Law 101 - ch. 7 - Summary Anderson\'s Business Law and the Legal Environment PDF

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summary of chapter 7 business law
Prof. Fichtenbaum...

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Business Law

Chapter 7: Crimes General Principles  

Society sets certain standards of conduct and punishes a breach of those standards as a crim Detailed criminal codes and statues define crimes and specify their punishment

Nature and classification of crimes  Crime- violation of law that is punishes as an offense against state or gov’t o Classified as common law or statutory according to their origin  Misdemeanor- criminal offense with sentence of less than one year that is neither treason nor a felony.  Felony- criminal offense that is punishable by confinement in prison for more than one year or by death, or that is expressly stated by statute to be a felony.  An act may be a felony in one state and a disdemenaor in another Basics of criminal liability  Crime consists of two elements: o Mental state (scienter or intent)  Doesn’t require awareness or knowledge of guilt  Ignorance that law is being broken doesn’t mean there is not mental state o Act or omission  Specific statutes define conduct, or actus reus, when coupled with sufficient mental state, constitutes a crime. Responsibility for criminal acts Persons who didn’t necessarily commit criminal act itself are still held criminally responsible for acts committed by others Corporate Liability  Corporations are held responsible for acts of their employees  May also be held liable for crimes based on failure of its employees to act Officers and agents of corporations  Main diff b/t nonbusiness and business crimes is that more people in company can be convicted for same business crime  For nonbusiness crimes, only those who are actually involved in act itself can be convicted of crime  For business crimes, mangers of firms whose employees commit criminal acts can be held liable if managers authorized conduct of employees or knew about their conduct and did nothing about it 

Federal laws targeting officer and director criminal responsibility  Insider Trading and Securities Fraud Act of 1988 increased criminal penalties for officers and directors who violated the law tenfold.  White-collar kingpin law imposed mandatory minimum sentences for corporate officers  Sarbanes-oxley increase penalties for officers and directors from 5 years to 20 years along with increase in fines by 20 times.  Dodd-Frank Wall Street Reform and Consumer Protection Act made types of white-collar executives to include brokers, insurers, and any financial service firms. o Also has ability to refer cases to Justice Department for prosecution Penalty for Crime: Forfeiture  When defendant is convicted of a crime, court may also declare defendant’s rights in any property used or gained from crime be confiscated  Some types of crime instruments are automatically forfeiter, like tools of a crime Penalties for business and white-collar crimes  Most common law criminal penalties were created with “natural” persons in mind, as opposed to “artificial” or corporate persons  Computing new penalties for corporations o Criminal penalties have been increased to allow judges to fine corporations according to how much a bad decision would cost o Instead of using fixed-amount fines for corporations, statues and courts apply percentage of income, revenue, or profits penalties.  Corporate integrity agreements o Using corporate integrity agreement (CIA), judges are able to place corporations on probation  Federal Sentencing Guidelines o Mandatory prison sentence for officers/directors who are convicted of crimes committed as they led their corporations o Human element of corporation punished for crimes business committed o Federal Sentencing Guidelines- US Sentencing Guidelines; federal standards used by judges in determining mandatory sentence terms for those convicted of federal crimes  Apply to federal crimes such as securities fraud, antitrust violations, racketeering, theft, etc.  Officer and executive banishment from business fields o Rapidly increasing forms of business crime punishment is barring executives and officers forms working their fields if they have criminal conviction  Mandatory sentence for officers of corporations who mastermind crimes o Increased corporate and white-collar criminal penalties enacted under SarbanesOxley also allows judges to consider seriousness of offense, company’s history of violations, its cooperation in investigation, effectiveness of its compliance program, and role of senior management in wrongdoing in determining fines. o US v. Booker: judge many only use guidelines as just that, guidelines; sentencing ranges are no longer mandatory for judges

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Sarbanes-Oxley reform to criminal penalties o White-collar crime penalty enhancement act of 2002- federal reforms passed as result of collapses of companies such as Enron; provides for longer sentences and higher fines for both executives and companies Creative penalties for white-collar crime o Federal judges are developing new types of sentences in order to use those convicted to convince businesspeople to avoid criminal conduct

