The Crimes within a corporation

·      Many business crimes are committed because companies apply pressure to managers and employees to produce results

o   This leads managers to cross ethical and legal lines

·      Personal financial pressures lead them to embezzlement as a source of pressure-relieving funds 

·      White-collar crime

o   Crimes committed for and against a business 

·      For business crimes, those in the management of firms who employees actually commit criminal acts can be held criminally responsible if they authorized the conduct, knew about the conduct but did nothing

o   Employees who participate with the company and its management in illegal acts are also criminally responsible

·      Key to liability is personal knowledge of wrongdoing 

·      difficulty with most criminal law penalties is that they were instituted with “natural” persons in mind, as opposed to “artificial” corporate persons

·      Criminal penalties have been increased to allow judges to fine the corporation as much as a bad business decision would cost 

·      “Shame punishment”

o   involves public disclosure of an offense

-ex: company must take out an add for three weeks confessing to a crime of violating federal law 

 ·      Elements (requirements of proof), of a business crime vary according to type

o   Can be classified into general components

-Mens rea (or scienter) and actus reu

o   Mens rea

o   Actus reus 

§  In addition to mental intent, a requirement of some specific action or conduct

ú  Ex: in embezzlement actus reus is the taking of an employees money 

·      2 intents involved when a corporation is prosecuted for a crime

o   the intent of the corporation to commit the crime

o   the intent of those in charge of the corporation, the officers and directors, to have the corporation commit the wrong 

·      Doctrine of Conscious avoidance

o   Means of establishing mens rea for officers

o   Under this theory, executives cannot “consciously try to avoid knowledge” 

o   The action of employees who take their employers property

o   Actus reus of the crime

§  Intent to take the property

§  Actual taking of the property for permanent use

§  No authorization to take the property

o   Mens rea

§  The intent of permanently depriving the owner of use and possession

o 

 How are they the same and how are they different?

§  They are the same with one more element: the person commits the crime while in the employ or position of trust of the property owner

o   A felony for anyone to alter, destroy, mutilate, conceal, cover up, falsify, or make a false entry with the “intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States.

- Encouraging or giving false testimony

-  Obstruction of altering documents in a pending investigation

o   Theft of Software

o   Unauthorized access

o   Intentional damage

o   Using computers to commit economic espionage

o   Using computers to harass: cyberbullying

o   Using computer to commit electronic fund transfer crimes

o   Using computer to circumvent copyright protection devices

o   Using computer access for unauthorized advertising: Spamming

o   False statement was made; statement was material- that is would affect the buying decision; and the person relied on the statement

Difference between contract and criminal fraud

§  Criminal fraud requires proof that the seller intended to mislead the buyer

- Ex: forgery

o   Racketeer influenced and Corrupt Organizations

§  Intent of curbing organized crime activity

o   “Pattern of racketeering activity” is defined as the commission of at least two racketeering acts within a 10-year period

§  91% of civil law actions have been based on the listed pattern crimes of mail fraud, wire fraud, or fraud in the sale of securities

o   Provides for both criminal penalties and civil remedies

§  In civil suit, injured parties can recover treble damages, the cost of their suit, and reasonable attorney fees

o   When charges are brought against corporations, one penalty is seizure of corporate assets

o   Provides that “the right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated”

§  Protects individual privacy by preventing unreasonable searches and seizures

ú  Valid search requires search warrant

ú  In unauthorized search is conducted any evidence recovered is inadmissible at trial for the purposes of proving the crime 

§  how lawsuits can obtain information from ISPs

- warrant

- probable cause

-  applicable exception (emergency because of a posted threat)

§  Exceptions is based on emergency grounds

§  If records are being destroyed

§  “plain view” exception, can seize evidence if it is within their view 

o   . 3 types of privileges where info. is in the hands of third parties but not necessarily discoverable

§  notes on trial strategy, audit procedures, and other plans and thoughts such as communications with lawyers and clients

- cases of abuse, disclosure of confessions, and sexual abuse are some exceptions

o   Extends several protections to those facing criminal charges

§  protection against self-incrimination

-  persons cannot be compelled to be witnesses against themselves 

-  cannot use to prevent compulsory production of corporate needs

-  prevent the production of corporate records on grounds that those records incriminate them personally

-  also to those involved in labor unions, close corporations, and unincorporated associations 

