Counseling Chapter 15 Fifteen Whitecollar Crime Cyber Crime And Commercial Crime Learning Objectives After

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CHAPTER FIFTEEN

WHITE-COLLAR CRIME, CYBER CRIME, AND

COMMERCIAL CRIME

Learning Objectives

After reading this chapter, students will be able to:

1. Define white-collar crime.

3. Describe the elements of a “scheme or artifice” under federal criminal statutes.

5. List the laws protecting intellectual property.

7. Identify one element making wire fraud different from bank fraud, and state why the

element exists.

9. State the elements of identity theft crimes.

Lesson Plan

Correlated to PowerPoints

I. White-Collar Crime – Assignment 3

Learning Objective 1: Define white-collar crime

Media Tool

White-collar crime

http://www.fbi.gov/about-us/investigate/white_collar

o Webpage provided by the FBI

o Discussion: What are the most recent crimes listed on the

webpage? How much money was lost as a result of these crimes?

What should the consequences be for perpetrators of white-collar

crimes such as these?

A. White-collar crime is a class or type of criminal conduct that has solely economic

gain for the criminal as its goal

B. The economic cost of white-collar crimes and other commercial crimes is much

greater than other crimes

1. Estimated $15.6 billion in 2011

5-6

II. Fraud and Fraudulent Practices – Assignment 1

Learning Objective 2: Explain why fraud convictions require action done knowingly.

Learning Objective 3: Describe the elements of a “scheme or artifice” under federal criminal

statutes.

Learning Objective 4: Explain the status of the “quid pro quo” requirement in federal bribery

charges.

Learning Objective 5: List the laws protecting intellectual property.

Learning Objective 7: Identify one element making wire fraud different from bank fraud, and

state why the element exists.

Learning Objective 8: Define insider trading.

Learning Objective 9: State the elements of identity theft crimes.

A. Fraud consists of deceitful means or acts used to cheat a person, corporation, or

governmental agency

Media Tool

Clinton’s Policy of Not Prosecuting Bank Fraud Continues

http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=9736

o The Real News Network Website

o Discussion: Why do you think that bank fraud is not being prosecuted? Do you agree with the

criminologist in the video? What will need to happen to see prosecution of bank fraud?

C. Bank fraud

2. Because of potential losses for the government, Congress passed the bank

fraud statute making bank fraud a federal crime

3. Examples of bank fraud

4. Bank fraud cases require proof that the defendant knowingly executed or

attempted to execute a “scheme or artifice” to defraud or, through false

statements, obtain money or property from a federally insured financial

institution

What If Scenario

What if your doctor asks you to sign a form for tests you have not received and says she will

take 50% off of your medical bill? Who would you talk to? What do you think the doctor is

7-21

doing?

D. Health care fraud

2. False claims to federal government health care programs cost the federal

government huge amounts each year

3. Congress has passed a number of different statutes to address this problem

a. Medicaid False Claims Statute

4. The meaning of “willful”

a. It makes it a crime for one to “knowingly and willfully” make a false claim

b. Is it enough to prove that the defendant’s actions were intentional rather than

accidental or negligent? Or, must the government also prove that the

defendant knew that making the false claim or statement, or copying the

work, was illegal? Federal courts have split on the meaning of “willful” in

these contexts.

What If Scenario

What if a friend of yours says he has a great idea to make some extra cash? He says that you

can buys some CD’s, copy them, and sell them to friend for half of what they cost in the stores.

What would you do?

E. Intellectual property fraud

2. The theft, piracy, or counterfeiting of intellectual property costs its owners

billions of dollars each year

5. Trade secrets

a. The federal government and every state have trade secret laws that

b. Economic Espionage Act

F. Fraud and corruption in government

2. Losses through fraud and corruption occur in many ways

a. Mail fraud, wire fraud, racketeering, bribery and theft of public

3. Contract fraud and the False Claims Act

4. Program frauds

a. Persons who make false claims for benefits under these programs

a. Offering a gift or payment to another with the specific intent to

obtain some unlawful particular quid pro quo for the gift or

payment

b. Charges often coupled with bribery include RICO statutes and

extortion

c. Bribery and, to some degree, extortion crimes usually involve a

quid pro quo—that is, an exchange of some official act for some

promised payment

d. Bribery was traditionally a crime committed by or with officials,

and as a result many state bribery statutes are specifically

addressed to official misconduct

Class Discussion/Activity

What might account for the unprecedented level of stock market and

corporate fraud experienced during the period from 1990 to 2004? Do you

believe the criminal prosecutions of Enron Corporation’s CEO and Martha

Stewart will serve as a deterrent to such greed?

