White Collar Crime, Fall 2014
Stetson University, College of Law
Prof. Ellen Podgor
ISRAEL, PODGOR, BORMAN, HENNING, WHITE COLLAR CRIME LAW AND PRACTICE 3d Ed. (2009)
1) Four parts to the course
a) Introduction
i) What is white collar crime
ii) Federal involvement in white collar crime
b) Specific Crimes
i) Mail fraud
ii) Wire fraud
iii) RICO
c) Procedure
i) Grand jury process
d) Sentencing
2) 100 Years of White Collar Crime
a) New York Central and Hudson River RR v. US (1909) – Corporations can be held criminally liable
b) Arthur Andersen v. US (2005) –
c) Edwin Sutherland
Prosecutorial Discretion
1) Limitations
a) Jurisdiction
b) Funding
c) Time
d) Grand jury prior to indictment
2) Dual sovereignty
a) Federal prosecution
i) local corruption, there must be a federal interest see 18 USC § 666
ii) Most statutes fall under Commerce clause
iii) Some fall under power to tax (tax fraud)
iv) Some fall under the post office (mail fraud)
b) Both State and Federal prosecutors can prosecute for the same criminal conduct (this is called “Dual Sovereignty”)
c) Petite Policy (Petite v. United States) – if the state is prosecuting, Federal prosecutors will refrain, unless there is a substantial federal interest in successful prosecution
i) This is a guideline and the Federal prosecutors are not bound to follow. (Basically not binding in law, no private right of action for violation of organizational policy)
Foreign Corrupt Practices Act (FCPA)
1) United States v. Castle 5th Cir. 1991
a)
b) Can foreign officials, whom gov’t concedes it cannot prosecute under the FCPA itself be prosecuted under general conspiracy statute 18§371 for conspiring to violate the act? 18 § 371:
i) Conspiracy to commit specific offense, or
ii) Conspiracy to defraud (the US gov’t)
c) Court ultimately determined Congress expressly excluded foreign officials from being culpable for violations of FCPA
2) Extraterritoriality (see Nippon Paper – conduct outside of US by )
a) Statute focused on extraterritorial conduct (FCPA)
i) Statutes which have extraterritorial provisions
ii) Key questions for statutes?
(1) What did congress intend?
(2) Did congress intend extraterritoriality
iii) Courts use five principles (from Harvard) – will probably allow prosecution under these circumstances
(1) Territoriality (where did event occur)
(2) Nationality (actor is US citizen?)
(3) Passive personality (victim is US citizen?)
(4) Protective (action may have effect on US)
(5) Universality (human rights)
b) Specific provisions
c) Judicial interpretation
d) Fed App. Court held in Nippon that conduct outside the US in violation of Sherman Act will be
September 2, 2014
Chap 3 – Corporate & Individual Criminal Liability
A. Corporate Criminal Liability
1. Introduction
i) NY Cent. & Hudson River RR v. US (USSC 1909)
(1) Corporation appeals a criminal conviction under the Elkins Act challenging the constitutionality of holding corporations criminally liable
(2) Concern is that innocent shareholders (reduction in share value) and consumers (raised prices to cover fines) will be damaged due to a criminal conviction
(3) There is an argument that consumers will not suffer because free market principles will drive competitors to capitalize on the transgressing corporation’s increase in
(4) Prior to 1909, corporate criminal liability only existed where no mens rea is required
(a) Acts that were omission (did not require intent, could only be punished by fines)
(b) Actual acts (as long as strict liability offenses)
(5) This case sets precedent of corporate criminal liability for “Actual acts which require mens rea”
(a) seeks relief from prosecution
ii) Notes
(1) Good faith defense
(a) See US v. Ionia Management SA (2nd Cir) – no precedent for affirmative defense of good faith by corporation (internal guidelines) in criminal prosecution (this is different in civil cases)
(b) For culpability, good faith is not a defense, but can be considered during sentencing
(2) Corporations may enter into agreements with prosecution to avoid prosecution for criminal acts
(a) Non-prosecuting agreements (NPA)
(i) Does not go to court
(ii) Attorney for defendant and prosecutorial attorney will reach agreement:
1. Fine
2. Compliance to be implemented
3. Auditing to be implemented
(b) Deferred prosecution agreement (DPA)
(i) Goes to court
(ii) Asking for deferral of prosecution contingent on certain terms
2. “For the Benefit”
i) Standard Oil Co. of Texas v. US (5th Cir. 1962)
(1) Two employees (Morgan and Hart) issued false reports of “oil leases” between two separate companies Pasotex and Standard (under reporting the take, in excess of legal limits, from one oil lease to pad the underproduction of another oil lease up to that legal limit) in violat
US Atty’s, corp atty’s, SEC reps, FBI agents
(2) responsible to indict corporations which were not compliant with laws
B. Individual Responsibility
1. US v. Park US 1975
i) Facts
(1) Acme Markets is a nat’l retail food chain accused by FDA on several occasions of having unsanitary conditions (rodents) in Baltimore warehouse where food was being held between 1970 and 1972. Acme plead guilty to all counts, however, the respondent (Park, the CEO) pled not guilty and is appealing the jury instructions.
(2) Park stated that the “organizational structure for responsibilities of certain functions” were “assigned to individuals who, in turn, have staff and departments under them”
ii) Procedural History
(1) Jury found Park guilty and fined him $50, though Park claimed instructions failed to reflect the Dotterweich decision and to define a “responsible relationship”, Appellate court reversed
(2) Certiorari granted (SC) as there is a conflict among Courts of Appeal as to standard if liability of corporate officers under the TDCA as construed in Dotterweich and because of certain enforcement interest
iii) Dotterweich
(1) Issue – Whether the manager of a corporation, as well as the corporation itself, may be prosecuted under the FDCA for the introduction of misbranded and adulterated articles into interstate commerce
(2) Appeal reversed – conviction upheld
(3) “the only way in which a corporation can act is through the individuals who act on its behalf”
(4) Corporation acquitted, while director convicted
(a) “whether the jury’s verdict was a result of carelessness or compromise or belief that the responsible individual should suffer the penalty instead of merely increasing, as it were, the cost of running the business of the corporation is immaterial”
iv) Prima facie case is when gov’t introduces evidence sufficient to warrant a finding by the trier of facts that “the defendant had, by reason of his position in the corporation, responsibility and authority either to prevent in the first instance, or promptly to correct, the violation complained of”
