The Criminal Law And Business

1. 10 The Criminal Law And Business

2. Introduction • Business Law Did Not Consist Of Understanding Of Criminal Law- Changed • Reasons For Change Of View: • Arthur Andersen • Enron • MCI/WorldCom

3. Crime • Wrong Against Society & Prohibited Conduct • Malum In Se • White-Collar Crime Committed By: • Business Entities • Officers • Accountants • Attorneys • Desk Workers

4. California Crime Statistics Crime Rate Per 100,000 Population Source: Office Of Attorney General, Dept. Of Justice, State Of California

5. Concepts • Willfully • Committed Voluntarily • On Purpose • Intent • Pleas • Guilty • Not Guilty • Nolo Contendere

6. Grand Jury • Constitution- 5th Amendment • 23 Citizens Of Jurisdiction • Probable Cause • Presumption Of Innocence • No Defense Counsel • Subpoena Power • Secret Proceedings

7. Fourth AmendmentTo Constitution • Illegal Search & Seizure- Unreasonable • Extends To Civil Matters • Assumes Expectation Of Privacy

8. Criminal Procedure Protections • 4th- Protection against unreasonable searches & seizures • Exclusionary Rule: Illegally obtained evidence inadmissible (Recent Local Example) • Porn, theft charges likely to be dropped: Judge says search by police illegalLast year, Carrboro police arrested Andrew Douglas Dalzell on theft and pornography charges but doctored another arrest warrant to make it look like they were picking him up for the 1997 murder of Deborah Leigh Key.Dalzell, now 28, confessed, but a judge ruled Dalzell's admission was coerced, and the district attorney dismissed the murder charges. Still, the charges that Dalzell stole a credit card number, took paint and figurines from an employer and downloaded child pornography remained. Until Thursday, when a judge ruled that Carrboro police also illegally collected evidence for the theft and pornography charges. As a result, Orange-Chatham District Attorney Jim Woodall said he will likely drop those remaining charges today. "The Carrboro Police Department ... took some chances and came up with a plan to try to make a break in the [murder] case," Woodall said. The plan would have worked, because Dalzell did confess to killing Key, he added. "It's just along the way many mistakes have been made preventing us from pursuing the case," he said. Carrboro police went on an illegal "fishing expedition" when they searched the murder suspect's apartment with a search warrant looking for stolen hobby goods last year, Superior Court Judge Howard Manning wrote in his decision, filed Thursday. For example, police seized a leather jacket because they thought it might be evidence in the murder investigation, even though the jacket wasn't listed on the search warrant. North Carolina law requires a search warrant to specify what items police are looking for, where they expect to find them and their relevance to a crime. But Carrboro Police lacked probable cause for the first warrant taken out Sept. 1, 2004, Manning wrote. Because every other search was based on things recovered during the first search, it's all tainted by the fact that the first was illegal. "The search warrant was no more and no less than an open invitation for [Investigator Anthony Westbrook] and [Lt. John Lau] to engage in a general, exploratory rummage through [Dalzell's] remaining belongings in the apartment," Manning wrote. Dalzell was long considered the prime suspect in Key's 1997 disappearance, but the case quickly went cold. So when Carrboro police arrested Dalzell and said he had confessed, they received both kudos and questions from family, friends, lawyers and other law enforcement officers. Then, after details emerged about how the department got Dalzell to say he killed Key after they left a Carrboro bar eight years ago, Superior Court Judge Wade Barber ruled the confession couldn't be used as evidence. Along with the fake arrest warrant, officers also faked a letter saying prosecutors would seek the death penalty unless Dalzell confessed and led police to Key's body. Carrboro Police Chief Carolyn Hutchison said that officers followed proper procedure in getting the search warrant and that everyone acted in good faith. “ This case presented complex legal issues all along the way," she said. Hutchison said the department has conducted internal reviews and officers have talked with the Carrboro town attorney, the District Attorney's Office and others to learn from the case. (Jessica Rocha, Raleigh News & Observer, 10/14/05.

9. Fifth AmendmentTo Constitution • 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

10. Fifth AmendmentTo Constitution • Double Jeopardy Double jeopardy (also called “autrefois acquit” is a procedural defense that forbids a defendant from being tried a second time for the same crime.

