978-0078023194 Chapter 3 Lecture Notes

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Essentials of Business Law, 9th edition

INSTRUCTOR’S MANUAL

Chapter 3 Criminal Law

LESSON OVERVIEW

In Chapter 1 we discussed how law enforcement authorities enforce specific laws called statutes that

are designed to protect the public at large. In Chapter 3, we discuss and distinguish between a crime

(violation of these statutes), and a tort (a private wrong). We examine and define the classification of

crimes into treason, felony, and misdemeanor, based on the seriousness of the offense. Finally, we study

the instances and types of crimes commonly committed in the business world—white-collar crime,

arson, larceny, bribery, false pretenses, forgery, perjury, embezzlement, extortion, and other

business-related crimes.

CHAPTER OUTLINE

A. CRIME (p. 36)

B. CLASSIFICATION OF CRIMES (p. 38)

1. Treason (pp. 37-38)

2. Felony (pp. 37-38)

3. Misdemeanor (pp. 37-38)

C. CRIMES IN THE BUSINESS WORLD (p. 37)

1. White-Collar Crime (p. 38)

2. Arson (p. 39)

3. Larceny (p. 40)

4. Bribery (p. 40)

5. False Pretenses (p. 41)

6. Forgery (p. 41)

7. Perjury (p. 41)

8. Embezzlement (p. 42)

9. Extortion (pp. 42-43)

10. Other Business-Related Crimes (pp. 44-45)

D. CHAPTER SUMMARY (p. 43)

E. CHAPTER ASSESSMENT (p. 43)

1. Matching Key Terms (pp. 43-44)

2. True/False Quiz (pp. 44-45)

3. Discussion Questions (p. 45)

4. Thinking Critically About the Law (p. 46)

5. Case Questions (pp. 46-47)

6. Case Analysis (pp. 47-49)

7. Legal Research (p.49)

KEY TERMS

Key terms are listed at the beginning of the chapter, posted in the student textbook margins, and placed

in bold in the copy. They are listed here for your quick reference.

crime (p. 36)

tort (p. 36)

treason (p. 37)

felony (p. 37)

misdemeanor (p. 37)

white-collar crime (p. 38)

RICO (p. 38)

Securities Fraud (p. 38)

Ponzi Scheme (p. 38)

arson (p. 39)

burning to defraud (p. 39)

larceny (p. 40)

robbery (p. 40)

burglary (p. 40)

bribery (p. 40)

false pretenses (p. 41)

forgery (p. 41)

perjury (p. 41)

embezzlement (p. 42)

extortion (p. 42)

LEARNING OUTCOMES

The chapter Learning Outcomes will help you and the students discover the concepts and information

that should be understood upon completion of the chapter. You may want to access the PowerPoint

(PPT) slides for Chapter 3 when you begin the study of the chapter and discuss each Learning

Outcomes. Each Learning Outcomes will be covered separately in the Instructor Notes, but they are

shown here in total as an overview of the sections being presented in Chapter 3. The corresponding text

page numbers and PPT slides are listed next to each outcome. These slides should be used to reinforce

the main points of the lecture.

After completing this chapter, the students will be able to:

1. Define crime and distinguish between crimes and torts. (p. 36, PPT slide 2-3)

2. Identify the three major classifications of crimes. (pp. 36-37, PPT slides 4-5)

3. Discuss several common crimes of particular concern to businesses and employees. (pp. 37-43,

PPT slides 7-21)

LECTURE OUTLINE

A. CRIME

The law enforcement authorities of federal, state, and local governments enforce specific laws called

statutes that are designed to protect the public at large. A violation of a statute is a crime. A private

wrong that causes injury to another person’s physical well-being, property, or reputation is called a

tort.

Certain actions can be both a crime and a tort.

It is important to note here that a certain action can be both a crime and a tort. An act, or failure to act,

is a crime because the governing statutes say it is. A high degree of uniformity has emerged among

states, so it is uncommon for a particular act to be legal in one state and illegal in another. Legislatures

attempt to reflect the public interest and will enact legislation that makes a certain act a crime if there is

sufficient demand. In other instances, also reflecting changing public sentiments, legislatures and courts

may decide that a particular act previously considered a crime should no longer be viewed as a

violation of the law. Similarly, a legislature may repeal statutes, thus making an act legal when it

previously had been a crime.

B. CLASSIFICATION OF CRIMES

Crimes are classified into three groups according to the seriousness of the offense:

· Treason

· Felony

· Misdemeanor

Federal law and the laws of the states determine the classification and largely specify the punishment.

1. Treason

Treason is a major crime defined by the Constitution of the United States as follows:

“Treason against the United States shall consist only in levying War against them, or in

adhering to their Enemies, giving them Aid and Comfort.”

2. Felony

A felony is a serious crime against society, such as murder, arson, larceny, bribery, and

embezzlement. It may be punished by execution, by a prison sentence of more than a

year, or by a fine.

3. Misdemeanor

A misdemeanor is a less serious offense than a felony. It is usually punished by a fine

and/or imprisonment for no more than one year.

C. CRIMES IN THE BUSINESS WORLD

1. White-Collar Crime

White-collar crime is the term used to describe various crimes that typically do not

involve force or violence committed by and against businesses. Originally, white-collar

crime related only to nonviolent crimes against businesses, usually committed by their

own employees (embezzlement). In recent years, however, this unofficial category of

illegal activity has been applied to nonviolent crimes committed by business firms as

well as against business firms (stock swindles, frauds against insurance companies,

credit card fraud, income tax evasion, cyberspace fraud, and theft of computer

programs). Depending on its seriousness, a white-collar crime can be either a felony or a

misdemeanor and can violate federal or state law.

