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White Collar Crime
Villanova University School of Law
Chanenson, Steven L.

Corporate and White Collar Crime

Chanenson Spring 2014

Strader & Jordan, White Collar Crime:

Cases, Materials, and problems (2d ed. 2009)

Introduction- most of the significant prosecutions occur at the federal level.

Street Crime v. White Collar Crime

White collar crime can typically be more costly and more dangerous than street crime.

Ex. Battery- dangerous and costly, but failing to recall and faulty part on a car could by much more dangerous and costly.

Frequently viewed as an economic crime

But not going to consider the affluence of the offender.

Facts in white collar may be difficult to reconstruct, because victim often doesn’t know there is a problem until the deed is done or sometimes long after.
Difficult to determine if there was a crime at all.

Malum in Se- Bad in and of itself (i.e. street crime)
Mala prohibita- things that are wrong because we say they’re wrong (ex. speeding)
Inconsistent supreme ct. precedent about what is a crime and what isn’t.

White collar crime statutes often vague

Problems

Over deterrence- placing companies at competitive disadvantages to other countries; deterring productivity
Fairness (was there notice? Should this be criminalized?)
Intent- did Δ have the proper intent

Willfulness is a shifting definition depending on the context

Over-criminalization

Rule of Lenity- if statute is vague doubts should be resolve in favor of Δ

Methods of Investigation Differ

Street crime- straightforward, we know how it will proceed
White collar- can be months and years of investigation by grand juries under the direction of prosecutors in conjunction w/ law enforcement agencies (esp. at federal level where resources are more readily available)

Criminal Procedure

Grand Juries- essential to WCC investigations (btwn 16-23 ppl)

Can authorize a lot of things by delegating that power to the prosecutor
Once its open prosecutor can issue grand jury subpoenas—big part of investigation—phone records, bank records etc. (gathering evidence and information)

Can also require ppl to come in and be fingerprinted and photographed, handwriting samples etc.

Grand jury also provides testimony—no judge or rules of evidence apply, but u can use hearsay, so usually it’s a federal agent (FBI etc.) comes in and gives summary to grand jury

Grand Jury Power- can strip away any liability of the person if they testify

After investigation is done, prosecutor will type up report (pros. Memo-facts, strengths, weaknesses and recommends indictment) and has to be approved by grand jury
Important: jury instructions—understanding what the statute requires/doesn’t and making sure the jury is properly instructed; cases are hung on jury instructions.

Parallel Proceedings (Federal v. state)

Often can be investigated by either state or fed.
Raises questions of federalism

Questions of over-federalization when the federal gov’t is supposed to be a body of limited power

Related issues of criminalization and civil alternatives

Are we over criminalizing or do we think there should be a better way to handle it

CONSPIRACY (18 U.S.C. § 371)

Text:

“If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof . . . and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined under this title or imprisoned not more than five years, or both.”

General All Purpose Statute

Does not merge with the crimes that are the object of the conspiracy (i.e. can be charged separately)

Federal Jurisdiction

Commerce Clause

Elements

Govt must show

Agreement existed

To commit an offense against the U.S., and/or
To defraud the U.S.

Two or more persons were parties to that agreement (the plurality requirement)
The Δ intended

To enter into the agreement and
That the object offense or fraud come to pass and

A co-conspirator committed an “overt act” in furtherance of the offense.

An agreement Existed btwn two or more persons (**agreement is key to conspiracy)

How formal?

Very informal; rarely a written agreement to commit a crime, can be an Informal, ad hoc understanding that may not even be expressed.
Can be demonstrated by circumstantial evidence

Ex. showing they did it together—one got the guns; they both went into the bank etc.

Each conspirator does not need to know the full scope of the conspiracy and the roles of the other conspirators

To commit an illegal or wrongful act

You must meet this standard, even if you do not know all of the details of the conspiracy
Two distinct things (one is the agreement/conspiracy—separate and distinct evil offense aside from the actual act)
Govt must establish (i) an agreement to commit an offense against the U.S. and/or (ii) to defraud the U.S.

These are distinct offenses

Under defraud clause, government need not suffer pecuniary loss to prove a conspiracy to defraud because fraud reaches “any conspiracy for the purpose of impairing, obstructing, or defeating the lawful function of any department of [the] government.”
U.S. v. Arch Trading- the two phrases are not mutually exclusive; govt has a lot of leeway whether to charge one or both.