11. Fifth AmendmentTo Constitution HUDSON v. UNITED STATES 118 S.Ct. 488 (1997) FACTS: Petitioners were assessed civil penalties and were later indicted on charges arising out of the same transaction. Petitioners moved to dismiss the indictment on Double Jeopardy grounds. • ISSUE: Is the Double Jeopardy Clause of the Fifth Amendment a bar to criminal prosecution?

12. Fifth AmendmentTo Constitution HUDSON v. UNITED STATES 118 S.Ct. 488 (1997) • DECISION: No. • REASONS: 1. The Double Jeopardy Clause protects only against the imposition of multiple criminal punishments. • 2. Whether a particular punishment is criminal or civil is, at least initially, a matter of statutory construction. If the statutory scheme is so punitive to transform the civil remedy into a criminal penalty, the Double Jeopardy Clause may be violated. • 3. Neither the monetary penalties nor the debarment sanctions are so punitive in form and effect to render them criminal.

13. Criminal Procedure Protections • 5th- Miranda • Right to remain silent • Anything said can/will be used against you • Right to consult with a lawyer, to have lawyer present during interrogation • Cannot afford lawyer, a lawyer will be appointed (free of charge)

14. Sixth AmendmentTo Constitution • Provides Protections To: • Speedy/Public Trial • Trial By Jury • Be Informed Of Charge • Confront Accuser • Subpoena Witnesses • Assistance Of Attorney

15. Criminal Procedure Protections • 8th- Protection against cruel and unusual punishment

16. OSHA Specific Business Crimes • Worker Endangerment- Occupational Safety & Health Act • Obstruction Of Justice (see chart, p. 301) • False Statement • Bank • Federal Agency

17. Some Crimes Affecting Business • Robbery- aggravated • Burglary- aggravated • Larceny • Grand • Petit/Petty • False Pretenses • Receiving Stolen Goods • Arson • Forgery

18. Some Crimes Affecting Business • Theft (also known as stealing) is in general, the wrongful taking of someone else's property without that person's willful consent, with the intent to permanently deprive them of its possession or use. In law, “theft” is usually the broadest term for a crime involving the taking of property. Legally, in most jurisdictions, theft is generally considered to be synonymous with larceny.

19. Some Crimes Affecting Business The crime of larceny was first identified some 600 years ago and was initially narrowly interpreted. However, it was also typically punishable by death! Under common law, larceny is the trespassory taking and asportation of the tangible personal property of another with the intent to deprive him or her of it permanently. Trespass limits the crime to acts which involve a violation of the right of possession--that is, lawful possession prior to the act negates trespass. Note that “taking” requires control, if only for a brief period of time.

20. Some Crimes Affecting Business In regard to larceny, intentrequires that one intended to deprive the possessor "permanently" of the property. Although the mens rea of larceny is the intent to steal, the focus is on the loss to the possessor, not the gain to the defendant. Thus, even if the thief did not gain in the taking, if the possessor lost in the process. Courts have also held that permanence can be more than keeping forever. Permanence can include the intent to deprive the possessor of economic significance, even if he plans on returning it later. It can also include taking and exposing the property to a risk of permanent loss, like driving a vehicle at very high speed.

21. Some Crimes Affecting Business Larceny by Trick or Deception occurs when the victim of larceny is tricked by a misrepresentation of fact into giving up possession of property. This should not be confused with false pretenses, where the victim is tricked into giving up title to the property.

22. Some Crimes Affecting Business Grand larceny is typically defined as larceny of a significant amount of property. In the U.S., it is often defined as an amount valued at $200 or more (though in some jurisdictions the amount is as low as $100, and in others, such as South Carolina, as high as $2000). Grand larceny is often classified as a felony with the concomitant possibility of a harsher sentence. A theft involving a lesser amount is generally classified as petty larceny, which is usually a misdemeanor.

23. Some Crimes Affecting Business Robbery is the crime of seizing property through violence or intimidation. A perpetrator of a robbery is a robber. Because violence is an ingredient of most robberies, they sometimes result in the harm or murder of their victims. The precise definition of robbery varies between jurisdictions. The main elements of robbery are a trespassory taking and asportation of personal property from another’s person or presence using either force or threat with the intent to steal the property.

