White Collar Crime Outline
Format
I. Corporate Criminal Liability
II. Conspiracy
III. Mail Fraud
IV. The Hobbs Act
V. Official Bribery and Gratuities
VI. Drug Offenses
VII. Currency Reporting Offenses & Money Laundering
VIII. RICO
IX. False Statements
X. Perjury & False Declarations
XI. Obstruction of Justice: Interference with Witnesses
XII. Sentencing
Corporate Criminal Liability
v The Model Penal Code
o MPC not the federal law, but it is very influential.
o § 2.07
§ A corporation may be convicted of the commission of an offense if:
· A. The offense is a violation
o if defined by a statute not in the penal code
o And legislative purpose to impose liability on corporation plainly appears.
· B. A corporation may be convicted of an offense if:
o The offense consists of
§ An omission
§ To discharge a specific duty of
§ Affirmative performance
§ Imposed on corporations by law
§ (an example of this- corporations have duty to file income tax)
§ C. A corporation may be convicted of an offense if:
· The offense consists of
o Its commission is
§ Authorized
§ Requested
§ Commanded
§ Performed
§ Recklessly tolerated- there is a mens rea requirement.
o By
§ Board of directors or
§ High managerial agent
· Acting for the corp.
· Within the scope of her office or employment
o Subparagraph (2)
§ When absolute liability is imposed
· A legislative purpose to impose liability on a corporation shall be assumed. Unless the contrary plainly appears.
v The Respondeat Superior Rule
o The federal courts observe the respondeat superior rule of corporate liability. Under the federal rule, a corporation is liable for the acts of its agents without regard to their status in the corporate hierarchy, and liability attaches without a showing of managerial complicity. Although the efforts of corporate management to prevent criminal misconduct may affect a prosecutor’s decision whether to prosecute, management’s due diligence is not a defense to a federal charge.
o Commonwealth v. Beneficial Finance Co.
§ Burden of proof to convict a corporation for the acts of its agents is sufficiently met if it is shown that the corporation has placed the agent in a position where he has enough authority and responsibility to act for and in behalf of the corporation in handling the particular corporate business, operation or project in which he was engaged at the time he committed the criminal act.
o United States v. Central National Bank
§ In this case, it was held that the resulting corporation is criminally liable for the criminal conducts of one of the corporations that merged.
o Dollar Steamship Co. v. United States
§ Law prohibited throwing garbage into harbor waters. ?’s ship employee threw garbage into the water even though ? had prohibited such conduct and signs were posted. But still liable. According to the Court, “having committed his ship to the seas, an owner takes the risk of much which he cannot easily control. Any other construction would change the statute from one of prohibition to that requiring merely due care.”
o United States v. Hilton Hotels Corp.
§ A corporation is liable under the Sherman Act for the acts of its agents in the scope of their employment, even though contrary to general corporate policy and express instructions to the agent.
o Due Diligence Defenseà Company’s good faith compliance efforts. Not really accepted defense anymore.
v Development of Corp crim liability
o NY Central & HudsonàCorporation punished under criminal law. Corp argued that this punished innocent shareholders, also no evidence that board of directors had authorized the illegal acts.
o SC affirmed conviction. Ct. reasoned that to not apply crim provisions to corporations wouldn’t work and applied the respondeat superior doctrine of tort in criminal context
v Respondeat Superior (followed by the Feds)
o Corporate liability for acts committed corporate agents acting
§ On behalf of the corporation
§ To benefit the corporation, and
§ Within the scope of the agent’s authority (actual or apparent)
o Liability even for the lowest level employees. Corp liability may be imposed even when agent has been acquitted
o Central National Bankàsuccessor corporation can be held liable for actions committed by agents of predecessor corporations. Also corporation can be indicted for a crime even if it is dead.
v MPC
o MPC 2.07(1)- corporation may be convicted where
§ A. 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 the conduct is performed by an agent of the corporation action on behalf of the corporation within the scope of his office or employment. or
§ B. the offense consists of an omission to discharge a specific duty of affirmative performance imposed on corporations by law, or
§ C.the commission of the offense was authorized, requested, commanded, performed or recklessly tolerated by the board of directors or by a high managerial agent acting in behalf of the directors or by a high managerial agent acting in behalf of the corporation within the scope of his office or employment.
o MPC provides “due diligence” defense where not contrary to legislative purpose.
v Respondeat Superior v. § 2.07
o MPC provides a more restrictive test for corp liability. (a) applies to criminal cases where MPC general interpretative principles apply but where the specific criminal offense is not itself defined under the MPCàthere must be a clear legislative intent to impose liability on corps. Such clear intent is not a requirement in respondeat superior.
o (c) gov must show that agent’s act was approved or recklessly tolerated by high level management. No such requirement in RS.
o A. Legislative Intent to impose liability
§ State v. Shepard
· Corporation convicted under antitrust law. ? argued that it cold not be guilty under statute because statute only provided imprisonment and corp can be imprisoned.
