workplace that can be monitored by managers, even when managers are away, are used
increasingly. Computer programs can signal when unusual transactions occur or if the level of
activity at a cash register is usually high or low, which can be a signal of a problem.
Racketeer Influences and Corrupt Organizations Act (RICO)—A federal statute originally aimed
at the mafia but now used by the government as a catchall for a wide range of illegal activities. It
can be used to seize assets or to prevent the transfer of assets; very elastic. Since it has a civil
liability provision, private litigation also arises under this statute that has still not been fully
defined as to scope of use.
CASE: Bridge v. Phoenix Bond (Sup. Ct., 2008)—Cook County (IL) sells tax liens at auction
and has rules to prevent collusion and rigged bids. Phoenix Bond sued Bridge for fraud in
obtaining liens by using methods that violated bidding rules. Phoenix claimed RICO violations
and mail fraud by a conspiracy of companies that involved falsified documents. District court
dismissed as fraud not directed at Phoenix. Appeals court reversed. Bridge appealed.
Decision: Affirmed. RICO allows private causes of action and treble damages when business
injured by mail fraud or other illegal acts. The fact that Phoenix did not rely directly on Bridge’s
Questions: 1. How were Phoenix Bond and other plaintiffs allegedly injured by bidding scheme
of Bridge and others?
Bridge and others allegedly could rig the bidding process so as to allow them to capture more of
the tax liens (which was a profitable business—the property owner must redeem the property by
paying the lienholder the delinquent taxes, plus a penalty established at auction, plus a 12%
2. Why was it to the advantage of plaintiffs to bring a cause of action under RICO?
If plaintiffs won, they could show how much potential profit they lost from the extra business
Cyberlaw: Your Laptop Is an Open Book
Reasonable suspicion is not needed for customs officers and other law enforcement authorities to
search laptops, such as when going through customs. Besides searching for child porn,
authorities may search for evidence of illegal business activities when there is suspicion of
corrupt practices.
Securities Fraud—A wide range of crimes under federal and state securities law, including theft
from clients’ accounts, churning of accounts, charging improper fees and the provision of false
information. (See Chapter 21)
Tax Evasion—Violation of federal and state laws for failing to report income, claiming false
expenses, not reporting all income properly. About 2,000 people a year are imprisoned for tax
fraud.
Add. Case: U.S. v. Anthony (1st Cir., 2008)–In 1998, Anthony and his spouse filed a joint tax
return with zeros entered for income and taxes owed. They received a refund for all taxes
withheld. They attached a statement that they had no duty to pay federal income tax or to file a
return and that it had been a mistake for them to file returns in earlier years. They filed an all
zero tax return in 1999 and no returns after that. During that time, Anthony opened a bank
account in Cyprus and transferred $870,000 to it. In 2004, learning that a criminal investigation
was underway, he began to file overdue returns and pay what was owed, although he stated to
the IRS that it was his belief he owed nothing. Despite filing back returns, he was convicted of
tax evasion and sentenced to 33 months in prison. The court held that Anthony was willfully
blind to his obligations and an enhanced sentence was appropriate. He appealed.
Decision: Affirmed. The evidence supported that Anthony was willfully blind. He recognized the
likelihood that he was in violation of the law, yet proceeded. A willful blindness instruction is
appropriate if: 1) the defendant claims a lack of knowledge, 2) the facts suggest a conscious
course of deliberate ignorance, and 3) the instruction cannot be misunderstood as mandating an
inference of knowledge. His actions indicated a voluntary, intentional violation of a known legal
duty. This is true in most income tax evasion cases. The fact that Anthony had a bunch of
material that stated that people do not have to pay taxes on income carried no weight and need
not be allowed in evidence.
Telephone and Telemarketing Fraud—Several statutes and general consumer protection laws
cover a wide range of scams that use electronic communications as part of the contract with
consumers. False statements include making it appear that a charity is involved when it is not.
Wire Fraud—Almost any illegal activity involving electronic communication can bring in federal
authorities with the hook of interstate communication used to further illegal activities. This is a
sweeping statute that includes e-mail communication. In 2010, the S.Ct. (Skilling v. U.S.) struck
down the failure to provide “honest services” part of the statute as too vague. Kickbacks, bribes,
and other such acts are often accomplished via “wire.”
