1
C H A P T E R 1 4
CRIMINAL LAW
Criminal law is a powerful tool for controlling corporate behavior and ensuring ethical conduct.
This chapter examines what a crime is, what the basics of criminal procedure are, and the major
constitutional issues involving criminal procedure. The chapter also introduces other federal
statutes involving such areas as white-collar crime, computer crime, and environmental law.
I. DEFINITION OF A CRIME. A crime is an offense against the public at large. Conviction
can lead to substantial punishment, including jail or prison, and/or fines. Criminal acts are
II. SOURCES OF CRIMINAL LAW. All criminal law is found in federal or state statutes.
Federal criminal law is found in various sources, including the United States Code and
III. ELEMENTS OF A CRIME. A crime is an offense against the public at large that consists
of two elements.
A. The Criminal Act (Actus Reus) is the guilty act or wrongful act in question.
B. The State of Mind (Mens Rea). Generally a criminal actor can only be guilty if
they possess the required mental intent at the time of the act.
given act or obtain a criminal outcome).
IV. CRIMINAL VERSUS CIVIL LIABILITY. For criminal trials the defendant is presumed
innocent until proven guilty beyond a reasonable doubt, and is entitled to numerous
constitutional protections.
A. Burden of Proof. Criminal trials have a higher burden of proof than civil cases.
BAGLEY, MANAGERS AND THE LEGAL ENVIRONMENT 7TH ED—INSTRUCTOR’S MANUAL
V. CRIMINAL PROCEDURE. A criminal action begins with the arrest of the person
suspected of a crime and proceeds through a preliminary hearing to plea bargaining and
trial.
A. Arrest.
B. Plea. Possibly a preliminary hearing to determine whether there is probable cause
that the defendant committed a felony.
VI. CONSTITUTIONAL PROTECTIONS. The U.S. Constitution guarantees certain protections
for criminal defendants.
A. Ex Post Facto Clause. A person can be convicted of a crime only if the person’s
B. Fourth Amendment Protections. The Fourth Amendment applies only to actions
by government officials, unless a private person is acting on behalf of the
government.
1. The Arrest Warrant Requirement. No arrest is valid without probable
cause, a reasonable belief that the suspect has committed a crime or is
CHAPTER 14 CRIMINAL LAW
3
(i) Searches and Seizures and Reasonable Expectations of Privacy: the
Katz test. In the home there is a strong expectation of privacy. In
Katz, the court asks a question: has the governmental action
intruded upon an individual’s subjective expectation of privacy?
CASE 14.1 United States v. Ziegler, 474 F.3d 1184 (9th Cir.
2007). Zeigler, an employee of Frontline, used a
(ii) Suspicion-less and Administrative Searches and Seizures.
Generally, a search or seizure is “unreasonable” without some
suspicion of wrongdoing, unless there are “special needs.”
(iii) Searches Employing New Technology. Thermal Imaging devices
can only be used if police have a warrant. Kyllo v. United States,
CASE 14.2 United States v. Forrester, 512 F.3d 500 (9th Cir.
2008). Forrester and Alba were indicted for
conspiracy to manufacture and distribute the illegal
(iv) Traffic Stops and Checkpoints. Police have broad scope to stop
motorists suspected of traffic violations. But the Supreme Court
BAGLEY, MANAGERS AND THE LEGAL ENVIRONMENT 7TH ED—INSTRUCTOR’S MANUAL
4
C. The Exclusionary Rule prohibits the introduction of illegal evidence in a criminal
trial obtained by an unconstitutional search or seizure in violation of the Fourth
Amendment. Exceptions: Good Faith and Inevitable Discovery.
D. Fifth Amendment Protections are tied to self-incrimination, double jeopardy and
due process.
1. Protection Against Self-Incrimination. The Fifth Amendment provides
that no person “shall be compelled in any criminal case to be a witness
against himself.”
(i) Business Records and Papers and the Collective Entity Doctrine.
2. No Double Jeopardy. A person cannot be tried for the same crime twice.
However a single act may result in both criminal and civil prosecutions
E. Sixth Amendment Protections.
1. Assistance of Counsel. A defendant has the right to effective legal
representation, and must be informed of this right.
CHAPTER 14 CRIMINAL LAW
5
CASE 14.3 United States v. Stein, 541 F.3d 130 (2d Cir. 2008). HELD:
KPMG’s fees policy amounted to a state action and the
2. Jury Trial. Most defendants in criminal cases have the right to a jury trial.
3. Other Procedural Rights. The Sixth Amendment also guarantees the
rights to a speedy trial, to confront and cross-examine witnesses.
F. Eight Amendment Protections. Prohibits cruel and unusual punishments.
VII. FEDERAL SENTENCING GUIDELINES. Generally statutes specify penalties for criminal
transgressions, though judges have some discretion in sentencing. Under the federal
guidelines, federal judges were to consider a number of factors when imposing sentence.
A. Individuals. The federal system has no parole. Individuals must serve at least
85% of their sentence.
B. Organizations. Under the federal sentencing guidelines, organizations could
VII. INDIVIDUAL LIABILITY FOR CRIMINAL ACTS.
BAGLEY, MANAGERS AND THE LEGAL ENVIRONMENT 7TH ED—INSTRUCTOR’S MANUAL
6
A. Direct Liability. Individuals will be prosecuted even if acting at the behest or for
the benefit of the company.
