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Chapter 13 - Criminal Law and Business
13-1
Chapter 13
Criminal Law and Business
Learning Objectives
The general purpose of this chapter is to alert students to the importance of criminal law in
operating a business. The emphasis is on crimes committed by businesses rather than on business
as a victim of criminal conduct. One point of emphasis is the use of criminal law enforcement in
response to recent corporate scandals. This chapter also introduces students to the terminology
used in criminal law, including basic concepts such as intent. Constitutional protections available
to those accused of a crime are considered with particular emphasis on unreasonable searches and
seizures, self-incrimination, double jeopardy, and trial by jury. The chapter covers specific crimes
that are commonly committed in business, especially fraud, conspiracy, and obstruction of
justice, as well as other serious crimes such as violations of the Racketeer Influenced and Corrupt
Organizations Act. Finally, trends in criminal law are discussed.
References
Creating a Culture of Compliance. Wiley (2006).
Broadhurst, Roderic and Peter Grabosky, Cyber-Crime: The Challenge in Asia. Hong Kong
UP (2005).
Coleman, J.W., The Criminal Elite: Understanding White-Collar Crime. Worth Publishers
(2002).
Rosoff, S.M., H.N. Pontell, and R. Tillman, Profit Without Honor: White-collar Crime and
the Looting of America. Prentice Hall (2002).
Shover, Neal, Choosing White-Collar Crime. Cambridge UP (2006).
Swartz, M. and S. Watkins, Power Failure: The Inside Story of the Collapse of Enron.
Chapter 13 - Criminal Law and Business
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Doubleday (2003).
Teaching Outline
I. Terms and Procedures
A. Classifications of Criminal Conduct (LO 13-1)
Emphasize:
The meaning of the phrase white-collar crime.
The difference between a felony and a misdemeanor.
How an indictment differs from an information.
Additional Matters for Discussion:
Discuss the examples of white-collar crimes in Table 13.1.
Discuss the specific indictments and prosecutions listed in Sidebar 13.1—“Handcuffs
That intent is an important element of many criminal laws.
The meaning of the terms willfully and knowingly.
The various pleas that can be entered by or on behalf of a criminal defendant.
The reasons why the plea of nolo contendere may be so important.
C. The Grand Jury
required to justify the issuance of a grand jury subpoena by presenting evidence
sufficient to establish probable cause because the very purpose of requesting that
information is to ascertain whether probable cause exists.
Cases for Discussion:
13-3
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1. United States v. Williams, 504 U.S. 36 (1992)
Williams challenged his indictment by a federal grand jury because the government had
failed to present substantial exculpatory evidence to the grand jury.
Issue: Can a court dismiss an otherwise valid indictment because the government failed
to disclose exculpatory evidence in its possession?
judiciary.
2. United States v. R. Enterprises, Inc., 111 S.Ct. 722 (1991)
A grand jury issued subpoenas to three companies wholly owned by Martin Rothstein,
seeking a variety of books, records, and videotapes. All three firms moved to quash the
subpoenas claiming that the materials sought were irrelevant to the grand jury’s
investigation.
Issue: Do the strict standards that apply to trial subpoenas apply equally in the grand
jury context?
law presumes, absent a strong showing to the contrary, that a grand jury acts within the
legitimate scope of its authority.
+
II. Constitutional Issues (LO 13-2)
A. The Fourth Amendment: Illegal Search and Seizure
Emphasize:
That the Fourth Amendment protects individuals and corporations from unreasonable
searches and seizures by the government.
The application of a search warrant.
That to protect police officers, courts have held that officers making an arrest do not
need a search warrant to search that person and the immediate area around that person
for weapons.
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© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
That Fourth Amendment protection also extends to certain civil matters.
Sidebar 13.3—“The Fourth Amendment: Exigent Circumstances and Warrantless
Searches”
That today’s increased security at airports and border crossings does not violate the
Fourth Amendment.
Case 13.1: Riley v. California 573 U.S. _ (2014)
Cases for Discussion:
1. City of Indianapolis v. Edmond, 121 S.Ct. 447 (2000)
The constitutionality of a highway checkpoint, established by the City of Indianapolis, is
challenged on the basis that its primary purpose is the discovery and interdiction of
illegal narcotics.
Issue: Does a highway checkpoint program, whose primary purpose is to detect criminal
wrongdoing, violate the Fourth Amendment guarantee against unreasonable searches
and seizures?
checkpoints, stops can only be justified by some measure of individualized suspicion.
The constitutionality of checkpoint programs depends on a balancing of competing
interests at stake and still may be permissible in exigent circumstances.
2. Skinner v. Railway Labor Executives’ Association, 109 S.Ct. 1402 (1989)
After receiving evidence that alcohol and drug abuse by railroad employees had caused
or contributed to train accidents, the Federal Railroad Administration issued safety
regulations that required blood and urine testing following train accidents.
Issue: Do these regulations violate the Fourth Amendment?
public plainly justifies the regulation.
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© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
3. Dow Chemical Co. v. United States, 106 S.Ct. 1819 (1986)
The EPA conducted an investigation of Dow Chemical Company. After Dow denied the
EPA entry to the plant for the purpose of taking photographs of its layout and facility,
the EPA contracted with a private company to obtain aerial photographs of Dow’s
facility.