· Court rejected: 1. statute provided that a person could be convicted, 2. the statute defined the term person to include corporations, and 3. the law provided that a fine could be imposed.
o C. approval by high managerial agent
§ State v. Chapman Dodge
· In this case, car dealership owned by close corp owned by one person. General manager committed license fraud not known to the owner. Court held that general manager was not a high managerial agent.
§ State v. Christy Pontiac
· In this case, car salesman and mid level manager filled out rebate forms. An officer signed the rebate applications and the president was aware of the dispute. Benefited the corp, so held liable.
§ People v. Lessofàlaw firm partner= high managerial agent.
v Acting on Behalf of the Corp
o Both MPC and RS require that agent have been acting on behalf of the corporation.
v Commonwealth v. BeneficialàCt. rejected the high managerial requirement of MPC and instead adopted RS because MPC too lenient and allows coprs to hide behind actions of low level employees.
v Court has held under RS that corps can be held responsible for agents acts which are on behalf of the corp even where the acts are contrary to explicit corporate policy. Even when there is a corp compliance program
o Dollar SteamshipàCorp held liable for employee’s act of throwing refuse into harbor. Company showed that its employees were advised of its policy against such dumping, ships officers had no knowledge, company had taken reasonable steps to prevent the dumping. Ct. rejected because statute imposed strict liability and due care no defense.
o US. v. Hilton HotelsàAgent involved in antitrust despite the company program and manager’s instructions. But ct. still affirmed corp conviction because corp not the employee benefited.
v Actions not taken for the benefit of the Corp
o Under RS, Corp not liable where acts not intended to benefit corp. But where agent and corp both benefit= liable. Actual benefit not needed. Agent’s intent rules.
o Standard Oilàemployees actions solely for personal benefit and actually harmed the corp. Therefore, corp not liable.
o Steere Tank LinesàHere also, actions of truckers in falsifying records solely for personal benefit. But here corp held liable because the work environment fostered such reporting and the management knew of this practice, so sufficient to show company’s intent.
v Corp mens rea
o What happens when corp liability doctrine applied to crimes other than strict liability.
o Under strict RS, proof of mental state of the agent who committed the wrongdoing is all that is needed and no need to show that management possesses this.
o But some fed courts require more especially when crimes require knowledge or willfulnessàso not really applying RS.
o Collective Knowledge
§ Corporate mens rea can be shown through collective knowledge.
§ Dotterwich and Park Cases
Conspiracy
v 1. An agreement by two or more persons
v 2. To commit an unlawful act (target offense) or a lawful act, by unlawful means
v Like attempt, conspiracy is an inchoate crime. Crime is complete when two or more people agree to commit a crime. Unlike attempt, conspiracy doesn’t require a substantial step toward the crime.
v Why conspiracy loved by prosecutors
o Joinder of all ?s in the conspiracy
o Venue flexibility
o Pinkerton Rule
§ Theory that co-conspirators are responsible for each other’s acts.
§ Under this rule, a ? may be guilty of his co-conspirator’s offenses if
· ? was a party to that conspiracy
· the offense was within the scope of the unlawful protect
· the offense was in furtherance of the conspiracy, and
· the ? could have reasonably foreseen the offense as a necessary or natural consequence of the unlawful agreement
o Conspiracy, unlike attempt, does not merge with the object crime.
v § 371
o makes it a crime for two or more persons to conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose
o Offense clauseà crime whenever the ? has agreed with one or more people to violate other federal laws
o Defraud clauseàcriminalizes conspiracy to defraud the US. Includes both schemes to deprive the US of money or property (e.g. taxes), and schemes to obstruct or interfere with government functioning or to deprive the government of information.
