the legal environment of business © 2006 prentice hall ch. 7-1 a critical thinking approach fourth...

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THETHE LEGALLEGAL ENVIRONMENTENVIRONMENT OFOF BUSINESSBUSINESS

© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-11

A Critical Thinking ApproachA Critical Thinking ApproachA Critical Thinking ApproachA Critical Thinking ApproachFourth EditionFourth Edition

Nancy K. KubasekNancy K. Kubasek

Bartley A. BrennanBartley A. Brennan

M. Neil BrowneM. Neil Browne

Nancy K. KubasekNancy K. Kubasek

Bartley A. BrennanBartley A. Brennan

M. Neil BrowneM. Neil Browne

Ch. 7-Ch. 7-22 © 2006 Prentice © 2006 Prentice HallHall

CHAPTER 7CHAPTER 7

White Collar Crime and the Business White Collar Crime and the Business CommunityCommunity

THE LEGAL ENVIRONMENT OF BUSINESS

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CrimeCrime

Crimes are offenses against the publicCrimes are offenses against the public

Wrongful actionsWrongful actions

Wrongful intent – Wrongful intent – mens reamens rea

FeloniesFelonies

MisdemeanorsMisdemeanors

Petty crimes Petty crimes

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Criminal ProcedureCriminal ProcedureWarrant issuedWarrant issued

ArrestArrest

MirandaMiranda Rights Rights

BookingBooking

First appearanceFirst appearance

BailBail

InformationInformation

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Grand Jury ProceedingsGrand Jury Proceedings

Used in felony casesUsed in felony cases

Evidence presented by the stateEvidence presented by the state

Witnesses may be subpoenaedWitnesses may be subpoenaed

Purpose of Grand JuryPurpose of Grand Jury

Decide if there is enough evidence to Decide if there is enough evidence to justify a full trialjustify a full trial

Purpose of Grand JuryPurpose of Grand Jury

Decide if there is enough evidence to Decide if there is enough evidence to justify a full trialjustify a full trial

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Other ProceduresOther Procedures

IndictmentIndictment

Whether sufficient admissible evidence Whether sufficient admissible evidence exists to obtain a convictionexists to obtain a conviction

Pretrial DiversionPretrial Diversion

Agreement to perform services under Agreement to perform services under supervisionsupervision

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Criminal ProcedureCriminal ProcedureArraignmentArraignment

PleaPlea

Plea bargainsPlea bargains

Burden of production of evidenceBurden of production of evidence

Burden of persuasionBurden of persuasion

Standard of proofStandard of proof

Fifth AmendmentFifth Amendment

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DefensesDefenses

EntrapmentEntrapment

InsanityInsanity

DuressDuress

MistakeMistake

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Features of White Collar CrimeFeatures of White Collar Crime

Crime committed in a commercial context by Crime committed in a commercial context by professional and management classes.professional and management classes.

DefinitionDefinition

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

~ Edwin Sutherland~ Edwin Sutherland

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Can the Corporation Be a ‘Criminal’?Can the Corporation Be a ‘Criminal’?

CorporationCorporation

an artificial, an artificial, legal entity legal entity

CorporationCorporation

an artificial, an artificial, legal entity legal entity

How can liability How can liability based on acts of based on acts of

natural persons be natural persons be attributed to a attributed to a corporation?corporation?

How can liability How can liability based on acts of based on acts of

natural persons be natural persons be attributed to a attributed to a corporation?corporation?

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Arguments in Support of Corporate Arguments in Support of Corporate Criminal LiabilityCriminal Liability

Fines will pressure shareholdersFines will pressure shareholders

Maintain incentives to obey lawMaintain incentives to obey law

Ease of investigation and prosecutionEase of investigation and prosecution

Collective decisionmaking should not provide Collective decisionmaking should not provide escapeescape

Avoids making scapegoats of employees Avoids making scapegoats of employees

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More Arguments in Support of Corporate More Arguments in Support of Corporate Criminal LiabilityCriminal Liability

Unfair to single out individuals for common Unfair to single out individuals for common pattern of criminal behaviorpattern of criminal behavior

Unfair to allow shareholders to benefit from Unfair to allow shareholders to benefit from crimecrime

Public information and disclosure to Public information and disclosure to consumers important function of prosecutionconsumers important function of prosecution

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Arguments Against Corporate Criminal Arguments Against Corporate Criminal LiabilityLiability

Fines are just passed on to consumersFines are just passed on to consumers

Punishing shareholders is misguided-Punishing shareholders is misguided-shareholders really do not control the shareholders really do not control the enterpriseenterprise

No real or lasting damage to corporate image No real or lasting damage to corporate image can be achievedcan be achieved

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Liability of Top ExecutivesLiability of Top Executives

The only way in which a corporation can act is The only way in which a corporation can act is through the individuals who act on its behalf.through the individuals who act on its behalf.