Issue: Did the EPA violate the Fourth Amendment?
industrial plant are different from a dwelling where occupants have a legitimate
expectation of privacy. A manufacturing plant is more like an open field in which an
individual may not demand privacy.
4. Washington v. Chrisman, 102 S.Ct. 812 (1982)
A state university police officer and a student went to the latter’s room after his arrest to
secure identification. The officer stood in the open doorway of the room but entered
when he observed marijuana seeds and a pipe on a desk inside. The officer seized the
seeds and the pipe.
Issue: Was there a legal search and seizure?
dictates, following the arrest.
B. The Fifth Amendment: Protection against Self-Incrimination
Emphasize:
That the Fifth Amendment is best known for its protection against compulsory self-
incrimination.
That the protection against compulsory self-incrimination does not protect a
businessperson from having to produce, in court, records prepared in the ordinary course
of business.
That the only business protected by the Fifth Amendment privilege against compulsory
Chapter 13 - Criminal Law and Business
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self-incrimination is a sole proprietorship.
Sidebar 13.4—“Know Your Miranda Rights”
Sidebar 13.5—“Fifth Amendment Rights: Mere Silence Does Not Invoke Miranda”
Case for Discussion:
1. In Re Grand Jury Witnesses, 92 F.3d 710 (8th Cir. 1996)
A federal grand jury was investigating possible criminal violations of the Clean Water
Act and issued subpoenas to corporate officials as part of an ongoing corporate criminal
investigation. The officials moved to quash the subpoenas claiming that compliance
would compel them to produce incriminating corporate documents.
Issue: Can witnesses be compelled to produce collective entity documents in their
possession if that act of production might incriminate them?
Private papers remain protected by the Fifth Amendment and issues of whether a
particular document is a private paper or a corporate document may be submitted to the
district court in camera.
C. The Fifth Amendment: Double Jeopardy
Emphasize:
The protections offered by and limitations associated with the double jeopardy clause.
Cases for Discussion:
1. Selective Service System v. Minnesota Public Interest Research Group, 104 S.Ct. 3348
(1984)
An action was brought challenging the constitutionality of a statute that denies federal
financial aid to male students who fail to register for the draft.
Issue: Does this denial of financial aid violate the protection against self-incrimination?
Chapter 13 - Criminal Law and Business
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registrants. There is no violation of the Fifth Amendment privilege against self-
incrimination.
2. United States v. Doe, 104 S.Ct. 1237 (1984)
Doe is the owner of several sole proprietorships. A grand jury, during the course of an
investigation of corruption in the awarding of county and municipal contracts, served
five subpoenas on the respondent. They sought his business records including telephone
calls, bank accounts, and checks.
Issue: Are these records protected by the Fifth Amendment?
document may be. A government subpoena compels the holder of the document to
perform an act that may have testimonial aspects and an incriminating effect.
Compliance with the subpoena tacitly concedes the existence of the papers demanded
and their possession or control by the taxpayer. It also would indicate the taxpayer’s
belief that the papers are those described in the subpoena.
D. The Sixth Amendment: Rights in a Criminal Case
Emphasize:
That the Sixth Amendment, like the Fifth, provides multiple protections in criminal
cases. See the six bullet points in the text.
That peremptory challenges during voir dire examination cannot be used to deny a
defendant a jury of one’s peers.
The right to an attorney exists in any case where incarceration is a possible punishment.
The ethical implications of the Department of Justice rule allowing government lawyers
to contact company workers in corporate criminal investigations.
Chapter 13 - Criminal Law and Business
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A. Fraud
It is estimated that up to ten percent of every dollar spent on health care is due to the
existence of fraud.
Discuss the need to more closely monitor health care professionals, hospitals, and
nursing homes to prevent overcharging and other forms of fraud.
Sidebar 13.7—“FBI Report: Common Fraud Schemes”
defraud.
Legal Aspects of Mail and Wire Fraud
Emphasize:
The legal aspects of mail fraud and wire fraud, including terms such as material
fact, intent to defraud, and good faith.
That securities fraud will be discussed in detail in Chapter 17.
Health Care Fraud
Emphasize:
Chapter 13 - Criminal Law and Business
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The six bullet points in the text showing examples of possible fraud in the health care
Emphasize:
That the use of an unauthorized access device, such as a lost, stolen, expired,
revoked, canceled, or fraudulently obtained bank card, is prohibited.
Bankruptcy Fraud
Emphasize:
began.
Additional Matter for Discussion:
The common practice of transferring property to relatives when bankruptcy becomes
a real possibility. Consider the legal and ethical implications of such an action.
B. Conspiracy
Additional Matters for Discussion:
The importance of disassociating oneself from the conspiracy immediately upon
discovery of the illegal scheme.
Sidebar 13.10—“Anatomy of a Prosecution: The Fall of Enron”
Additional Case for Discussion:
13-10
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
1. United States v. Shabani, 115 S.Ct. 382 (1994)
Shabani was convicted of conspiracy to distribute cocaine even though the trial court
refused to instruct the jury that proof of an overt act in furtherance of a narcotics
conspiracy is required.
That it is a federal crime for anyone willfully to make a false statement to a federally
insured financial institution.
That the purpose behind making such falsehoods a crime is to protect banks and attempt
to ensure the accuracy of financial information.
