Chapter 5: Criminal Law and Business

Chapter 5Criminal Law and BusinessElements of a Crime“Actus Reus”—Wrongful behavior (guilty act)“Mens Rea”—Wrongful state of mind, such as purpose, knowledge, recklessness, or negligence (guilty mind)Classification of CrimesFelonies—Serious crimes punishable by imprisonment for greater than one year, or deathMisdemeanors—Less serious crimes punishable by fines, or imprisonment for less than one yearPetty Offenses—Minor misdemeanors punishable by small fines or short jail sentencesWhite Collar CrimeDefinition: A variety of nonviolent illegal acts against society that occur most frequently in the business contextCrimes Affecting Business: “White Collar” CrimesBriberyExtortionFraudEmbezzlementComputer CrimesBriberyDefinition: The offering, giving, soliciting, or receiving of money or any object of value for the purpose of influencing the judgment or conduct of a person in a position of trustExtortion (Blackmail)Definition: The making of threats for the purpose of obtaining money or propertyFraudDefinition: A variety of means by which an individual intentionally uses some sort of misrepresentation to gain advantage over another personElements of FraudA material false representation made with intent to deceive;A victim’s reasonable reliance on the false representation; andDamagesExhibit 5-1: Selected Types of Fraudulent CrimesForgeryDefalcationFalse EntriesFalse TokenFalse PretensesFraudulent ConcealmentMail FraudHealth Care FraudTelemarketing Fraud“Ponzi Schemes”Check “Kiting”“Pretexting”EmbezzlementDefinition: The wrongful conversion of another’s property by one who is lawfully in possession of that propertyComputer CrimeDefinition: Any wrongful act that is directed against computers, uses computers to commit a crime, or involves computersCriminal ProcedureDifferences Between Criminal and Civil ProcedureCriminal ProcedureThe government, through a prosecutor, always brings the criminal caseThe objective is punishment, in the form of a criminal fine and/or imprisonmentNumerous constitutional safeguards for the criminal defendantCivil ProcedureThe party filing the case, the plaintiff, can be an individual, business, or government entityThe objective is to remedy a wrong done to the plaintiff, so the defendant will either have to pay money damages, or be subject to an equitable remedy (injunction or specific performance)Constitutional Safeguards: The Fourth AmendmentProtection from “unreasonable search and seizure”Restrictions on warrantsConstitutional Safeguards: The Fifth AmendmentProhibition of “double jeopardy”Right not to incriminate oneselfRight to “due process”Constitutional Safeguards: The Sixth AmendmentRight to a speedy and public trialRight to a trial by an impartial jury of one’s peersRight to be informed of the accusations against oneselfRight to confront witnessesRight to have witnesses on one’s sideRight to counsel at various stages of the proceedingsConstitutional Safeguards: The Eighth AmendmentFreedom from excessive bailFreedom from excessive finesFreedom from cruel and unusual punishmentConstitutional Safeguards: The Fourteenth AmendmentExtension of the right to due process to all state mattersExtension of most constitutional rights to defendants at the state levelCriminal Procedure: Pretrial ProcedureArrestBookingFirst AppearanceIndictmentArraignment“Miranda Rights”--Before a law enforcement officer engages in “custodial interrogation,” he/she 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”“Now that I have advised you of your rights, are you willing to answer any questions without an attorney present?”Criminal Procedure: Trial ProcedureJury SelectionTrial (with burden of proof on prosecution)Jury DeliberationsJury VerdictSentencing Hearing (if Defendant found guilty)Defenses to CrimesInfancyMistakeIntoxicationInsanityDuressEntrapmentNecessityJustifiable Use of ForceCriminal Procedure: Posttrial ProcedureIf jury returns verdict of not guilty, government (prosecution) cannot appeal the acquittalIf jury returns verdict of guilty, defendant may appeal verdict by claiming prejudicial error of law at trialIf no appeal, defendant sentenced after judge receives additional information relevant to sentencingThe Racketeer Influenced and Corrupt Organizations Act (RICO)Prohibits persons employed by or associated with an enterprise from engaging in a pattern of racketeering activityAnyone whose business or property has been damaged can sue to recover treble damages and attorney fees in a civil actionThe False Claims ActAllows employees to sue employers on behalf of the federal governmentEmployee retains share of recoveryThe Sarbanes-Oxley ActPassed 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 clientIncreases the punishment for a number of white-collar offensesExtends the statute of limitations regarding the discovery of fraud (two years from the date of discovery of the fraud, five years from the date of the criminal act)