White Collar Crime - Prof.

Moohr

Tracey McCormick - Fall 2001

Four part analysis of WCC cases:

1. What is the lie?
2. Who is the liar(s)?
3. Who did they lie to/who was hurt?
4. What was stolen/what were the damages?
White collar crime similarities:
lack of physical harm, lack of force
use of trust and deceit fraud requires a lie
pecuniary
often done in the course of business or occupation
often involves a technical skill
often involves a breach of fiduciary duty
victims not always sympathetic
crimes are planned/calculated, so youd think they could be deterred
Federal Jurisdiction
Federal criminal code has no general theft or fraud statutes
o A theft must be charged as extortion, mail fraud, etc.
Must include a jurisdictional hook to make something a federal offense
3 types of federal criminal statutes
o an act that involves an instrumentality of interstate commerce
o an act that is in an interstate commerce channel
o laws that affect interstate commerce
I. TRADITIONAL WHITE COLLAR CRIMES
A. Mail & Wire Fraud 18 USC 1341, 1343, 1346
Fraud obtaining money or property through a trick, deceit or misrepresentation
Criminal Fraud:
o Must be an affirmative misrepresentation
o Need no actual damages
Civil Fraud Elements:
o Misrepresentation of material fact
1. Can be a half-truth, or
2. an omission, IF: it creates an impression, or there is a fiduciary relationship
o Intent can be reckless intent
o Requires actual damages & reliance by the victim
Mail Fraud Act 1341 passed in 1872
The oldest post Civil War - part of Post Office reform
Congress has no power to simply prohibit fraud, so
o used power to have a post office & the necessary and proper clause to protect mails
Wire Fraud Act 1342 passed in 1952
Interpreted the same as Mail Fraud Act 1341
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must have used a connection that crossed a state line

Courts have said this covers telephone, fax, Internet (on phone lines)
Honest Services Fraud 1346 passed in
Extends what may be defrauded not just property
Includes depriving another of the intangible right of honest services
Can only be found where there is a fiduciary duty
Elements of Mail & Wire Fraud
Use of the mail (or a private carrier)
A scheme to defraud, or engaging in false pretenses
o Defraud is depriving another of property (includes the right to honest services)
Intent
Mailing or wire
o Mailing is just a jurisdictional hook to create a federal offense
o Knowing requirement - need only be reasonable foreseeable
o need not intend that anyone mail the letter
o Mailing for the purpose of executing scheme
o Can occur after has the money
o Cover-up is part of overall scheme to defraud
o Mailing need not be fraudulent
o Mailing need only be incidental to an essential part of the scheme
o need not mail the letter - could be by a subordinate or even a 3rd party
o Some case law legally required mailings not included
o This was diluted must be innocent have no deceitful statements.
Scheme to defraud the actus reus
o Deception or planned deception - 3 ways to deceive
statement (affirmative)
conduct (affirmative)
failure to disclose w/1346 violation only when a fiduciary duty
5th Circuit in Brumley says must look to state law to see if honest
services were owed
other circuits, state law can establish a duty, but duty may still be
established without state law
o Deception must be about a material fact induced victim to make decision
o To obtain $ or property (courts split over whether intangible = property)
o 1346 defines the intangible right of honest services as property
Intent criminal = specific intent to defraud
o Acting with purpose to deprive someone of money or property
even if the fraud has been completed (covering up can be part of scheme)
Inchoate - prosecution does not have to prove the fraud occurred, only intent
o High standard from 2nd Circuit 11th says only general intent to deceive needed
o Jury can infer specific intent from the circumstances
- Pereira held that mailing need not be an essential part of the scheme need only be incidental to
an essential part of the scheme
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Guy marries widow, says he is an investor in oil, hotels - takes off with her $ and Cadillac
Mailing - Wifes check was mailed from the presenting bank to the paying bank
o Mailing check was incidental to collecting money (the essential part of scheme)
o Intent to mail satisfied by reasonable foreseeability that bank would mail check
- Sampson held that mailing can occur after crime has reached fruition cover-up is part of the
overall scheme to defraud
Corporation, its officers & employees took fees to secure loans they never intended to get
Mailing after getting fees, s mailed letters to victims assuring they would get loans
Before Sampson, Kann and Parr held the mailing had to occur before fruition
- Schmuck affirmed Pereira & Sampson mailing can be incidental to an essential part of
scheme, can occur after crime has reached fruition also, mailing need not be deceptive
Guy rolled back odometers, sold used cars to dealers, who sold to retail customer victims
Mailing after cars were sold, dealers mailed title applications to DOT
Court ongoing & continuous scheme could not have continued w/out mailing
- Brown held reliance is not an element of criminal fraud no scheme to defraud if the
representation is about something the customer could easily confirm
Florida developer used false appraisals to sell 2nd homes to snowbelt buyers for high prices
Court puffery is not fraud reasonable buyers would have checked the value
Other circuits disagree with Brown criminal liability should turn on scheme, not victims
Moohr - false financing documents (the appraisals) are probably more than puffery
- Emery Posner holds that an omission or half-truth is actionable as fraud - also differs from
Brown because he thinks there is a higher duty to gullible victims
Emery sues finance co. for RICO damages predicate crime is mail fraud
Mailing Finance co. sends borrower offer for loan, but intends to flip original loan
Remanded to determine finance co.s intent (s employees state of mind)
- DAmato 2nd Circuit held intent to deceive is not enough must have specific intent to defraud,
which is specific intent to cause a result
Unisys hired senators brother to get senators ear, but paid him for reports
DAmato not guilty of fraud b/c no specific intent to harm Unisys
o Evidence is that he did exactly what they wanted him to do
Lie is the deceit (general intent), causing harm is the defraud (need specific intent)
Inchoate, so govt need not show actual harm, only intent
o But actual harm is evidence of intent
11th Circuit uses lower (general intent) standard equates deceit with the defraud
Moohr 2nd Circuit uses correct standard
- George 1973 held that a party can be defrauded of the right to honest services when there is a
fiduciary relationship
Zenith buyer Yonan took kickbacks from supplier that would have gotten contract anyway
First, Yonan held himself out to be a loyal employee, but did not give his honest services
Second, Yonan did not disclose that supplier would have taken less profit (kickback $)
- McNally 1987 held mail fraud does not cover losses of intangible rights, such as the right to
honest and faithful services
Public officials took kickbacks for insurance contracts
There was no property loss, because govt would have paid anyone the same $
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1346 now covers honest services, but courts are split on other intangibles
- Brumley 5th Circuit held that 1346 services must be services owed under state law, AND that
the govt must prove in a federal prosecution that the services were in fact not delivered
Associate Director of Texas WCC borrowed $ from attorneys who appeared before him
o Brumley did not give those attorneys more $, but did give them favoritism
argued that McNally limited mail fraud to tangible property
o Court 1346 overturned McNally with respect to the right to honest services
argued that 1346 another (victim) should be defined by whoever (criminal), and
since whoever has been held to not include the govt, a state can never be a victim
o Court - it does not make sense to define the victims by the definition of the perpetrator

B. Conspiracy 18 USC 371

2 Kinds of Conspiracy:
1. To commit a crime against the United States (federal crime)
2. To defraud the United States (or any agency of the U.S.)
Conspiracy Elements:

Agreement between 2 or more persons to commit a wrongful (civil) or illegal

(criminal) act
Agreement may be tacit
Mental actus reus may be difficult to prove courts have allowed juries to infer agreement
371 target offense = offense against the United States , or defraud of the United States
o Offense need not be a crime can be violation of executive order or act of Congress
o Defraud need not be a crime can be a lie that results in obstructing a govt function

Intent to commit the wrongful or illegal act (target offense)

Intent is that of the target offense
Knowledge may be inferred when acts in furtherance of the conspiracy

One overt act committed by one co-conspirator is in furtherance of the conspiracy

Some federal crimes (Hobbs, RICO) conspiracy provisions that dont require overt act

