Dynamic business law 4e kubasek 4e CH07

Chapter 7
Crime and the Business Community

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Overview

• LO7-1: What are the basic elements of a crime?
• LO7-2: What are some of the common crimes affecting businesses, and how do we
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prove them?
LO7-3: When a crime is committed to benefit a corporation, who can be held liable ?
LO7-4: What are the basic constitutional safeguards for a person accused of a crime?
LO7-5: What are the basic steps of a criminal proceeding?
LO7-6: How can we prevent white-collar crimes?

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Chapter 7 Hypothetical Case 1
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George Barringer sat restlessly in his living room recliner in the wee hours of the morning. For the third night in a row, Barringer's neighbor,
Eddie Young, had been playing his stereo system so loud that Barringer could hear every word of every song.

On the first night of the auditory violation, Barringer had politely asked Young to turn the sound down and was ignored. On the second

night, Barringer's request was still civil but more demanding and insistent. Both requests had "fallen on deaf ears," as they say.

Barringer's wife, Patricia, found him in the living room that morning in his distressed state. When Barringer saw his wife, he immediately
said, "Can you believe Eddie is disturbing us like this? I am going to kill that jerk!" Alarmed by her husband's statement, Patricia Barringer
called the police and reported the threat on Young's life.

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Has Barringer committed a crime justifying his arrest and prosecution? Explain your response.

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Chapter 7 Hypothetical Case 2
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Warren Delaney believed that his home was his castle, and during the summer months every year, his castle was a tiny cabin
nestled in the woods of upstate New York.

For several consecutive years, Delaney's cabin had been vandalized or burglarized during the winter months. During the winter of
2013, several windows had been shattered. In the winter of 2014, several pieces of furniture had been stolen. At some point during
the winter of 2015, the bedroom mattress had been ripped apart, with foam and fabric scattered about the bedroom floor. On
each of these occasions, the perpetrator had forced the front door lock open.

Delaney envisioned a way to stop the criminal(s) responsible for these violations. He spring-loaded a shotgun in the living room of
the cabin, and pointed it directly at the front door. The shotgun was configured so that if someone opened the front door while he
was away, it would fire at the intruder.

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Chapter 7 Hypothetical Case 2 (cont'd)

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Delaney returned to his cabin in May 2016 and came upon a grisly scene. The front door had been
opened, and at the threshold was the partially decomposed body of what appeared to be a middleaged man, dead of a shotgun blast to the chest. Delaney immediately called the local sheriff,
Officer Brian Mulholland. Upon arriving at the scene and briefly questioning Delaney, Mulholland
arrested him.

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Was the arrest valid? Did Delaney commit first-degree murder? Did he use justifiable force in this
situation?

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Elements of a Crime

• Actus reus—Wrongful behavior (guilty act)
• Mens rea—Wrongful state of mind, such as purpose, knowledge,
recklessness, or negligence (guilty mind)

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Classification of Crimes

• Felonies—Serious crimes punishable by imprisonment for greater than

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one year, or death
Misdemeanors—Less serious crimes punishable by fines, or imprisonment
for less than one year
Petty offenses—Minor misdemeanors punishable by small fines or short
jail sentences

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Crimes Affecting Business:
Property Crimes

• Robbery
• Burglary
• Larceny
• Arson

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Crimes Affecting Business:
White-Collar Crimes

• Bribery
• Extortion
• Fraud
• Embezzlement

• Computer crimes

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Selected Types of
Fraudulent Crimes

• Forgery
• Defalcation
• False entry
• False token
• False pretenses
• Fraudulent concealment

• Mail fraud
• Health care fraud
• Telemarketing fraud
• Ponzi schemes
• Check kiting
• Pretexting
• Mortgage and real estate fraud
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Liability in Corporate Crimes

• Corporations can be held criminally accountable for almost any crime
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except those punishable only by a prison sentence.
Corporate executives may be personally liable for business crime.
Vicarious crime is when employers are liable for wrongful acts of
employees in some instances.