Add. Case: U.S. v. Vucko (7th Cir., 2007)–Vucko worked in bookkeeping for Northwest
Building. Over a period of years, she stole $700,000 from her employer by “refunding” credit
charges to her bank account. She did not report that income on her tax returns. She was
convicted of wire fraud for the theft and for making false statements in tax returns. The trial
court imposed concurrent sentences of two years’ prison for each offense plus restitution. Vucko
appealed, contending the trial court failed to group the charges so they would be considered a
single offense.
Decision: Affirmed. Vucko’s actions of stealing money and not reporting the income to the IRS
were related, but it would not be appropriate to group these actions as one. The offenses had
International Perspective: White-Collar Crime in France
Under the French Penal Code, corporate crimes are rare. It must be shown that the corporate act
was ordered by the board o directors or senior managers. Illegal acts committed by others within
the organization cannot be attributed to the organization, as can happen in the U.S.
Business Implications from Money Laundering—Focus here is on one of the many areas just
reviewed in brief—money laundering—and how it impacts normal business operations. More
than $1 trillion a year may be laundered, so it is a big area—making criminal gains appear
legitimate. An example is given to show how Anti-Money Laundering (AML) measures work.
Elements of Control within Business Operations—AML looks to 1) identify the beneficial owner
of assets, 2) trace the transmission of asset, and 3) report suspicious transactions.
Who Owns What?—Who enjoys the benefits of ownership, not whose name appears on
documents. This gets at setting up sham enterprises for ill-gotten gains. Hence, one should look
past the documents of firms dealt with and try to know beneficial owners. Especially true in the
financial industry. Financial institutions at risk must take particular care to try to determine if
customers are acting on behalf of another—dig into the background of a company or trust.
Track It Down—Financial institutions must ask about the source of funds and document the path
before they showed up. Don’t just take a pile of cash or large sum without asking questions.
Same can apply to high-end merchants, such as diamond dealers, who may have an obligation to
try to determine if money paid for gems is legit.
Who Is Up to What?—Financial institutions must report suspicious transactions. A report must
be filed for every transaction over $10,000 and suspicious activity report for anything that raises
possible concern. The IRS and Financial Crimes Enforcement Network of the Treasury provide
guides to suspicious activities.
Consequences of Non-Compliance—Failure to report suspicious activity can result in civil and
criminal penalties. Willful violations can result in prison for those in Money Services Business
(check cashing and other non-banking services involving cash) who do not follow regulatory
requirements.
SENTENCING GUIDELINES AND COMPLIANCE—A controversial federal statute that
sets specific ranges of punishments for most federal crimes based on a point scoring system
provided by the Sentencing Commission. Companies can help reduce the punishment suffered by
having effective compliance programs in place to train personnel about various legal
requirements, have quality internal reporting programs, enforcement of standards, and volunteer
missteps. Some courts have ruled the Guidelines unconstitutional; the Supreme Court has held
the Guidelines to be advisory, not mandatory, but in general they are followed within the ranges
set by the Guidelines or the sentence may be remanded.
CASE: U.S. v. Allmendinger (4th Cir., 2013)—Allmendinger (A) and others ran a huge
insurance scam. When the feds closed in, A his assets and continued to do so after being indicted.
A was given a much longer prison sentence than his co-conspirators. He appealed that the very
long sentence he was given was not justified.
Decision: Affirmed. Courts are expected to follow guidance provided by the Sentencing
Guidelines. Parties convicted may challenge the rationale of the judge. Here there was no
Questions: 1. Oncale got 10 years while Allmendinger got 45 years. Both were involved in the
same scam for years. Should sentences be that much lower for defendants who cooperate?
Prosecution would be much harder without cooperative participants in complicated schemes and
2. Defendants were guilty of multiple counts of mail fraud and other violations. Why would they
be convicted on multiple counts, rather than just one count for their illegal activity? Is that just
piling on more punishment for the same event?
