable use of force
Defenses to crimes include infancy, mistake-of-fact, involuntary intoxication, duress, insanity, entrapment, necessity, and justifiable use of force.

13. Constitutional Safeguards: The Fourth and Fifth Amendments
Fourth Amendment
Protection from unreasonable search and seizure
Restrictions on warrants
Fifth Amendment
Prohibition on double jeopardy
Right not to incriminate oneself
Right to due process
The Fourth Amendment of the United States Constitution prohibits unreasonable searches and seizures. It generally requires a warrant before a search or seizure can occur, and restricts the issuance of warrants by requiring probable cause. The Fifth Amendment of the United States Constitution prohibits double jeopardy, grants the defendant the privilege against self-incrimination, and guarantees the right to due process.

14. Constitutional Safeguards: The Sixth Amendment
Right to a speedy and public trial
Right to a trial by an impartial jury
Right to be informed of the accusations against oneself
Right to confront witnesses
Right to have witnesses on one's side
Right to counsel at various stages of the proceedings
The Sixth Amendment of the United States Constitution guarantees numerous constitutional rights, including the right to a speedy and public trial, the right to a trial by an impartial jury, the right to be informed of the accusations against oneself, the right to confront witnesses, the right to call favorable witnesses to one's defense, and the right to counsel at various stages of criminal proceedings.

15. Constitutional Safeguards: The Eighth and Fourteenth Amendments
Eighth Amendment
Freedom from excessive bail
Freedom from excessive fines
Freedom from cruel and unusual punishment
Fourteenth Amendment
Extension of the right to due process to all state matters
Extension of most constitutional rights to defendants at the state level
The Eighth Amendment of the United States Constitution guarantees freedom from excessive bail, excessive fines, and cruel and unusual punishment. The Fourteenth Amendment of the United States Constitution extends the right to due process to all state matters, and grants most constitutional rights to defendants at the state level.

16. Exclusionary Rule
Definition: All evidence obtained in violation of the Fourth, Fifth, and Sixth Amendments is not admissible in court
The exclusionary rule states that all evidence obtained in violation of the Fourth, Fifth, and Sixth Amendments is not admissible in court.

17. Criminal Procedure: Pretrial Procedure
Arrest
Booking
First appearance
Indictment (for a felony) or Information (for a misdemeanor)
Arraignment
Pretrial criminal procedure includes the arrest, booking, first appearance, indictment for a felony or information for a misdemeanor, and arraignment.

18. Miranda Rights
"You have the right to remain silent and refuse to answer any questions"
"Anything you say may be used against you in a court of law"
"You have the right to consult an attorney before speaking to the police and have an attorney present during any questioning now or in the future"
"If you cannot afford an attorney, one will be appointed for you before the questioning begins"
"If you do not have an attorney available, you have the right to remain silent until you have had an opportunity to consult with one"
"Now that I have advised you of your rights, are you willing to answer any questions without an attorney present?"
Miranda rights indicate that before a law enforcement officer engages in custodial interrogation, he must inform the defendant of the following: "You have the right to remain silent and refuse to answer any questions"; "Anything you say may be used against you in a court of law"; "You have the right to consult an attorney before speaking to the police and have an attorney present during any questioning now or in the future"; "If you cannot afford an attorney, one will be appointed for you before the questioning begins"; "If you do not have an attorney available, you have the right to remain silent until you have had an opportunity to consult with one"; and "Now that I have advised you of your rights, are you willing to answer any questions without an attorney present?"

19. Criminal Procedure: Trial Procedure
Trial (with burden of proof on prosecution)
Jury deliberations
Jury verdict
Sentencing hearing (if defendant found guilty)
Criminal trial procedure includes the trial (with the burden of proof on the prosecution,) jury deliberations, the jury verdict, and a sentencing hearing (if the defendant is found guilty.)

20. Ways to Prevent White-Collar Crime
Federal crime-fighting laws
Racketeer Influenced and Corrupt Organizations (RICO)
False Claims Act
Sarbanes-Oxley Act
Three federal crime-fighting laws are the Racketeer Influenced and Corrupt Organizations (RICO) Act, the False Claims Act, and the Sarbanes-Oxley Act of RICO and the False Claims Act were originally created with different purposes in mind. Sarbanes-Oxley, however, was created specifically to combat white-collar crime.

21. Racketeer Influenced and Corrupt Organizations 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 can sue to recover treble damages and attorney fees in a civil action
The Racketeer Influenced and Corrupt Organizations Act, or RICO, prohibits persons employed by or associated with an enterprise from engaging in a pattern of racketeering activity. RICO provides that anyone whose business or property has been damaged as a result of racketeering can sue to recover treble damages and attorney fees in a civil action.

22. The False Claims Act
Allows employees to sue employers on behalf of the federal government
Employee retains share of recovery
The False Claims Act allows employees to sue employers on behalf of the federal government. If the lawsuit results in a favorable verdict, the employee retains a share of the recovery.