Conspiracy is valuable prosecutor tool because once conspiracy is proven, the FRE allow
co-conspirator statements that would otherwise be hearsay to prove other crimes
- Brown If acts in furtherance of the conspiracy, a jury may infer knowledge
Attorney helped clients hide assets from bankruptcy court: drafted quitclaim deed, burned files
Offense against the United States is defrauding the bankruptcy court
need not have knowledge of all the details of the conspiracy
- Morrow held that a must have knowledge of the conspiracys multiplicity of objectives before
he can be convicted of a multiple-crime conspiracy
Group of guys traded cars, made documents to show false prices & accidents for insurance $
If a agrees with others to commit a single crime, but has no knowledge of the conspiracys
broader scope, that is a member only of the narrower, one-crime conspiracy
Although no single conspiracy included both M & N, each was guilty of separate conspiracy

White Collar Crime - Prof. Moohr

Tracey McCormick - Fall 2001

M & N argued it was prejudicial to allow co-conspirator statements against them from
conspiracies they were not involved in Court agreed, but found harmless
- Arch Trading held that offense includes not only crimes, but also violation of executive
orders, and defraud includes a lie that results in obstructing a govt function
Arch violated Bushs executive order prohibiting travel to Iraq and dealing with Iraq govt
o Arch execs went to Iraq to to install virology & bacteriology equipment per contract
o They then lied about dates to make it seem the trip was before the executive order
Arch argued that violation of executive order is not an offense against the United States
Although not a crime, violation of an executive order constitutes a 371 offense
Also, defraud includes a lie that results in obstructing a govt function
II. PUBLIC CORRUPTION

A. Bribery and Gratuity 18 USC 201; Federal Program Bribery 18 USC 666
201 Bribery and Gratuity
Covers only federal officials (or person about to become one) no jurisdictional hook needed
Covers both briber and bribee
Bribe requires quid pro quo - $ in return for an official act
o corruptly gives/receives is high intent - purposeful
Gratuity thank you - $ because of an official act
o Can be given before or after the official act
Official act is defined in (a) as any decision or action on any question, matter, cause, suit,
proceeding or controversy . . . that the public official may decide upon in his official capacity.
Anything of value is more broad than property could be a job or services
- Sun Diamond held that govt must prove a link between a thing of value conferred upon a
federal official and a specific official act for or because of which it was given
Growers cooperative gave U.S. Open tickets & other gifts to Sec. of Agriculture Espy
Indictment did not allege a specific connection between alleged desired acts and gifts
Jury charged that conviction did not require such a connection charged it was sufficient that:
o Sun Diamond provided things of value to Espy because of his position
Court plain language of statute requires the gifts be given for or because of any official act
666 Federal Program Bribery
Enacted in 1984 to fill a gap in the Federal bribery statute (201).
o 201 limited to federal officials
o 666 covers any agent of an agency receiving federal $
Punishes the briber and the bribee inconsistent verdicts are common
Jurisdictional hook - spending power, not commerce clause power
Includes a theft provision
$5,000 minimum bribe
o Anything of value is more broad than property could be a job or services
Value may be subjective or objective statute is unclear
$10,000 federal funding requirement - the agency must receive
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o since most govt gets federal $, this is almost a general bribery statute
What connection must exist between the bribery and the funds?
o 6th Circuit No connection
o Salinas (USSC) - No particular connection
o Zwick (3rd Circuit) Some federal interest
o Direct interest not the standard

- Salinas held that 666 bribe need not affect federal funds, but did not answer whether a
connection is required between the bribe and the federal funds
County jail guard took a pickup truck & 2 watches to let convict have conjugal visits
o Federal funding included a grant to improve jail & daily $ for each federal prisoner
Statute not limited to cases where the bribe has a demonstrated effect on federal funds
o Need not consider whether a connection is required
if so, there was enough connection here (bribe related to prisoner in facilities
paid for in part by federal funds)
- Zwick held that the bribe must have some connection with the federal interest involved (funded)
Town commissioner/gambling addict took $ for granting permits and landscaping contracts
o Federal funds were for soil removal snow erosion
o Zwicks bribes were for things unrelated to the soil removal
666 requires that federal interest is implicated by the corrupt conduct 2 ways to show:
o If the greater part of an agencys budget came from federal funds, OR
o If the offense conduct implicates a particular substantive federal interest

B. Extortion Hobbs Act, 18 USC 1951

Extortion the obtaining of property from another, with his consent, induced by wrongful use of
actual or threatened force, violence, or fear, or under color of official right
Covers only the person who solicits the bribe (bribee, not bribor)
o Anyone, not just federal officials
Fear element can be satisfied by putting the victim in fear of economic loss
o Fear of economic loss is considered from the victims point of view
Proof must establish that the victim reasonably believed that:
The had the power to harm the victim, AND
The would use the power to the victims detriment
Under color of official right campaign contributions
o Govt must show quid pro quo
Payment in exchange for a specific exercise of official power
o Need not show induced the deal
o Must show that had actual, not constructive knowledge of quid pro quo
This can be established by showing mutual understanding of the parties
- Capo held that fear of economic loss requires that the victim feared the would harm the
victims prospects of getting the economic benefit (job, contract, etc.)
Several guys were selling temporary Kodak jobs for $500 - $1000 each

White Collar Crime - Prof. Moohr

Tracey McCormick - Fall 2001

Although s took $ for securing jobs, the victims did not believe that failure to pay
would damage their prospects of getting Kodak jobs through the normal channels
- McCormick held that quid pro quo is necessary to establish extortion of payments under color
of official right in the campaign contribution context
W. Va. Congressman took campaign contributions from foreign doctors
Court of Appeals said payments were not legitimate campaign contributions
o
See 7 part test on page 510
Scalia dissent under color of official right means asking for $ to do what the officials
position already requires
- Evans extortion of payments under color of official right established even if a campaign
contribution when there is a quid pro quo inducement not required, but actual knowledge is
County commissioner took $ from undercover agent for re-zoning (agent solicited the deal)
o

C. Cover-up Crimes

1. Obstruction of Justice 18 USC 1503 & 1512

1503 omnibus clause elements:

Need a proceeding

Corruptly (motivated by an improper purpose)

o has to know about impending proceeding (actual knowledge)
o because he must know his act will have natural and probable effect of obstructing justice

Endeavor to influence (inchoate)

Due administration of justice

- Aguilar
Judge Aguilar denied knowledge of wiretap to investigators
Court finds Aguilar did not know his false statement would be provided to a grand jury
o A false statement to an investigator cannot be said to have the natural and probable
effect of obstructing justice

2. False Statements 18 USC 1001

1001 False Statement elements:

o statement
o false, fictitious or fraudulent
o within jurisdiction of the US
o materiality
o knowing
o willful
Includes all 3 branches of government
Excludes judicial proceedings unless:
o Administrative matters
o Investigation or review
Exculpatory denials of wrongdoing are false statements within 1001
Knowingly mens rea does not apply to the jurisdictional element
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o need not know that his statements are being made to the U.S. Government
- Hubbard A federal court is not a department or agency of the U.S.
Hubbard made false statements in un-sworn bankruptcy proceeding papers
Pre-revision of 1001 limited department or agency of the U.S. to executive only
- Brogan held that 1001 covers false statements that consist of a mere denial of wrongdoing
Union officer lied to federal investigator said he had not received $ from JRD Management
o USSC abolished the exculpatory no doctrine
Brogans false denial of his acts to federal investigator violated 1001
- Yermian held knowledge requirement does not apply to jurisdictional element knowledge of
govt involvement is not required
Guy lied on job application admitted knowledge of lie, but denied actual knowledge that his
statements would be transmitted to a federal agency
III.CIVIL VIOLATIONS AND CRIMINAL OFFENSES

