White Collar Crime Outline

I. CORPORATE CRIMINAL LIABILITY
A. Corps have the capacity to commit criminal acts.
1. New York Central & Hudson River RR (1) – RR and two employees were each held liable for bribing sugar refiners, an anti-competitive practice in violation of the Elkins Act. RR held 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. S. Ct. J.
2. C.R. Bard, Inc. (12) – 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. 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.
B. ACTUS REUS:
1. usual way of meeting an actus reus requirement: the respondeat superior doctrine: A corp can be held liable under this theory if (1) a corp agent (even the most menial employee) acted (2) within the scope of his or her employment authority (i.e., the acts were directly related to the performance of the type of duties the employee had a general duty to perform, actually or apparently) and (3) on behalf of the corp (4) w/ the intent to benefit the corp. This is defn. of the federal rule, and it’s the rule most prevalent in state courts.
a) Beneficial Finance Co. (18) – A group of small loan companies bribed public officials so that they could keep interest rates high (which benefited them). If an employee was a position such that he or she had enough power, duty, responsibility, and authority to act for and on behalf of the corp, then the employee’s acts which were committed within that scope may be imputed to the corp. Title/position does not conclusively determine authority.
b) Lessoff & Berger (22) – 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.
c) Hilton Hotels (24) – 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.
2. Alternative way of meeting an actus reus requirement: proving that there was a corporate policy. If the misconduct was performed, authorized, ratified, adopted, or tolerated (even recklessly tolerated) by the corp’s directors, officers, or other “high managerial agents” who are sufficiently high in the hierarchy to warrant the assumption that their acts in some substantial sense reflect corporate policy, then the corp can be held criminally liable. This is MPC standard. Proof problems: higher-ups usually cover their tracks.
C. Mens rea requirements: knowledge and willfulness. 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).
1. Bank of New England (27) – Bank held liable for violating the Currency Transaction Reporting Act; customer withdrew more than $10K in cash by presenting multiple checks simultaneously to a single bank teller. Other employees gossiped about how unusual and suspicious this was, and yet no one reported or even inquired whether the transactions should be reported. The Bank didn’t even make any effort to report after it received a federal grand jury subpoena (the transactions at that point were still reportable). Ct. held that the Bank’s flagrant indifference to its reporting obligations could serve as a proxy for willfulness.

II. PERSONAL LIABILITY IN AN ORGANIZATIONAL SETTING
A. Direct participants: Federal law doesn’t recognize any distinction between principals and accessories:
1. Wise (41): A corporate officer may be held personally liable if he knowingly participates in illegal conduct – whether he authorizes, orders, or helps perpetrate the crime – even if he’s acting in a representative capacity. Both the corp and the officer can be prosecuted. We punish the corp to encourage supervision and the implementation of compliance programs; we punish the officer b/c that has a particularly powerful deterrent effect. .
B. Imposing liability on corporate officers via the responsible share theory: A corporate officer may be found to have had a responsible share in a transaction which led to a violation if (1) she was in a position of power and authority over the transaction/operation out of which the violation arose and (2) she had a legal duty to prevent or correct such violations.
1. Dotterweich (42): President and GM of pharmecuital company held personally liable for shipping adulterated products because best position to minimize the risk of harm, even though didn’t participate and didn’t know about violations.
2. Park (46): CEO of huge corp w/ multiple operations and locations (in contrast to the pharmaceutical corp in Dotterweich) was held personally liable for FDA violations (rodents in food warehouses). He had lots of notice of the problem (series of letters from the FDA); he delegated authority to fix the problem to subordinates whom he trusted; he thought everything was taken care of; and in the end he was still held liable under the responsible share theory. Authority can be inferred from position/title, or ostensible or effective authority and responsibility.
a) Park failed to fulfill the two duties he had under the Act: a positive duty to seek out and remedy violations when they occur and also a duty to implement measures to ensure that violations won’t occur. He knew that his system of delegation had broken down, so he shouldn’t have continued to rely on it. The only available defense under the Act (which he didn’t have): objective powerlessness to prevent the violations (e.g., sabotage under weird circumstances).

III. MAIL FRAUD
A. The mail fraud statute, 18 U.S.C. § 1341: The use of the mails to further fraudulent activity.
1. Elements:
a) The defendant knowingly created a scheme to defraud (to obtain money or property by false or fraudulent pretenses);
b) The defendant acted with a specific intent to commit fraud; and
c) The use of the mails or interstate wire communications in furtherance of the scheme.
2. Note that the fraud itself doesn’t have to be criminal, which makes the mail fraud statute a useful device for prosecutors. Also: The fraud doesn’t have to entail something that the fed. govt. can regulate independently, which allows the fed. govt. to expand its jurisdictional hook beyond the usual commerce clause limits.
B.