1. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-1 A Critical Thinking Approach Fourth Edition Nancy K. Kubasek Bartley A. Brennan M. Neil Browne Nancy K. Kubasek Bartley A. Brennan M. Neil Browne

2. Ch. 7-2 © 2006 Prentice Hall CHAPTER 7 White Collar Crime and the Business Community THE LEGAL ENVIRONMENT OF BUSINESS

3. © 2006 Prentice Hall Ch. 7-3 -3 Crime Crimes are offenses against the public Wrongful actions Wrongful intent – mens rea FeloniesMisdemeanors Petty crimes

4. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-4 -4 Criminal Procedure Criminal Procedure Warrant issued Arrest Miranda Rights Booking First appearance BailInformation

5. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-5 -5 Grand Jury Proceedings Used in felony cases Evidence presented by the state Witnesses may be subpoenaed Purpose of Grand Jury Decide if there is enough evidence to justify a full trial Purpose of Grand Jury Decide if there is enough evidence to justify a full trial

6. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-6 -6 Other Procedures Indictment Whether sufficient admissible evidence exists to obtain a conviction Pretrial Diversion Agreement to perform services under supervision

7. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-7 -7 Criminal Procedure Criminal Procedure ArraignmentPlea Plea bargains Burden of production of evidence Burden of persuasion Standard of proof Fifth Amendment

8. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-8 -8 Defenses EntrapmentInsanityDuressMistake

9. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-9 -9 Features of White Collar Crime Crime committed in a commercial context by professional and management classes. Definition “Crime committed by a person of respectability and high social status in the course of his occupation.” ~ Edwin Sutherland

10. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-10 -10 Can the Corporation Be a ‘Criminal’? Corporation an artificial, legal entity Corporation How can liability based on acts of natural persons be attributed to a corporation?

11. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-11 -11 Arguments in Support of Corporate Criminal Liability Fines will pressure shareholders Maintain incentives to obey law Ease of investigation and prosecution Collective decisionmaking should not provide escape Avoids making scapegoats of employees

12. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-12 -12 More Arguments in Support of Corporate Criminal Liability Unfair to single out individuals for common pattern of criminal behavior Unfair to allow shareholders to benefit from crime Public information and disclosure to consumers important function of prosecution

13. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-13 -13 Arguments Against Corporate Criminal Liability Fines are just passed on to consumers Punishing shareholders is misguided- shareholders really do not control the enterprise No real or lasting damage to corporate image can be achieved

14. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-14 -14 Liability of Top Executives The only way in which a corporation can act is through the individuals who act on its behalf. ~ Dotterweich Therefore, a corporate agent through whose act, default, or omission the corporation committed a crime, was himself guilty individually of that crime. ~ Park

15. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-15 -15 Factors Encouraging White Collar Crime Pressure to succeed Short-term goals Groupthink Easy to rationalize Dispersed decisionmaking Lack of stigma even when convicted Lax regulation Poor personnel policies

16. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-16 -16 Sentencing of White Collar Criminals 1991 Federal Sentencing Guidelines Base Fine + Culpability Score Aggravating + Mitigating Factors Extraordinary circumstances

17. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-17 -17 Alternative Sentencing Community service Occupational disqualification House arrest Weekend prison

18. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-18 -18 Common White Collar Crimes Bribery Regulatory Violations Criminal Fraud Defalcation False entries False token False pretenses Forgery Fraudulent concealment

19. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-19 -19 More White Collar Crimes LarcenyEmbezzlement Computer Crimes Some examples: PiggybackingImposter Trojan Horse Salami slicing Data destruction (Virus, Worm) Data misappropriation

20. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-20 -20 Prevention Federal vs. state chartering Require public directors Link fines to benefits obtained Equity fines More vigorous regulation Internal corporate measures

21. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-21 -21 Federal Laws RICO 1970 False Claims Act Sarbanes-Oxley Act 2002 Whistleblowers: good or bad?

22. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-22 -22 State Laws Whistleblower protection statutes Protect public employees Provides specific remedies Texas v. Green Retaliatory discharge leads to punitive damages for whistleblower employee  Affirmed. Texas v. Green Retaliatory discharge leads to punitive damages for whistleblower employee  Affirmed.

23. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-23 -23 Global Dimensions White Collar Crime: A worldwide problem Example: IOS case Lack of cooperation among law enforcement 2001: Creation of international fraud database Convention on cybercrime effective 2005

24. THE LEGAL ENVIRONMENT OF BUSINESS © 2006 Prentice Hall Ch. 7-24 -24 Summary Criminal law protects the public Criminal procedure differs from civil procedures White-collar crimes difficult to prosecute and punishments are light New technology and globalization of the economy have made new crimes possible