What is a business crime? The following is a summary of business crimes:
- Bank Fraud: involves engaging in an act or pattern of activity where the purpose is to defraud a bank of funds.
- Blackmail involves a demand for money or other consideration under threat to do bodily harm, to injure property, to accuse of a crime, or to expose secrets.
- Bribery: When money, goods, services, information or anything else of value is offered with intent to influence the actions, opinions, or decisions of the taker. You may be charged with bribery whether you offer the bribe or accept it.
- Computer fraudoccurs when computer hackers steal information sources contained on computers such as: bank information, credit cards, and proprietary information.
- Counterfeitingoccurs when someone copies or imitates an item without having been authorized to do so and passes the copy off for the genuine or original item. Counterfeiting is most often associated with money however can also be associated with designer clothing, handbags and watches.
- Credit Card Fraud is the unauthorized use of a credit card to obtain goods of value.
- Embezzlement occurs when a person who has been entrusted with money or property appropriates it for his or her own use and benefit.
- Extortionoccurs when one person illegally obtains property from another by actual or threatened force, fear, or violence, or under cover of official right.
- Forgery occurs when a person passes a false or worthless instrument such as a check or counterfeit security with the intent to defraud or injure the recipient.
- Health Care Fraud occurs when an unlicensed health care provider provides services under the guise of being licensed and obtains monetary benefit for the service.
- Insider Tradingoccurs when a person uses inside, confidential, or advance information to trade in shares of publicly held corporations.
- Insurance Fraudinvolves engaging in an act or pattern of activity wherein one obtains proceeds from an insurance company through deception.
- Investment Schemesoccurs when an unsuspecting victim is contacted by a person who promises to provide a large return on a small investment.
- A Kickbackoccurs when a person who sells an item pays back a portion of the purchase price to the buyer.
- Larceny/Theft: When a person wrongfully takes another person’s money or property with the intent to appropriate, convert or steal it.
- Money Launderingis the investment or transfer of money from racketeering, drug transactions or other embezzlement schemes so that it appears that its original source either cannot be traced or is legitimate.
- Racketeering is the operation of an illegal business for personal profit.
- Securities Fraud is the act of artificially inflating the price of stocks by brokers so that buyers can purchase a stock on the rise.
- Tax Evasionoccurs when a person commits fraud in filing or paying taxes.
- Telemarketing Fraud occurs when a person operate out of boiler rooms and place telephone calls to residences and corporations where the person requests a donation to an alleged charitable organization or where the person requests money up front or a credit card number up front, and does not use the donation for the stated purpose.
- Welfare Fraud is to engage in an act or acts where the purpose is to obtain benefits (i.e. Public Assistance, Food Stamps, or Medicaid) from the State or Federal Government.
- Advanced Fee Schemes occur when a person induces a victim to give him some type of advanced fee in return for a future benefit. The future benefit never occurs and the victim never receives the advanced fee back.
- Check Kiting: abank account is opened with good funds and a rapport is developed with the bank. Actor then deposits a series of bad checks but prior to their discovery, withdraws funds from the bank.
- Coupon Redemption: Grocery stores amass large amounts of coupons and redeem them to manufacturers when in fact merchandise was never sold.
- Directory Advertising: Actor either impersonates sales person from a directory company like the yellow pages or fraudulently sells advertising which the victim never receives.
- Fortune Telling: Actor advises victim that victim is cursed. Actor advises victim that the curse must be removed. Actor advises that she must meditate to the spirits and will require payment. Over a period of time, victim pays fortune teller thousands of dollars to remove curse.
- Gypsies: Actor states that victim’s money is cursed. In order to remove the curse, the money must be placed into a bag or box that the actor provides. The bag or box is switched. Actor advises victim to perform certain rituals over the money and the curse will be removed. The bag or box cannot be opened for a period of time when it is opened, the money is gone.
- Home Improvement: Actor approaches a home owner with a very low estimate for a repair or improvement. Inferior or incomplete work is performed. Once the repairs are completed, actor intimidates the victim to pay a price much greater than the original estimate.
- Inferior Equipment: Actors travel around selling inferior equipment such as tools at high prices.
- Jamaican Switch: Actor #1 approaches a victim looking for the address of a prostitute. Actor #1 shows a large sum of money to the victim. Actor #2 arrives and tells Actor #1 where he can find the prostitute but cautions on taking all the money as the prostitute might rob him. Actor #1 asks the victim to hold the money for him. Actor #1 puts his money into a handkerchief with the victim’s money. Actor #1 shows the victim how to hide the money under his arm, inside his shirt while switching handkerchiefs. Victim takes the handkerchief and the parties split up, however, Actor #1 leaves with victim’s money.
- Land Fraud: Actor induces victim to purchase tracks of land in some type of retirement development which does not exist.
- Odometer Fraud: Unscrupulous used car salesman purchased used cars and turn back the odometers. The used car is sold at a higher price due to its low mileage.
- Pigeon Drop: Actor #1 befriends the victim. Actor #2 shows both Actor #1 and victim a “found” package containing a large amount of cash. Actor #1 insists that the found money be divided equally but only after each person puts up his own money to demonstrate good faith. All the money is put in one package and the package is later switched.