§ US v. Licciardi
· ? intended to defraud the wineries by mislabeling grapes. Court said that no conspiracy to defraud the US because ? intended to defraud the wineries not the US.
§ US v. Hay
· US made loans and ? tried to misuse loans. Conspiracy conviction upheld because US has a fundamental interest in the manner in which projects receiving its aid are conducted.
§ Tanner v. US
· SC held that just because a private corp received gov. funding doesn’t make scheme to defraud that private corporation a crime against the US.
v Elements of Conspiracy
o Actus Reus- The agreement
§ The actus reus is the agreement itself.
§ Plurality requirementà agreement has to be between two or more people
§ It is not necessary that all co-conspirators be charged or convicted or even known to the government for an individuals to be found guilty of conspiracy.
§ Can’t have conspiracy with undercover agent because for conspiracy need both
· Parties intended to enter into conspiracy and
· That the object crime or crimes be committed.
§ Wharton’s Rule
· Can’t be guilty of crimes that require 2 or more actors (e.g. adultery, bigamy)
· Under Fed law, Wharton Rule is a presumption (conspiracy unless Congress intended that no conspiracy charge should lie)
o Unlawful Object
§ Fed law criminalizes both civil and criminal offenses
o Mental State- Mens Rea
§ Need intent to agree and intent that the object offenses be committed.
§ Specific intent crime therefore ? must consciously desire the criminal result.
§ US v. Dimeck
· Mere knowledge of illegal activity, even in conjunction with participation in a small part of the conspiracy is not enough sufficient to establish that minor participant knowingly joined the conspiracy.
§ Need purpose and mere knowledge not enough
§ ? need not specifically intend that all the object crimes be committed.
§ ? need not know all the details of the object crimes. General knowledge ok.
§ Need not know the identities of all the co-conspirators, so long as ? generally aware of the co-conspirators’ existence
o Overt Act
§ The general federal conspiracy statute requires the government to prove an overt act in furtherance of the conspiracy.
§ Overt act is any act, or failure to act, by any co-conspirator during and in furtherance of the conspiracy.
§ Very easy to meet this requirement (e.g. a phone call can be considered an overt act)
§ Need not show overt act by each co-conspirator. Act by one attributable to others.
Mail Fraud
v Mail and wire fraud very often used because statutes are relatively simple requiring in the most basic terms a scheme to defraud and the use of mail and wires. Also statutes are extremely flexible.
v § 1341
o whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises,… for the purpose of executing such scheme or artifice or attempting so to do, places in any pose office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service, or deposits or causes to be deposited any matter or thing whatever to be sent or delivered by any private or commercial interstate carrier, or takes or receives therefrom, any such matter or thing, or knowingly causes to be delivered by mail or such carrier according to the direction thereon, or at the place at which it is directed to be delivered by the person to whom it is addressed, any such matter or thing.
v § 1343- Fraud by wire, radio, or television
o Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice…
v Elements
o ? engaged in scheme to defraud
o ? made material misstatements or omissions
o ? used, or cause the use of, (a) the United States mail, (b) a private courier service, or (c) interstate or international wires;
o The use of the mails, courier, or wires was in furtherance of the scheme to defraud; and
o The scheme resulted, or would result upon completing, in the loss money or property, or in the deprivation of honest service
v Mail fraud is inchoate crime so gov. need not prove that intended victim was deprived of money, property or the right to honest services
v Jurisdiction
o Any use of US mail- inter or intra state- provides federal jurisdiction
o Wire fraud relies on commerce clause so must be interstate or international. ? doesn’t have to know that wire would cross state lines.
v Scheme to defraud
o Intent to defraud
§ Durland v. United Statesà Court concluded that “any scheme or artifice to defraud” includes everything designed to defraud by representations a to the past or present, or suggestions and promises as to the future. The significant fact is the intent and purpose.
o Deception relating to the economic bargain
§ ? must intend that deception go to the substance of the bargain between the defendant and the intended victim.
§ Economic substance requirement. Mere puffing will not support mail fraud “e.g. this is the best car.”
§ US v. Regent office SupplyàSalesperson tells receptionist that knows the boss and this way sells the items. But not mail fraud because legit items sold at legit price.
o Literally True and Misleading Statements
§ Lustiger v. USà ad to sell property went beyond puffing so false and misleading.
o Omissions and Concealment
§ Material acts of omission or concealment can give rise to mail fraud.
