Chapter 14: White-Collar Crime

Flashcards on White-Collar Crime

edwin Sutherland

published study “white collar crime”

white collar crime

crimes committed by individuals of high status in the course of their occupation

• social background

• non violent offenses

• the costs of wc crime are several times greater than common crimes

• typically punished by fines with less severe penalties

occupy positions of responsibility and trust in government, industry, the professions and civil orgs

us department of justice definition of white collar crime

Illegal acts that employ deceit and concealment, rather than the application of force

• to obtain money

• to avoid payment or loss of money

• to secure a business or professional advantage

focuses on the nature of the criminal activity and the job of the offender

doesn’t limit wc crime to employment related offenses

another definition of WC crime

Defines in terms of the type of criminal activity involved

Draws attention to various socioeconomic backgrounds

Most white collar crime prosecutions are brought by the U. S government rather than by staying local officials.

• Usually committed in an effort to make or save money.

• Generally involve a betrayal of trust placed in the government and business

enviromental crimes

crimes that threaten the natural environment including harm to the air, water, land, and natural resources

• Increased concern with environmental crimes has led to federal government in various state governments to establish special prosecution units

roughly 450 environmental crimes cases pending at any given time (half involve violations of the clean air act)

FBI’s investigative priorities in environmental crimes

Protecting workers against hazardous wastes and pollutants

Preventing large scale environmental damage that threatens entire communities

Pursuing organized crime interests that illegally dump solid waste

Monitoring businesses with a history of environmental crime

investigations and prosecutions of environmental crimes

most prosecutions by the federal government

Investigations are usually carried out by the EPA, and then will refer matters to the Department of Justice for criminal prosecution

Environmental investigations are initiated by the Interior Department through Fish and Wildlife Service and Bureau of Land Management

• Coast Guard conducts investigations of pollution from ships

• Forest Service investigates violations of timber regulations

• Criminal provisions or penalties incorporated in civil statutes

rivers and harbors appropriation act (1899)

Imposes criminal penalties for improper discharge of refuse (foreign substances in pollutants) Into navigable or tributary waters of the U.S

federak water pollution control act (1972)

Imposes criminal penalty for the discharge of certain pollutants beyond an authorized limit into navigable waterways

AND

A Prohibition on unauthorized dredging, the filling of wetlands and the failure to clean up oil and other hazardous substances.

Resource Conservation and Recovery Act (1976)

Punishes knowingly storing, making use of, or disposing of hazardous waste without a permit

• severe penalties imposed for placing individuals in danger

clean air act (1990)

Imposes criminal penalties for the knowing violation of a mission standards and other related requirements

safe drinking water act (1974)

Prohibits contamination of the public water system

toxic substances control act (1976)

Imposes criminal penalties for the failure to follow standards for use of toxic chemicals in manufacturing and industry.

federal insecticide fungicide and rodenticide act (1996)

Imposes criminal penalties for the failure to follow standards for the manufacturer, registration, transportation and sale of toxic pesticides

mens rea of environmental crime

knowingly committing the prohibited act

• roughly 25% of wc crime prosecutions between 2001-2012 involved environmental crimes

Occupational Safety and Health Act (1970)

A federal law protecting workplace safety

• established agency within the DOC

• Guarantee safe and healthful working conditions

• Primarily relies on the civil process and financial penalties to ensure compliance.

Sentencing Reform Act of 1984

Fines for the death of a worker increase to as much as $250,000 for an individual and up to $5 million for an organization

For the federal government to impose criminal liability for the worker.. must establish that:

1. The defendant is an employer engaged in a business affecting commerce

2. The employer violated a standard prescribed under osha

3. The violation was willful or knowing or committed with an intentional disregard or plain indifference

4. The violation caused the death of an employee

OSHA prosecutions

Osha violations are prosecuted by the DOJ

• Can refer violations for prosecutions by state authorities. And in recent years, the EPA

• non fatal injuries declining; fatal injuries rising

OSHA covid 19

Issued guidance to various industries on work-related standards to protect workers against COVID 19

• Under the Trump Administration suspended the requirement that industries keep detailed reports of infections because of the difficulty of attributing these infections to a workplace

• And because of a decision to encourage employers to focus their energy on measures to protect workers, rather than on compiling reports

investment in stocks

Individuals purchase stocks in hopes that, as corporate profits rise, the stock will increase in value, and they will be able to eventually sell it for a substantial profit

fiducrary relationship

A duty of care owned by a corporate official to the stockholders in a corporation

• Corporate executives and corporate boards of directors possess a fiduciary relationship to safeguard and to protect the investments of stockholders.

federal securities and exchange commission (SEC)