G. Stock market and financial market frauds

1. These markets are important to the economic development of the United

States and other countries

3. Inter-positioning

4. Stock market and corporate fraud reached unprecedented heights during

the period from 1990 to 2004

a. Enron

H. Other fraud statutes in the Federal Criminal Code

2. Congress has power to punish these crimes under the Interstate Commerce

Clause and other federal laws based on the use of banks, the stock market,

or other large financial institutions

I. Many federal crimes have a broad scope and are used in prosecutions for

violations of the particular statute and also in both fraud and RICO violations

1. Mail Fraud Act

3. The Travel Act

4. The Major Fraud Act

What If Scenario

What if the mayor of your city approaches your construction business and tells you that if you

want to get the contract for building the new city parking garage, all you have to do is pay him

$10,000. The contract is worth millions…what do you do?

J. Every state has fraud statutes

1. These statutes generally follow the federal language

Class Discussion/Activity

What will it take on the part of government, businesses, and individuals to

curb the rapid growth of identity theft in this country?

What If Scenario

What if your wallet is stolen? It happens while you are out with friends on a Friday night and

do?

K. The crime of identity theft and false identification documents

1. In a 2011 report, the Department of Justice Bureau of Justice Statistics

2. Identity theft has two forms: “true name” and “synthetic identity” theft

a. True name theft: an actual person’s identity is stolen

20–21

3. Because many identity thefts are done using computers, mail, or phone

lines, many prosecutions are federal

4. The principal federal statutes are 18 U.S.C. § 1028, identity theft; and 18

U.S.C. § 1028(A), aggravated identity theft

5. Most states have identity theft statutes similar to the federal statutes, but

often with broader definitions of the crime

Class Discussion/Activity

What are the different types of identity theft crime? What are the best ways

a person can protect him/herself from identity theft? Should law

enforcement agencies focus more on identity theft given the large number

of consumer complaints?

III. Counterfeiting of Money and Commercial Products

Media Tool

How to detect counterfeit U.S. money

http://www.wikihow.com/Detect-Counterfeit-US-Money

o Wikihow.com website article

o Discussion: Should this information be on the internet? If you

were going to try to counterfeit money, would you go to websites

like this to see what to do? Why do some of the steps taken by the

federal government to prevent counterfeit U.S. money work so

well?

A. Counterfeiting of currency

2. In response to the growing problem of counterfeiting, the United States

began issuing new folding money that is much harder to counterfeit

Class Discussion/Activity

Is it likely that U.S. consumers will stop purchasing counterfeited designer

jeans, compact discs, videotapes of movies, and electronics? What will it

take to change such behavior?

B. Other counterfeiting problems

1. Many counterfeited products are sold in the United States

2. Import, manufacture, or sale of a counterfeit product in the United States

could result in

3. Counterfeiting of driver’s licenses and other documents has become a

serious problem in the United States

IV. Computer Crime or Cyber Crime

A. As more people own and use computers, more computers are used for criminal

activity

B. Computers can also be the object or subject of crime

2. Internet attacks

C. Most states have modified their criminal codes to account for the rise in computer

use in criminal behavior

D. Most states have a statute that prohibits computer trespass

E. Most states also have an anti-hacking statute

F. The federal government uses the Computer Fraud and Abuse Act to target

computer crime

V. Arson

Media Tool

Arson

http://video.msnbc.msn.com/the-cycle/52244036#52244036

o MSNBC website

o Discussion: Based on the information in the video, how could

Detroit stop the arson going on in the city? What would you

recommend? Can the arson be stopped?

Class Discussion/Activity

What are the essential elements of arson? What are some situations in

which it might prove difficult for a prosecutor to charge a person with

arson? What alternative charges might be an option when a crime has been

committed but the elements of arson are difficult or impossible to prove?

1. Most statutes require that the state prove the following elements:

a. That there was a fire and that some part of the building or personal

property was damaged

b. That the fire was of incendiary origin and was willfully and

VI. Product Tampering

Media Tool

How Red Bull handled product tampering threat could pay off

http://www.insurancejournal.com/news/international/2013/03/22/285207.htm

o Insurance Journal Website Article

o Discussion: What is the challenge that a company must face when

threatened with product tampering that could harm its customers?

What do you think of Red Bull’s response to this extortionist?

1. Extortion

3. Attempts to create the basis of a civil lawsuit

1. The act also includes as product tampering actions that reduce the efficacy

of a drug designed to save a life or alleviate bodily injury, as well as

tampering that turns a drug into a poison

Lecture Notes

White-collar crimes are major media stories, as are cyber crimes, the counterfeiting of goods,

and product tampering. White-collar fraud crimes are very complex, and Chapter 15 exposes

students to a range of fraud crimes and federal statutes for more in-depth study. Most of these

crimes are violations of both state and federal law, and students can research state and federal

statutes to get the full picture. Many criminal justice and sociology programs offer courses on

White-collar crimes are extremely difficult to prosecute because it’s hard to determine who in the

organization made which decisions that led to illegal behavior. Many state prosecutors’ offices

and the federal attorney generals’ offices have special divisions of attorneys assigned to these

cases. The cases require extensive discovery and the examination of mountains of documents.

