1. The Concept of “White Collar Crime”
a. Corporate Criminal Liability — Common Law Background
i. NY Central v. US – approved criminal sanctions against corporations. Expressly extended the tort doctrine of respondeat superior to criminal cases.
1. liable b/c the crime was committed for the sake of the RR’s economic gain, the bribes were paid for with the RR’s funds, and the RR benefited by gaining a temporary competitive edge
ii. Thompson Memo – cooperation by the company is a major factor in determining whether or not to prosecute. Compliance is also important.
1. to claim cooperation, companies must
a. (1) turn over materials from internal investigations,
b. (2) waive attorney-client privilege, and
c. (3) not provide targeted executive with company-paid lawyers.
iii. US v. C.R. Bard
1. A corp was held liable for its violations of FDA regulations, which led to serious injuries and deaths. Misconduct pervasive and motivated by greed; the executives approved it.
a. Ct. held that the plea agreement at issue was reasonable b/c it had certain features: it allowed for criminal prosecution of individual employees; it imposed fines; and it imposed a compliance program involving more intense FDA oversight.
iv. Model Penal Code restricts liability to 3 categories:
1. Violations or Offenses defined by the statute outside the criminal code where the legislature has imposed liability on a corporation.
2. Where there is an omission of a specific affirmative duty imposed on a corporation.
3. Where the offense was authorized, performed, or recklessly tolerated by the Board of Directors or a high managerial agent acting on behalf of the corporation.
v. Commonwealth v. Beneficial
1. Respondeat Superior.
2. An agent must perform the acts on “behalf of” the corporation and that the acts must be directly related to the performance of the type of duties that employee has general authority to perform; so needs to be for the benefit of the corporation. Must prove the individual was placed in a position by the corporation where he had enough power, duty, responsibility, and authority to act for and in behalf of the corp.
vi. People v. Lessoff & Berger
1. A law partnership was held liable for fraud, even though only one of the partners was involved in the commission of the crime. “Harsh, but rational.” Harsh: Other partners who were clueless about the misconduct suffered. Rational: The other partners also stood to gain from the fraud, and they should have had incentives to do a better job of policing.
vii. US v. Hilton
1. Corp held liable for the acts of its rogue employee, even though corp had explicit policy that it wouldn’t engage in illegal boycotts and the employee acknowledged receiving specific instructions to the same effect. The employee just went off the deep end b/c of “anger and personal pique.” If a corp entrusts an employee with enough responsibility so that it’s possible for the employee to get into significant trouble with the law while acting within the scope of his employment, then the corp should take the precaution of policing the employee to the extent that that risk exists. Note that mgmt’s diligence is no defense: If the agent acts willfully, then we can impute the agent’s act to the principal.
viii. Criminal Intent
1. Two ways of proving knowledge: (1) one or more agents had actual knowledge; (2) collective knowledge doctrine (i.e., if one employee knows one piece of info, and another knows another piece, then the employer can be charged with the aggregate knowledge). Two ways of proving willfulness: (1) one or more agents acted willfully; (2) there was flagrant organizational indifference (serves as a proxy for proof of willfulness on the part of a single agent).
2. US v. Bank of New England
a. Willfulness can be established by drawing reasonable inferences from the available facts. So if the Δ consciously avoided learning about something AND there is collective knowledge (dif. People knew dif. Things that would have formed a full picture) of the crime, there is enough to impute liability.
b. Ct. held that the Bank’s flagrant indifference to its reporting obligations could serve as a proxy for willfulness.
ix. MPC Rule (more Defense-friendly)
1. Corp can be convicted where
a. Offense is a violation, or the offense has a legislative purpose to impose liability on corporations and conduct is performed by agent acting on behalf of the corp within the scope of employment
b. Omission to discharge a specific duty of affirmative performance imposed on corpo
le for conspiracy where he had knowledge of a subordinate’s participation in a conspiracy and did nothing to prevent the conspiracy from going forward.
d. Object Offense
i. US v. Arch Trading – “offense” is construed broadly. Company traded with Kuwait in violation of an executive order. Convicted under the ‘offense’ clause. Where congress authorized the exec order and criminal sanctions for that order, such violations do constitute offenses against the US.
ii. US v. Licciardi – although defendant clearly defrauded wineries, they did not defraud the US. Mens rea requirement for the “defraud” part of the statute.
e. Withdrawal and Termination
i. US v. Steele – cessation of activity is not enough; D must have done some affirmative act of withdrawal, usually either a full confession to authorities or communication to his co-conspirators that he has abandoned the enterprise and its goals.
ii. US v. Jiminez Recio – conspiracy does not terminate just because, unbeknownst to some of the conspirators, has defeated the conspiracy’s object.
3. Mail Fraud
i. 1341 –
ii. 1346 –
b. Schemes to Defraud
i. Intent to Defraud
1. US v. Hawkey – ticket buyers intended for their money to go to charity, but D took the funds for personal use. D claimed no fraud since everyone got what they bargained for. D intentionally engaged in a scheme to defraud: concerts were designed to raise money for charitable purposes; D knowingly diverted these funds for his personal benefit; and D failed to inform the concert promoter, his accountant, the contributors, and the benefactors.
2. Lustiger v. US – literally true statements designed to deceive a party concerning the essential economic bargain will support mail fraud charges. Taken as a whole, the mailings were fraudulently misleading and deceptive.