23. The Sarbanes-Oxley Act
Passed by Congress in response to the business scandals of the early 2000s
Examples: Enron, WorldCom, Global Crossing, Arthur Anderson
Criminalizes specific non-audit services when provided by a registered accounting firm to an audit client
Increases the punishment for a number of white-collar offenses
Extends the statute of limitations regarding the discovery of fraud (two years from the date of discovery of the fraud and five years from the date of the criminal act)
The Sarbanes-Oxley Act was enacted by Congress in response to the business scandals of the early 2000s, including Enron, WorldCom, Global Crossing, and Arthur Anderson. Sarbanes-Oxley criminalizes specific non-audit services when provided by a registered accounting firm to an audit client, and increases the punishment for a number of white-collar offenses. The Act extends the statute of limitations regarding the discovery of fraud to two years from the date of discovery of the fraud, and to five years from the date of the criminal act.

24. Chapter 7 Hypothetical Case 3
In 1985, Thomas Townsend was convicted of pedophilia, having had sexual relations with a 15-year-old child (at the time, Townsend was 29 years old). Since then, Townsend has led a relatively uneventful life, spending most of his time building and selling musical instruments to earn a living, and keeping to himself on his property on the edge of town. Local police are curious whether Townsend has truly reformed. The local sheriff has received a number of complaints from citizens who are appalled that a child sex offender lives among them. Working in collaboration with the Federal Bureau of Investigation (FBI), local authorities devise and implement a plan to determine whether Thomas is leading an innocent life.
Chapter 7 Hypothetical Case 3: In 1985, Thomas Townsend was convicted of pedophilia, having had sexual relations with a 15-year-old child (at the time, Townsend was 29 years old). Since then, Townsend has led a relatively uneventful life, spending most of his time building and selling musical instruments to earn a living, and keeping to himself on his property on the edge of town. Local police are curious whether Townsend has truly reformed. The local sheriff has received a number of complaints from citizens who are appalled that a child sex offender lives among them. Working in collaboration with the Federal Bureau of Investigation (FBI), local authorities devise and implement a plan to determine whether Thomas is leading an innocent life.
[Instructor: See Defenses to Crimes in Chapter 7]

25. Chapter 7 Hypothetical Case 3 (cont'd)
Over the course of an 18-month period, police investigators send Townsend a monthly advertisement for a publication. The ad entices readers to "order now, before publication ceases; see young boys and girls aged 12–16 engaged in all sorts of acts only big boys and girls should be allowed to do!"
Townsend finally responds to the circular on the eighteenth occasion, mailing in the $39.95 purchase price. Local, state, and federal authorities immediately intervene, arresting Townsend for solicitation of child pornographic materials.
At Townsend's arraignment hearing, his attorney moves for immediate dismissal of the charges, arguing entrapment. Do the police efforts described constitute entrapment? Does entrapment justify dismissal of all charges against the accused? Rather than dismissal of charges, why not simply sanction those authorities responsible for the entrapment?
Chapter 7 Hypothetical Case 3 (cont'd): Over the course of an 18-month period, police investigators send Townsend a monthly advertisement for a publication. The ad entices readers to "order now, before publication ceases; see young boys and girls aged 12–16 engaged in all sorts of acts only big boys and girls should be allowed to do!"
Townsend finally responds to the circular on the eighteenth occasion, mailing in the $39.95 purchase price. Local, state, and federal authorities immediately intervene, arresting Townsend for solicitation of child pornographic materials.
At Townsend's arraignment hearing, his attorney moves for immediate dismissal of the charges, arguing entrapment. Do the police efforts described constitute entrapment? Does entrapment justify dismissal of all charges against the accused? Rather than dismissal of charges, why not simply sanction those authorities responsible for the entrapment?
[Instructor: See Defenses to Crimes in Chapter 7]

26. Chapter 7 Hypothetical Case 4
Steven Harbrough, former administrator of the Environmental Protection Agency, has been charged in a federal lawsuit. Recently, documents have come to light that indicate that Harbrough's wife, a director at investment bank Wollstone Sanford, sold off thousands of shares of stock in Barrett Industrial one day before her husband announced that the company was under investigation for illegally dumping chemicals.
Which law or laws has Harbrough most likely been charged with violating in the lawsuit—RICO, the False Claims Act, or Sarbanes-Oxley?
Chapter 7 Hypothetical Case 4: Steven Harbrough, former administrator of the Environmental Protection Agency, has been charged in a federal lawsuit. Recently, documents have come to light that indicate that Harbrough's wife, a director at investment bank Wollstone Sanford, sold off thousands of shares of stock in Barrett Industrial one day before her husband announced that the company was under investigation for illegally dumping chemicals.
Which law or laws was Harbrough most likely charged with violating in the lawsuit—RICO, the False Claims Act, or Sarbanes-Oxley?
[Instructor: See Tools for Fighting Business Crime in Chapter 7]