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Chapter 13 - Criminal Law and Business
13-11
Emphasize:
That a businessperson may violate this law by making a false statement to another firm
or person with knowledge that the information will be submitted to a government
agency.
That the Supreme Court has rejected the exculpatory no defense.
Sidebar 13.12—“Massey Energy Co. Explosion: Multiple Charges”
Case for Discussion:
1. United States v. Yermian, 104 S.Ct. 2936 (1984)
Yermian was employed by a private firm that was working on a defense contract for the
U.S. government. When he was asked to complete a security questionnaire, he failed to
disclose that he had been convicted of mail fraud and made misrepresentations about
other employment as well.
Issue: Must the government prove that the defendant had actual knowledge that his false
statements were being submitted to a federal agency.
F. Larceny
Emphasize:
The definition of larceny as it relates to the concepts of property.
The distinction between burglary and robbery.
Additional Matters for Discussion:
The fact that concepts of larceny by employees takes many forms.
The examples of CEOs accused of larceny through the trials of Dennis Kozlowski of
Tyco and Richard Scrushy of HealthSouth.
G. Racketeer Influenced and Corrupt Organizations Act (RICO)
Emphasize:
The broad application of RICO.
That a person in a private civil action found to have violated RICO is liable for treble,
Chapter 13 - Criminal Law and Business
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triple damages as well as for costs and attorney’s fees.
Table 13.2 with examples of racketeering activities.
Additional Matters for Discussion:
Sidebar 13.13—“Major RICO Prosecutions”
Typical RICO cases:
o Ratepayers sue public utilities alleging fraud in ratemaking proceedings
o Suits by the government to rid the unions of corrupt officials
o Criminal charges against brokers for rigged trades on the Chicago Board of Trade
o Employers suing unions and vice-versa, usually alleging extortion
o Customers suing stock brokers for fraud
o Clients and creditors of debtors suing accountants for defective audits and errors
in financial statements
Case for Discussion:
1. H.J. Inc. v. Northwestern Bell Telephone Company, 109 S.Ct. 2893 (1989)
A class action suit, with H.J. Inc. as the plaintiff, sought an injunction and triple
damages in a RICO suit against Northwestern Bell. The basis for the RICO claims arises
from employees of Northwestern Bell bribing members of the Minnesota Public Utilities
Commission related to the rates that Northwestern Bell charges. The trial court
dismissed this suit since it concluded there was no pattern of wrongdoing. The appellate
court affirmed. H.J. Inc. received certiorari from the Supreme Court.
Issue: Does RICO require distinct actions of illegality to find a pattern of racketeering?
continue satisfy the requirements of a RICO claim.
H. Cyber Crime
Emphasize:
The use of the internet as a means for criminal activities.
Sidebar 13.14—“HACKED! Examples of Cyber Crimes”
Chapter 13 - Criminal Law and Business
13-13
The difficulty of investigating and proving cyber crimes.
Additional Matter for Discussion:
The efforts of companies (especially Microsoft) to have those responsible for creating
and spreading computer viruses prosecuted for engaging in criminal behavior.
I. Endangering Workers
Emphasize:
That corporate officials have a duty to protect workers. Breach of this duty may be a
crime.
That the Occupational Safety and Health Administration (OSHA) can also bring actions
against businesses for violation of health and safety standards.
Additional Matter for Discussion:
Some states have adopted a corporate criminal liability act. Under it, companies and
managers can be found guilty of a crime if they fail to notify regulators about safety
defects in their products. The law also requires notice to workers of any life threatening
hazards in the workplace. Is a swimming pool such a hazard?
J. Aiding and Abetting
Emphasize:
The ease at which a person may be charged with this crime.
That to avoid going to trial, many will agree to testify against those more directly
involved in return for lesser punishment or even immunity from prosecution.
The similarity between aiding and abetting and a conspiracy.
The difference between an accessory before the crime and an accessory after the fact.
Additional Matters for Discussion:
A and B were out drinking together. A asked B to drive him home. B was legally drunk
and was arrested for drunken driving. A was also convicted for aiding and abetting B to
drive under the influence. Ask the students if they agree with this conviction.
K. Bribery and Kickbacks
Emphasize:
The elements of bribery.
That bribery is illegal in both domestic and international contexts. (Refer to the Foreign
Corrupt Practices Act in Chapter 12 regarding international liability.)
Chapter 13 - Criminal Law and Business
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That bribery of a public official is illegal under federal law, 18 U.S.C. Section 201.