A. RICO 18 USC 1961-68

Overview:
Racketeer Influenced and Corrupt Organizations Act
Congress passed to reach organized crime - has much been used against legitimate businesses
Supreme Court has insisted upon broad interpretation
Both criminal and civil provisions (civil may be brought by U.S. Attorney or private person(s))
Stiff penalties:
o Criminal violation: mandatory forfeiture & possible 20-year imprisonment and fines
o Civil violation: treble damages & attorney fees
4 different offenses:
1962(a) a person may not use or invest income derived from a PRA in an enterprise
1962(b) a person may not acquire or maintain control of any enterprise through a PRA
1962(c) most common offense see elements below
1962(d) a person may not conspire to do any of the acts in 1961(a)-(c)
o Usual conspiracy elements & agreement must be to violate substantive RICO provision
Elements of 1962(c) Person () employed by or associated with
Enterprise
Conducted/participated in conduct of enterprise
Through pattern of racketeering activity *EXAM* always start with the PRA
Enterprise:
2 types of enterprise: 1) legal business entity (will always qualify as an enterprise)
2) association-in-fact (may be legal or illegal)
Turkette factors:
1) There is an ongoing organization, formal or informal
o there must be some sort of structure within the group for making decisions
2) The associates function as a continuing unit
o can be shown by repeated commission of the same type of acts, even if actors change,
AND
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3) Enterprise is an entity separate and apart from the pattern of activity in which it engages
o Enterprise has an existence beyond that necessary merely to commit each predicate act
o Minority of courts enterprise need be no more than the sum of the predicate acts
Arg. against this view: enterprise element would be superfluous
However, same evidence may be used to establish both enterprise and PRA
Enterprise must be distinct from the person named as the RICO
o s involvement in the enterprise does not create an identity with the enterprise
Pattern of Racketeering Activity:
At least 2 listed racketeering acts (though 2 may not be sufficient)
Must occur within 10 years of each other
Racketeering predicates must be related
o same or similar purposes, results, participants, victims or methods, OR
o are otherwise interrelated by distinguishing characteristics, and are not isolated events
Predicates amount to/pose a threat of continued criminal activity
o Continuity requirement may be met in 2 ways:
1)
Closed: during a period of activity, a continuing threat existed

More than a few weeks or months courts say at least a year

2)
Open: activity is presently continuing, or there is a threat of
continuing activity

Threat can be found:

1) by the open-ended nature of the bad acts, or
3) the acts are part of an ongoing enterprises way of doing business
Conduct the Affairs of the Enterprise
Person must participate in the operation or management of the enterprise itself
o Applies to both civil and criminal RICO actions
o Does not exclude lower-level participants or outsiders
- United HealthCare civil RICO case that goes through all the elements
Benton ran UHC premiums through his 3 intermediary companies - $ never got to the final
insurance companies UHC sued for civil RICO Benton claims RICO elements not met
Enterprise was the 3 companies met 3 elements also, Benton was not the enterprise
Benton was associated with the enterprise as consultant or owner to each company
Racketeering activities were mail & wire fraud elements of these were met
PRA the mail & wire fraud was done for the same purpose (to get UHCs $) and used the
same methods. Continuity was shown by the regularity of the activities over a lengthy period
Enterprise cases:
- Console applied Turkette factors to establish the existence of an enterprise
Lawyers & doctors referred accident victims to each other & inflated insurance claims
Proof of an ongoing organization: parties met & Console directed most activities
Associates function as continuing unit: s & employees each performed roles to further fraud
Entity separate from PRA: coordinated multiple predicate acts & provided legit services
Association-in-fact can be composed of legal as well as non-legal entities
- Burdett held that informal enterprise exists if structured and continuous (not ad hoc)
Prof. Miller & friends got Ms. Burdett to invest in limited partnerships that later failed
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Miller plus 3 associates constituted an association-in-fact enterprise

Defense argued enterprise not separate & apart because same individuals involved
o Burdett lost because complaint alleged wrong enterprise (Miller & accounting firm)
PRA cases:
- H.J., Inc. multiple acts cannot be condensed into a single scheme to preclude finding
existence of a PRA proper inquiries are continuity and relationship of acts
Customer class action - NW Bell bribed Minn. Public Utilities Commission to increase rates
Court of Appeals had ruled that NW Bells acts constituted a single fraudulent scheme, and
that a single scheme was insufficient to establish a pattern of racketeering activity
USSC said too narrow RICO must be interpreted broadly
PRA requires continuity plus relationship
- Sawyer held no PRA when RICO predicate acts are part of a single, otherwise lawful transaction
PrimeTime Live broadcast that TV church did not make paid-for prayers
Predicate acts = PrimeTime stole mail, transported computer disks interstate, wire fraud
Court found church did not plead a continuity of racketeering activity, or its threat
- Vild applied relationship factors to find no PRA
Vild contracted with s to exclusively sell their real-estate
o Alleged many predicate acts M&W fraud, extortion, state law violations
Court said s committed 2 types of conduct some acts were directed at Vild, some at others
Relationship element not met because the 2 types of conduct had dissimilar purposes, results,
victims, and methods same participants was held irrelevant
- Uniroyal held lack of multiple victims does not preclude finding of PRA
Saudi distributor MTC paid Uniroyal exec for confidential info & help with several schemes
o Uniroyal paid MTC for non-existent refunds, billboards, bonuses on non-existent sales, etc.
Several schemes here are not a single act: different and distinct injuries even if only 1 victim
Conduct the affairs of the enterprise case:
- Ernst & Young held that to meet the conduct the affairs of the enterprise element, one must
participate in the operation or management of the enterprise itself
Accounting firm E&Y omitted information about co-ops insolvency on condensed financial
statements (full financials did not omit)
E&Y only prepared financial statements based on managements information - did not
participate in the operation or management of the enterprise itself
Civil RICO - 1964
Gives civil plaintiffs a cause of action to recover for damages caused by a RICO injury
1964(c) Elements of Civil RICO
o Any person
o Injured (in business or property physical injuries not included)
o By reason of violating 1962
o May sue for treble damages, costs & attorney fees
4 year statute of limitations
The injury need not be a racketeering injury may be from a predicate act
Criminal conviction of predicate acts not required, but
o will be collateral estoppel in a civil RICO action

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- Sedima held that civil RICO requires neither a previous criminal conviction, nor a racketeering
injury
Imrex was supposed to share deal profits, but understated profits to cheat Sedima
Lower courts said injury must be different from direct injury resulting from predicate acts
o USSC held that damages occurring by reason of a 1962 violation will flow from the
commission of the predicate acts
Lower courts said requirement of RICO violation not met without prior criminal conviction
o USSC said violation does not imply conviction refers to a failure to adhere to the law
USSC said lower courts holdings would handicap potential plaintiffs RICO is broad
Marshall dissent argues against private attorneys general federalism implicated

B. False Claims and Qui Tam Actions 18 USC 287; 31 USC 3729-33
3 kinds of actions:
1) Criminal
2) Civil - Brought by the DOJ
3) Civil - brought by private relator - Qui Tam action
287 False Claims Act

287 False Claims elements:

o Claim
o False, fictitious or fraudulent
o Upon the U.S.
o Knowing (no willful requirement)

1001 False Statement (also used to prosecute false claims) elements:

o Statement (can be an omission if there is a duty to disclose)
o False, fictitious or fraudulent
o Within jurisdiction of the US
o Materiality (statement material if it has a natural tendency or is capable of inducing action)
o Knowing & willful
- Irwin held that: 1) an omission can be a false statement there must be a duty to disclose; and
2) a falsification is material if it has a natural tendency or is capable of inducing action
Grant writer becomes city manager & takes kickbacks on industrial park contracts
o Submitted federal grant applications - omitted the $ he was getting from contractor
wanted jury instruction that a statement is material if it is capable of inducing payment, or of
influencing a determination or decision to be made.
o Court said jury charge substituting action for payment was not in error
Omission = false statement if duty to disclose: govt didnt plead omission so didnt show duty
- Siddiqi we just skimmed the case
Oncologist prosecuted for 287 false claims & Medicare fraud he billed for services
performed while out of the country, but had arranged for another doctor to supervise
3729-33 False Claims & Qui Tam
3729 False claims
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o Presents a false bill to the government