24. Inchoate Offenses An inchoate act/offense is a crime relating to the act of preparing for or seeking to commit another crime. A true inchoate offense occurs only when the intended crime is not perpetrated. Absent a specific law, an inchoate offense requires that the defendant have the specific intent to commit the underlying crime. For example, for a defendant to be guilty of the inchoate crime of solicitation of murder, she must specifically intend to cause the death of a particular human being. It would not be enough for defendant to ask another to kill the victim when she simply intended to scare the victim. (Note that specific intent can be inferred, and many people would infer the specific intent to kill the victim simply by defendant asking another to do it).

25. Inchoate Offenses Examples of inchoate offenses include: Attempt Conspiracy Solicitation Aiding or abetting Accessory

26. Attempt In 360 B.C. Plato is attributed with stating that one who “has a purpose and intention to slay another and only wounds him should be regarded as a murderer.” However, about 1300, English Nobleman Henry of Bracton stated that “For what harm did the attempt cause, since the injury took no effect.” (As they say in common American parlance, “No harm, no foul.”) Attempt was not a crime at early British common law. However, by the 1400’s English judges began applying the maxim “The will shall be taken for the deed” and English criminal records show parties began be criminally charged for attempt in England in the late 1500’s. In the 1600’s, Frances Bacon argued that “all acts of preparation should be punished.” By the 1700’s, English courts recognized a formal law of attempt. In Rex v. Scofield (1784), a servant was charged for attempting but failing to burn down his master’s house.

27. Attempt The purpose of laws punishing attempts to commit a crime is to discourage people from planning and attempting to commit “dangerous conduct.” The essence of the crime of attempt is that the defendant has tried but failed to commit the actus reus ("guilty act") of the full offense, but has the direct and specific intent to commit that full offense. The normal rule for establishing criminal liability is to prove an actus reus accompanied by the appropriate mens rea at the relevant time. Early common law required some actual injury. Most modern criminal statutes do not.

28. Attempt Whether the actus reus of an attempt has occurred is a question of fact for the jury to decide. A charge of attempt requires more than mere intent (see People v. Murray). Note that the common law used to distinguish between acts that were “merely preparatory” and those which were “sufficiently proximate”. When anyone is planning and executing a plan, there will always be a series of steps that have to be taken to arrive at the intended conclusion. Some aspects of the execution will be too remote from the full offense, e.g. watching the intended victim over a period of time to establish the routines, traveling to a store to buy necessary tools and equipment, etc. But the closer to the reality of committing the offense the potential wrongdoer moves, the greater the social danger he or she becomes. Since the potential wrongdoer could change his or her mind at any point before the crime is committed, the state should wait until the last possible minute to ensure that the intention is going to be realized.

29. Attempt In English law, the test of proximity was that the defendant must have "...crossed the rubicon, burnt his boats, or reached a point of no return". (D.P.P. v. Stonehouse [1977] 2 All ER 909 per Lord Diplock.) Another test is whether the defendant has “reached that part of the series of acts, which if not interrupted or frustrated or abandoned, would inevitably result in the commission of the intended offence” (Stephen's Digest of the Criminal Law). Former U.S. Supreme Court Justice Oliver Wendell Holmes said “acts should be judged by their tendency”, but that there “must be a dangerous proximity to success.”

30. Attempt The “res ipsa loquitor test”, also called the “unequivocality test”) looks to see if, at a certain point in time, the defendant had “no other purpose than the commission of a specific crime.” The “probable desistance test” focuses on whether the defendant would have followed through with the crime had the opportunity existed. The Model Penal Code (MPC) uses a “substantial step test”, looking at whether the defendant has taken a substantial step or steps towards the commission of the crime. The “indispensable act test” asks whether the defendant had gotten control of everything they needed to commit the crime. In most jurisdictions, possession of the materials to commit the crime is not sufficient evidence of attempt. Most jurisdictions havespecific attempt statutes related to specific crimes, such as attempted murder, or attempted robbery.

