White Collar Crime
Introduction (1-15)
Historical Definition: (Sutherland) Crime committed by a person of respectability and high social status in the course of his occupation, and can be crimes committed by organizations such as corporations
– Not valid today because tax fraud may be committed by corporate execs and blue collar workers alike, cannot be status-based
– White Collar Crime is better defined by delineating what it is not:
o Threat of physical force against victim or victim’s property (extortion may sometimes be, if victim is threatened with economic harm)
o Offenses directly related to possession/sale of controlled substances (handled by DEA)
o Crime directly related to organized crime activities (handled by FBI, etc)
o Crime directly related to national policy-driven areas such as immigration, civil rights, national security
o Common theft and ‘vice’ crimes – considered ‘common’ crimes, EXCEPT fraud which is a ‘white collar’ crime
o Therefore, White Collar Crime encompasses: simple fraud with mail & wires, to political corruption, to sophisticated securities fraud, and tax fraud cases.
Corporate Crime & White Collar Crime
– Business crime is considered subset of white collar criminal activity – often committed for the benefit of the organization for economic reasons
– Can be committed by individuals either to benefit org or for personal gain
– The attraction for prosecuting white collar crime is that the federal system means that the prosecutor will win 95% of the time.
o The grand jury
o Forensic powers
o Might of the government
Due Process
– Translations of statutes into judicially applied rulings may risk criminalization that Congress did not intend, and don’t provide fair notice to potential defendants
Prosecutorial Discretion:
– Can decide whether facts merit criminal charges under any applicable statutes OR whether criminal penalties should be sought (instead of civil/administrative)
– The Champaign courthouse opened in 1992, and federal criminal cases have all been found guilty. Very few federal indictments have been dismissed.
Stages of Representation in White Collar Crimes
– U.S. v. MSI (Management Services)
o The government had a duty to give public services and do their jobs.
o There are a lot of different factors to consider.
– U.S. v. Pereira
o Defendants committed fraud on a wealthy widow and played on her romantic feelings.
o This was decided in Federal court because there were federal issues of jurisdiction and federal mail fraud.
o Mens Rea was shown through action inference and proof of lies.
Corporate and Individual Liability (17-58)
– A corporation may be criminally liable irrespective of the individual liability of those who acted on behalf of the corporation.
– An individual acting solely on the behalf of the corporation may be liable even if that individual were acting solely to benefit the corporation.
– Corporations lack the most fundamental aspects of criminal liability: there is no body to act and no mind to think.
o Does this preclude actus reus and mens rea?
o Courts have struggled with the idea of convicting and sentencing an abstract reality partly because punishing a corporation in reality punishes innocent shareholders and deprives them of their property.
– Federal Courts have rejected that it is not appropriate to apply standards of civil law to criminal matters:
o Liability is necessary to ensure that corporations adequate supervise their agents and employees.
Corporate Criminal Liability
– Corporations can be held liable for acts of employees under two different legal approaches:
o Respondeat Superior
o Model Penal Code (MPC)
o Some criticisms:
· The MPC makes it difficult to see who authorized what and allows the corporation to slip away.
· The RS may be too broad and meant only for civil liability? There is no corporate mens rea – the mens rea of the agent is substituted for the corporation.
– New Models of Corporate Criminal Liability
o Collective Knowledge
· Collects all knowledge of the individual corporate agents and attributes this knowledge to the organization.
o Willful Blindness
· Failing to establish reasonable inferences from available facts. Should have been suspicion.
· This has been rejected as overly broad and inconsistent with principles of criminal accountability.
– Respondeat Superior
o The essence of the respondeat superior doctrine imposes liability on Corporations for acts committed by corporate agents acting:
· On behalf of the Corporation
· To benefit the Corporation
· Within the scope of the Agent’s authority
o United States v. Automated Medical Laboratories, Inc.
· The court discusses the sufficiency of the evidence on the “scope of employment.”
· AML argues its convictions should be reversed because several instances of prosecutorial misconduct denied it a fundamentally fair trial and evidence was insufficient.
· The court has previously rejected the argument that the Government has to prove that the corporation as represented by officers and managers had a separate intent from lower level employees to violate anti-trust laws.
· AML may be held criminally liable for the unlawful practices at RPC if its agents were acting within the scope of their employment, which includes a determination of whether the agents were acting for the benefit of the corporation.
§ The agent/employee acts within the scope of the employment for the benefit of the corporation.