The Racketeer Influenced and Corrupt Organizations Act of 1970 also known as RICO,

is one of the most successful laws used to combat white-collar crime. It was created to

restrict the entry of organized crime into legitimate businesses and prohibits an

organization’s employees from engaging in a pattern of racketeering activity

2. Securities Fraud

Securities fraud occurs when a person or company, such as a stockbroker or investment

firm, provides false information to potential investors to influence their decisions to buy

or sell securities.

A Ponzi scheme is a type of securities fraud in which large gains are promised to

investors; but in reality, newer investments are used to provide a return on older

investments. These schemes inevitably collapse over time as older investments

eventually become too large to cover with new investments.

3. Arson

The crime of arson is the willful or malicious act of causing the burning of property

belonging to another person. Some states have broadened the definition of arson to

include the burning of a house by its owner and the destruction of property by other

means. Most instances of arson are profit-related. Most states have statutes that provide

for the punishment of persons who burn their own property with the aim of collecting

insurance money. Such statutes establish a special category of crime called burning to

defraud. To combat these practices, the insurance industry has developed very

sophisticated investigation techniques and has an impressive record of assisting in

successful prosecutions.

4. Larceny

Larceny is a broad term that includes most forms of theft (robbery, hijacking,

embezzlement, and shoplifting). Larceny is often classified as petty (small) or grand

(large), depending upon the value of the stolen property. It is important to distinguish

among the various types of larceny. Robbery is defined as the taking of property in the

possession of another person against that person’s will and under threat of bodily harm

—as in the case of a holdup. Hijacking is stealing from a vehicle in transit or the vehicle

itself, and shoplifting is stealing merchandise from a retail store. Burglary is the illegal

entering of another person’s premises for the purpose of committing a crime.

5. Bribery

The crime of bribery consists of giving or taking money or property of value with the

intent of influencing someone (usually a public official) in the performance of his or her

duty. Some states have enacted laws that also make it a crime to bribe someone other

than a public official. Both the giver of the bribe and the receiver can be charged with

bribery.

6. False Pretenses

The term false pretenses describes a broad category of crimes that involve activities

intended to deceive others by making false claims, or to obtain goods by using false

pretenses. A number of federal and state statutes govern activities that might be

considered false pretenses.

7. Forgery

The crime of forgery consists of wrongfully making or altering the writings of another

with the intent to defraud. Forgery could include falsifying a signature on a check or the

endorsement (the signature on the reverse side of the check). The act of signing another

person’s name to a credit card charge slip without permission is also considered forgery.

8. Perjury

The crime of perjury consists of intentionally giving false oral or written statements

under oath in a judicial proceeding after having sworn to tell the truth. In some

instances, giving false information on a government form is also considered perjury.

9. Embezzlement

The crime of embezzlement may be defined as the wrongful taking of money or other

property that has been entrusted to a person as a part of his or her employment. Some

jobs (accountant, cashier, and bank teller) generally provide more opportunity for

embezzlement than other jobs where the employee has little contact with money. The

use of computers in business had led to some ingenious schemes for embezzling.

10. Extortion

The crime of extortion is the act of taking or demanding money or other property from

someone by using force, threats of force, or economic harm. The difference between

extortion and bribery is that in bribery both parties are willing participants, whereas in

extortion one person is willing and the other is unwilling.

11. Other Business-Related Crimes

The number of crimes that involve businesses continue to grow as changes in business

practices and technology offer new opportunities for wrongdoers to benefit from illegal

or questionable activities.

a) Credit Card Fraud

Certain individuals have seized the opportunity for illegal gain by using stolen or

counterfeit credit cards. Frequently, persons with knowledge of computers access

the credit card numbers of consumers who have made purchases on the Internet

and use these credit card numbers without authorization. The practice of

obtaining credit cards under false pretenses continues to plague banks, credit

card issuers, and consumers.

b) Identity Theft

Identity theft occurs when an unscrupulous individual steals the name and

personal information of someone else by stealing private mail, by obtaining

personal data on the Internet, or by soliciting personal information from an

unwitting victim over the telephone. The person stealing another’s identity does

so in order to obtain credit cards and other types of loans, with no intention of

ever repaying these. It is as important to protect one’s identity as it is to protect

one’s credit cards.

INSTRUCTOR NOTES

A resulting answer or explanation is provided below for each Learning Outcomes in Chapter 3. Every

outcome is also mapped to corresponding text page numbers, PPT slides, and relevant chapter

assessment exercises and activities for ease of reference and use.

LO1. Define crime and distinguish between crimes and torts.

A crime is a violation of a specific statute. A tort is a private wrong that causes injury to another

person’s physical well-being, property, or reputation.

Text Page: 36

PowerPoint: Slide 2-3

Discussion Questions: 26, 29

LO2. Identify the three major classifications of crimes.

The three classifications of crimes, based upon their perceived seriousness, are (a) treason, (b) felonies,

and (c) misdemeanors.

Text Pages: 36-37

PowerPoint: Slides 5-6

Discussion Questions: 27, 30

Thinking Critically About the Law: 37

LO3. Discuss several common crimes of particular concern to businesses and employees.

Many crimes are particularly important to business and employees, including the following:

white-collar crime, arson, burning to defraud, larceny, robbery, hijacking, shoplifting, burglary, bribery,

false pretenses, forgery, perjury, embezzlement, extortion, credit card fraud, and identity theft.

Text Pages: 37-43

PowerPoint: Slides 6-21

Discussion Questions: 28, 31

Thinking Critically About the Law: 32-36

Case Questions: 38-40

Case Analysis: 41-44