Indemnification of crime victims  Victims of Crime Act of 1974 creates federal Crime Victims Fund o Using fines paid to federal courts, fed gov’t makes grants to state to assist them in financing programs to provide assistance for victims of crime  Victim and Witness Protection Act of 1982 authorizes sentencing judge in federal district court to order, in certain cases, defendant make restitution to victim or pay victim amount of medical expenses or loss of income caused by crime

White Collar Crimes  

White collar crimes- crimes that don’t use nor threaten to use force or violence or don’t cause injury to persons or property Generally considered business crimes

Conspiracies  Conspiracy- agreement b/t 2+ persons to commit an unlawful act  Committed before actual crime; planning of a crime  Almost all white-collar criminal charges involve count of conspiracy Money laundering  Fed. Gov’t adopted Money Laundering Control Act (MLCA) o Prohibits knowing and willful participation in financial transaction when transaction is designed to conceal or disguise source of funds  USA Patriot Act (passed on Oct. 26, 2001) made changes and amendments to MLCA and Bank Secrecy Act (BSA); designed to curb funding of terrorist activities in US Racketeering  Racketeer influenced and corrupt organizations (RICO) act- federal law, initially targeting organized crime that has expanded in scope and provides penalties and civil recovery for multiple criminal offenses, or pattern of racketeering o Congressed passed as part of Organized Crime Control Act o Law designed primarily to prevent individuals in organized crime from investing money obtained through racketeering in legitimate business Criminal and civil applications

RICO authorizes criminal and civil actions against persons who use any income derived from racketeering activity to invest in, control, or conduct an enterprise through pattern of racketeering activity  Pattern of racketeering activity must be established by providing at least 2 acts of racketeering activity (predicate acts) Expanding usage  Predicate act- qualifying underling offense for RICO liability 

Bribery  Act of giving money, property, or any benefit to particular person to influence that person’s judgment in favor of giver. Commercial bribery  Agent for another is paid or given something of value in order to make decision on behalf of his/her principal that benefits party paying the agent Extortion and blackmail  Crimes in which money is exchanged for either specific actions or restraint in taking action  Extortion- illegal demand by public officer acting with apparent authority  Blackmail- extortion demands made by nonpublic official Corrupt Influence Improper political influence  At fed and state levels, crime for one who holds public office to hold financial interest in or to receive money from an enterprise that seeks to do business w/ gov’t  Conduct is conflict of interest b/t official’s duty to citizens and his/her personal financial interests Foreign Corrupt Practices (FCPA)- federal law that makes it a felony to influence decision makers in other countries for purpose of obtaining business, such as contracts for sales and services; also imposes financial reporting requirements on certain US corporations Counterfeiting  Making, with fraudulent intent, document or coin that appears to be genuine but is not b/c person making it didn’t have authority to make it. Forgery  Forgery- fraudulently making or altering an instrument that apparently creates or alters a legal liability of another  Uttering- crime of issuing or delivering a forged instrument to another person Perjury  Consists of knowingly giving false testimony in judicial proceeding after having been sworn to tell truth.

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False swearing: false answers given in situation other than in court or litigation process

False claims and pretenses  Making statues make it a crime to submit false claims or to obtain goods by false pretenses False claims  Federal false statement statute makes it a crime to knowingly and willfully make a false material statement about any matter within jurisdiction of any department or agency of US Obtaining goods by false pretenses  Intent to defraud is an essential element of obtaining property by false pretenses False information submitted to banks  Knowingly making false statements in a loan application to federally insured bank is a federal crime Bad Checks  Crime to use or pass check with intent to defraud with knowledge that there are insufficient funds in bank to pay check when it is presented for payment Credit card crimes  Crime to steal credit card and to possess credit card of another person without that person’s content.  Using card without permission of card owner is crime of obtaining goods/services by false pretenses or without intent to defraud Embezzlement  Embezzlement- statutory offense consisting of unlawful conversion of property entrusted to wrongdoer  Fraudulent conversion of another’s property or money by person to whom it has been entrusted Obstruction of justice: Sarbanes-Oxley (SOX)  Another provision clarifies what constitutes obstruction of justice and increases the penalties for such an act. Corporate fraud: SOX  SOX form of mail or wire fraud is based on new requirements imposed on corporate officers to certify their financial statements when they’re issued Common law crimes  Crimes that involve use of force or threat of force or cause injury to persons or damage to property Larceny- Wrongful or fraudulent taking of personal property of another by any person with fraudulent intent Robbery-Taking of personal property from presence of victim by use of force or fear