· Unlawful actions do not absolve AML of legal responsibility because it was contrary to company policy.
o U.S. v. Hilton Hotels
· This is an appeal from a conviction under an indictment charging a violation of section 1 of the Sherman Act. Was it error to instruct the jury that an agreement by hotel members would constitute a per se violation?
· “A corporation is responsible for agents done or made within the scope of employment even if the conduct is contrary to their actual instructions or the corporation’s stated policies.”
· Congress may impose criminal liability without proof that the conduct was within the agent’s actual authority, even though it may have been contrary to express conditions.
· As a general rule a corporation is liable under the Sherman for the acts of its agents in the scope of their employment even if against company policy.
– Model Penal Code
o A corporation may be convicted of a crime under Section 2.07(1) where:
· The offense is a violation or the offense is defined by a statute other than the Code in which a legislative purpose to impose liability on corporations plainly appears and conduct is performed by an agent acting on behalf within the scope of his employment
· The offense consists of an omission to discharge a duty or affirmative performance imposed by law
· The commission of the offense was authorized, requested, commanded, performed or recklessly tolerated by the board of directors or high managerial agent.
o The Agent or Employee who is a “high managerial” acts within the scope of employment for the benefit of the corporation.
o Commonwealth v. Beneficial Finance Co.
· The agents of various companies skirted the law and charged illegal high interest rates. The court instructed the jury to apply RS, but defendants argue the court should have used MPC – to require a jury to find that a high level agent authorized or recklessly tolerated the bribery scheme.
· An RS approach is where the commonwealth must prove beyond a reasonable doubt that there existed between the guilty individuals and corporation a relationship such that acts and intent were the same.
· Juxtaposition of the traditional criminal law requirement of ascertaining guilt beyond a reasonable doubt with the RS fully justifies application of standard enunciated by the judge.
·
at a corporation can conspire with its own agents, provided that there at least two agent/coconspirators.
· This rule does not apply where the alleged coconspirators are
§ The corporation and
§ A sole stock holder who completely controls the corporation
o A corporation may be vicariously liable under respondeat superior for a conspiracy entered into by its agents.
– The “Overt Act” requirement
o Any act by a coconspirator that occurs during the conspiracy and in furtherance of the conspiracy will qualify as an overt act..
o The overt act doesn’t need to meet the test required for the Actus Reus of attempt at common law; the overt act need not constitute a “substantial step” towards nor be “dangerously proximate” to the criminal objective.
o An overt act by one coconspirator is sufficient for everyone.
Mens Rea
– A defendant must both knowingly and intentionally enter into an agreement to achieve illegal objectives, and intend to achieve those objectives.
– United States v. Svoboda
o Defendant contends on appeal that there should have been a “Conscious Avoidance” instruction with respect to conspiracy.
o A “Conscious Avoidance” instruction is to the effect that the government could satisfy its obligation to prove knowledge of the unlawful source of information by proving a deliberate avoidance of knowledge.
o The CA instruction is about agreement. The evidence must be sufficient to permit the jury to infer that the defendant and other alleged coconspirators entered into a joint enterprise with consciousness of its nature and extent.
· The doctrine provides that a defendant’s knowledge of a fact required to prove the defendant’s guilt may be found when the jury is persuaded that the defendant consciously avoided learning while aware of the probability of its existence.
· It does not prove intent. It is insufficient but it is proof.
o The CA instruction may be given if:
· The defendant asserts the lack of some specific aspect of knowledge required for conviction
· The appropriate factual predicate for the charge exists – i.e. the evidence is such that a rational juror could reach a conclusion beyond a reasonable doubt.
§ Evidence that the defendant was aware of the high probability of the occurrence and deliberately avoided knowledge.
The “Offense Clause” and the “Defraud Clause”
– The relationship between the two
– United States v. Arch Trading Co.
o The defense is that AT states the indictment was defective because they should have been charged only with defrauding the U.S. and not for committing an offense.
o When Congress provides criminal sanctions for violations of executive orders (this was an executive order against Iraq trade) it empowers the President to issue, such violations are an offense.
o The two prongs of the Conspiracy charge are not mutually exclusive. Defraud has been given wide interpretation and the two clauses overlap.
· The fact that a particular course of conduct is chargeable under one clause does not render it immune from prosecution under the other.
· The defraud clause does not apply where there is no direct connection to the U.S. government.
Scope of the Conspiracy