o Knowingly: 1) actual knowledge; 2) willful blindness; or 3) reckless disregard
o Differs from 287 in burden of proof
3729 is preponderance standard
287 is reasonable doubt
o Civil penalty = treble damages plus $5 to $10K fine
3730 Civil actions for violation of 3729
o Brought by attorney general OR a relator (qui tam)
o Purpose of qui tam is to provide incentive for people to come forward with information
o Relator is usually an employee/whistle-blower
(h) gives extra damages if employer retaliates
o Relator brings suit
Stays under seal for 60 days while govt decides whether to join
If govt joins, qui tam plaintiff becomes an adjunct party
Relator still gets 15-20% of judgment (+ costs & attorney fees)
If govt does not join, relator may proceed alone
Relator gets 25-30% of judgment (+ costs & attorney fees)
o If relator planned & initiated the violation, his % of recovery is reduced
If criminal conviction for his role, he is dismissed from action gets nothing
Jurisdictional Bar - (e)
No court will have jurisdiction based upon public disclosure of the info
Reason for bar qui tam goal is to get information no need if already public
o Public Disclosure:
2d Cir John Doe standard is public disclosure even if relator brought info
4th Cir Siller standard is based upon ask if the relators claim is based
upon facts publicly disclosed, or facts brought in by the relator
o Kind of Public Disclosure:
10th Cir - Ramseyer actual public disclosure required (filed away disclosed)
3d Cir - Stinson potential disclosure enough (discovery material = disclosed)
o Original Source Exception:
2d Cir LILCO original source:
1. has direct and independent knowledge of the information on which the
allegations are based
2. has voluntarily provided such information to the govt before filing suit
3. provided information that became the basis of the suit in the public
disclosure
4th Cir more Siller original source:
first 2 requirements only (statutory)
no invented 3d requirement
o Government Employees:
1st Cir Raytheon govt employee may be relator, but not if:
information is discovered in his regular employment
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11th Cir - Williams no bar against govt employee as relator

- Vermont Agency of Natural Resources held that a state cannot be a qui tam states are
sovereign, and may not be sued without their consent
Agency was overstating labor to increase federal grant $ - Employee filed qui tam as relator

IV.

ENVIRONMENTAL CRIMES
4 major federal statutes:
RCRA - Resource Conservation and Recovery Act - 42 USC 6928
o Solid waste disposal
CERCLA - Comprehensive Env. Response, Compensation and Liability Act 42 USC 9603
o Clean-up of abandoned hazardous waste sites
CAA - Clean Air Act 42 USC 7413
CWA - Clean Water Act 33 USC 1319
33 USC 1319(c) provides criminal penalties for violations of other CWA sections
Intent:

Knowingly requires only knowledge of conduct, not knowledge that conduct is illegal
o Mistake of fact (mistaken as to what the conduct actually is) knowing violation
o Mistake of law (mistaken as to whether conduct is illegal) = knowing violation
CWA - 1319(c)(3) - knowing endangerment provision:
o
Requires actual awareness or belief that he is placing another in imminent danger
Jury can infer actual knowledge from circumstantial evidence
Imminent danger = danger that is a highly probable consequence of a discharge
o Risk analysis - balances:
Risk of event happening
Dangerousness of event if it did happen

Individual Criminal Liability:

CERCLA 103 requires a person in charge of a . . . facility to

notify the NRC immediately upon release of a hazardous substance
o
This can be a relatively lower-level employee
o
The facility he is in charge of may be broadly defined
o
Goal to make people in a position to detect, prevent &
abate release of hazardous substances accountable
Responsible Corporate Officer Doctrine
o
3 elements:
1.
Officer of corporation not just an employee
2.
Had direct responsibility to supervise the activities in question
3.
Must have known or believed that the illegal activity of the type alleged
occurred
o
Not appropriate when the mens rea is actual knowledge
Actual knowledge means knowledge of the specific instance of illegal activity
o May only be used in strict liability cases

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- Weitzenhoff held that knowingly requires only knowledge of conduct, not knowledge that
conduct is illegal
Managers at a Honolulu sewage treatment plant pumped sewage into the ocean
- they did not know they were violating the terms of their permit
Court they still knew they were dumping - mistake of law does not negate knowingly
- Ahmad held that mistake of fact is not knowing violation
Convenience store owner pumped 5000 gallons of gas into sewer
Ahmad said he knew it was illegal to dump gas thought he was dumping water
Court mens rea must be applied to every element - mistake of fact is not knowingly
- Villegas knowing endangerment requires actual awareness of imminent danger to another
Guy dumped blood vials in a river
CWA has knowing endangerment provision
o had no actual knowledge that vials would be swept to sea, or people walked on rocks
- Carr held that CERCLA 103 reaches even a person of low rank who was in a position to
detect, prevent, and abate a release of hazardous substances b/c he was in charge of a facility
Foreman had army base workers dump paint cans in a pit knew illegal, he said cover w/dirt
o Defense: Carr was not in charge of a facility under CERCLA 103
Court said paint truck was a facility Carr did not have to be in charge of the army base
- MacDonald held that the Responsible Corporate Officer Doctrine is not appropriate when mens
rea is actual knowledge may only be used in strict liability cases
Waste company was hired by chemical manufacturer to dispose of toluene waste (hazardous)
M&W employees convicted of RCRA violation - knowingly transporting and causing
transportation of hazardous waste to a facility which did not have a permit
o M&W employee Shadd signed K to remove contaminated soil and toluene
Shadd challenged knowingly court held she signed K, so she knew
o Ritarossi supervised transportation of toluene to NIC dump property
Conviction affirmed evidence of actual knowledge
o DAllesandro was M&W President
Conviction vacated no evidence of actual knowledge
M&W and NIC convicted of: 1) RCRA violation knowingly treating, storing and disposing
of hazardous waste without a permit; 2) CERCLA 103 violation failure to report
o NIC leased property to M&W where toulene was dumped - no hazardous waste permit
Conviction vacated may have been based on DAllesandros vacated conviction
DAllesandro was also convicted under the Responsible Corporate Officer Doctrine in his
capacity as M&W President for RCRA violation
o Conviction vacated RCRA requires actual knowledge cannot come from agent liability
V. ASSIGNING CRIMINAL LIABIILITY

A. Corporate Liability
Vicarious Liability - holding someone responsible for the acts and mens rea of
another
o
Not a part of criminal law because criminal law punishes the choice to do a bad act
Respondeat Superior - common law

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o Federal standard
o Elements corporation will be held liable for the acts of its agents who:

Commit a crime

Within the scope of employment/authority

With the intent to benefit the corporation

This element has been almost read out of existence

MPC standard in many states
o Corporation only responsible for offenses by a high managerial agent

High managerial agent = policy-maker

Problem ostrich effect

Collective Intent used by some courts when one single agent has not broken the law
o Imputes the agents collective knowledge to the corporation
o Significantly broadens corporate liability

- Beneficial Finance Mass. Supreme Court rejects MPC high managerial agent standard
adopts common law respondeat superior theory of liability

Employees of small loan companies bribed public officials

Court adds 2 elements to common law respondeat superior:

o
Conduct at issue must have been performed on behalf of the corporation
o
All elements of this standard must be proven beyond a reasonable doubt
B. Managerial Liability
Responsible Share Doctrine from Dotterweich
Offense is committed by all who have a responsible share in furthering the criminal transaction
o A manager will be liable for criminal sanctions even without mens rea
o Where grave public harm & low punishment, OK to hold manager liable to encourage care
Standard: the law requires some fault not quite strict liability can be an omission
Compliance Plan
Directors have a duty to establish/maintain a corporate compliance plan
o Failure to do so may make director liable for losses
- Park applied responsible share doctrine to an omission failure to prevent FDA violation
CEO of grocery chain liable for rodent-infestation at 2 food warehouses
o Park received FDA letters advising of unsanitary conditions
he delegated responsibility for correcting problem did all he could
Court seems to create an affirmative duty for management to seek out violations
Court allows may be defense if: powerless or impossible to know of/correct violations
- Caremark held that directors have a duty to ensure that an adequate corporate information and
reporting program exists, and that failure to do so may render a director liable for losses
Derivative suit against directors of health care provider that was found to be breaking rules
regarding Medicare referral fees
Caremark had a compliance plan made serious efforts to enforce guidelines - failed
VI. NEW WHITE COLLAR CRIMES
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A. Money Laundering includes both reporting and transportation violations

Reasons people want to hide money:
o Protect from legal judgments or divorce property division
o Tax evasion
o Capital flight - move cash to a country with a more favorable economy
o Hide securities law violations
o Smuggling of contraband
3 steps in money laundering:
o Placement introducing cash into banking system or legitimate commerce
o Layering separating $ from criminal origins by transferring or getting cashiers checks
o Integration mixing the dirty $ with legitimate $, or lying about its origin

