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Chapter 7
CRIMES
RESTATEMENT
Society sets standards of conduct and labels breaches of those standards crimes which are punishable by fines or
imprisonment or both. Crimes are classified as felonies (the more serious crimes) and misdemeanors. State statutes
classify crimes and provide penalties. A crime consists of two elements: the mental state and the actual act or
omission that constitutes the subject of the crime. Employers, including corporations, can be held liable for facilitating
or encouraging an employee to commit a crime or for their failure to take action when it is required.
Planning to commit a crime is also a form of criminal activity and can be prosecuted as attempts or conspiracies. In
some situations, part of the penalty for criminal conduct is restitution for victims. The victims may also seek recovery
in a civil case. Because criminal penalties often involve fines, the government is given authority to ask for forfeiture of
the defendant’s property in certain circumstances.
Crimes that do not cause injury to persons or physical damage to property are called white-collar crimes. There are
many forms of white-collar crimes including securities fraud, racketeering, bribery, extortion, blackmail, improper
influence, counterfeiting, forgery, perjury, fraud, bad check writing, swindles, mail and credit card fraud, lotteries and
gambling, and embezzlement.
Computer crime as a form of criminal activity is still evolving as the technology and use of computers evolves.
Crimes include damage to the computer, unauthorized use of computers, EFT crimes, and spamming.
There are certain procedural rights guaranteed to those charged with crimes. Those rights include protection against
warrantless searches under the Fourth Amendment and protections against self-incrimination under the Fifth
Amendment. The Fifth Amendment also guarantees due process.
STUDENT LEARNING OUTCOMES
LO.1: Discuss the nature and classification of crimes.
LO.2: Describe the basis of criminal liability.
LO.3: Identify who is responsible for criminal acts.
LO.4: Explain the penalties for crimes and the sentencing for corporate crimes.
LO.5: List examples of white-collar crimes and their elements.
LO.6: Describe the common law crimes.
LO.7: Discuss crimes related to computers.
LO.8: Describe the rights of businesses charged with crimes and the constitutional protections afforded them.
INSTRUCTOR’S INSIGHTS
Break the chapter down into four components – related Learning Outcomes are indicated in ( ):
1. What are the nature and definition of crimes and criminal penalties?
Describe the various types of crime (LO.1)
Explain when and how criminal liability is imposed (LO.2)
2. What are the types of white-collar crimes?
Define and discuss conspiracies (LO.5)
Cover the crimes related to production, competition and marketing (LO.5)
Define money laundering (LO.5)
Explain racketeering (LO.5)
Explain bribery (LO.5)
Define commercial bribery (LO.5)
Discuss extortion and blackmail (LO.5)
3. What are computer crimes?
Define computer crimes (LO.7)
Explain the computer as the victim (LO.7)
Discuss the unauthorized use of computers (LO.7)
Define computer raiding (LO.7)
4. What are the steps and rights of those charged with crimes?
Explain the Fourth Amendment protections (LO.8)
CHAPTER OUTLINE
I. What are the Nature and Definitions of Crimes and Criminal Penalties?
A. Nature of crimes
1. Crimes are conduct prohibited and punished by government
2. Various degrees of criminal activity
B. Basis for criminal liability
1. Need proper mental state
2. Act or omission: conduct prescribed as an offense by statute
CASE BRIEF: United States v. Ahmad
101 F.3d 386 (5th Cir. 1996)
FACTS: Ahmad owns a Spin-N-Market in Texas, a convenience store and gas station. One of the
Spin-N-Market’s gasoline tanks developed a leak. Jewel McCoy of CIT Environmental Services
inspected the tank, said it needed to be drained and then pumped. McCoy gave Ahmad the cost of
draining and he suggested he would do it himself despite McCoy’s warning about violations of the
Ahmad was charged with violation of the Clean Water Act and was convicted of two charges.
ISSUE: Did Ahmad have intent to violate the statute (CWA)?
REASONING: He thought he was discharging water, not gasoline. There is more knowledge required for CWA
violations, not just strict liability.
C. Responsibility for criminal acts
1. Corporate liability
a. Corporation is liable to extent they facilitated the crime – e.g., employer gives employee money for
2. Responsibility for criminal acts
a. Corporate liability – for example, Siemens was held liable for the bribery of employees
CASE BRIEF: United States v. Park
421 U.S. 658 (1975)
FACTS: The federal Food and Drug Administration (FDA) had inspected the Philadelphia warehouses of
Acme Markets, Inc., a food retailer with 36,000 employees, in 1970, 1971, and 1972 and had found
the same problem with rodent infestation. The FDA, frustrated with the lack of response by
warehouse employees, sent a letter to John Park, the president of Acme detailing the problems in
the warehouse.
