Constitutional Safeguards
Corporate Crime
White Collar Crime
Organized Crime
Defenses
10
Law enforcement officers must normally obtain this type of order to conduct a search and seizure because of the 4th Amendment.
"The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no ___ shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”
What is a search warrant? Police must normally obtain a search warrant -- an order from a judge or magistrate -- that authorizes a search of a business or residential premises (and seizure) based on probable cause.
LIMITS: No general warrants! Also, the search cannot extend beyond what is described in the warrant! But if the search warrant is for a residence or a car, items within the residence or car may be searched even if they do not belong to the property owner!
E.g., Police who suspected a nightclub owner of trafficking in narcotics got a warrant to attach a GPS device to the suspect's wife's car, which they had probable cause to believe was used or was being used to commit a crime.
10
Corporations can be convicted for crimes committed by these persons.
What are agents and employees acting within the course and scope of their employment?
10
This is what a suspect is charged with when he/she is entrusted with and legally possesses funds or property but misappropriates/misallocates it for their own use without the owner's permission.
What is embezzlement?
1. A bank teller is given a deposit by a customer intended for a bank account but pockets it instead of carrying out the transaction as the customer directed.
2. The CEO of Tyco uses stock fraud, unauthorized bonuses, falsified expense accounts, and corporation-forgiven loans to pay for an apartment on Park Avenue, a home in Boca Raton, FL, jewelry from Harry Winston and Tiffany's, and half the cost of a multimillion-dollar 40th-birthday party on the Italian island of Sardinia for his wife.
3. Lawyer uses clients' money from the firm trust account to pay for his daughter's college tuition, country club membership, etc.
10
This criminal charge results when a financial institution, sometimes aided by attorneys, passes illegally obtained money through legitimate business activities to conceal the identity, source, and/or destination of those funds, thus allowing the criminal clients to use the money.
What is money laundering?
Example: A drug dealer obtains part ownership of a restaurant. The restaurant begins experiencing incremental increases in profits. The drug dealer then can report that income and pay taxes on it, thus cleaning it and being able to spend it without worrying about his lifestyle exceeding his reported income.
Example 2: A financial institution, with the assistance of its outside counsel and a real estate developer, gave a bogus loan to a fraudster. They knew he had fraudulently obtained $100,000 cash using fake invoices from his employer as a portion of the purchase price. In a real estate transaction, the attorney was the seller and prepared all real estate and financial documents, including addenda to the sales agreement reflecting two $15,000 cash payments to the attorney totaling $30,000. All parties agreed to falsely represent on the sale agreement that the purchase price was $100,000 less than the actual $200,000 price, thereby hiding $100,000 in cash. The real estate developer and financial institution employee also received kickbacks/bribes for their parts in the deal.
10
This is the defense to a property crime or white-collar crime in which the suspect alleges that he/she was mistaken, and therefore did not possess a guilty mind.
What is the defense of mistake (which, btw, has no place in a strict liability crime situation)?
1. The suspect reasonably believed he/she/they had a right to possess the property taken or act as they did (except in statutory rape: a person is prevented from arguing they believed the person was an adult rather than a minor below the age of consent, a strict liability crime where the act alone is enough to convict without need for a guilty mind.
OR
2. The suspect believed in good faith that a statute or judicial decision provided the legal right to do the conspired act. This only applies in minor offenses, e.g., traffic law matters, and in four limited circumstances:
-The statute or judicial decision was not yet published; OR
-The defendant relied on a statute that was later overturned or deemed unconstitutional; OR
-The defendant on a judicial decision that was later overruled; OR
-The defendant relied upon an interpretation of a statute or judicial decision of a judge or admin. law judgel (not attorneys, thank heavens)
20
Law enforcement officers do not need a warrant in these two circumstances.
What are:
1. Exigent circumstances (no time for police to obtain one) and probable cause exists
2. The business premises belong to a company in a highly regulated industry, such as: food production, firearms, alcoholic beverage production, strip mining of minerals and ores
20
These are the guilty acts that a prosecutor must prove to convict a corporation of a crime.