Charged with ensuring that corporate officials comply with the requirements of the Securities Exchange Act of nineteen thirty four in the offering and selling of stocks

• Seek civil law financial penalties against corporations that the law and refers allegations of fraud to the Department of Justice for prosecution

sarbanes-oxley act

Corporate criminal fraud statute that requires the head of corporations to certify that their firm's financial reports are accurate

• Violation of this act is punishable by up to 25 years in prison

insider trading

Use of confidential corporate information to buy or sell stocks

• Enforcement of these provisions is intended to ensure that the stock market functions in a fair and open fashion

tippers

Individuals who provide insider info

tipees

Individuals who receive insider info

theories of insider trading

disclose or abstain doctrine

misappropriation doctrine

• both theirs impose criminal liability on tippers and tippees

• difficult to establish

  Prosecution must prove fraudulent intent (Defendant intentionally purchase or sold the stock, knowing that the transaction was in violation of the law)

disclose or abstain doctrine

State select corporate officials must publicly reveal information to the public relating to the economic condition of a corporation before they buy or sell the company's stock OR can refrain from trading in the corps stock

• tell everyone or don’t tell at all

misappropriation doctrine

Expand the law beyond individuals who work for a corporation and criminally punishes all individuals who take and use insider corporate information that is in the possession of their employer

• unfair use (could be someone else’s info)

pump and dump

Spreading pulse information about a company to drive up the stock price

• The individuals behind the scheme then sell the shares that they inexpensively purchase for a significant profit

• Hyped up a flop, dumped its shares, left everyone else broke

sherman v united states 2016

U S Supreme Court held that gifts of confidential information to relatives intended to be used for insider trading are a violation of securities laws

securities and investment fraud stats

in 2018, 213 individuals were sentenced for securities and investment fraud

• a decline of 10.25% from 2014

• average sentence length: 54 mo prison

fraud

Inintentional misrepresentation of a material existing fact with the knowledge of its falsity intended to induce another person to part with money, property or a legal right.

mail fraud

Knowing an intentional participation in a scheme were artifice intended to obtain money or property through the use of mail to execute the scheme

a conviction for mail fraud requires

scheme: Knowing participation in a scheme or artifice to defraud

falsehood: Intentional false statement or promise.

money or property: The intent to obtain money or property

reliance: The statement or promise was a kind that would reasonably influence a person to part with money or property

mail: The males were used for the purpose of executing the scheme. The mail is required to be only incidental to an essential part of the criminal design (includes private mail delivery services

wire fraud

Knowing an intentional participation in a scheme or artifice intended to obtain money or property through the use of interstate wire communication

• Most Cross State or foreign boundaries

consipracy of mail and wire fraud

Conspiracy to commit mail or wire fraud is also prohibited under federal law

A prosecutor under the conspiracy statue is required to demonstrate that the use of the mail or wires would naturally occur in the course of the scheme, or that the use of the wires or mail was reasonably foreseeable

united states v duff

Defendant falsely claimed his businesses were minority and women owned to win special city contracts

His companies received large payments through the mail, which helped prove mail fraud

Since the fraud relied on these mailings, it counted as part of the crime

• Settings to ten years in prison and fined over $22 million

travel act

A crime involving mail or other means of commerce to support illegal activities

When someone moves money or resources across state or national borders, or uses communication channels like mail or the Internet to help commit or attempt a crime

• Authorizes the federal government to prosecute what are ordinarily considered the state criminal offenses (Gambling illegal shipment and sale of alcohol extortion, bribery, arson and prostitution)

jurisdiction for travel act

Based on the fact that crimes have been committed following travel in interstate or foreign commerce, or through the use of US mail or any other facility in the interstate or foreign commerce.

U.S. v Jenkins

Second Circuit Court of Appeals stated that a conviction under the travel act requires:

1. travel or the use of mail in commerce

2. intent to commit a criminal offense listed in the travel act

3. the commission of a crime or attempt to commit a crime

united states v goodman

Defending illegally played radio station staff to add records to their playlists

He was convicted under the Travel Act for using interstate mail to commit bribery and under the communications act for payola (Paying for airplay without disclosure)

Court ruled that the offense occurred as soon as the payment was made, regardless of whether the records were actually paid (offense is complete upon the payment of the money

Statute on health care fraud 1996

Punishes individuals who knowingly and willfully execute or attempt to execute a scheme or artifice

• To defraud any health care benefit program

• To obtain five means of false or fraudulent pretenses

  Representations or promises any of the money or property owned by or under the custody of or control of any health care and benefit program

punishable by a fine and imprisonment up to 10 years or both

Fraudulent acts that cause serious injury punishable by imprisonment of up to 20 years