B. Vicarious Liability. Officers, directors, and managers are criminally liable for
CASE 14.4 United States v. Freed, 189 F.App’x 888 (11th Cir. 2006).
The responsible corporate officer doctrine is not limited to
cases involving health and safety. The defendant was in a
VIII. CORPORATE LIABILITY. A corporation is liable for criminal offenses committed by
employees if the acts were committed within the scope of their employment.
A. Deciding Whether to Prosecute a Business Organization. One federal prosecutor
outlined nine factors to consider before seeking to indict a corporation. Given the
IN BRIEF: LIABILITY FOR CRIMINAL ACTIONS
Type of Defendant
Standard for Liability
The individual must have performed actus reus (criminal act)
CHAPTER 14 CRIMINAL LAW
7
Officers can be directly liable for failing to supervise
subordinates. In addition to individual liability for their own
Respondeat superior liability. A corporation is criminally liable
for (1) all misdemeanor offenses and regulatory crimes
committed by any of its agents or employees; (2) all crimes
IX. WHITE-COLLAR CRIME. Many white-collar criminal statutes do not require criminal
intent to break the law.
A. Crime Against the Employer. Examples of crimes committed by an employee
against his or her employer include:
1. Theft (larceny) ranges from taking home pens and paper from the office to
stealing money through the company’s computer system.
B. Crimes Perpetrated by the Corporation and its Agents. Crimes include consumer
fraud, securities fraud, tax evasion, and environmental pollution.
BAGLEY, MANAGERS AND THE LEGAL ENVIRONMENT 7TH ED—INSTRUCTOR’S MANUAL
1. Racketeering under the Racketeer Influenced and Corrupt Organizations
Act (RICO). RICO is designed to combat organized “white collar” crime
and provides an enforcement mechanism against syndicate bosses. More
often it is used against insider-trading.
• RICO Requirements: “Enterprise” and Racketeering Activity. An
2. Mail and Wire Fraud. Under the Mail and Wire Fraud Act individuals
and corporations can be convicted if the Government demonstrates: (a) a
scheme intended to defraud or to obtain money or property by fraudulent
means, and (b) the use of the mails or of interstate telephone lines in
furtherance of the fraudulent scheme.
CASE 14.5 Skilling v. United States, 130 S.Ct. 2896 (2010). Skilling,
former CEO of Enron, was charged with conspiracy to
3. Money Laundering. Transfer of funds derived from unlawful activities
4. False Statements to the U.S. Government. The False Statements Act is
CHAPTER 14 CRIMINAL LAW
5. False Claims to the U.S. Government and Qui Tam Plaintiffs. Since the
1980s, the government has used the False Claims Act to attack contract
6. Fighting Health Care Fraud. HIPAA created new criminal offenses
7. Computer Crime takes many forms. Most computer crime can be
prosecuted under state law.
(1) The Computer Fraud and Abuse Act (CFAA) prohibits: (a)
accessing a computer without authorization, (b) knowingly
CASE 14.6 United States v. Nosal, 642 F.3d 781 (9th Cir. 2011).
Nosal worked for Korn/Ferry International. He left
in in 2004 and signed a one-year non-compete
agreement. He also left with three KFI employees
(2) Computer Piracy. Congress amended the Copyright Act to address
computer software as a means to stop or remedy computer piracy.
8. Crimes Involving Intellectual Property. Companies lose over $200 billion
BAGLEY, MANAGERS AND THE LEGAL ENVIRONMENT 7TH ED—INSTRUCTOR’S MANUAL
10
9. The Foreign Corrupt Practices Act makes it a crime for any U.S. firm to
10. Antitrust Laws. Under the Sherman Anti-trust law, most companies are
prosecuted for restraints on trade, price-fixing and monopoly.
11. Securities Law Violations. Federal Securities Laws—Securities Act of
1933 and the Securities Exchange Act of 1934, administered by the
X. OTHER FEDERAL REGULATORY AND TAX OFFENSES.
A. Environmental Laws. Individuals may be prosecuted under the Clean Water Act
and The Resource Conservation and Recovery Act (RCRA).
B. Worker Safety Laws.
1. The Occupational Safety and Health Act (OSHA) usually imposes civil
penalties unless there are continuing willful violations.
C. Tax Laws. Federal tax violations, including fraud and willful evasion can lead to
fines and prison sentences.
XI. AMNESTY AND LENIENCY PROGRAMS. The federal government has incentivized self-
THE RESPONSIBLE MANAGER: Ensuring Criminal Law Compliance.
CHAPTER 14 CRIMINAL LAW
Senior management can take various actions to encourage criminal law compliance.
• Managers should develop a code of ethics with an enforcement mechanism that
clearly states that violations will result in sanctions and, in extreme cases,
termination of employment.
THE RESPONSIBLE MANAGER: TEACHING SUGGESTIONS
1. Explain why a search warrant is not needed for a cellular telephone conversation. Should a
warrant be required for thermal imaging? For e-mail?
2. Does the FBI’s “Carnivore” software that monitors our e-mail violate our right to privacy?