~ Dotterweich~ Dotterweich

Therefore, a corporate agent through whose act, Therefore, a corporate agent through whose act, default, or omission the corporation committed a default, or omission the corporation committed a crime, was himself guilty individually of that crime.crime, was himself guilty individually of that crime.

~ Park~ Park

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Factors Encouraging White Collar Crime Factors Encouraging White Collar Crime

Pressure to Pressure to succeedsucceed

Short-term goalsShort-term goals

GroupthinkGroupthink

Easy to rationalizeEasy to rationalize

Dispersed Dispersed decisionmakingdecisionmaking

Lack of stigma even Lack of stigma even when convictedwhen convicted

Lax regulationLax regulation

Poor personnel Poor personnel policiespolicies

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Sentencing of White Collar CriminalsSentencing of White Collar Criminals

1991 Federal Sentencing Guidelines 1991 Federal Sentencing Guidelines

Base Fine + Culpability ScoreBase Fine + Culpability Score

Aggravating + Mitigating FactorsAggravating + Mitigating Factors

Extraordinary circumstancesExtraordinary circumstances

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Alternative SentencingAlternative SentencingCommunity serviceCommunity service

Occupational disqualificationOccupational disqualification

House arrestHouse arrest

Weekend prisonWeekend prison

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Common White Collar CrimesCommon White Collar Crimes

BriberyBribery

Regulatory ViolationsRegulatory Violations

Criminal FraudCriminal Fraud

DefalcationDefalcation

False entriesFalse entries

False tokenFalse token

False pretensesFalse pretenses

ForgeryForgery

Fraudulent concealmentFraudulent concealment

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More White Collar CrimesMore White Collar CrimesLarcenyLarceny

EmbezzlementEmbezzlement

Computer CrimesComputer Crimes

Some examples:Some examples:

PiggybackingPiggybacking

ImposterImposter

Trojan HorseTrojan Horse

Salami slicingSalami slicing

Data destruction (Virus, Worm)Data destruction (Virus, Worm)

Data misappropriationData misappropriation

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PreventionPrevention

Federal vs. state charteringFederal vs. state chartering

Require public directorsRequire public directors

Link fines to benefits obtainedLink fines to benefits obtained

Equity finesEquity fines

More vigorous regulationMore vigorous regulation

Internal corporate measuresInternal corporate measures

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Federal LawsFederal Laws

RICO 1970RICO 1970

False Claims ActFalse Claims Act

Sarbanes-Oxley Act 2002Sarbanes-Oxley Act 2002

Whistleblowers: Whistleblowers: good or bad?good or bad?

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State LawsState LawsWhistleblower protection statutesWhistleblower protection statutes

Protect public employeesProtect public employees

Provides specific remediesProvides specific remedies

Texas v. GreenRetaliatory discharge leads to punitive damages for whistleblower employeeAffirmed.

Texas v. GreenRetaliatory discharge leads to punitive damages for whistleblower employeeAffirmed.

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Global DimensionsGlobal Dimensions

White Collar Crime:White Collar Crime: A worldwide problem A worldwide problem

Example:Example: IOS case IOS case

Lack of cooperation among law enforcementLack of cooperation among law enforcement

2001: Creation of international fraud 2001: Creation of international fraud databasedatabase

Convention on cybercrime effective 2005Convention on cybercrime effective 2005

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SummarySummary

Criminal law protects the publicCriminal law protects the public

Criminal procedure differs from civil Criminal procedure differs from civil proceduresprocedures

White-collar crimes difficult to prosecute White-collar crimes difficult to prosecute and punishments are lightand punishments are light

New technology and globalization of the New technology and globalization of the economy have made new crimes possibleeconomy have made new crimes possible

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