31. Attempt Defenses to a charge of attempt may include, voluntary abandonment, legal impossibility or actual impossibility. Legal impossibility involves the situation where the defendant believes their intended act was illegal but it in fact was not. (Reminds me of the Sponge Bob Square Pants episode when Sponge Bob and Patrick “steal” a balloon on free balloon day! Hey, give me a break, I have young kids.) Another example of this is a case from Wisconsin where the defendant tried to receive a stolen Harley-Davidson Motorcycle which it turned out was not actually stolen (State v. Kordas, N.W.2d 483 (Wis. 1995). Note that both American and English law, criminal attempt usually applies even though the facts are such that the commission of the offense is actually impossible, so long as the defendant believes that he is about to break the law and intends to commit the relevant full offense. (State v. Haines)

32. Conspiracy As a legal term, a conspiracy is an agreement of two or more people to commit a crime. The agreement is the actus reus and the intent to both agree and act constitute the mens rea. In some jurisdictions, the agreement alone is sufficient to bring a charge of conspiracy. Other jurisdictions require “substantial steps” or “overt acts”.

33. Conspiracy In Hyde v. U.S., (1912), Justice Holmes stated that “if an overt act is required, it does not matter how remote the act may be from accomplishing the purpose, if done to effect it.” As to the parties to a conspiracy, most modern criminal statutes apply a unilateral approach whereby all conspirators need not necessarily be in agreement with all others or even be aware of the other conspirators, and failure to convict one party to an alleged conspiracy does not prevent others from being convicted.

34. Conspiracy In “wheel conspiracies”, one of more defendants participate in every transaction, as the “hub” of the conspiracy. In “chain conspiracies”, participants at one end of the chain may no nothing of conspirators at the other end of the chain. Drug smuggling conspiracies are often of this type.

35. Conspiracy Defenses: Mistake of law or fact are often acceptable defenses to a charge of conspiracy. Withdrawal however is usually not a defense, since the crime of conspiracy is considered to be complete when the parties first enter into an agreement.

36. Conspiracy UNITED STATES OF AMERICA v. HUGHES AIRCRAFT CO. INC. 20 F.3d 974 (9th Cir. 1994) • FACTS: Hughes Aircraft contractually agreed to supply the United States with microelectronic circuits to be used in weapons defense systems. The results of the testing of these circuits was falsified by Donald LaRue, a Hughes Aircraft employee. Other employees informed LaRue’s supervisors of the false testing reports. No actions were taken against LaRue, and the United States was not informed of the fraudulent test results. Both Hughes Aircraft and LaRue were indicted and tried on charges of conspiracy to default. The trial jury found Hughes Aircraft guilty, but LaRue was acquitted. Hughes Aircraft appealed its conviction arguing that it cannot be guilty of conspiracy if the alleged co-conspirator was found not guilty. • ISSUE: Can Hughes Aircraft be found guilty of engaging in a conspiracy if its alleged co-conspirators are found not guilty?

37. Conspiracy UNITED STATES OF AMERICA v. HUGHES AIRCRAFT CO. INC. 20 F.3d 974 (9th Cir. 1994) • DECISION: Yes. • REASONS: • 1. The conviction of one co-conspirator is valid even when the alleged co-conspirators are acquitted. • 2. A corporation may be liable for conspiracies entered into by its employees. • 3. Conspiracies exist when more than one corporate employee works to defraud the government. • 4. Since LaRue’s supervisors failed to act after receiving information about LaRue’s wrongdoing.

38. Solicitation Solicitation consists of a person inciting, counseling, advising, urging, or commanding another to commit a crime with the specific intent that the person solicited commit the crime. It is not necessary that the person actually commit the crime, nor is it necessary that the person solicited be willing or able to commit the crime (such as if the "solicitee" were an undercover police officer). For example, if A commands B to assault C and A intends for B to assault C, then A is guilty of solicitation. Note that solicitation can apply to just about any criminal act. Examples might be solicitation of murder, solicitation of prostitution, or solicitation of a bribe.

39. Aiding And Abetting Abetting (from the Old French to bait or urge dogs upon someone) involves instigating or assisting in the commission of an offence. An abettor differs from an accessory in that he must be present at the commission of the crime; all abettors (with certain exceptions) are principals, and, in the absence of specific statutory provision to the contrary, are punishable to the same extent as the actual perpetrator of the offence. A person may in certain cases be convicted as an abettor in the commission of an offence in which he or she could not be a principal, e.g. a woman or boy under fourteen years of age in aiding rape. More recently, an abbetor is generally known as an accomplice.