1. Reporting Statutes 31 USC 5313, 5324; 26 USC 60501

Not as widely used as the transportation statutes
5313 requires domestic financial institutions to report cash transaction of $10,000 or more
Exemptions allowed for certain customers, but banks rarely use more trouble than its worth
5322 provides criminal penalties for willful violation of chapter
5324 prohibits structuring financial transactions to evade reporting requirements
Smurfing is breaking up transactions into amounts under $10,000 to avoid reporting
Also prohibits causing (or attempting to cause) a bank to:
Not file a required report, or
File a false report
(c) provides criminal penalty - mens rea satisfied here if actor knew about reporting
requirement, but purposefully evaded it (avoids Ratzlaf problem)
60501 requires all persons engaged in a trade or business to report cash transactions over $10,000
this section has its own structuring provision same as 5324
Gertner attorneys made report, but did not disclose names/addresses of clients that paid cash
- Ratzlaf held that willful mens rea requires knowledge that the activity was illegal later,
Simon case held that actual knowledge may be inferred
Guy pays casino gambling debt with several cashiers checks under $10,000 after casino
advises him of reporting requirements
argued (and won) that even though Ratzlaf knew of the reporting requirement, he did not
know that the structuring was illegal, and willful crime requires actual knowledge
No longer good law as to $ laundering - Congress amended 5324 to add criminal penalty
o Still applies to regulatory offenses with a willful mens rea
Forfeiture rules:
Criminal involvement of property must be proven beyond a reasonable doubt
Civil prosecutor need only show cause & only by a preponderance
- Bajakajian USSC found that $357,144 forfeiture violated the Excessive Fines Clause
Guy tried to transport $357,144 out of the country - $ was taken in criminal forfeiture
USSC found that forfeiture was grossly disproportionate to the crime
o Only crime was failure to report - $ was legally obtained, used for legal purposes
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2. Transportation Statutes 18 USC 1956, 1957

Money laundering is called the new RICO

o 1956(c)(7)gives specified unlawful activity list of predicate crimes
o 20 year penalty is higher than most predicate crimes
o Unlike RICO, does not require DOJ approval

1956 Elements:
Knowing that property came from any illegal activity,
Conducts (or attempts to conduct) a financial transaction
That involves the proceeds of specified (see list) unlawful activity,
Either:
o (a)(1)(A) with the intent to promote a specified unlawful activity, OR
o (a)(1)(B) knowing the transaction is designed to conceal (or violate IRS code)
Concealment non-exclusive factors to consider:
Defendants statements indicating intent to conceal,
Unusual secrecy surrounding the transaction,
Structuring the transaction to avoid attention,
Commingling of illegal with legitimate funds,
Highly irregular features of the transaction,
Using 3rd parties to conceal the real owners identity,
Series of unusual financial moves culminating in the transaction
o (Moohr thinks Congress wrote (A) to cover the criminal, and (B) to cover the bank)
No minimum jurisdictional requirement
Very strict penalties
(a)(2) deals with international transportation
(a)(3) still a crime when not really illegal proceeds, if represented as such by undercover agent
1957 Elements:
Knowing that property came from any illegal activity,
Engages (or attempts to engage) in a monetary (banking) transaction with that property
o Property must come from a specified unlawful activity, but need not know this
$10,000 minimum jurisdictional requirement
- Jackson spending illegal proceeds on lawful expenses satisfies designed to conceal element
Davis, an inner-city minister/crack dealer, deposited drug proceeds in legal church account
o He spent some $ on expenses to further drug business, and some $ on lawful expenses
argued cant prove because cant trace drug $ to church account
o Court said no tracing required commingled funds count transaction need only involve
illegal proceeds this was shown because deposits far exceeded church income
Court - some payments did not violate (a)(1)(A) - not used to promote the drug deals
Court - all of the payments violated (a)(1)(B) - designed to conceal the source of the funds
Moohr this holding is too broad - makes it a spending, not a laundering, violation

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- Sanders held if party did not intend to conceal a transaction, it was not designed to conceal
intent can be proven by conspicuous use & no use of 3rd parties to hide identity
Sanderses bought 2 cars & put one in their daughters name may have used heroin proceeds
o They conspicuously purchased cars themselves - didnt use 3rd parties to hide their identity
Mrs. Sanders did not intend the transaction to conceal, so it was not designed to conceal

B. Computer Fraud and Abuse Act 18 USC 1030

CFAA prohibits 2 kinds of abuse:
1) Damage to a computer; or
2) Using a computer as a tool to get something
o Another tool to prosecute theft of information
(a)(2) Using a computer to obtain information
o Intentionally accesses a (non-protected) computer,
o Without authorization, OR exceeds authorized access, AND
o Thereby obtains:
Credit card/financial information,
Information from any U.S. department or agency, OR
Information from any protected computer if by interstate or foreign communication
(a)(4) Using a computer as a tool to defraud or to steal something
o Knowingly and with intent to defraud,
o Accesses a protected computer
o Without authorization, OR exceeds authorized access, AND
o Obtains anything of value
Value is the value to Czubinski says use by may show value
If only value is use of computer, must exceed $5000
(a)(5) - Damage to a computer system
o Knowingly transmits a program/command that
o Causes damage to a protected computer
3 mens rea sections:
Intentionally causes damage - felony
Recklessly causes damage - felony
Causes damage (strict liability) - misdemeanor
Protected computer: 1) U.S. govt or financial institution computer (see code - exclusive use)
2) computer used in interstate or foreign commerce communication
Not covered in class: (a)(1) accessing a computer with national security information
(a)(3) little used
(a)(6) traffic in passwords
(a)(7) extortion threatening to damage computer
Attempt carries same penalties as completed crime (specific penalties)
Civil cause of action like RICO, but no enhanced damages - economic damages only
- Morris ((a)(5) Held mens rea only required intent to release the virus, not cause damage
Cornell student released internet virus caused lots of $ damages in down-time
Now (a)(5) has been amended 3 possible intent levels see above
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- Czubinski ((a)(4)) - limits CFAA to serious violations - no fraud if nothing of value is taken
use may establish value
Racist IRS agent looked up tax records of his friends & enemies - did not print or further use
IRS lost exclusive use of its property; value to Czubinski was the thrill of seeing private info
Court criminal law measures value to Czubinski did not use, so did not realize any value
o May be possible to show use (thus value to ) if he prints or makes notes
C. Intangible Property

1. Theft and Fraud

Problem: Information is different from tangible property
o If someone takes tangible property, original owner has lost it
o If someone takes information, original owner still has it
Harm is the diminished value of information owner still has due to loss of exclusivity
Traditional theft/fraud statutes dealt with physical taking of property

Is intangible property property?

Consider in the M&W fraud context (also other crimes)

- McNally 1987 USSC held mail fraud does not cover losses of intangible rights, such as the
right to honest and faithful services

Public officials took kickbacks for insurance contracts

There was no property loss, because govt would have paid anyone the same $

1346 now says honest services = property, but what of other intangibles?
- Carpenter 1987 - USSC held confidential information = property (pre-1346)
WSJ columnist & stockbrokers profited from stock trades based on his columns
o He didnt alter columns used knowledge of how columns would influence buyers/market
o WSJ did not lose $ - guys were convicted of M&W fraud & insider trading
Exclusive use of contents and publication is a property right
- Czubinski held that information is not property or a thing of value in itself
Racist IRS guy looked up tax records of his friends & enemies - did not print or further use
Followed McNally, not Carpenter held loss of exclusive use property right
Important b/c limits mail & wire fraud (both honest services & property) to serious violations
- Cleveland held that a business license (intangible) is not property before issued by the State
Guys lied on state (LA) video poker license applications & mailed them
Court a business license is property in the hands of the owner
o Business license is NOT property in the hands of the State
States power to regulate is NOT a property interest
M&W fraud require that owners property be taken
- Dowling held that copyrighted songs property under the National Stolen Property Act
Guys were selling bootlegged Elvis recordings transported across state lines
Copyrighted materials are not traditional property statute uses infringed, not stolen
Copyright act is exclusive remedy for infringement
o Govt cant use NSPA for easier prosecution & stiffer penalties
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o NSPA was meant to be a gap-filler there was no gap here

