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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
