McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

8-2

8-3 Learning Objectives  Define White Collar Crime  Discuss the initiation of a criminal case  Identify the constitutional protections offered a criminal defendant  Define the constitutional protections offered to companies  Identify the types of white collar crimes associated with business  Discuss sentencing guidelines as they relate to white collar crimes  Discuss the Sarbanes Oxley Act’s impact on investor confidence  Determine ethical considerations regarding business crimes

8-4 White Collar Crimes  Illegal acts that use deceit or concealment  Crimes against the public  No threat of physical force or violence  Committed to obtain money, property, service, or to avoid payment or loss of money  Criminals occupy positions of power and responsibility in companies, organizations, or government

8-5 White Collar Crimes Prosecuted by the U.S Government  Financial Institution Fraud  Economic Crimes  Public Corruption  Health Care Fraud  Fraud against the Government

8-6 Criminal Procedure for Defendants Reasonable, particularized basis for suspecting one has committed a crime Probable Cause Issued by a judge calling for the arrest of an individual Arrest Warrant Physical restraint by law enforcement Custody Panel selected to hear evidence by prosecution to determine whether there is sufficient evidence to indict Grand Jury Gives right to police to arrest suspect Indictment

8-7 Constitutional Protections  Fourth Amendment  Fifth Amendment  Sixth Amendment  Eighth Amendment

8-8 Corporate Criminal Liability  Corporations criminally liable for acts performed by officers, directors, employees  Employees who perform those acts can be criminally liable  Business Constitutional Rights  Corporations have mostly same constitutional rights as individuals.  Fourth and Sixth Amendments apply  Fifth and Eighth Amendments do not apply

8-9 Types of White Collar Crimes Securities FraudInsider TradingMail FraudMisappropriationConspiracyBid RiggingAntitrust CrimesPrice FixingObstruction of Justice

8-10 Antitrust Crimes  Antitrust crimes involve unfair marketing techniques and conduct designed to eliminate competition through unfair means.  Antitrust statutes that regulate trade practices:  The Sherman Act  The Clayton Act  The Robinson-Patman Act  The Federal Trade Commission Act

8-11 Environmental Crimes  Air pollution  Illegal dumping  Toxic waste on land and in water  Federal Environmental Protection Statutes  Environmental Protection Act  Clean Air Act  Clean Water Act  Recourse Conservation and Recovery Act

8-12 Organized Crime  RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT (RICO)  Requires a pattern of predicate acts in furtherance of an illegal activity  Example: A broker engaging in a pattern of activity involving the illegal sale of stocks over a 5-year period of time can be charged with the underlying crimes and a RICO charge

8-13 Computer Crimes  Internet Fraud  Identity Theft  Cyberterrorism  Hacking

8-14 Defenses  Constitutional Defenses  Violation of any constitutionally protected rights  Substantive Defenses  Corporate Immunity  Defenses available to corporate officers:  Insanity  Self-Defense

8-15 Sentencing Guidelines  Uniformity in Sentencing  Violation of any constitutionally protected rights  Guidelines:  Offense level  Severity of crime  Specific offense characteristics  Sentences can include fines, imprisonment, injunction

8-16 Sarbanes-Oxley Act  Reformed corporate culture after the 2002 Enron scandal  Gave SEC more control over ethics and accountability rules on corporations  Increased criminal penalties for violations under the Act  Public Company Accounting Oversight Board (PCAOB)  Designed to oversee the auditors of public companies