- LaMacchia held that copyrighted material property for M&W fraud (extended Dowling)
LaMacchia let public copy copyrighted software from his website for free
Copyrighted materials are not traditional property statute uses infringed, not stolen
Copyright act is exclusive remedy for infringement
o Govt cant use M&W fraud for easier prosecution & stiffer penalties
o M7W fraud was meant to be a gap-filler, there was no gap here

2. Economic Espionage Act 18 USC 1831-39

Prohibits 2 types of conduct:

1)
Stealing trade secrets to benefit a foreign government,
instrumentality or agent
2)
Converting a trade secret
o Elements:
intent to convert a trade secret
product is made for or placed in interstate commerce (jurisdictional element)
for economic benefit of one other than the owner
intent/knowledge that the owner will be injured
knowingly, either:
steals or takes by deception
copies or transmits
accepts or buys, knowing secret is stolen
attempts to do one of the above, OR
conspires to do one of the above
Prosecution for M&W fraud is still available
1835 protects from disclosure of trade secrets in court proceedings may get interlocutory appeal
EEA is more broad than state laws
o 1839(3) trade secret definition includes all forms of information, if:
owner has taken reasonable measures to keep information secret, and
information has value b/c not generally known to the public
Penalties:
o Mandatory forfeiture
o Fines
o Prison term (1831 - max. 15 years; 1832 max. 10 years)
o Injunctive relief

- Hsu I &II held that if charge is attempt or conspiracy, prosecution need not establish there was
an actual trade secret only need the to believe there was a trade secret
Taiwan company tried to buy trade secret info on Taxol from Bristol-Meyers employee
through undercover FBI agent
VII. FEDERAL SENTENCING GUIDELINES

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A. Individuals (((I didnt get this far)))

B. Corporations

VIII. JURISPRUDENTIAL ISSUES:

(((These are covered throughout the semester)))

A. Federalization of Criminal Law

Can & should a crime be federally governed/prosecuted? (ask this w/each new crime)
Can = jurisdictional base (Lopez)
Should = federalism arguments
Can question:
Does Congress have specific jurisdiction to pass a federal criminal law?
o
The Constitution grants the States unlimited police power
o
The powers granted to the federal government are few and defined
o
Congress must have a specific jurisdictional grant to pass a law
o
Criminal laws are usually under the Commerce Clause, but sometimes others
Commerce Power 3 broad categories of activity Congress may regulate under CC:
o
The use of channels of interstate commerce
o
The instrumentalities of, or persons or things in, interstate commerce, even though the
threat may come only from intrastate activities
o
Those activities having a substantial relation to interstate commerce, i.e., those
activities that substantially affect interstate commerce
United States v. Lopez
o
Invalidated the Gun-Free School Zones Act - 18 USC 922(q)(1)(A)
o
Analyzed whether the Act substantially affected interstate commerce
o
922(q) had no express jurisdictional hook that would limit its reach to only those
firearms possessions that have a connection to or affect interstate commerce
o
Govt argued substantial effect b/c school zone firearm possession increases violent
crime, thus: (1) creates population-wide costs, and (2) affects interstate travel by
making people unwilling to travel to violent crime areas
o
Court responded that under these theories, there is virtually no limit to federal power,
even in traditional State sovereignty areas like crime or education
o
Dissent argued that Congress had rational basis cumulative effect applied
Congress has criminalized many state offenses by adding an interstate element:
o
Kidnapping, theft, transportation of stolen vehicles, flight to avoid prosecution, sexual
exploitation of children, firearms offenses, gambling, credit card counterfeiting,
robbery, extortion
Should question:
Pro-federal role in WCC prosecution arguments:
o Uniform standards (this arg goes both ways some are pro-local standards)
o Feds have more/better resources: laws, procedures
RICO - Can convict on accomplice testimony alone

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Grand juries easier to access

Liberal rules: grand jury testimony (hearsay ok, penalties for refusal to testify)
Federal Sentencing Guidelines allow for stricter penalties
Guidelines also allow reduction for substantial assistance
Prisons have more funding time served is higher % of sentence
o Avoid corruption federal judges have lifetime appointments not elected
Anti-federal role in WCC prosecution arguments:
o Burden on the federal courts
Federal courts will not be as able to tend to their real duties
Rehnquist fed is an elite system that shouldnt be bothered w/small taters
District judges would disagree on a lot, so we would still have local law
Moohr not a very principled argument argument of expediency
More trials b/c of high sentences (Why plea bargain?)
More appeals through the sentencing guidelines
o Misallocation of federal resources spending federal $ to do state work
o Abuse of power
o Usurps states role as the immediate and visible guardians of life and property
o Allows development of law on a small scale
States are more responsive, accountable and flexible
States can learn from each others mistakes
o Sentencing disparity between state/federal convictions for essentially same crime
Balance when do we want federal action?
o Civil rights violation (federal right violated)
Cases Schmuck broadly framed mail fraud statute to reach state fraud, Sedima endorsed private
attorneys general & allows civil RICO to be litigated in state courts

B. Prosecutorial Discretion
The U.S. Attorney is not the representative of an ordinary party to a controversy, but of a
sovereignty whose . . . interest in a criminal prosecution is not that it shall win a case, but that
justice shall be done. . . . Justice Sutherland.
Prosecutor powers:
o Investigations: whether and on what terms (when under prosecutors control)
o Charging: whether and on what terms
o Plea Bargaining: whether and on what terms
o Grand jury power:

To compel the appearance and interrogation of witnesses (reinforced)

To compel the production of documents (strengthened)

To dispense with fundamental protections of witnesses (broadened)

To subpoena attorneys to testify & produce documents (incl. fees)

o Other:

Reluctance of courts to check prosecutorial excesses

Decline of supervisory powers

cant claim prosecutor misconduct until conviction, must show prejudice

Limitations on Prosecutor powers:
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o 5th Amendment Double Jeopardy Clause

No one shall twice be put in jeopardy of life or limb for the same offense
o Equal Protection & Due Process Clauses
Selective prosecution must show he has been singled out for prosecution
while others similarly situated have not been proceeded against AND that selection
was unconstitutionally based on race, religion, or desire to prevent s exercise of
1st amendment rights
Vindictive prosecution applied only where prosecutors retaliated against s
exercise of protected rights like 1st amendment rights or right to appeal
o US Attorneys Manual
Petite policy precludes prosecution following a state or prior federal prosecution
based on substantially the same act(s) or transaction unless there is compelling
federal interest
o Policies and guidelines set priority crimes Administration, Justice Dept. & Local
o Ethical restraints ABA Model Rules of Professional Conduct:
Rule 3.8 says criminal prosecutor shall:

not prosecute a charge he knows is not supported by probable cause

try to assure is advised of right to and how to obtain counsel & has
reasonable opportunity to obtain counsel

not seek a waiver of important pretrial rights

make timely disclosure of all evidence favorable to (and

mitigating evidence to tribunal for sentencing decisions)

try to prevent associated personnel from making extra-judicial

statements the prosecutor could not make himself
Rule 4.2 says a lawyer cant talk about a case with a person that is represented by
another lawyer (What if doesnt want his corrupt lawyer to know? No
constitutional violation, because has waived his right, but 4.2 is violated.)

Reno rule permits investigative contacts with represented persons

Hyde Amendment - 1998
o When the prevails in a criminal case, the court may award reasonable attorneys fees and
litigation expenses where the court finds the U.S. position was vexatious, frivolous or in
bad faith (unless special circumstances make an award unjust).
o U.S. v. Reyes ( lost)

won summary judgment on conspiracy, aiding & abetting federal bribery

Filed for atty fees under Hyde Amendment

has burden to prove the U.S. was vexatious, frivolous or in bad faith

Dictionary definitions of vexatious, frivolous & bad faith:

Vexatious is without reasonable or probable cause or excuse

Frivolous is of little weight or importance

Bad faith implies the conscious doing of a wrong b/c of dishonest

purpose or moral obliquity
o U.S. v. Ranger (U.S. lost)

Ranger violated permit import regs - imported CB radios w/wrong

frequencies

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Charges dismissed b/c knowledge requirement not met

Held: prosecutors acts fell within bad faith of Hyde amendment

Withholding of evidence violated obligation to share exculpatory

info
o
U.S. v. Holland (U.S. lost)
Senator & son acquitted of bank fraud, perjury, obstruction of justice
Won attorney fees under Hyde
District Ct - govt caused undue irritation, worry by bringing criminal charges
o What is frivolous, vexatious or bad faith?