Fraudulent acts that result in death punishable by life in prison

HC fraud costs

Estimated that health care fraud costs the taxpayers $68 billion annually

U.S. v baldwin

Defendants were convicted of submitting a false claim of $275,000 for four dental chairs

U.S v Lucien

Defendants orchestrated fake car accidents, paid “victims” to claim injuries, and referred them to clinics that build New York for nonexistent treatments

• “victims” then sued other drives for insurance payouts

• Court ruled that the health care fraud statue applied to those outside the medical field

U.S. v miles

Affiliated professional home health (APRO) was formed by defendants and family

They fraudulently. build Medicare by inflicting expenses and using funds for personal gain

Also laundered money through fake employee reimbursements and split large checks to avoid detection

• Convicted of Medicare fraud

money lanundering

Financial transaction involving proceeds or property derived from unlawful activity

• Hiding illegally obtained money to make it look like it came from a legit source

• Moving money through businesses banks or complex transactions to clean their tracks and avoid detection

  punishable by fine of up to $500,000 or imprisonment for up to 20 yrs

elements of money laundering

1. Defendant engaged or attempted to engage in a monetary transaction

2. Defendant knew the transaction involved funds or property derived from one or more of a long list of criminal activities listed in the statute

3. Transaction was intended to conceal or disguise the source of the money or property

   OR

4. Transaction was intended to promote the carrying on of a specified, unlawful activity

5. The money constituted the proceeds or profit from an unlawful activity

U.S. Johnson

Defendant made millions from a fraudulent scheme involving Mexican currency and used it to buy luxury items

Tenth Circuit Court of Appeals said these purchases violated the money laundering statute and helped him continue his scam by making him appear legit and attracting more victims

U.S. v Carucci

A real estate agent was acquitted after helping an organized crime figure by homes

Court agreed the source of the funds was unclear, but ruled the government failed to prove they came from an illegal activity

sherman antitrust act of 1980

Intended to ensure a free and competitive business marketplace

Designed to be a comprehensive charter of economic liberty aimed at preserving free, unfettered competition as the rule of trade

• price fixing

• conspiracy counts

antitrust violations directly affect consumers

cpnspiracy to interfere with interstate commerce (anti trust)

Any person who shall make any contract or engage in any combination or conspiracy to interfere with interstate commerce is guilty of a felony

• Punished with a fine of $10 million (corporation)

• Punished with a fine of $1 million or by imprisonment not exceeding 3 years or both (individual)

a conviction of antitrust violations requires proof that two or more person or organizations

knowingly entered into a contract or formed a combination or conspiracy

AND

it produced or potentially produced an unreasonable restraint of interstate trade

U.S. v Azzarelli construction co and John F Azzarelli

The owner of a construction firm worked with others to rig state contract bids

• They ensured predetermined winners by submitting inflated bids while losing firms received kickbacks

• Court ruled this practice harmed Interstate Commerce by increasing highway construction costs and reducing funds for infrastructure improvements

crimes of official misconduct

knowingly corrupt behavior by public officials in the exercise of their official responsibly

• NY highest # of federal public corruption convictions

bribery of a public official

offering an item of value to an individual occupying an official position to influence a decision or action

requirments for crimes of official misconduct and bribery of a public official

committed by an individual who gives, offers, or promises a benefit to a public official

OR
a public official who demands, agrees to accept, or accepts a bribe

• requires intent to influence or to be influenced in carrying out a public duty

• does not require a mutual agreement between the individuals

requiremnts for offering a bribe to a public official

the accused wrongfully promised, offered, or gave money or an item of value to a public official

the individual occupied an official position or possessed official duties

the $ or item of value was promised, offered, or given with the intent to influence an official decision or action of the individual

reuqirments of soliciting a bribe

• the accused wrongfully asked for, accepted or received money or an item of value from a person or org

• the accused occupied an official position or exercise official duties

• the accused asked for, accepted, or received money or an item of value with the intent to have a decision or action influenced with respect to this matter

graft

asking for, accepting, receiving, or offering money as compensation for a reward for an official decision

• does not require an intent to influence or be influenced

• a public official uses their official position to personally profit often w/o needing someone to offer them anything first

  ex- a council member puts fake employees (friends or family) who don’t actually work on the government pay roll. they collect the paychecks and then hand the money back to the council member

  deprives the public to receive honest and faithful services

why punish bribery

• public officials should society, not individuals who offer financial benefits

• corruption erodes trust in government

• favors the wealthy over general public (should prioritize majority)

• undermines fairness and equal treatment

  McDonnell v United States

  Kelly v United States

foreign corrupt practices act (FCPA)

makes it illegal for an individual or company to bribe a foreign official in order to gain assistance in obtaining or retaining business