L. Sentencing Guidelines
Emphasize:
The reasons the guidelines were developed.
That the guidelines were the subject of much study, debate, and controversy.
That federal judges are now free to decide for themselves if the defendants deserve
sentences longer or shorter than the ranges in the guidelines.
That in accordance with a U.S. Supreme Court decision, the guidelines are now
advisory, requiring a court to consider the guideline ranges, but permitting it to tailor the
sentence in light of other concerns.
Why the sentencing commission has developed special guidelines for sentencing
organizations convicted of federal crimes and the type of penalties that the focus is on.
Additional Matters for Discussion:
The special guidelines for sentencing business organizations.
Illustrate how the grid system operates in a specific case.
Case for Discussion:
1. United States v. Nesenblatt, 171 F.3d 1227 (9th Cir. 1999)
The defendant appeals the district court’s four-level enhancement of his sentence for
deriving more than one million dollars in gross receipts from his offense.
Issue: Did the district court properly apply the U.S. Sentencing Guidelines?
case.
M. Trends (LO 13-4)
Emphasize:
One of the more significant trends is an increase in prosecution of white-collar criminals
and legislative efforts to protect the public from fraud.
Chapter 13 - Criminal Law and Business
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Additional Matter for Discussion:
Recent examples of plea bargaining, convictions, and sentences that are in the media at
the time this material is covered.
Answers to Review Questions and Problems
Terms and Procedures
1. Classifications of Criminal Conduct
a. Businesspeople may be the victims of a variety of crimes. Equally possible, many
2. Basic Concepts
3. The Grand Jury
The second juror is more accurate. The grand jury provides a vehicle for investigating
possible criminal activity, and its conclusion is simply whether or not there is sufficient
evidence to charge the defendant with a crime.
Constitutional Issues
4. The Fourth Amendment: Illegal Search and Seizure
5. The Fifth Amendment: Protection against Self-Incrimination
Chapter 13 - Criminal Law and Business
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b. A subpoena that demands production of documents does not compel oral testimony;
nor would it ordinarily compel the taxpayer to restate, repeat, or affirm the truth of the
contents of the documents sought. The contents are not privileged. Although the
contents of a document may not be privileged, the act of producing the 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.
subpoena. The only business protected by the Fifth Amendment privilege against
compulsory self-incrimination is a sole proprietorship. A closely held corporation with
only one shareholder is not protected.
6. Fifth Amendment: Double Jeopardy
7. The Sixth Amendment: Rights in a Criminal Case
The Sixth Amendment protects individuals by providing for a speedy and public trial, a trial
by jury, information related to the pending charges, the opportunity to confront the accuser,
the right to subpoena witnesses, and the assistance of an attorney.
Specific Crimes
8. Fraud
9. Conspiracy
Yes. The agreement to participate in wrongful activities can constitute the crime of
13-17
© 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.
10. Obstruction of Justice
11. False Statement to a Bank
12. False Statement to a Federal Agency
a. Adam attempts to squeeze between nondisclosure and full disclosure. Because the
13. Larceny
Both Joe and Harry are stealing money from the ABC Company.
14. Racketeer Influenced and Corrupt Organizations Act (RICO)
Yes. The shareholder and the corporation are viewed, in the law, as separate entities.
15. Cyber Crime
16. Endangering Workers
17. Aiding and Abetting
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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.
Yes. Susan was an accomplice or an accessory before the fact to Susan filing a false return
with the IRS.
18. Bribery and Kickbacks
The pharmaceutical company is performing bribery, which is of criminal behavior.
19. Sentencing Guidelines
20. Trends
The application of criminal law has been a strong response to corporate scandals in the early
21st century. Businesses and businesspeople have been subjected to increased media
coverage including public displays of arrests and court appearances. The use of plea
bargaining with lower-level businesspeople to gain information to use against higher-level
executives has become commonplace news items. Large sums for bail have been publicized.
Also the government’s attempts to enforce harsh sentences, including seizure of assets, are
frequent occurrences.
Business Discussion #1
1. Did you commit a crime when you sold the stock?
Perhaps. The utilization of the nonpublic information the individual received from the
2. Did you commit a crime in your answer to the federal agent?
3. Were you part of an illegal conspiracy?
Chapter 13 - Criminal Law and Business
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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.
defraud by selling stock based on nonpublic information and by lying to federal officials. If
there was no such agreement, then no conspiracy likely exists.