Withholding of evidence

Probably the subornation of perjury (Ranger)

Mere dismissal of case before it goes to grand jury is not enough

Pro-Prosecutor discretion arguments:
o will get due process later, at the grand jury, preliminary hearing or trial
o Prosecutors are ethical & will make ethical decisions
Anti-Prosecutor discretion arguments:
o Standardless discretion
o Can invoke societys harshest judgments on the basis of ad hoc personal judgments
o Risk of unequal treatment, arbitrary enforcement
o Minorities, poor, outcast (typical discrimination targets) will be treated most harshly
o s have no opportunity to be heard before prosecutor makes his decisions
Cases:
o Reyes, Ranger,Holland
o Gertner
Govt used $ laundering reporting requiremt to attack attorneys (get client info)

C. Blurring the Civil-Criminal Distinction

4 assertions of Coffee Article (or, whether to price or to prohibit:

o Any clearly definable line between civil and criminal law has disappeared
o This blurring will result in injustice and will weaken criminal law as social control
o To define the proper sphere of criminal law, must explain how its purposes and methods
differ from those of tort law
o Implementation of the crime/tort distinction is feasible only at the sentencing phase
3 trends:
o WCC law is mostly judge-made
o Mens rea requirement is disappearing, especially in regulatory crimes
o Traditional public welfare offenses, which combined strict liability with modest penalties,
are being upgraded to felonies
Hart, Kadish & Packer school:
o Overcriminalization excessive reliance on the criminal sanction, particularly w/respect to
behavior that is not inherently morally culpable
o Criminal law is societys mechanism of communicating the moral condemnation of the
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community
Critics law shapes morality determines what is morally culpable
o Also if criminal law is overused, it will lose its distinctive stigma
If everything wrongful is made criminal, society is unable to reserve special forms
of condemnation for really bad stuff
If everything is a crime, everyone is a criminal or there is no deterrence
Deterrence goal justifies criminal penalty for corporate managers pollution, negligence, etc.
Deterrence is no justification for strict liability/no mens rea crimes
o Cant change unintended behavior
Civil law focuses on victim, not actor
o Focuses on reparation of actual harm not intent
Criminal law focuses on actor, not victim
o Focuses on bad intent not actual harm
o The actors conduct was the same, regardless of the outcome
Prison is a disincentive unique from fines incarceration is a societal equalizer should be
reserved for morally bad stuff
Who will draw the line? (according to Coffee)
o Courts have left to legislature
o Legislature cant too politically risky to oppose any call for criminalization
o Prosecutors cant would seem an attempt to undermine legislature
o U.S. Sentencing Commission should decide when to price and when to prohibit
Behavior that society wishes only to tax should be fined
Behavior that society wishes to prohibit should be sentenced
Coffee no mens rea crimes should only be priced
Cases:
o
D. Effect of Civil Penalties (Parallel Proceedings)

When is a civil penalty really a criminal penalty?

o Prong 1 Does the legislature label the sanction civil? If yes:
o Prong 2 Kennedy test
Kennedy test to decide when a civil sanction is so punitive it is really a criminal penalty, evaluate
whether:
o the sanction involves an affirmative disability or restraint,
o it has historically been regarded as a punishment,
o it comes into play only on a finding of scienter,
o it promotes the traditional aims of punishment-retribution and deterrence,
o the behavior to which it applies is already a crime,
o an alternative purpose to which it may rationally be connected is assignable for it (is its
sole purpose to punish?), and
o it appears excessive in relation to the alternative purpose assigned.
**These factors must be considered in relation to the statute on its face, and
o **Only the clearest proof will suffice to override legislative intent and transform what has
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been denominated a civil remedy into a criminal penalty

United States v. Halper
o Halper inflated 65 Medicare claims for $9 each ($585)
o Criminal sentence - 2 years prison and $5000 fine; Civil sanction - $130,000
o USSC said sanction violated double jeopardy b/c really punishment
o Punishment serves traditional goals of retribution and deterrence
o Any sanction so overwhelmingly disproportionate to the injury could not be said solely
to serve the remedial purpose of compensating the government for its loss
o Repudiated by Hudson
Hudson v. United States
o Hudson was chairman of 2 banks got the banks to loan him $ through 3rd parties
o Hudson & accomplice bankers paid Civil Money Penalty of $16,500 to the OCC
o Indicted for conspiracy & other criminal charges, they moved to dismiss on double
jeopardy grounds
o Court held the OCC proceedings were civil, and no bar to later criminal prosecution
o Used Kennedy test & said Halper was wrong for 2 reasons:
Halper bypassed question whether punishment is a criminal punishment
Treated excessiveness of punishment as dispositive
o Kennedy says no one factor should control as they may point in different directions
o Interestingly, the Hudson courts analysis seemed to look at each of the sevcn factors in
isolation no one factor showed the OCC fines were really criminal.
o Since all civil penalties have some deterrent effect, a requirement that a sanction be solely
remedial would mean no civil penalties are beyond the scope of the DJ Clause
o Halper had other constitutional protections:
Due Process and Equal Protection Clauses protect from irrational punishment
Eighth Amendment protects against excessive civil fines
Mary Cheh: 3 constitutional problems w/parallel proceedings:
o Can put special pressure on a s 5th amendment self-incrimination privilege
o Can weaken a s due process rights b/c the government may benefit from the more
generous discovery allowed in civil proceedings
o May undercut a s 6th amendment right to effective assistance of counsel 2 ways
When government gets info protected by attorney-client privilege through civil
discovery
When counsel discovers materials for civil defense that hurt criminal case
Cases:
o
E. Criminalization

Stuart Greens 3 elements of moral content:

o Culpability = the moral value attributed to a s state of mind during the commission of a
crime (mens rea, guilty mind, scienter, lack of excuse such as insanity or mistake)
Refers to the actor rather than the act and its consequences
Crimes said to be lacking in culpability include:
Public welfare and strict liability crimes
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o Green says not all regulatory offenses are part of this group
o Social Harmfulness = an intrusion into a persons interest (thing the person has a stake in)
Refers to the act and its consequences rather than the actor
Includes harms to individuals person/property; to societys interests collectively; to
governmental interests
Acts can be harmful without being wrongful
Crimes said to be lacking in social harmfulness include:
Trivial and minor violations
o Some, like parking violations, are trivial in comparison to more
harmful crimes such as rape or homicide
o Some, like retailers tearing off a mattress tag, have a very low
probability of resulting in any harm (house fires)
o Moral Wrongfulness = conduct that violates a moral norm or standard
Refers to the moral conduct of the act, rather than the moral status of the actor
Acts can be wrongful w/out being harmful (lying, cheating, promise-breaking)
Acts can be wrongful w/out the actor being culpable (murder by accident/insanity)
Crimes said to be lacking in moral wrongfulness (morally neutral) include:
Malum prohibitum, economic & certain white-collar crimes
Issues:
o Criminalization of conduct that is virtually indistinguishable from acceptable aggressive
business behavior: regulatory economic offenses including antitrust, unfair competition,
price controls, securities regulations, some tax laws. Lack of moral wrongfulness?
If there is no stigma of moral reprehensibility, the deterrent nature of the criminal
sanction is impaired
o Relationship between criminal law and societys views of morality.
Hart criminal sanctions cannot be justified unless crime is condemned by the
community the decision to make certain conduct criminal reflects publicly-held
moral norms.
But public perceptions of morality are affected by what has been made criminal.
Law shapes morality.
o Over-Criminalization bad effects:
Dilution: weakens deterrent effect of criminal penalties & criminal stigma
If all action is crime, fear of criminal punishment results in inaction.
Cases:
o
F. Sentencing the Corporation

DOJ Policy: Benefits of indicting a corporation

o When one corporation is indicted for criminal conduct that is pervasive throughout the
industry, other corporations are likely to take immediate remedial action, providing
deterrence on a massive scale
o A corporate indictment may result in specific deterrence by changing the culture of the
indicted corporation and the behavior of its employees
o Certain crimes that have a substantial risk of public harm, like environmental crimes or
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financial fraud, are most likely to be committed by businesses

