the legal environment of business © 2006 prentice hall ch. 7-1 a critical thinking approach fourth...
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THETHE LEGALLEGAL ENVIRONMENTENVIRONMENT OFOF BUSINESSBUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-11
A Critical Thinking ApproachA Critical Thinking ApproachA Critical Thinking ApproachA Critical Thinking ApproachFourth EditionFourth Edition
Nancy K. KubasekNancy K. Kubasek
Bartley A. BrennanBartley A. Brennan
M. Neil BrowneM. Neil Browne
Nancy K. KubasekNancy K. Kubasek
Bartley A. BrennanBartley A. Brennan
M. Neil BrowneM. Neil Browne
Ch. 7-Ch. 7-22 © 2006 Prentice © 2006 Prentice HallHall
CHAPTER 7CHAPTER 7
White Collar Crime and the Business White Collar Crime and the Business CommunityCommunity
THE LEGAL ENVIRONMENT OF BUSINESS
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-33
CrimeCrime
Crimes are offenses against the publicCrimes are offenses against the public
Wrongful actionsWrongful actions
Wrongful intent – Wrongful intent – mens reamens rea
FeloniesFelonies
MisdemeanorsMisdemeanors
Petty crimes Petty crimes
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-44
Criminal ProcedureCriminal ProcedureWarrant issuedWarrant issued
ArrestArrest
MirandaMiranda Rights Rights
BookingBooking
First appearanceFirst appearance
BailBail
InformationInformation
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-55
Grand Jury ProceedingsGrand Jury Proceedings
Used in felony casesUsed in felony cases
Evidence presented by the stateEvidence presented by the state
Witnesses may be subpoenaedWitnesses may be subpoenaed
Purpose of Grand JuryPurpose of Grand Jury
Decide if there is enough evidence to Decide if there is enough evidence to justify a full trialjustify a full trial
Purpose of Grand JuryPurpose of Grand Jury
Decide if there is enough evidence to Decide if there is enough evidence to justify a full trialjustify a full trial
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-66
Other ProceduresOther Procedures
IndictmentIndictment
Whether sufficient admissible evidence Whether sufficient admissible evidence exists to obtain a convictionexists to obtain a conviction
Pretrial DiversionPretrial Diversion
Agreement to perform services under Agreement to perform services under supervisionsupervision
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-77
Criminal ProcedureCriminal ProcedureArraignmentArraignment
PleaPlea
Plea bargainsPlea bargains
Burden of production of evidenceBurden of production of evidence
Burden of persuasionBurden of persuasion
Standard of proofStandard of proof
Fifth AmendmentFifth Amendment
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-88
DefensesDefenses
EntrapmentEntrapment
InsanityInsanity
DuressDuress
MistakeMistake
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-99
Features of White Collar CrimeFeatures of White Collar Crime
Crime committed in a commercial context by Crime committed in a commercial context by professional and management classes.professional and management classes.
DefinitionDefinition
““Crime committed by a person of respectability and Crime committed by a person of respectability and high social status in the course of his occupation.”high social status in the course of his occupation.”
~ Edwin Sutherland~ Edwin Sutherland
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-1010
Can the Corporation Be a ‘Criminal’?Can the Corporation Be a ‘Criminal’?
CorporationCorporation
an artificial, an artificial, legal entity legal entity
CorporationCorporation
an artificial, an artificial, legal entity legal entity
How can liability How can liability based on acts of based on acts of
natural persons be natural persons be attributed to a attributed to a corporation?corporation?
How can liability How can liability based on acts of based on acts of
natural persons be natural persons be attributed to a attributed to a corporation?corporation?
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-1111
Arguments in Support of Corporate Arguments in Support of Corporate Criminal LiabilityCriminal Liability
Fines will pressure shareholdersFines will pressure shareholders
Maintain incentives to obey lawMaintain incentives to obey law
Ease of investigation and prosecutionEase of investigation and prosecution
Collective decisionmaking should not provide Collective decisionmaking should not provide escapeescape
Avoids making scapegoats of employees Avoids making scapegoats of employees
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-1212
More Arguments in Support of Corporate More Arguments in Support of Corporate Criminal LiabilityCriminal Liability
Unfair to single out individuals for common Unfair to single out individuals for common pattern of criminal behaviorpattern of criminal behavior
Unfair to allow shareholders to benefit from Unfair to allow shareholders to benefit from crimecrime
Public information and disclosure to Public information and disclosure to consumers important function of prosecutionconsumers important function of prosecution
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-1313
Arguments Against Corporate Criminal Arguments Against Corporate Criminal LiabilityLiability
Fines are just passed on to consumersFines are just passed on to consumers
Punishing shareholders is misguided-Punishing shareholders is misguided-shareholders really do not control the shareholders really do not control the enterpriseenterprise
No real or lasting damage to corporate image No real or lasting damage to corporate image can be achievedcan be achieved
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-1414
Liability of Top ExecutivesLiability of Top Executives
The only way in which a corporation can act is The only way in which a corporation can act is through the individuals who act on its behalf.through the individuals who act on its behalf.