Burglary- breaking and entering during night into dweeling house of another with intent to commit felony Arson- willful and malicious burning of another’s dwelling Riots and civil disorders- damage to property in course of riot or civil disorder covered by other types of crimes like larceny or arson

Criminal Law and Computer What is a computer crime?   

Computer crime- wrongs committed using computer or with knowledge of computers Refer to a crime that can be committed only by a person having some knowledge of operation of a computer Computer crimes can be committed against the computer, using the computer, through the computer

The computer as victim  Crime can be committed by stealing/intentionally damaging a computer Theft of hardware  When computer itself is stolen, ordinary law relating theft crimes apply Theft of software  When thief takes software, is not tangible property as larceny requires  Every state makes stealing software a crime Intentional damage  Purpose is to ause computer’s owner financial loss of computer and destruction of information that is stored in it  Can result from subtle means Unauthorized use of computers  Key to prosecution in misuse of computer case is proof that access was not authorizes Diverted delivery by computer  Instructing computer give false directions can cause fraudulent diversion of goods

Economic espionage by computer  Economic espionage by computer (EEA)- federal law that makes it a felony to copy, download, transmit, or in any way transfer proprietary files, documents, and information from a computer to an unauthorized person Electronic fund transfer crimes (EFTA)

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Make it crime to use any counterfeit, stolen, or fraudulently obtained card, code, or other device to obtain money/goods in excess of specified amount through electronic fund transfer system

Circumventing copyright protection devices via computer  Digital Millennium Copyright Act (DMCA) makes it fed offense to circumvent or create programs to circumvent encryption devices that copyright holders place on copyrighted material to prevent unauthorized copying  No Electronic Theft Act makes it fed criminal offense to willfully infringe copyrighted material worth more than $1000 using Internet or other electronic devices Spamming  Practice of sending out thousands of emails at once to many different computer users  Controlling assault of non-solicited pornography and marketing (CAN-SPAM) act- allows private companies to bring suit against spammers for their unauthorized use of Internet service providers (ISPs)

Criminal procedure rights for business 

US constitution guarantees protection of individual and corporate rights within criminal justice system

Fourth amendment rights for business Search and seizure: warrants  Fourth amendment- privacy protection in US constitution; prohibits unauthorized searchers and seizures o “right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated.”  Search warrant- judicial authorization for search of property where there is expectation of privacy Exceptions to warrant requirement  Emergencies which allows law enforcement officials to take any property anyone can see, for no privacy rights are violated when items and property are left in open for members of public to see o Ex: Dow Chemical Co. v. United States: supreme court held that company doesn’t have right of privacy from low-flying planes of is production facilities  Privacy and cyber space: access to our messages and files Business records and searches  Records that prove crime was committed aren’t in hands of person who committed that crime  In addition to 4th amendment, may be protections for business defendants Protections for privileged records and documents

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All states recognize an attorney-client privilege, individual’s conversation with lawyer and notes of those conversations are not subjective to seizure unless privilege is waived

Fifth amendment self-incrimination rights for business Self-incrimination  Fifth amendment- constitutional protection against self-incrimination; also guarantees due process o Prevents compelling a person to be witness against himseld o Corporations are not given fifth amendment Miranda rights  Miranda rights- warnings require to prevent self-incrimination in a criminal matter  Miranda v. Arizona: US supreme court rules that certain warnings must be given to persons who face custodial interrogation for purposes of possible criminal proceedings Due process rights for business  Due process- constitutional right to be heard, question witnesses, and present evidence  Sixth amendment- US constitutional amendment that guarantees speedy trial...