Here, gov’t charged Δ with committing an offenses against U.S.; Δ argued Exec. Orders don’t have the force of law so at best it was defrauding; Ct said congress voted on the exec. order so it was an offense but the two are not mutually exclusive, just because you can charge one doesn’t mean you’re precluded from charging the other.

D intended to enter into the agreement (knowing it was illegal) and to help conspiracy succeed

Usually demonstrated by circumstantial evidence.
Δ must knowingly and intentionally enter into an agreement to achieve illegal objectives and intend to achieve those objectives.

US v. Brown

Facts: Law firm helped Furniture store conceal assets in bankruptcy proceeding so creditors couldn’t get them. Partner at firm asked associate to take care of concealment. Associate coached furniture owners to deny existence of assets during depositions. Then destroyed evidence of transactions a year later.
Holding: Based on circumstantial evidence, jury could have found beyond a reasonable doubt that associate was aware of all furniture store’s financial transactions; that he agreed to defraud the US by concealing their financial transactions, and he aided the conspiracy in its objectives.

Conscious Avoidance Doctrine- jury may infer intent where there is a high probability that D was aware of act’s illegal nature and consciously avoided confirming that fact

US v. Svoboda (2003)

Facts: D worked for bank; shared info with trader friend who traded on it and they split profits. Convicted of conspiracy; Δ argued jury shouldn’t have been allowed to consider conscious avoidance instruction, required actual knowledge
Holding: Conscious avoidance instruction was appropriate because evidence clearly indicated that D knew of trade’s illegal nature and consciously avoided confirming that fact

D knew that his friend was a bank officer and thus privy to confidential financial information
Trades D made based on

Co-Conspirator Hearsay Rule

Fed Rule of Evid 801(d)(2)(E): statement of co-conspirator offered against D is not hearsay if (i) It was made during the course of the conspiracy; and (ii) in furtherance of the conspiracy

In order to introduce statement, govt must first prove by preponderance of evidence:

the existence of a conspiracy;
the declarant’s and D’s participation in the conspiracy; and
that the hearsay statement was made during the course of and in furtherance of the conspiracy.

Most cts require more than just the statement to prove conspiracy existed (i.e. no pure bootstrapping).

Statements to cover up the conspiracy after the fact are not made during the course of conspiracy and are inadmissible as hearsay. (Krulewitch)

Krulewitch

Facts: D charged with conspiracy to transport woman from New York to Florida for purposes of prostitution. After arrest, one prostitute said to woman, “It’s better for us to take the blame than “D” because he couldn’t stand to take it.” D charged and convicted on the basis of statement.
Holding: SC reversed. Statement was inadmissible because conspiracy was over. Woman had already come to Florida at time of statement and all the relevant parties had been arrested (conspiracy had ended or been achieved—in this case achieved).

To determine admissibility of co-conspirator’s statement, a court may look at the content of the statement itself, but must also consider independent evidence.

Lindemann

Facts: Δ was the beneficiary of insurance contract on horse, supposedly asked partner to hire ppl to kill horse. The killers testified that (i) business partner’s assistant had asked him to kill horse for “D”; and (ii) that business partner had told him directly that “D” would pay whatever it takes.
Holding: Statements were admissible under hearsay exception because independent evidence proved

Existence of conspiracy

Independent evidence that witness killed horse that D lied to insurance investigators (horse was in fl. when declarant said etc.)

Declarant and D participated in conspiracy

Statements themselves referring to D
Independent evidence that witness killed horse, that D was in Asia when business partner said he was, that D lied to insurance investigators

Statements were made during course of and in furtherance of conspiracy

Statements themselves referring to killing
Independent evidence that partner’s assistant asked witness to kill horse, that business partner showed witness where killing was to take place

Statements made by co-conspirators prior to the time D joined the conspiracy may be admissible against D because the D “takes the conspiracy as he finds it” (help to show what you agreed to join).

Vicarious Liability

Pinkerton Doctrine: Co-conspirator may be held liable for reasonably foreseeable overt acts of one co-conspirator committed in furtherance of the conspiracy