- Police Impersonation: Actor tells victim that his bank is being operated by fraudulent bank officers. Actor instructs victim to take money out of bank and place it into a good bank. After the money is withdrawn, the actor allegedly takes the money to the police station for safe keeping. The victim never sees the money again.
- Ponzi:An investment scheme where the actor solicits investors in a business venture, promising extremely high financial returns or dividends in a very short period of time. The actor never invests the money, however, does pay dividends. The dividends consist of the newest investors funds. The first investors, pleased to receive dividends, encourage new investors to invest. This scheme falls apart when the actor no longer has sufficient new investors to distribute dividends to the old investors or the actor simply takes all the funds and leaves the area.
- Pyramid: An investment fraud in which an individual is offered a distributorship or franchise to market a particular product. The promoter of the pyramid represents that although marketing of the product will result in profits, larger profits will be earned by the sale of franchises. For example, if a franchise price is $10,000.00, the seller receives $3,500.00 for every franchise sold. Each new franchise purchaser is presented with the same proposal so that each franchise owner is attempting to sell franchises. Once the supply of potential investors is exhausted, the pyramid collapses. Many times, there are no products involved in the franchise, simply just the exchange of money.
- Quick Change: Victim is confused by actor’s speedy series of money exchanges and in the end, is short changed.
- Shell Game: Actor #1 manipulates a pea beneath three walnut shells or bottle caps. Actor #1 moves the caps around and shows victim the cap with the pea under it. With the encouragement of another player, also Actor #2, victim places larger and larger bets as to which cap contains the pea. The game is ended by Actor #1 when the take is large enough.
- Utilities Impersonators: Actor impersonates utilities employees by wearing jumpsuits with name tags. Actor approaches victim with story about a gas leak or electrical surge to gain entry to the home. Valuables are taken by actor.
- VCR Scam: Actor purports to sell new VCR’s or televisions at an extremely low cost due to his connections. Victim pays for the VCR or television only to discover that the box has been filled with rocks.
- West African Investment Scams Actors target businesses and obtain business’ bank account information from which all funds are later withdrawn.
Who is Liable for Business Crime? Corporations were not initially held criminally responsible for corporate activities. A corporation was considered to be a legally fictitious entity, incapable of forming the Intent necessary to commit a criminal act. The Supreme Court ultimately rejected this notion in 1909 in New York Central & Hudson River Railroad v. U.S., 29 S. Ct. 304 (1909). In this case, a railroad company employee paid rebates to shippers in violation of federal law. The court upheld the corporation’s criminal conviction, finding no reason that corporations could not be held responsible for and charged with the knowledge and purposes of their agents, acting within the authority conferred upon them. The Supreme Court concluded that criminal liability could be imputed to the corporation based on the benefit it received as a result of the criminal acts of its agents. A corporation may be convicted for its agent’s unlawful acts when the agent acted within the scope of his or her actual or apparent authority.
Another theory of corporate criminal liability is the collective knowledge doctrine. As knowledge of criminal activity is often the scienter[1] element of a particular crime, the requisite knowledge can be imputed to the corporation based on the collective knowledge[2] of the directors and officers.
It is now well settled that corporate directors, officers, and employees can be held criminally liable for any criminal acts that they personally commit regardless of whether they were acting in furtherance of the corporation’s interests. A corporate director, officer, or agent must answer for any personal wrongdoing and cannot be shielded by the corporate entity. An officer and a director can also be held criminally responsible for criminal acts committed by their agents under the respondeat superior tort theory mentioned above. Directors, officers, and employees may also be criminally responsible for any crime that they aid and abet.
Directors and officers may also be subject to criminal liability for any crime under the theory that they failed to prevent the crime by neglecting to control the misconduct of those subject to their control. Under this theory of liability, a person is criminally liable based on his responsible relation to the criminal violation regardless of whether he has any knowledge of the criminal activity.
United States v. Park, 421 U.S. 658 (1975), John R. Park was president of Acme Markets, Inc., a national food chain headquartered in Philadelphia with 36,000 employees and 16 warehouses. In 1970, the FDA found problems with rodent infestation at Acme’s Philadelphia warehouse facility. In 1971, the FDA found the same conditions in Acme’s Baltimore warehouse. In 1972, the FDA’s chief of compliance wrote to Park and asked that he direct his attention to the prolonged problems of warehouse infestation. The FDA inspected the Baltimore warehouse two months after Park was sent the letter and found the same problems. Acme and Park were both charged with violations of the Pure Food and Drug Act. Park was convicted and fined $500. The Court of Appeals reversed. The issue on appeal was whether or not Park liable for the warehouse problems when subordinates had been ordered to remedy the situation. The U.S. Supreme said yes. He was aware of the deficiencies in his subordinates’ system and still took no action.