What are:
1. The corporation could have prevented the employee or agent from engaging in the criminal act
OR
2. A supervisor within the corporation either
a. authorized the employee's criminal act
OR
b. knew of the criminal act?
20
This criminal charge results from furthering any fraudulent scheme by using U.S. mail, UPS or FedEx, telephones, television advertisements, email, or online social media such as Xitter, Instagram, or Facebook.
What is wire and mail fraud, the easiest of charges to prove.
Example 1: using telephone lines to sell and increase the value of weak stocks, then selling those stocks for a profit at their peak before dumping them and causing their value to plummet
Example 2: using Instagram posts of social media influencers to promote a fraudulent luxury music festival with the intent of promoting the company's Fyre app for booking music talent.
20
This is a federal statute that is used to curb the entry of crime organizations into the legitimate business world, and also legitimate businesses' entry into the criminal world, and is the federal government's solution for criminals' use of multi-tiered shell companies.
What is the RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT (RICO Act or just RICO).
This federal statute provides for extended criminal penalties and a civil claim. A person who has committed "at least two acts of racketeering activity" drawn from a list of 27 federal crimes and 8 state crimes included in this statute (and growing) within 10 years can be charged with racketeering if such acts are related in one of four specified ways to an "enterprise":
1. using income obtained from racketeering to purchase any interest in the enterprise
2. acquiring/maintaining an interest in an enterprise through racketeering activity
3. conducting/participating in the affairs of an enterprise through racketeering activity
4. merely conspiring to do any of the above
If convicted, the person is fined up to $25,000 and sentenced to 20 years in prison per racketeering count.
20
This is the defense where a suspect alleges that someone used force or threat of force against the suspect or another person that induced the suspect to commit a criminal act that they would not ordinarily commit absent that force or threatened force.
What is the defense of duress?
1. Suspect was forced to take the property, commit arson, forge, embezzle, or commit wire fraud, insider trading, RICO, etc., because of reasonable belief of immediate wrongful, dangerous threat to himself/herself or of another, e.g., family member.
This defense negates the guilty mind element, just like mistake, BUT IT CANNOT BE USED IN MURDER CASES!!!
30
This is the standard of probable cause.
What is a substantial likelihood – not just possibility – that a person has committed, or is about to commit, a specific crime. In terms of percentages, that is less than 50.1% but more than articulable suspicion, so about 25%-30%.
30
Corporate directors and officers can be directly convicted of a crime if the prosecutor proves this.
What are:
1. The directors/officers themselves committed a criminal act, e.g., stock fraud, running a Ponzi scheme, etc. -- even if the act did not benefit the corporation or them personally
OR
2. The directors/officers in a financial institution, pharmaceutical company, or medical device company failed to prevent employees/agents under their supervision from committing a criminal act -- even if the officer or director did not participate, direct, or know about that criminal act -- under the RESPONSIBLE CORPORATE OFFICER DOCTRINE?
E.g., Enron used off-balance-sheet entities to hide the company's debts from investors and creditors. Although using such entities was not illegal in itself, Enron's failure to disclose the necessary details of its dealings constituted accounting fraud. As the true extent of Enron's debts became known to the public, its share price collapsed. By the end of 2001, Enron declared bankruptcy.
Criminal accounting fraud charges were brought against many of the company's top executives, and some of them were sent to prison. The scandal also eventually destroyed accounting giant Arthur Andersen LLP, which handled Enron's books and audits and was therefore involved in the fraud.
30
This criminal charge results from offering anything of value to someone in an attempt to influence them to act in a way that serves the offeror's interest and may disserve the offeree company's interest.
What is bribery or commercial bribery?
1. A company employee pays a government official to open a market for the company's product or service in a state or country where bribery is illegal, e.g., the U.S.
2. The company's employee pays someone with access to take from a rival company's files, without permission, trade secrets such as marketing plans, methods of production, customer lists, etc.
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The criminal penalties for RICO convictions are these.
What are:
1. Fines up to $25,000
2. Imprisonment from not exceeding 20 years per violation, but can be from 1 year to life depending on the predicate offense sentencing guideline.