DOJ Policy: Respondeat Superior
o Prosecutors should always consider targeting a corporation for its agents wrongdoing.
o Corporations may be held criminally liable for illegal acts of their directors, employees,
officers and agents.
o To hold a corporation liable, the government must establish that the agents actions were:
Within the scope of his duties, AND
Intended, at least in part, to benefit the corporation.
DOJ Policy: Factors to consider as to the proper treatment of a corporate target in: 1)determining
conduct of an investigation, 2)when to bring charges, and 3)when to negotiate plea agreements:
o Nature and seriousness of offense, including risk of harm to the public, and policies
o Pervasiveness of wrongdoing within the corporation, including management complicity
o Corporations history of similar conduct
o Corporations timely and voluntary disclosure of wrongdoing, and willingness to cooperate
o Existence and adequacy of corporations compliance plan
o Corporations remedial actions
o Collateral consequences (harm to innocent employees and shareholders)
o Adequacy of non-criminal remedies
Other relevant stuff:
o Scope of employment can include situations where an employee is acting contrary to
express corporate policy
o An employees act may be deemed for the benefit of the business even if the business
received no actual benefit or if the employee was also motivated by personal factors
o Collective knowledge doctrine: businesses can be found criminal even if no single
employee is criminally culpable no single agent need satisfy all the elements of a crime
o Criminal intent can be satisfied by willfully blindness
o Regulatory offenses often have little or no intent requirement
Federal Sentencing Guidelines:
o Prosecutors have been unwilling to use the guidelines full potential against corporations
Early practice prosecutions are aimed at corporations with higher culpability
Core offenses involving small corps with culpable high-level personnel
o Calculations:
Base fine = the highest of:
Fine amount from the fine table, which ranks offense levels
Pecuniary loss from the offense (extent caused intentionally, knowingly or
recklessly), OR
Pecuniary gain to the organization
Then factor in culpability score
Factors that increase culpability score:
Prior history of criminal activity
Obstructing justice during the investigation, and
Extent of high-level personnel involved in or tolerant of the activity
Factors that decrease culpability score (may reduce base fine as much as 95%):
An existing effective program to prevent and detect violations of law
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Prompt reporting of any offenses

Full cooperation in the investigation
Acceptance of responsibility for the conduct
MPC Standard (see Texas Code)
o Agent = director, officer, employee or other who is authorized to act for corporation
o High managerial agent = partnership partner, corporate officer, or corporate policy-maker
o Business is criminally liable for:
Laws plainly meant to reach businesses, or for strict liability offenses, for the
conduct of its agents
Felonies, only if offense was authorized, commanded, performed, or recklessly
tolerated by a majority of the board or a high managerial agent.
o Affirmative defense: the high managerial agent diligently tried to prevent offense.
Cases:
o
G. The Aims of Criminal Law Hart article
Criminal law has many goals. They overlap and sometimes are at odds with each other.
o Deterrence of offenders
o Rehabilitation of offenders
o Disablement of offenders
o Sharpening of the communitys sense of right and wrong
o Satisfaction of the communitys sense of just retribution
o Avoiding conviction of the innocent
o Enhancing societys sense of security
What is crime?
o Not simply anything a legislature chooses to call a crime.
o Not simply antisocial conduct which public officers are responsible to suppress.
o Not simply conduct to which the legislature has attached a criminal penalty.
o IS conduct which incurs a formal pronouncement of the communitys moral condemnation
True Goal, then, is to define the minimum conditions of mans responsibility to his fellows and
hold him to that responsibility. Criminal law helps to create the good society.
Cases:
o
H. Judicial Role in Defining Crime
Federal criminal law is statutory Congress has sole power to make
o Judiciary does not engage in wholesale penal-lawmaking
o Judiciary does engage in interstitial lawmaking in the course of interpreting positive law
o If the criminal statutes are so broad as to completely lack definition, courts are arguably
creating federal criminal common law when they apply statutes to fact situations that the
statutes do not speak to.
o An unclear criminal statute forces the judge and jury to derive the elements of the law
from the factual circumstances of the case. Moohr
Problems with/prohibitions on federal criminal common law (OSullivan, Moohr):
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o Separation of Powers:
Federal judges would have too much power if allowed to make, interpret and
administer federal criminal law
Only the legislature should make laws that can deprive personal freedom, since the
legislature is most accountable to the people.
o Principle of Legality advance legislative specification of criminal misconduct 2 tools:
Void for Vagueness Doctrine criminal offense must be definite 2 prongs:
1. Notice prong: Ordinary people can understand what conduct is prohibited,
2. Arbitrary prong: In a manner that does not encourage arbitrary &
discriminatory enforcement
Facial analysis 1st amendment issue on its face rarely used against
federal laws facial analysis addresses both prongs
As applied analysis if no 1st amendment issue, look only at the statute
as applied - the as applied analysis addresses both prongs
o Courts do not usually address the 2nd prong above
Rule of Lenity If Congress did not use clear and definite statutory language, the
court should choose the less harsh interpretation of what conduct is criminal.
Ambiguity that does not rise to vagueness
Based upon 2 theories:
o Notice a clear line must be drawn to fairly let people know what is
criminal
o Because criminal penalties are serious, and represent the
communitys moral condemnation, legislatures should define them
o Kahans 3 costs of federal criminal common law:
Limited expertise of federal judges
Uniformity (every federal district could have different criminal law)
Prosecutorial overreaching
Arguments in favor of federal criminal common law (Kahan):
o Common law is cheaper than legislated law
It would take too much of Congresss time to define every possible prohibition
o Efficient updating of the criminal code
Courts can adapt existing statutes to new crimes and to loopholes Congress would
have to amend or enact new laws to cover
o Quality of criminal law:
Courts deal with real world circumstances, and can use that info to avoid
unforeseen conflicts with other values and policies
o Notice problem? Ordinary morality suffices to tell criminals what not to do (at least when
dealing with clearly undesirable conduct what about aggressive business practices?)
o Democracy problem? Congress does not necessarily enact criminal law the people want,
anyway judges do just as well. (But are they accountable when they do not?)
Cases Pereira

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Exam format for M&W fraud questions:

(This is important to Moohrgot me an A on the final)
I. Scheme to defraud includes deception (lie) and defraud (harm)
1. Deception or planned deception must be affirmative act or conduct, except
Failure to disclose will suffice if there is a fiduciary duty - Emery (Posner case)
Also - deception must be about a material fact induced victim to make a decision
2. Defraud is the thing taken traditional property, intangible property or honest services?
What kind of fraud?
3. If 3 parties ask: 1) who is deceived; 2) who lost property
If property comes from party other than the one deceived, it is a 3 party fraud
o This is honest services fraud, since party deceived has no loss
Say who is deceived & how
Deception in HSF is pretending loyalty when really not loyal
Must be a fiduciary duty not to deceive mention Brumley holding
Say who loses property & how
1346 establishes intangible right to honest services = property
If property comes from deceived party, it is a 2 party fraud
o This is usually property fraud, whether tangible or intangible (may still be HSF)
Still say who is deceived & how
Deception in intangible property fraud is also pretending loyalty
Must be a fiduciary duty not to deceive mention Brumley holding
Still say who loses property & how
If intangible, need to relate cases
o
will argue McNally, Czubinski, Cleveland (intangible
property)

McNally intangible property property

Czubinski property must be used by taker

Cleveland must be property in the hands of orig. owner

o
Prosecution will argue Carpenter (loss of exclusive use =
property)
II. Mailing Can establish even if 3rd party mails:
o Knowingly causes to be mailed is established by reasonable foreseeability
Mailing can occur after has the money part of overall scheme to defraud - Sampson
Mailing need only be incidental to an essential part of the scheme - Pereira
Mailing need not be fraudulent
Legally required mailings may not be included, but must have no deceitful statements.
III. Intent is the specific intent to defraud (cause harm) Mention DAmato- 2nd Circuit
Was party acting with purpose to deprive someone of $ or property?
o Jury may infer specific intent from the circumstances
11th Circuit disagrees only general intent needed (equates deceit w/defraud)
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