The most frightening part of being a defendant in a white collar criminal case – or any criminal case – is the potential penalties if convicted. Most white collar defendants have no prior experience with the criminal justice system, and the uncertainty of their future looms understandably large in their minds. In addition to criminal penalties, many white collar offenses may give rise to civil lawsuits, brought either by the federal or state government, or by the victims of the offense. Any civil liability imposed as a result of these suits is in addition to, and not a substitute for, the penalties imposed in the criminal case.
The criminal penalties for white collar crimes vary. Most of the laws authorize a monetary fine, a prison sentence or a combination of the two. The criminal laws authorize maximum penalties, which are often quite severe. Most defendants, however, receive less than the maximum sentence. Courts often follow sentencing guidelines, which may vary depending on the jurisdiction. These guidelines are meant to ensure that criminal sentences are uniform, so the sentencing judge is often given very little discretion on the sentence imposed. The guidelines take into account the crime for which the defendant has been convicted, and any prior criminal record of the defendant. In some cases, the court may consider factors that will allow it to depart, or impose a sentence different from the sentence required by the guidelines.
Defendants without a significant criminal record may be sentenced to probation, a suspended jail sentence or a jail sentence far shorter than the maximum. They may have fines levied against them, and may be required to forfeit any profits or pay restitution to their victims.
Computer crime has been referred to as cyber crime, e-crime, electronic crime, or hi-tech crime. It is an act performed by a knowledgeable computer user, sometimes referred to as a hacker that illegally browses or steals a company’s or individual’s private information. In some cases, this person or group of individuals may be malicious and destroy or otherwise corrupt the computer or data files.
Below is a listing of the different types of computer crimes today.
- Child pornography– Making or distributing child pornography.
- Cyber terrorism– Hacking, threats, and blackmailing towards a business or person.
- Cyberbully or Cyberstalking– Harassing others online.
- Creating Malware– Writing, creating, or distributing malware (e.g. viruses and spyware.)
- Denial of Service attack– Overloading a system with so many requests it cannot serve normal requests.
- Fraud– Manipulating data, e.g. changing banking records to transfer money to an account.
- Harvesting– Collect account or other account related information on other people.
- Identity theft– Pretending to be someone you are not.
- Intellectual property theft– Stealing another persons or companies intellectual property.
- Phishing– Deceiving individuals to gain private or personal information about that person.
- Salami slicing– Stealing tiny amounts of money from each transaction.
- Spamming– Distributed unsolicited e-mail to dozens or hundreds of different addresses.
- Spoofing– Deceiving a system into thinking you are someone you really are not.
- Unauthorized access– Gaining access to systems you have no permission to access.
- Wiretapping– Connecting a device to a phone line to listen to conversations.
Economic Espionage
In general terms, economic espionage is the unlawful or clandestine targeting or acquisition of sensitive financial, trade or economic policy information; proprietary economic information; or technological information.
The Economic Espionage Act of 1996 (EEA), 18 U.S.C. §§ 1831-1839, defines the term economic espionage as the theft or misappropriation of a trade secret with the intent or knowledge that the offense will benefit any foreign government, foreign instrumentality, or foreign agent. The act of receiving, purchasing, or possessing a trade secret known to have been stolen or misappropriated, as well as any attempt or conspiracy to commit economic espionage are punishable as a federal crime under the EEA.
The Electronic Fund Transfer Act (EFTA) is a federal law enacted in 1978 to protect consumers when they use electronic means to manage their finances. Electronic fund transfers (EFT) are commonly used and initiated through electronic technology, replacing the use checks, deposit slips and other paper transactions. This law was passed in 1978 as a result of the growth of electronic ATM machines and electronic banking. The use of paper checks has steadily declined since then, but the check served as hard evidence of payment. The explosion of electronic financial transactions created a need for new rules that would give consumers the same level of confidence that they had in the checking system. This includes the ability to challenge errors and correct them within a 60-day window, and to limit liability on a lost card to $50 if the card is reported as lost within two business days.
The Digital Millennium Copyright Act (DMCA) was signed into law by President Clinton on October 28, 1998. The legislation implements two 1996 World Intellectual Property Organization (WIPO) treaties: the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty. The DMCA also addresses a number of other significant copyright-related issues. The DMCA is divided into five titles:
- Title I, the WIPO Copyright and Performances and Phonograms Treaties Implementation Act of 1998, implements the WIPO treaties.
- Title II, the Online Copyright Infringement Liability Limitation Act, creates limitations on the liability of online service providers for copyright infringement when engaging in certain types of activities.
- Title III, the Computer Maintenance Competition Assurance Act, creates an exemption for making a copy of a computer program by activating a computer for purposes of maintenance or repair.
- Title IV contains six miscellaneous provisions, relating to the functions of the Copyright Office, distance education, the exceptions in the Copyright Act for libraries and for making ephemeral recordings, “webcasting” of sound recordings on the Internet, and the applicability of collective bargaining agreement obligations in the case of transfers of rights in motion pictures.
- Title V, the Vessel Hull Design Protection Act, creates a new form of protection for the design of vessel hulls.
[1] Intent or knowledge of wrongdoing.
[2] This doctrine aids the prosecution by imputing the knowledge of all employees to the corporation.