3. Forfeiture to the United States of all property of or proceeds acquired through the RICO violations
30
In this defense, a criminal defendant alleges that governmental law enforcement officials harassed or coerced them to engage in a criminal act they would not otherwise have committed.
What is the defense of entrapment?
Each state has case law and a statute that outlines when and how the entrapment defense is applicable.
Example 1: An undercover law enforcement officer threatens the defendant with punishment if the defendant does not commit burglary for the official
Example 2: An undercover law enforcement officer shows up every day and harasses the defendant to commit the burglary even though the defendant does not appear interested.
OPPORTUNITY is NOT ENTRAPMENT. Law enforcement MAY set up a false criminal opportunity for an unwary criminal and simply observe as he/she voluntarily commits a criminal act.
Example: An undercover law enforcement officer pretends to be a fellow criminal and alerts the defendant of the time and place of a warehouse shipment arrival lacking security. If the defendant then acts on that information by stealing the goods in that shipment, entrapment does not exist.
40
These are the required four declarative sentences and two questions that law enforcement officers must speak to a defendant before questioning, to ensure observance of the 5th Amendment right against self-incrimination and the 6th Amendment right to counsel.
What are:
1. You have the right to remain silent.
2. Anything you say can and will be used against you in a court of law.
3. You have the right to an attorney.
4. If you cannot afford an attorney, one will be provided for you.
5. Do you understand the rights I have just read to you?
6. With these rights in mind, do you wish to speak to me?
40
A corporation may be held indirectly liable for illegal acts of its directors, officers, employees, i.e. agents via the doctrine of Respondeat Superior (Latin for: let the master answer), if prosecutor can prove these two elements:
What are:
The employee/agent’s actions were:
1. Within the scope of their duties;
AND
2. Intended to benefit -- at least in part -- the corporation
40
This charge results from, taking, without permission, customer lists, etc. in violation of the federal Economic Espionage Act or similar state laws.
What is theft of trade secrets?
40
These are the possible remedies for civil RICO claims against a business organization or labor organization.
For a private plaintiff: 3x damages lost because of the RICO violations, aka treble damages.
For the DOJ: a directive to pay to the United States Treasury the costs of the lawsuit, and any further costs necessary to prevent further RICO violations by the defendants, along with:
1. Injunction restraining defendants from:
a. committing any act of racketeering activity.
b. participating in any way in the affairs of the enterprise or its subordinate organizations
c. having any dealings with the enterprise or its subordinate organizations
d. having any dealings with any officer, agent, employee, or representative of the enterprise or its subordinate organizations
e. occupying a position of trust within any organization
f. knowingly associating with any member of any criminal group or permitting any member or associate from exercising any control or influence over the affairs of the enterprise
g. participating in any way in the affairs of, investing in, acquiring an interest in, or otherwise having any dealings with the enterprise
h. obstructing, or otherwise interfering with, the duties of any officer appointed by the court, including any Court Appointed Officer(s) or person appointed by a Court-Appointed Officer.
2. Appointment of a Court-Appointed Officer(s) to oversee the operations of the enterprise and its related subordinate organizations until those entities are free from corruption
3. Injunction directing all individual defendants to disgorge the proceeds of the RICO violations so that such proceeds are distributed to victims and used to fund costs incurred by the Court-Appointed Officer(s).
4. Injunction directing that the defendants bear all costs of court-appointed officers jointly and severally
40
A defendant uses this defense where he/she exchanges information helpful to the prosecutor in prosecuting another defendant, sometimes a defendant higher in rank within an enterprise.
What is the defense of immunity?
A defendant is reluctant to give up information if it could be used to prosecute them and serves as a waiver of their 5th Amendment right against self-incrimination
However, if the defendant is offered an immunity deal (a contract that the defendant is questioned about in open court), state or federal prosecutors give the defendant absolute privilege against self-incrimination for the crimes they committed, in exchange for the defendant giving the prosecutor valid, credible information and testifying in court about that information. Sometimes, the deal includes the defendant pleading guilty to a lesser charge. This solves both the reluctance problem and the 5th Amendment problem.
Only state prosecutors can give total immunity, aka transactional immunity, which provides a shield against ANY future charges based on any matter related to the testimony. (The prosecution still can bring charges against the defendant for matters unrelated to the testimony.)