§ US v. Siegelà?s made scheme to misuse proceeds form sale of employer’s products. Since breached their fiduciary duties to the corporation by failing to reveal their scheme to the company and its auditors, met the deception element of the wire fraud statute.
§ Intent to defraud is the key. Mail fraud requires proof of a specific intent to defraud. So if ? acted in good faith (e.g. acted with good will and without intent to harm) will provide a complete defense to the charge.
o Materiality
§ Nader v. United Statesàthe mail and wire fraud statutes require that the scheme to defraud involve a material deception. ? convicted for mail fraud for fraudulent bank loans applications. ? argued on appeal that trial judge erred by failing to require that the jury find the ?’s misstatements were material to the transactions. SC agreed.
§ Reasonable Reliance Issue
· Some circuits rule that material if a reasonable person would believe the fraudulent statements. Other disagree.
v The Use of the Mails and Wires
o In furtherance requirement
§ A mailing need not be essential to the fraudulent scheme and may even be incidental to the scheme.
§ United States v. Schmuckà? sold cars to used car dealers and rolled back the odometer. Dealers not involved in this. Dealers when selling cars mailed change forms to the state. Ct. held that this was sufficient for mail fraud. According to the Court, a failure in this passage of title would have jeopardized ?’s relationship of trust and goodwill with the dealers upon whose unwitting cooperation is scheme depended.
§ US v. Mazeà?s committed credit card fraud and the merchants who accepted cards mailed bills for payment to the credit card issuer. Ct. found that such mailing were not in furtherance of the underlying fraud.
§ If mail and wires are too far removed from ?’s plan, they mail fail even if the se of the mails and wires is in support of ongoing schemes (e.g. the NCAA case).
o The Lulling Rule
§ Even after fraud complete, if mail used to cover up or delay the detection, then the condition of use of mail suffices. E.g. case where burned house and got insurance money. But then sent false invoice to insurance company. Also case where fraudulently got money from people promising them that they will help obtain loans. After got the money from victims kept sending them letters that they will help them with the loans soon.
o Legally required mailings (e.g. Income tax return- if file false tax, are you liable not only under the tax statute but also the mail fraud statute? Split of authority on this. Probably it is the ):
The false-statement rule (in some circuits- Note a on 184)- if the legally required mailing has the false statement in it, you are dead. You were legally required to make the statement but not lie in it. So it is sufficient mailing hook. This results in stacking of charges. But attorney general manual says that US attys shouldn’t stack charges this way.
§ The other view: Esterbrook in Green (184 note b)- If legally required mailings are important to the success of scheme, so looks at the intent. But this opinion is not being followed much.
o The Causation Requirement
§ In addition to requiring that the mail was in furtherance of the fraud, the courts have also required proof that the ? caused the mailing.
§ Causation requirement is usually proven by showing that ? knew or should have reasonably foreseen that the mail would be used as part of the scheme.
§ Pereira v. USà? induced the V to make some payments to him. ? deposited the check and check mailed to the bank in CA. ? claimed that didn’t cause the check to be mailed. The court disagreed. It is in common knowledge that checks are sent to the banks on which they are drawn, and ? knew or should have known that the Texas bank would mail the check to the CA bank.
§ SO GOVERNMENT HAS TO PROVE BOTH IN FURTHERANCE OF FRAUD AND THE CAUSATION ELEMENTS.
v Deprivation of Money, Property, or Honest Services
o US v. Carpenterà? working for Wall Street Journal and issued articles that affected stock prices and before publishing, traded stocks and made profits. ? argued that he did not deprive Wall Street of any property or money. Court disagreed. Paper was deprived of the rights to keep the information confidential and to have exclusive use of the information prior to its publication.
o Licenses and Permits
§ Cleveland v. United States
· ? lied in his application for a gambling license. Court held that unissued permits or licenses are not property. Even if a license may become property owned by the recipient after the license is issued, it is not property of the state or local authority that has the power to issue the license or permit.