40. Accessory Anyone who aids, counsels, encourages or assists in the preparation for a crime, but who is not actually present in the commission of the crime, may be an “accessory before the fact”. At common law an accessory before the fact could not be convicted unless and until a principal was convicted. However, many modern-day criminal law statutes have removed this requirement. An accessory before the fact is often punished at the same level as a principal. Any person who gives aid, comfort or shelter to a criminal with the purpose of assisting same in avoiding arrest after a the crime has been committed, but who was not present during the crime, may be an “accessory after the fact”. Accessories after the fact are usually punished at a lesser level than principals.

41. securities Health Care Mail & Wire FRAUD Fraud • Elements: • Intention To Mislead • Misstatement Of Fact • Justifiable Reliance • Injury • Securities Fraud • Health Care Fraud • Mail & Wire Fraud

42. Mail And Wire Fraud • 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

43. Mail And Wire Fraud SCHMUCK v. UNITED STATES 109 S.Ct. 1443 (1989) • FACTS: Wayne Schmuck bought and sold used cars. Schmuck’s fraudulent scheme involved rolling back the odometer on used cars and selling them for inflated prices due to low mileage. Schmuck was charged with mail fraud since the car title certificate was mailed to the Wisconsin Department of Transportation. These mailings and the issuance of new title certification were the necessary steps in completing the sales transaction. Schmuck argued he cannot be convicted of mail fraud since he did not mail any documents. The trial court resulted in a conviction. The appellate court affirmed the conviction. Schmuck filed for and was granted certiorari. • ISSUE: Can Schmuck be guilty of mail fraud when he did not mail anything related to the fraud?

44. Mail And Wire Fraud SCHMUCK v. UNITED STATES 109 S.Ct. 1443 (1989) • DECISION: Yes. • REASONS: 1. Schmuck’s rolling back the odometer constitutes fraud. • 2. The mailing (by the buyer) of the title certificate forms is an essential element to the completion of the fraudulent transaction. • 3. Although Schmuck did not mail anything, his conviction of the mail fraud charge is upheld since the mailing clearly was necessary to complete the fraudulent transaction

45. Bankruptcy Crimes • Falsify Information • False Claim • Concealment

46. Racketeer Influenced &Corrupt Organizations Act(1970) • Liability • Use/Invest Income From Prohibited Activities • Acquire/Maintain Interest In Prohibited Enterprise • Conducts/Participates/Conspires In Prohibited Enterprise • Prohibited Activity • Pattern Of Racketeering • Collection Of Unlawful Debt • Allows for Seizure of Assets • Allows for Treble Damages

47. Racketeer Influenced &Corrupt Organizations Act(1970) H.J. INC. v. NORTHWESTERN BELL TELEPHONE COMPANY 109 S.Ct. 2893 (1989) • FACTS: A class action suit, with H.J. Inc. as the plaintiff, sought an injunction and triple damages in a RICO suit against Northwestern Bell. The basis for the RICO claims arises from employees of Northwestern Bell bribing members of the Minnesota Public Utilities Commission related to the rates that Northwestern Bell charges. The trial court dismissed this suit since it concluded there was no pattern of wrongdoing. The appellate court affirmed. H.J. Inc. received certiorari from the Supreme Court. • ISSUE: Does RICO require distinct actions of illegality to find a pattern of racketeering?

48. Racketeer Influenced &Corrupt Organizations Act(1970) H.J. INC. v. NORTHWESTERN BELL TELEPHONE COMPANY 109 S.Ct. 2893 (1989) • DECISION: No. • REASONS: 1. A pattern is found in establishing a relationship among the illegal acts (predicates) and the threat of continuing illegal activity. • 2. The evidence presented in this case shows numerous bribes being paid over a 6-year period. • 3. These multiple examples of predicates and the likelihood the bribes would continue satisfy the requirements of a RICO claim.

49. Cyber Crime • Hacker (Cracker)- Unlawful Access To Electronic Information • Electronic Theft • Trade Secrets • Personnel Records • Customer Lists

50. Trends • Sarbanes-Oxley Act • Prosecution For Tax Evasion • Plea Bargain With Mid-Level Employees In Exchange For Testimony Against Top-Level Employees • Seizure Of Assets