Multiple counts are common. That helps increase the odds of conviction. Even if the jury rejects
some counts, they can still convict on others. That keeps the cost of prosecution lower rather than
Add. Case: U.S. v. Young (8th Cir., 2005)—Young and his partner raised funds for a large cattle
operation. Their scheme collapsed with over $100 million in losses. When the feds moved in,
they cooperated in providing information about the operation. They plead guilty. Young was
sentenced to 9 years in prison based on Guideline criteria. He appealed the sentence as too
harsh given his cooperation.
Decision: Affirmed. Under the Guidelines, Young and his partner could have been given longer
sentences. They claim they did not know that their scheme could cause losses, such as the
Add. Case: U.S. V. Wilkinson (4th Cir., 2010)– Wilkinson was indicted for conspiracy to
defraud the government, conspiracy to commit wire fraud, and conspiracy to steal trade secrets.
He pleaded guilty under a plea agreement. The charges arose from his role in a company that
provided aviation fuel to the military at various bases. He paid an employee of a competitor to
provide information about bids that company was making when the two companies were
competitors so bids could be rigged. Due to cooperation, the prosecutors reduced the level of
sentencing that was recommended to a lower level than may have been imposed in case of
convictions in which there was no cooperation. The judge sentenced Wilkinson to three year’s
probation and 800 hours of community service. The government appealed that the sentence was
too light in violation of the Sentencing Guidelines.
Decision: Vacated and remanded. The government recommended that Wilkinson pay restitution
to a competitor injured by the bid rigging and to the government for the high prices paid by the
fraudulently obtained contracts. The district court must explain why no restitution should be
Discussion Question
There is a very high rate of conviction at trial, which would indicate that the standard of proof is
not “too high.”
Case Questions
1. There is no exception to federal criminal liability for a false statement consisting of an
“exculpatory no.” Any false statement “of whatever kind” is in violation of the law. Brogan’s
2. (answer on Internet for students) Reversed. In a case of first impression on this subject, the
appeals court held that legal impossibility is not a defense to the charge of conspiracy and
3. (answer on Internet for students) Affirmed in part, reversed in part. Jolivet’s mail fraud and
conspiracy convictions stand. The mails were used to send fraudulent documents that she
prepared and signed. She received insurance proceeds. Her participation in the conspiracy was
knowing. However, the money laundering conviction is reversed. Her act of depositing into her
4. Affirmed. Hector may not recover the costs he incurred in his criminal prosecution. The
victims of unreasonable searches or seizures may recover damages directly related to the
invasion of their privacy, including, when appropriate, damages for physical injury, property
5. (answer on Internet for students) Affirmed. Under Wyoming law (as in general), a person
alleging an illegal search must show a legitimate expectation of privacy in the searched property.
In considering whether a person has an expectation of privacy, the court considers: 1) the
6. Conviction affirmed. The New York appeals court held that a company could be held
criminally liable for the acts of its employees committed within the scope of their employment.
7. Motion denied. The trial plan “was the work product of a business relationship between client
and attorney, and may thus be viewed as an ordinary subject of commerce, created for
commercial purpose.” The transmission of information by e-mail falls under the statute, since it
8. Reversed. The law states that if the state proves that a dealer in property purchases or sells
stolen property “out of the regular course of business or without the usual indicia of ownership
other than mere possession” an inference arises that the person buying or selling the property
9. (answer on Internet for students) Yes, Corner is correct. The 7th Circuit noted that recent
Supreme Court decisions have stated the Sentencing Guidelines are advisory and that judges may
vary from their recommendations as long as they respect all statutory requirements. Since the
Ethics Question
Clearly the company could, legally, fire the employees for committing a criminal act. If an
employee is convicted of a criminal act in a legal system that requires proof beyond a reasonable
doubt or some other high standard for a conviction, there is usually a presumption that the
Internet Assignment
Sentencing Law and Policy blog:
http://sentencing.typepad.com/
The Confrontation Blog:
www.confrontationright.blogspot.com/
CrimProf Blog:
http://lawprofessors.typepad.com/crimprof_blog/
Compare the blogs listed here—Sentencing Law and Policy, and The Confrontation Blog, and
The Crim Prof Blog. They have very different styles You can also find criminal law blogs
devoted to issues in your state. (Law-related blogs are often called “blawgs.”)