§ The Right to Control Property Interests
· US v. Evans
o ? lied to US that weapons will be sold to some other county than Iran. Court held that this scheme did not involve a loss of money or property. The only right gov. had was to restrict the weapons’ destination, which was akin to a regulation but was not a property right.
o Section § 1346
§ For purposes of this Chapter, the term “scheme or artifice to defraud” includes a scheme or artifice to deprive another of the intangible right of honest services.
o The reach of § 1346
§ Three possible interpretations
· Only applies to public officials
· Only applies to private employees
· Applies to both public officials and private employees (majority of cts. have accepted this definition)
§ Definition of Honest Services
· Majority rule: no violation of state law is required in an honest service prosecution
· Minority Rule: Brumleyàviolation of state law required. Federalism concerns.
v Prosecutions of Public Officials
o Approaches
§ Limiting honest service to misuses of public positions for personal gains;
§ Limiting honest services to schemes that violate state law
§ Limiting honest services to schemes that violate state criminal law; or
§ Limiting honest services to cases involving serious
v Prosecution of Private Employees
o US v. Vinyard
§ Fifth circuit affirmed the ee’s conviction for defrauding his er, a manufacturer, by arranging for it to buy raw materials from a firm in which ? had an interest. Even if no actual economic harm is shown, an ee can be liable so long as such harm was reasonably foreseeable. Because the er was deprived of the benefit of choosing among competitive suppliers, such harm was foreseeable.
o US v. Jain
§ Eighth Circuit required proof of intent to cause tangible harm from the fraudulent scheme. A psychologist was convicted for a receiving kickbacks from a psychiatric hospital. Court found that though the government had strong evidence of a patient referral kickback scheme, it had no evidence of tangible harm to the patients. The court rejected the argument that this case fell within the honest services provision of § 1346 noting that such cases are generally been brought against public employees.
o So the duty of honest service is pretty limited in private sectoràCts require actual harm.
v US v. Maze- when statute covers specific type of mail fraud, can you be charged with both it and mail fraud?
o Common law found them to be exclusive, an in some cases, such as IRC, that is still the case
o But mostly now they can be charged with one or both.
The Hobbs Act
v The Hobbs Act, 18 U.S.C. § 1951, criminalizes three distinct forms of criminal conduct:
v 1. robbery,
v 2. extortion by force, threat or fear
o Extortion by using physical force, or exploiting fear of physical harm, and
o Extortion by exploiting fear of economic harm.
v 3. Extortion committed under color of law
o public official used the power of a public office to obtain payment from a victim
o Unlike federal crimes of bribery and gratuity, the federal crime of extortion under color of official right is not limited to federal public officials. So Hobbs can be applied to state and local officials.
v Elements of Extortion
o The ?’s acts affected interstate commerce;
o The ? obtained, or attempted or conspired to obtain, property of another;
o The property was obtained, or would have been obtained, with the other person’s consent[1],
o The defendant acted with the required mens rea; and
o The property was obtained, or would have been obtained, by either
§ Wrongful use of fear; or
§ Under color of official right
v Extortion is an inchoate crimeà so covers inchoate conduct of conspiring or attempting to commit extortion. Because no general attempt statute under fed law, the crime of attempted extortion exists only because the statute itself contains this provision. But the conspiring to commit extortion could be charged under the extortion statute or under § 371, the general federal conspiracy statute.
v Effect on Interstate Commerce
o Courts have held that any moiré, or de minimis, effects on commerce will suffice. Under the depletion of assets theory, almost any extortionate activity will produce federal jurisdiction.
v Obtaining Property From Another
o Gov must show that ? obtained, or attempted or conspired to obtain, property from another. This has rarely provided a barrier to extortion prosecutions. E.g. interference with the right to participate in labor unions constitutes property deprivation. Anti-abortion activities implicate Hobbs Act.
v Mens Rea
o No mens rea required with respect to the jurisdictional requirement.
o Where fear- gov has to show that ? purposefully or knowingly used force, induced fear, or exploited the victim’s fear.
o Where color of law, gov must show that ? purposefully or knowingly used an official position to obtain property.
v Extortion by the Use of Fear
o May be by fear of physical or economic harm. ? must intend to take advantage of the victim’s fear. The prosecution need not show that ? created or attempted to create the fear.
o United States v. Capoà?s involved in job selling scheme. The plant needed large number of new employees. Prospective Ees paid ? who used their influence to ensure that these applicants received jobs. ?s charged for extortion based on theory that created fear of economic harm.
§ Second circuit ruled that there was insufficient evidence that victims acted out of fear. Whether there is fear must be viewed form the victim’s perspective. Gov. must show that the victim both actually and reasonably believed first that the ? had the power to harm the victim and that ? would exploit that power to the victim’s detriment. Here the activity was bribery and not extor