We note with much concern that the old and new warehouse areas used for food storage
were actively and extensively inhabited by live rodents. Of even more concern was the
observation that such reprehensible conditions obviously existed for a prolonged period of
time without any detection, and were completely ignored.
We trust this letter will serve to direct your attention to the seriousness of the problem and
formally advise you of the urgent need to initiate whatever measures are necessary to
prevent recurrence and ensure compliance with the law.
Park asked his vice president to take care of the problem. Two months after the letter was sent, the
FDA inspected the warehouse again and still found rodent infestation. Acme and Park were
charged with violations of the federal pure food laws. Acme pleaded guilty, and Park was found
guilty and fined $500. Park appealed his conviction because he was not responsible for the
warehouse.
ISSUE: Can an officer be held criminally liable for the failure of employees to correct a violation?
REASONING: The court affirmed Park’s conviction on the grounds that he was told of a serious situation at one of
his facilities that constituted a violation of federal law and that after two months he had failed to get
the situation corrected. His knowledge of the problem and his inaction were sufficient to hold him
criminally liable.
DISCUSSION POINTS: Discuss with the students who can be held liable for criminal violations using the United
States v. Park case.
Use Figure 7-1 to show penalties for corporations and individuals.
c. Federal laws targeting officer and director criminal responsibility
i. Dodd-Frank Wall Street Reform and Consumer Protection Act – increases penalties
ii. Honest services fraud has been refined – officers cannot be convicted just because something
d. Penalties for crimes: forfeiture
i. Taking fruits of the crime, e.g., they took Madoff’s homes and yacht
e. Penalties for business and white-collar crimes
ii. Corporate integrity agreement
aa. Can defer prosecution
iii. Fine is a percentage of profits
f. U.S. Sentencing Commission developed uniform guidelines
g. Federal sentencing guidelines; apply to
i. Securities violations
ii. Antitrust violations
3. Mandatory sentences for officers of corporation who mastermind crime
a. SOX mandates penalties – see Figure 7-1
b. Fines and damages to investors who lose money
i. Students always ask about the concept of plea bargaining. Structure a hypothetical case to
show how it works. Have the students list the advantages and disadvantages of plea
bargaining. Ask them what would happen if all defendants accused of a crime insisted on a
ii. It is said that the theory behind imprisonment is to punish as well as reform an individual.
Many people believe that this does not work. Criminals are returned to the streets after being
convicted criminals can be sentenced to thirty years in jail and be out in seven? Have your
students discuss “Three strikes and you’re out.”
iii. Have the students discuss whether “an eye for an eye and a tooth for a tooth” is an appropriate
DISCUSSION POINTS: Thinking Things Through
Can a Pharmacy's License Be Revoked for Too Many Cash Sales of Oxycodone?
The corporation can be held liable if it did not have adequate internal controls in place that would track the levels of
narcotic drugs being dispensed at its locations. Lax internal controls can be used to impute knowledge to the
company and result in liability. The goal of the criminal statutes is to require companies to have internal mechanisms
to trigger questions and then to ask those questions.
4. SOX reforms
a. Part of these post-Enron and WorldCom reforms was the White-Collar Crime Penalty Enhancement
Act
b. Increased fines and prison sentences substantially
DISCUSSION POINTS: Ethics & the Law
When Addictions Are Off and On Again
Those who have used the rehab loophole to reduce their prison terms have brought attention to the issue and the
program has now been placed under greater scrutiny and includes more requirements. The support of the probation
officer (who makes sentencing recommendations) is one requirement considered because that would bring in any
information from the report about addictions or claims that they are not alcohol or drug abusers.
The actions are duplicitous. The prisoners are telling different stories in order to reduce their sentences.
D. Indemnification of crime victims
1. Statutory assistance
a. Victims of the Crime Act of 1984
2. Action for damages
a. Racketeer Influenced and Corrupt Organizations Act (RICO) – allows suits for recovery
3. Indemnification of unjustly convicted
a. Statutory right
II. What are the Types of White-Collar Crimes?
A. Conspiracy
1. Agreement between two or more persons to commit a crime
B. Crimes related to production, competition, and marketing