More often, federal and state prosecutors give only derivative immunity, aka use immunity. This type has more restrictions. It protects the defendant witness from having the prosecution use their statements or any evidence discovered from their statements against them. It allows the prosecution to bring charges based on the same crime against the witness, as long as the charges are based entirely on independent evidence from a different source. Whether that evidence is sufficient to convict the witness without using their statements can be left to a judge or jury to decide.
However, once the immunity deal is executed, the defendant/witness can no longer refuse to testify under the Fifth Amendment because the deal gave them the same protection. The defendant/witness can be held in contempt of court, pay fines, and possibly be jailed for their contempt alone. Also, the prosecutors can now charge them with all the crimes negated by the plea deal.
50
These 2 court doctrines REQUIRE that ALL evidence obtained in violation of a person's constitutional rights under the 4th, 5th, and 6th Amendments, as well as ALL evidence DERIVED/FLOWING FROM that ILLEGALLY OBTAINED EVIDENCE, must normally be excluded from the trial.
What are:
1. The Exclusionary Rule
2. Fruit of the Poisonous Tree doctrine?
Courts implemented these doctrines to deter police from conducting searches without warrants and engaging in other misconduct
E.g., a confession and arrest of others (fruits) obtained after an unreasonable search or seizure, or failing to provide Miranda warnings (poisonous tree).
E.g., Sowards (Hypo #1 in slides): search and cocaine seizure (fruit) after traffic stop made despite lacking probable cause (poisonous tree)
HOWEVER, if law enforcement properly/legally find another independent source for the same evidence they obtained unconstitutionally, then that legal independent evidence is still ADMISSIBLE AT TRIAL and can be used to convict instead of the excluded evidence.
50
Can the U.S. Department of Justice successfully charge, i.e., convict a CEO of a pharmacy company incorporated in Switzerland for using that company's stock shares to pay off investors who lost money with a hedge fund he ran in the past, before establishing the pharmacy company?
Yes, for securities fraud. See Martin Shkreli, aka Pharma Bro
50
This charge results when any person uses information that the public does not yet know to purchase or sell those securities.
What is insider trading?
1. Ivan Boesky, head of a brokerage firm, paid employees of the investment banking firm Drexel Burnham Lambert's mergers and acquisitions (M&A) department for inside information. This allowed him to profit from nearly every major M&A deal in the 1980s, including Getty Oil, Nabisco, Gulf Oil, Chevron, and Texaco.
2. A Wall Street Journal columnist, R. Foster Winans, arranged to leak to some stockbrokers the stocks he was going to profile in his "Heard on the Street" column before it was published by the WSJ. Those stockbrokers purchased the leaked stocks before the column's publishing. After profiting off the stocks, they gave a portion to Winans, i.e., a kickback.
3. Celebrity homemaker, Martha Stewart sold 4,000 ImClone shares of stock one day before it plummeted in price, based on inside information from the CEO. Although the securities fraud charges were thrown out, Stewart was found guilty of obstruction of justice and lying to investigators. She was sentenced to five months of prison, five months of house arrest, and two years of probation.
50
A classic example of a corporation and its officers and directors convicted under RICO, which we have already reviewed in one of our assignments is this.
What is Enron?
50
CONSTITUTIONAL DEFENSE (SORRY): Deputy Barney Fife stopped Bob for speeding after visually estimating that Bob’s car was traveling 75 mph in a 70 mph zone
Although Deputy Fife’s cruiser was equipped with radar, he had intentionally positioned his vehicle at an angle that rendered an accurate radar reading impossible
During stop, Deputy Fife’s drug-sniffing dog signaled the possible presence of a controlled substance inside Bob’s car.
Fife and other officers then searched Bob’s car and discovered 10 kilos of cocaine.
A grand jury charged Bob with possession of at least 5 grams of cocaine with intent to distribute under 18 USC §§841(a)(1) and (b)(1)(A).
Q. What argument could Bob make regarding that charge?
What is the exclusionary rule, as the cocaine was the fruit of a poisonous tree, a traffic stop without probable cause?