~ Dotterweich~ Dotterweich
Therefore, a corporate agent through whose act, Therefore, a corporate agent through whose act, default, or omission the corporation committed a default, or omission the corporation committed a crime, was himself guilty individually of that crime.crime, was himself guilty individually of that crime.
~ Park~ Park
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-1515
Factors Encouraging White Collar Crime Factors Encouraging White Collar Crime
Pressure to Pressure to succeedsucceed
Short-term goalsShort-term goals
GroupthinkGroupthink
Easy to rationalizeEasy to rationalize
Dispersed Dispersed decisionmakingdecisionmaking
Lack of stigma even Lack of stigma even when convictedwhen convicted
Lax regulationLax regulation
Poor personnel Poor personnel policiespolicies
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-1616
Sentencing of White Collar CriminalsSentencing of White Collar Criminals
1991 Federal Sentencing Guidelines 1991 Federal Sentencing Guidelines
Base Fine + Culpability ScoreBase Fine + Culpability Score
Aggravating + Mitigating FactorsAggravating + Mitigating Factors
Extraordinary circumstancesExtraordinary circumstances
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-1717
Alternative SentencingAlternative SentencingCommunity serviceCommunity service
Occupational disqualificationOccupational disqualification
House arrestHouse arrest
Weekend prisonWeekend prison
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-1818
Common White Collar CrimesCommon White Collar Crimes
BriberyBribery
Regulatory ViolationsRegulatory Violations
Criminal FraudCriminal Fraud
DefalcationDefalcation
False entriesFalse entries
False tokenFalse token
False pretensesFalse pretenses
ForgeryForgery
Fraudulent concealmentFraudulent concealment
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-1919
More White Collar CrimesMore White Collar CrimesLarcenyLarceny
EmbezzlementEmbezzlement
Computer CrimesComputer Crimes
Some examples:Some examples:
PiggybackingPiggybacking
ImposterImposter
Trojan HorseTrojan Horse
Salami slicingSalami slicing
Data destruction (Virus, Worm)Data destruction (Virus, Worm)
Data misappropriationData misappropriation
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-2020
PreventionPrevention
Federal vs. state charteringFederal vs. state chartering
Require public directorsRequire public directors
Link fines to benefits obtainedLink fines to benefits obtained
Equity finesEquity fines
More vigorous regulationMore vigorous regulation
Internal corporate measuresInternal corporate measures
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-2121
Federal LawsFederal Laws
RICO 1970RICO 1970
False Claims ActFalse Claims Act
Sarbanes-Oxley Act 2002Sarbanes-Oxley Act 2002
Whistleblowers: Whistleblowers: good or bad?good or bad?
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-2222
State LawsState LawsWhistleblower protection statutesWhistleblower protection statutes
Protect public employeesProtect public employees
Provides specific remediesProvides specific remedies
Texas v. GreenRetaliatory discharge leads to punitive damages for whistleblower employeeAffirmed.
Texas v. GreenRetaliatory discharge leads to punitive damages for whistleblower employeeAffirmed.
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-2323
Global DimensionsGlobal Dimensions
White Collar Crime:White Collar Crime: A worldwide problem A worldwide problem
Example:Example: IOS case IOS case
Lack of cooperation among law enforcementLack of cooperation among law enforcement
2001: Creation of international fraud 2001: Creation of international fraud databasedatabase
Convention on cybercrime effective 2005Convention on cybercrime effective 2005
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THE LEGAL ENVIRONMENT OF BUSINESS
© 2006 Prentice Hall© 2006 Prentice Hall Ch. 7-Ch. 7-2424
SummarySummary
Criminal law protects the publicCriminal law protects the public
Criminal procedure differs from civil Criminal procedure differs from civil proceduresprocedures
White-collar crimes difficult to prosecute White-collar crimes difficult to prosecute and punishments are lightand punishments are light
New technology and globalization of the New technology and globalization of the economy have made new crimes possibleeconomy have made new crimes possible