Criminal Law in Business Context

Learning outcomesIdentify the sources of criminal law and its differences between civil law.

Identify the element of crime and types of white collar crimes

Cybercrime and its relation with business environment

Crime Crime: Positive or negative action that violates a penal law Not civil law Act against a state or federal government Congress and state legislatures decide the criminality of actions and determine penalties

Seen more and more in the business context Computer and technology have created new versions of old criminal laws◦ e.g. Unauthorized entry into computer systems is the new

version of the old breaking and entering laws

Crime Categories Violent crimes – murder, armed robbery, assault Non-violent victim crimes – vehicle theft, burglaries Victimless crimes – possession of illegal drugs White collar crimes – embezzlement, bribery, fraud Punishment depends on the category under which a person is convicted (plea bargains)

Crimes & Elements of Crimes Government agencies decide who will be charged with a crime.

Prosecutors receive reports of alleged crime, & results of investigation.

Prosecutors then decide whether or not to bring charges.

Not all claims of criminal activity are investigated.

Politics & personal preference may come into play in decisions by prosecutors.

Process is not perfect. Requirements for prosecution:

◦ Actus reus – the guilty act◦ Mens rea – criminal intent

Commonwealth v. Angelo Todesca Corp.

Gauthier drove truck full of asphalt for Angelo Todesca Corp.◦ To a highway construction site near a busy intersection.

Police officer directing traffic killed as Gauthier backed up to deliver asphalt. Back-up horn on the truck was not working. Gauthier and Todesca knew horn wasn’t working – Violation of company safety procedures.

Gauthier was charged with driving offices: fined and driving limited Massachusetts charged Todesca w/vehicular homicide. Jury convicted company and fined $2,500. Appeals court reversed the conviction. Commonwealth appealed.

(continued)

Commonwealth v. Angelo Todesca Corporation, cont.

Must prove that Gauthier had power, duty, responsibility & authority to act on behalf of corporation for business he was doing.

And that he committed a criminal act while acting for corporation.

To prove corporation is guilty of criminal offense, must prove:◦ 1) individual committed a criminal offense;◦ 2) at the time of committing offense, person “was engaged in some particular corporate

business”; AND◦ 3) individual had authority to act for corporation on its behalf to carry out particular

business when offences occurred

Todesca claimed corporation can’t be involved in motor vehicle homicide since “corporation” cannot “operate” a vehicle.

HELD: Judgment of trial court affirmed. Because corporation is not a living person, can only act through its agents. To hold otherwise would mean corporations would never be liable for any crime.

Corporations can be held criminally liable for acts performed by employees “within the scope of their employment” and “on behalf of the corporation.

Evidence Strict standards for gathering and presentation at trial

◦ Evidence was handled properly◦ Called “chain of custody”

If improperly obtained or presented, evidence is excluded (under procedural due process)

Authorities may:◦ Search property◦ Seize documents and other physical items

Warrants usually needed for search of property, persons, or seizure of property. Warrant issued by a judge or magistrate

Law enforcement officials must show probable cause to a judge to obtain a warrant.

United States v. Young Under IRS (Internal Revenue Services) regulations fuel may be sold tax free if for marina use.

Marinas sell tax-free by obtaining a “647 certificate” from the IRS. Young obtained a certificate for his marina.

IRS believed he sold fuel in cash deals to truck stops and service stations that should have paid taxes on fuel.

IRS believed Young shipped money he made by FedEx. FedEx let the IRS x-ray packages shipped by Young. Cash seen. IRS then obtained a warrant to seize and open Young’s packages – there was the suspected cash

Young moved to suppress evidence because IRS did not obtain a warrant to x-ray FedEx packages.

Trial court rejected Young’s motion; he was convicted. He appealed. (Continued)

United States v. Young HELD: Judgment affirmed. No reasonable person expects to retain privacy after signing an air bill warning of carrier’s authorization to inspect packages.

FedEx told customers (1) do not ship cash, and (2) we may open and inspect your packages at our option.

Prosecution Process Occurs when prosecuting attorney has enough evidence to make criminal charges.

Legal process Accused placed under arrest based on a warrant. In non-violent matters, accused may turn herself in, rather than be taken into custody by the police.

Suspect is “booked” at police station, photographed, finger printed and searched. Chance given to the accused to contact an attorney. Arraignment: court appearance before judge or magistrate. Accused may plead guilty, nolo contendere (no contest), or innocent. Judge may release accused or require bail and will set a court date. Violent criminals, or those who court fears might flee before trial are held without bail, or bail is set very high.

Often defendants plea bargain – pleads guilty to charges or lesser charge or pleads no contest in exchange for agreed punishment.

White Collar Crime

“Crime committed by a person of respectability and high social status in the course of his occupation.”

Criminal activity for financial advantage occurring in business. FBI estimates such crimes create $1/3 trillion in losses each year. Most cases are against individuals; corporations may also be prosecuted. Bribery: Offer or taking of money, goods, services, etc. to influence official actions or decisions.

Counterfeiting: Copying of genuine items without authorization – money, designer clothing, other products.

Credit Card Fraud: Unauthorized use of a credit card.

White Collar Crime

Computer and Internet Fraud: ◦ Credit card fraud involving a computer/internet◦ Unauthorized access to financial accounts ◦ Unauthorized use of computers and computer files◦ Sabotage of computers

Embezzlement: Person in position of trust takes money or property for his/her own use.

Environmental Law Violations:◦ Data fraud cases, e.g. private laboratories submit false environmental

data◦ Hazardous waste dumping◦ Ocean dumping by cruise ships◦ Oil spills◦ Illegal handling of hazardous substances (asbestos, etc.)

White Collar Crime Financial Fraud: Regulation of banks and financial institutions

◦ Firms and employees subject to criminal liability◦ Fraud in loans, financial documents, mortgages, etc.

Government Fraud: Governs contracts with public agencies ◦ Billing for goods not delivered◦ Double billing◦ Inferior goods◦ Government payment programs

◦ Farm subsidies◦ Public housing◦ Educational programs◦ Hurricane Katrina disaster in New Orleans – convictions of fraud in collecting benefits

intended for victims Healthcare Fraud: Over-billing and scams by hospitals, doctors ambulance services, laboratories, pharmacies, extended care facilities

Insider Trading: Person trades a security while in possession of material, non-public information.

White Collar Crime

Insurance Fraud: Insurance companies commit fraud, charging higher rates than allowed by state regulators.◦ Policy holders lie about property to get lower rates.◦ Policy holders pad their claims to get more money.

Mail Fraud: Sending of fraudulent materials through Postal Service or using the Postal Service to communicate fraudulent activities.

Money Laundering: Hiding the truth about the origins of money, especially illegal activities. Obligation to report income even from illegal income for tax purposes.