1. Chapter 07 Crime and the Business Community

2. Elements of a Crime “Actus Reus”—Wrongful behavior (guilty act) “Actus Reus”—Wrongful behavior (guilty act) “Mens Rea”—Wrongful state of mind, such as purpose, knowledge, recklessness, or negligence (guilty mind) “Mens Rea”—Wrongful state of mind, such as purpose, knowledge, recklessness, or negligence (guilty mind) 7-2

3. Classification of Crimes Felonies—Serious crimes punishable by imprisonment for greater than one year, or death Felonies—Serious crimes punishable by imprisonment for greater than one year, or death Misdemeanors—Less serious crimes punishable by fines, or imprisonment for less than one year Misdemeanors—Less serious crimes punishable by fines, or imprisonment for less than one year Petty Offenses—Minor misdemeanors punishable by small fines or short jail sentences Petty Offenses—Minor misdemeanors punishable by small fines or short jail sentences 7-3

4. Crimes Affecting Business: Property Crimes Robbery Robbery Burglary Burglary Larceny Larceny Arson Arson 7-4

5. Crimes Affecting Business: “White Collar” Crimes Bribery Bribery Extortion Extortion Fraud Fraud Embezzlement Embezzlement Computer Crimes Computer Crimes 7-5

6. Exhibit 7-1: Selected Types of Fraudulent Crimes Forgery Forgery Defalcation Defalcation False Entries False Entries False Token False Token False Pretenses False Pretenses Fraudulent Concealment Fraudulent Concealment Mail Fraud Health Care Fraud Telemarketing Fraud “Ponzi Schemes” Check “Kiting” “Pretexting” Mortgage and Real Estate Fraud 7-6

7. Defenses to Crimes Infancy Infancy Mistake Mistake Intoxication Intoxication Insanity Insanity Duress Duress Entrapment Necessity Justifiable Use of Force 7-7

8. Constitutional Safeguards: The Fourth Amendment Protection from “unreasonable search and seizure” Protection from “unreasonable search and seizure” Restrictions on warrants Restrictions on warrants 7-8

9. Constitutional Safeguards: The Fifth Amendment Prohibition of “double jeopardy” Prohibition of “double jeopardy” Right not to incriminate oneself Right not to incriminate oneself Right to “due process” Right to “due process” 7-9

10. Constitutional Safeguards: The Sixth Amendment Right to a speedy and public trial Right to a speedy and public trial Right to a trial by an impartial jury Right to a trial by an impartial jury Right to be informed of the accusations against oneself Right to be informed of the accusations against oneself Right to confront witnesses Right to confront witnesses Right to have witnesses on one’s side Right to have witnesses on one’s side Right to counsel at various stages of the proceedings Right to counsel at various stages of the proceedings 7-10

11. Constitutional Safeguards: The Eighth Amendment Freedom from excessive bail Freedom from excessive bail Freedom from excessive fines Freedom from excessive fines Freedom from cruel and unusual punishment Freedom from cruel and unusual punishment 7-11

12. Constitutional Safeguards: The Fourteenth Amendment Extension of the right to due process to all state matters Extension of the right to due process to all state matters Extension of most constitutional rights to defendants at the state level Extension of most constitutional rights to defendants at the state level 7-12

13. Exclusionary Rule (Definition): All evidence obtained in violation of the Fourth, Fifth and Sixth Amendments is not admissible in court 7-13

14. Criminal Procedure: Pretrial Procedure Arrest Arrest Booking Booking First Appearance First Appearance Indictment Indictment Arraignment Arraignment 7-14

15. “Miranda Rights”--Before a law enforcement officer engages in “custodial interrogation,” he must inform the defendant of the following: “You have the right to remain silent and refuse to answer any questions” “You have the right to remain silent and refuse to answer any questions” “Anything you say may be used against you in a court of law” “Anything you say may be used against you in a court of law” “You have the right to consult an attorney before speaking to the police and have an attorney present during any questioning now or in the future” “You have the right to consult an attorney before speaking to the police and have an attorney present during any questioning now or in the future” “If you cannot afford an attorney, one will be appointed for you before the questioning begins” “If you cannot afford an attorney, one will be appointed for you before the questioning begins” “If you do not have an attorney available, you have the right to remain silent until you have had an opportunity to consult with one” “If you do not have an attorney available, you have the right to remain silent until you have had an opportunity to consult with one” “Now that I have advised you of your rights, are you willing to answer any questions without an attorney present?” “Now that I have advised you of your rights, are you willing to answer any questions without an attorney present?” 7-15

16. Criminal Procedure: Trial Procedure Jury Selection Jury Selection Trial (with burden of proof on prosecution) Trial (with burden of proof on prosecution) Jury Deliberations Jury Deliberations Jury Verdict Jury Verdict Sentencing Hearing (if Defendant found guilty) Sentencing Hearing (if Defendant found guilty) 7-16

17. The Racketeer Influenced and Corrupt Organizations Act (RICO) Prohibits persons employed by or associated with an enterprise from engaging in a pattern of racketeering activity Prohibits persons employed by or associated with an enterprise from engaging in a pattern of racketeering activity Anyone whose business or property has been damaged can sue to recover treble damages and attorney fees in a civil action Anyone whose business or property has been damaged can sue to recover treble damages and attorney fees in a civil action 7-17

18. The False Claims Act Allows employees to sue employers on behalf of the federal government Allows employees to sue employers on behalf of the federal government Employee retains share of recovery Employee retains share of recovery 7-18

19. The Sarbanes-Oxley Act Passed by Congress in response to the business scandals of the early 2000s (Examples: Enron, WorldCom, Global Crossing, Arthur Anderson) Passed by Congress in response to the business scandals of the early 2000s (Examples: Enron, WorldCom, Global Crossing, Arthur Anderson) Criminalizes specific non-audit services when provided by a registered accounting firm to an audit client Criminalizes specific non-audit services when provided by a registered accounting firm to an audit client Increases the punishment for a number of white-collar offenses Increases the punishment for a number of white-collar offenses Extends the statute of limitations regarding the discovery of fraud (two years from the date of discovery of the fraud, five years from the date of the criminal act) Extends the statute of limitations regarding the discovery of fraud (two years from the date of discovery of the fraud, five years from the date of the criminal act) 7-19