§  must be given to all people who are subjected to custodial interrogation

-  custody does not necessarily mean “locked in jail” but it is generally based on individuals perceptions of a situation

-  failure to give Miranda warnings are not fatal to a case if the crime can be proved through evidence other than the statement of the defendant

Miranda v. Arizona (1966)

-court case that caused the interpretation of the 5^th amendment

§  means that no one can be convicted of a crime without the opportunity to be heard, to question witnesses, and to present evidence

-  the 6^th amendment complements due process rights by requiring that all these procedures be completed in a timely fashion 

. Warrant and/or Arrest

Initial appearance

Preliminary hearing or grand jury

Arraignment

. Discovery

. Omnibus hearing

trial

§  criminal proceeding can begin when a crime is witnessed, as when a police office attempts to apprehend a person who has just robbed a convenience store  

-  warrant can be issued and the individual then arrested, whether w/ or w/o a warrant the due process steps beginning with the arrest 

§  once arrest an arrest has been made, defendant must have an opportunity to appear before a judicial figure within a short time period (24 hours) to be informed of his charges, rights, and so on

ú  some are required to post a bond to be released, others are held without release terms

§  Defendant is released without have to post a bond

ú  Released on his own recognizance and released OR 

Preliminary hearing or grand jury

§  purpose of a preliminary hearing or grand jury proceeding is to require the prosecution to establish that there is some evidence that the defendant committed the crime

§  preliminary hearing

ú  prosecution presents evidence to a judge to indicate that the accused committed the crime

·      information

o   to a criminal proceeding what a complaint is to a civil proceeding: it establishes what the defendant did and when and what crimes were committed 

§  grand jury

ú  panel of citizens who serve for a designated period of time (usually 6 months) and act as the body responsible for the review of evidence of crimes

ú  conducted secretly, also have the authority to conduct investigations to determine whether crimes were committed and who did so 

§  indictment

-  similar to an information and serves the same function

·      issues this if the grand jury finds sufficient evidence that a crime was committed 

o   Arraignment

§  the proceeding at which the defendant enters a plea of guilty, not guilty, or no contest (nolo contendere)

ú  if not guilty plea is entered, a date for trial is set

  plea bargain

-  term used in criminal proceedings for a settlement

·      ex: defendant may plead guilty to lesser offense in exchange for the prosecutions promise to support a lesser sentence, such as probation 

§  discovery period continues between the time of arraignment and the trial

ú  ex: documents, murder weapons, and pictures

§  the forum wherein all of the challenges can be presented for the judge’s ruling as to the admissibility of evidence

-  held before the trial 

- goes to this if no plea agreement is reached before it

·      Caveat Emptor

o   “let the buyer beware” – sellers were not liable fore defects in their products and that it was the buys responsibility to be on the alert for defects and take the appropriate precautions 

o   Restatement (second) of torts

§  With this adoption the area of product liability had gone full swing fro no liability (caveat emptor) to an almost per se standard of liability for defective products (caveat vendor)

o   Under the uniform commercial code (UCC) it is an express promise (oral or written) by the seller as to the quality, abilities, or performance of a product (UCC 2-313)

§  Does not need words promise or guarantee, seller makes warranty by displaying a sample model or giving a description of goods

§  Adds are express warrantees, opinions are not they are considered a basis of transactions

§  Ex of express warranty

ú  “will not stain clothing” or “disease free” 

o   Federal trade commission act of 1914 authorized FTC

o   To prevent “unfair and deceptive trade practices”

o   Wheeler-lea act of 1938

§   clarified and expanded the FTC’S power by authorizing it to regulate “unfair and deceptive acts or practices” whenever the public is being deceived, regardless of any effects on competition 

o   FTC challenged certain types of price claims

o   Challenges ad claims

o   Mail or telephone order merchandise rule

§  Requires that catalog merchants disclose delays in delivering ordered goods to consumers and that consumers be informed up front about product delays that result from custom or special orders or because of direct-from-the-manufacturer shipment 

o   Requires a seller to explain unsubstantiated claims made in previous ads

o   Warner-Lambert Co. v. FTC

§  Court did not rule in their favor, Listerine did not have to do advertising that said their product didn’t help with sore throats

o   Requires celebrities to be sure that why they claim in their ads is the truth

o   Cannot make any claims about product use unless they have actually used and experienced the product

o   Celebrities cannot make claims about the product or service that are not based on their own experience 

o   A sales tactic in which a cheaper product than the one in stock is advertised to get customers into a store – seller has no intention of selling the product

