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FIFTEENTH EDITION The Legal & Regulatory Environment of Business Chapter 12— Criminal Law and Business REED McGraw-Hill/Irwin SHEDD PAGNATTARO MOREHEAD Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. Introduction Criminal law provides a means to punish wrongdoers who affect ownership of property. A crime is a wrong against society. Federal & state penal codes 12-2 Learning Objectives To recognize the kind of acts that constitute white-collar crimes. To explain Fourth, Fifth and Sixth Amendment rights. To identify the elements of specific crimes. To understand how the same acts can give rise to both civil and criminal liability. To realize the far-reaching impact of criminal behavior on corporations and individuals. 12-3 Crime Inherently Wrong Malum In Se Deemed Wrong By Legislature, e.g. – White-collar crime committed by: •Business entities •Officers •Accountants •Attorneys •Desk workers 12-4 Crime Classifications Felony Misdemeanor Indictment Grand Jury Information Gov’t Charge Fine Or Imprisonment Fine Or Jail<1 yr. 12-5 Underlying Concepts Crime Intent Willfully Or Knowingly 12-6 Pleas in Criminal Cases Guilty Not Guilty Nolo Contendere (“no contest”) Criminal conviction may be basis for civil damages suit. 12-7 Grand Jury Constitution- 5th Amendment 23 Citizens Determine Probable Cause Presumption Of Innocence No Defense Counsel Subpoena Power Secret Proceedings 12-8 pop pop pop QUIZQUIZQUIZ Crimes punishable by one year or more imprisonment are called _________. a. Misdemeanors b. Criminal indiscretions c. Felonies d. Indictments 12-9 Constitutional Protections The Bill of Rights of the U.S. Constitution provide civil liberties that protect persons from the power of government, including persons accused of crimes and protect businesses from excessive regulation. 12-10 Fourth Amendment Unreasonable search & seizure - privacy Extends to certain civil matters Expectation of privacy Generally assumed Not for some businesses 12-11 Fifth Amendment 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 Double Jeopardy 12-12 Sixth Amendment Provides Protections To: Speedy/Public Trial Be Informed Of Charge Trial By Jury Confront Accuser Subpoena Witnesses Assistance Of Attorney 12-13 Specific Business Crimes Fraud Larceny Conspiracy RICO Obstruction of Justice Cyber Crime False Statement Endangering Workers 12-14 think think think TANK TANK TANK Generally, when corporations are charged with crime, corporate officers can also be criminally charged. a. True b. False 12-15 think think think TANK TANK TANK Employees of some business do not have 4th amendment protections because of public policy considerations. a. True b. False 12-16 Specific Business Crimes Fraud Fraud Conspiracy Obstruction of Justice False Statement •Must be Scheme Larcenyto Defraud •Elements – RICO • Intent To Mislead • Misstatement Of Fraud • Justifiable Reliance Cyber Crime • Injury •Mail & Wire Fraud •Securities Fraud Endangering Workers •Health Care Fraud •Counterfeiting •Bankruptcy Fraud 12-17 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 12-18 Specific Business Crimes Fraud Conspiracy Conspiracy Larceny More than 1 person agrees to carrying out criminal offense RICO Each member is agent/ Obstruction of Justice False Statement Cyber Crime Partner of other memberswillful member Commit overt actnot Endangering Workers required to know details 12-19 Specific Business Crimes Fraud Conspiracy Obstruction of Obstruction of Justice Justice False Statement Larceny •Act committed with intent to obstruct legislative or judicial process RICO • Integrity of proceedings • Examples: •Clean up files Cyber Crime •Changing record of phone conversation •Shredding documents Endangering Workers during pending investigation 12-20 Specific Business Crimes Fraud Conspiracy Obstruction of Justice False False Statement Statement Larceny • To Bank •Financial statements RICO •Relate to material fact •To Federal Agency Cyber Crime •Willfully and knowingly •Relate to material matter •“Exculpatory Workers no” Endangering 12-21 Specific Business Crimes • Larceny – unlawful Fraud taking of property •Robbery •Burglary Conspiracy •Embezzlement •Examples: •Use of company Obstruction of Justice property without permission •Padding expense False accounts •Falsifying time Statement records Larceny Larceny RICO Cyber Crime Endangering Workers 12-22 Specific Business Crimes LiabilityFraud Larceny •Use/invest income from prohibited activities Conspiracy •Acquire/maintain interest in prohibited enterprise Obstruction of Justice •Conducts/participates in RICO RICO Cyber Crime prohibited enterprise Prohibited activity False •Pattern of racketeering Statement •Collection of unlawful Endangering Workers debt 12-23 Specific Business Crimes Fraud • Hacker (cracker) – unlawful access to Conspiracy electronic information •Obstruction Id theft of Justice • Electronic theft •Trade secrets •Personnel Falserecords •Customer lists Larceny RICO Cyber Crime Cyber Crime Endangering Workers Statement 12-24 Specific Business Crimes Fraud Larceny • Assault & Battery Conspiracy RICO •Obstruction Safety Precautions of Justice Cyber Crime • Accidental Homicide • Occupational Safety And Health Act False Statement Endangering Workers Endangering Workers 12-25 Aiding And Abetting Federal charge Assist in criminal act Participating in conspiracy State charge = accessory Before crime After the fact 12-26 Sentencing Guidelines Judges •Loss of control •Complexity Supreme court made advisory Reversed if unreasonable 12-27 Trends Sarbanes-Oxley Act Plea bargain with mid-level employees in exchange for testimony against top-level employees Forfeiture of assets 12-28