Most states also have a consumer protection division in the state’s attorney general’s office that

pursues civil remedies for consumer fraud. Students will be interested to learn that some white-

collar crime criminal cases also involve violations of civil law. Because civil cases can be proved

an individual level, the dollar amount is small. Discuss with them the high price that the country

as a whole pays as a result of these kinds of counterfeiting.

connecting this issue to topics that they are eager to cover, such as computer hacking, ties of

computer crime to terrorism, or file-sharing through peer-to-peer networks. Most of them have

probably used peer-to–peer networks and can easily discuss this topic.

Key Terms

white-collar crime – A class or type of criminal conduct that has solely economic gain to the

criminal as its goal. (p. 424)

fraud – Use of deceit or trickery to obtain profit or advantage. (p. 424)

bank fraud – Fraud aimed at banks and other financial institutions. (p. 425)

quid pro quo – Giving something of value (“quid”) for something else. (p. 433)

identity theft – Theft based on stealing a real person’s identification information (true name) or

theft based on creating a fictitious person’s identification (synthetic identity). (p. 439)

cyber crime – Criminal acts implemented through use of a computer or other form of electronic

communication. (p. 444)

Assignments

1. What constitutes intellectual property fraud and the “fair use” doctrine? How has the

Internet impacted this crime? [LO 5]

2. List the essential elements of the crime of arson. By what standard must the defendant be

found guilty? Arson is not the only criminal statute that addresses damage to property.

3. Have students research current white-collar crime cases. Discuss the issue(s), and debate

4. Have students work individually or in small groups. Have them choose (or assign them) a

Case Analysis and Writing Exercises

1. Woody and Kathy Medlock ran a medical ambulance company. They transported patients

to and from hospitals and clinics for treatments like kidney dialysis, where use of an

ambulance was required. Medicare reimbursed them for such transportation. The

Medlocks made several billings to Medicare for transportation of named patients that

misrepresented the nature of the transportation, e.g. saying a stretcher was used when it

wasn’t, or “double loading” patients but billing for two ambulance runs. They were

charged with both health-care fraud and aggravated identity theft under federal statutes.

Should they be convicted of both crimes? See United States v. Medlock, 792 F.3d 700 (6th

2. Carlos Ezeta was a professor and student advisor at a Las Vegas community college. As

part of his position he advised Hispanic students on enrollment and curriculum choices.

He also helped these students apply for federal financial aid by making false statements

on FAFSA forms. He did not receive any payment for his actions, and any financial aid

went to the students. Ezeta was indicted under 20 U.S.C. § 1097(a) for making false

statements to the government to “obtain federal financial aid money.” He moved to quash

(dismiss) the indictment, contending he could not violate the statute because he did not

“obtain” any financial aid for himself. The trial judge agreed, and dismissed the

indictment. The government appealed. What should the appeals court decide? Why? See

3. The two top executives of Executive Recycling Inc. (ERI) were convicted of violating the

federal Resource Conservation and Recovery Act, which was applicable through

adoption by the EPA of the Colorado Hazardous Waste Management Act. ERI was a

recycling company that recycled electronic waste (computer keyboards, monitors,

television tubes, and so forth). Because some computer parts, such as Cathode Ray Tubes

(CRT), contain lead, e-waste must be disposed of as a hazardous material. ERI collected

e-waste from its customers in Colorado, promising to dispose of the waste in compliance

with environmental laws. However, ERI resold 142,917 CRTs to buyers in China, for

incorporation into electronic devices made in China. The government contended those

sales violated the environmental laws, because any electronic part that could not be resold

or refurbished “for its original intended purpose” must be destroyed under the state and

federal acts. The executives contended the state statute, which the EPA adopted in lieu of

the federal act, did not say “original intended purpose,” and thus it was not a violation to

sell the e-waste for another purpose. How did the court of appeals receive those

arguments? If the government was correct, why were some of the convictions reversed?

As we saw in the Skilling case discussed in this chapter, the “honest services” fraud statute

was interpreted by the U. S. Supreme Court to apply only to “core” corruption actions like

“bribery and kickbacks.” Lower courts were then left to figure out when a “bribe or

kickback” occurred. Why did the courts in the following two cases conclude neither a bribe

nor a kickback took place, and reverse convictions for honest services fraud? United States

v. Aunspaugh, 792 F.3d 1302 (11th Cir. 2015). [Defendant made secret payments to key

employee of company defendants were negotiating with for business]; United States v.