§  FTC prohibits this sales tactic 

o   Comparisons of products must be fair and accurate

o   Federal trademark law

§   permits competitors to recover from companies that run misleading comparative ads

o   Somewhat rewarding because plaintiffs can recover treble damages, the defendant company’s profits, and n some cases attorney fees 

o   Come about through a consent decree

§  Constant decree

-  Negotiated settlement between the FTC and the advertiser 

o   Has authority over some forms of advertising

§  Ex: the FDA has control over direct advertising to the public of prescription of medications such as antidepressants 

o   Most states have limitations on the types of ads professionals (such as doctors, lawyers, dentists, and accountants) can use in reaching the public

o   US supreme court held bans too restrictive and violative of first amendment protections on commercial speech 

o   Given in every sale of goods by merchant seller, warranty is given only by merchant sellers 

o   Warranty requires that goods sold by a merchant “are fit for the ordinary purposed for which goods of that description are used”

§  Basketballs must bounce, book bindings much hold together

o   Merchant

§  Sellers who are engaged in the business of selling the goods that are the subject matter of the contract 

o   “food warranty”

§  warranty that provides a remedy when we find odd items in our purchased or restaurant food 

-implied warranty of merchantability

o   Mitchell v. TGI Fridays

-implied warranty of merchantability

§  Sandra Mitchell bit into a clam shell and sued TGI Fridays, ruling was not in her favor

o   Arises when a seller promises a buyer that the goods will be suitable for a use the buyer has proposed

§  Ex: owner of a nursery makes an implied warranty for a particular purpose when telling a buyer that a weed killer will work in the buyers rose garden without harming the roses 

Requirements for Implied warranty of fitness for a particular purpose

§  The seller has skill or judgment in use of the goods

§  The buyer is relying on that skill or judgment

§  The seller knew or had reason to know of the buyer’s reliance

§  The seller makes a recommendation for the buyer’s use and purpose 

o   Warranties can be eliminated by the use of disclaimers

§  Table 9.2 pg . 209

o   Record

§  New to the Received UCC and expands the definition of writing to include electronic communications such as e-mails and faxes 

o   Strict liability in tort and liability based on negligence for defective products

o   Strict liability in tort was created and defined by section 402A of the Restatement (second) of torts

Strict tort liability: Product liability Under Section 402A 

·      Special liability of seller for of product for physical harm to use or consumer 

o   BE ABLE TO RECITE (PG. 210)

o   A seller is not liable for a product that has been modified or changed. Once a product is modified or changed, we can’t be sure whether the original product of the modifications caused the unreasonably dangerous condition

§  design defects

§  dangers of use due to lack of warnings or unclear use instructions

§  errors in manufacturing, handling, or packaging of the product 

§  slightly broader under section 402A than the UCC meaning of merchant

-  ex: baseball club is not a merchant of beer, but if the club sells beer at its games, it is  a seller for purposes of section 402A

§  Section 402A covers manufacturers, wholesalers, retailers, food sellers, and those who sell products out of their homes

.  Privity issues in tort theories of product liability·     

-Privity

o   Direct contract relationship between parties

§  Ex: someone injured in a plane crash from a defective bolt , privity of contract between the bolt manufacturer and the plane manufacturer

o   Standard for liability of manufacturer or seller in tot is the forseeability of their product use 

·      Elements for establishing a negligence case for product liability

o   Same as those for a section 402A case with one addition: establishing that the product seller or manufacturer either knew of the defect before the product was sold or allowed sales to continue with the knowledge that the product had a defect

o   REVIEW TABLES 9.3 & 9.4 PG. 213

·      3 defenses available to defendant in a product liability tort

o   misuse or abnormal use of a product

§  Design failure on frontloader truck

-  some states have adopted comparative negligence

·      defendant 60% at fault plaintiff 40% at fault, plaintiff recovers but the amount of the recovery is reduced by 40%

§  if a car manufacturer recalled your car for repair and you failed to have the repair done, you have assumed the risk of driving with that problem 

Federal Standards for Product Liability

·      Consumer Product Safety Commission (CPSC)

o   Regulatory agency set up under the consumer product safety act to regulate safety standards for consumer products