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Defenses to Crimes

• Infancy
• Mistake-of-fact
• Involuntary intoxication
• Duress
• Insanity
• Entrapment
• Necessity
• Justifiable use of force

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Constitutional Safeguards:
The Fourth and Fifth Amendments

• Fourth Amendment

• Protection from unreasonable search and seizure
• Restrictions on warrants

• Fifth Amendment

• Prohibition on double jeopardy
• Right not to incriminate oneself
• Right to due process

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Constitutional Safeguards:
The Sixth Amendment

• Right to a speedy and public trial
• Right to a trial by an impartial jury
• Right to be informed of the accusations against oneself
• Right to confront witnesses
• Right to have witnesses on one's side
• Right to counsel at various stages of the proceedings

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Constitutional Safeguards: The
Eighth and Fourteenth Amendments

• Eighth Amendment

• Freedom from excessive bail
• Freedom from excessive fines

• Freedom from cruel and unusual punishment

• Fourteenth Amendment

• Extension of the right to due process to all state matters
• Extension of most constitutional rights to defendants at the state level

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Exclusionary Rule

• Definition: All evidence obtained in violation of the Fourth, Fifth, and Sixth
Amendments is not admissible in court

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Criminal Procedure:
Pretrial Procedure

• Arrest
• Booking
• First appearance
• Indictment (for a felony) or Information (for a misdemeanor)
• Arraignment

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Miranda Rights
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"You have the right to remain silent and refuse to answer any questions"

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"If you cannot afford an attorney, one will be appointed for you before the questioning begins"

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"Anything you say may be used against you in a court of law"
"You have the right to consult an attorney before speaking to the police and have an attorney present during
any questioning now or in the future"
"If you do not have an attorney available, you have the right to remain silent until you have had an
opportunity to consult with one"
"Now that I have advised you of your rights, are you willing to answer any questions without an attorney
present?"

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Criminal Procedure:
Trial Procedure

• Trial (with burden of proof on prosecution)
• Jury deliberations

• Jury verdict
• Sentencing hearing (if defendant found guilty)

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Ways to Prevent White-Collar Crime

• Federal crime-fighting laws

• Racketeer Influenced and Corrupt Organizations (RICO)
• False Claims Act
• Sarbanes-Oxley Act

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Racketeer Influenced and Corrupt Organizations Act (RICO)

• Prohibits persons employed by or associated with an enterprise from
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engaging in a pattern of racketeering activity
Anyone whose business or property has been damaged can sue to recover
treble damages and attorney fees in a civil action

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The False Claims Act

• Allows employees to sue employers on behalf of the federal government
• Employee retains share of recovery

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The Sarbanes-Oxley Act
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Passed by Congress in response to the business scandals of the early 2000s

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Criminalizes specific non-audit services when provided by a registered accounting firm to an audit
client

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Examples: Enron, WorldCom, Global Crossing, Arthur Anderson

Increases the punishment for a number of white-collar offenses
Extends the statute of limitations regarding the discovery of fraud (two years from the date of
discovery of the fraud and five years from the date of the criminal act)

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Chapter 7 Hypothetical Case 3
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In 1985, Thomas Townsend was convicted of pedophilia, having had sexual relations with a 15-year-old child (at
the time, Townsend was 29 years old). Since then, Townsend has led a relatively uneventful life, spending most of
his time building and selling musical instruments to earn a living, and keeping to himself on his property on the
edge of town.

Local police are curious whether Townsend has truly reformed. The local sheriff has received a number of
complaints from citizens who are appalled that a child sex offender lives among them. Working in collaboration
with the Federal Bureau of Investigation (FBI), local authorities devise and implement a plan to determine
whether Thomas is leading an innocent life.

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Chapter 7 Hypothetical Case 3
(cont'd)
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Over the course of an 18-month period, police investigators send Townsend a monthly advertisement for a publication. The ad
entices readers to "order now, before publication ceases; see young boys and girls aged 12–16 engaged in all sorts of acts only big
boys and girls should be allowed to do!"

Townsend finally responds to the circular on the eighteenth occasion, mailing in the $39.95 purchase price. Local, state, and federal
authorities immediately intervene, arresting Townsend for solicitation of child pornographic materials.

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At Townsend's arraignment hearing, his attorney moves for immediate dismissal of the charges, arguing entrapment. Do the police
efforts described constitute entrapment? Does entrapment justify dismissal of all charges against the accused? Rather than
dismissal of charges, why not simply sanction those authorities responsible for the entrapment?

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