Seminar 2 CJ264 White Collar Crime Jeff Collins. Welcome Jeff Collins [email protected] AIM Screen...

Seminar 2Seminar 2

CJ264 White Collar CrimeCJ264 White Collar Crime

Jeff CollinsJeff Collins

Welcome

Jeff [email protected]

AIM Screen Name: JeffCollins1198Office Hours – Thursday Evenings 8:00 PM – 10:00 PM Eastern Time

Seminar Time, Thursday nights at 10:00 PM Eastern Time

Welcome to the Class

Course Expectations Discussion Boards

A minimum of least three posts per unit.1. to answer the question in 80-100 words2. to respond to another students responses. 3. Post as often as desired, the more interaction

the better Good activity, not waiting until the last night to

post Boards will be locked at the end of the unit, so

if you are running late, let me know in advance!

Course Expectations, Continued

Courtesy and RespectBe courteous in your posts, no offensive language will be tolerated, after all, this is a group of professionals !!!

Be respectful, even if you disagree with another class member.

Any harmful, offensive, derogatory postings will be deleted and you will not receive credit for the board.

Discussion BoardDiscussion Board

• Questions from Questions from Unit 1Unit 1

• Questions from Questions from Unit 2Unit 2

Corporate Crime An influential definition of corporate crime,

by Marshall Clinard and Richard Quinney (1973), characterized it as ‘‘offenses committed by corporate officials for their corporation and the offenses of the corporation itself ’’

Trusted Criminals: White Collar Crime in Contemporary Society, 3e, David O. Friedrichs

Corporate Crime Much corporate crime wreaks no

violence but has vast political and economic consequences

Includes the abuse of power, fraud, and economic exploitation.

These crimes victimize: the public, consumers, employees ,taxpayers, competitors, shareholders and creditors


Categorizing Different Activities That Can Be Encompassed By The

Term Corporate Crime. First approach is to adopt a typology

emphasizing the primary victims: for example, the general public, consumers, employees, or a corporation’s competitors.

Second approach is to focus on the nature of the harmful activity: for example, corporate violence, corporate corruption, corporate stealing, or corporate deceptions.


Categorizing Different Activities of Corporate Crime Continued.

Third approach emphasizes the size or scope of the corporate entity: for example, crimes of transnational corporations; crimes of major domestic corporations; crimes of small, locally based corporations; or crimes of incorporated individual enterprises.

Fourth approach has classified corporate crime according to the type of product or service involved: for example, crimes of the automotive industry, crimes of the pharmaceutical industry, crimes of the banking industry, or crimes of health care providers.Trusted Criminals: White Collar Crime in Contemporary Society, 3e, David O. Friedrichs

Plea Agreements with Corporations

A. General Principle: In negotiating plea agreements with corporations, prosecutors should seek a plea to the most serious, readily provable offense charged. In addition, the terms of the plea agreement should contain appropriate provisions to ensure punishment, deterrence, rehabilitation, and compliance with the plea agreement in the corporate context. Although special circumstances may mandate a different conclusion, prosecutors generally should not agree to accept a corporate guilty plea in exchange for non-prosecution or dismissal of charges against individual officers and employees.

U.S. Department of Justice Office of the Deputy Attorney Gen Principles of Federal Prosecution of Business Organizations


Prosecutors may enter into plea agreements with corporations for the same reasons and under the same constraints as apply to plea agreements with natural persons.. This means, that the corporation should be required to plead guilty to the most serious, readily provable offense charged.

As is the case with individuals, the attorney making this determination should do so "on the basis of an individualized assessment of the extent to which particular charges fit the specific circumstances of the case, are consistent with the purposes of the federal criminal code, and maximize the impact of federal resources on crime. In making this determination, the attorney for the government considers, inter alia, such factors as the sentencing guideline range yielded by the charge, whether the penalty yielded by such sentencing range ... is proportional to the seriousness of the defendant's conduct, and whether the charge achieves such purposes of the criminal law as punishment, protection of the public, specific and general deterrence, and rehabilitation.”.



A corporation should be made to realize that pleading guilty to criminal charges constitutes an admission of guilt and not merely a resolution of an inconvenient distraction from its business. As with natural persons, pleas should be structured so that the corporation may not later "proclaim lack of culpability or even complete innocence.”


A corporate plea agreement should also contain provisions that recognize the nature of the corporate "person" and ensure that the principles of punishment, deterrence, and rehabilitation are met. In the corporate context, punishment and deterrence are generally accomplished by substantial fines, mandatory restitution, and institution of appropriate compliance measures, including, if necessary, continued judicial oversight or the use of special masters. See USSG §§ 8B1.1, 8C2.1, et seq. In addition, where the corporation is a government contractor, permanent or temporary debarment may be appropriate. Where the corporation was engaged in government contracting fraud, a prosecutor may not negotiate away an agency's right to debar or to list the corporate defendant.



In negotiating a plea agreement, prosecutors should also consider the deterrent value of prosecutions of individuals within the corporation. Therefore, one factor that a prosecutor may consider in determining whether to enter into a plea agreement is whether the corporation is seeking immunity for its employees and officers or whether the corporation is willing to cooperate in the investigation of culpable individuals. Prosecutors should rarely negotiate away individual criminal liability in a corporate plea.



Rehabilitation, of course, requires that the corporation undertake to be law-abiding in the future. It is, therefore, appropriate to require the corporation, as a condition of probation, to implement a compliance program or to reform an existing one. As discussed above, prosecutors may consult with the appropriate state and federal agencies and components of the Justice Department to ensure that a proposed compliance program is adequate and meets industry standards and best practices.



Plea agreements in which the corporation agrees to cooperate, the prosecutor should ensure that the cooperation is complete and truthful. To do so, the prosecutor may request that the corporation waive attorney-client and work product protection, make employees and agents available for debriefing, disclose the results of its internal investigation, file appropriate certified financial statements, agree to governmental or third-party audits, and take whatever other steps are necessary to ensure that the full scope of the corporate wrongdoing is disclosed and that the responsible culprits are identified and, if appropriate, prosecuted.


Plea AgreementsBenefits

A suspected and indicted individual with knowledge pertaining to criminal acts committed by others may seek to decrease their personal consequences (prison sentences) in return for cooperation.

This results in a larger net being cast on those involved in wrong-doing that otherwise would have not been identified as being involved.

The truth of the matter is that many high level corporate crimes are committed by the people that are the “prime” experts in their field making apprehension and investigation very complicated and confusing if not impossible.

Plea AgreementsBenefits

In many cases a lengthy and costly trial is avoided increasing the efficiency and effectiveness of the Courts.

The Great Tomato Caper Between 1990 and 2008, Scott Salyer was the owner

and CEO of SK Foods LP, a grower, processor and distributor of tomato and other agriculture products.

SK Foods former vice president of operations, Steven James King, 46, was also charged with one count of food adulteration and misbranding. King agreed to plead guilty and to cooperate in an ongoing federal investigation, prosecutors said.

Salyer, was arrested in February of 2010 and charged with obstructing justice after he was accused of altering SK Foods' records after the government's investigation became known.

According to prosecutors, Salyer orchestrated a number of schemes where SK Foods regularly paid bribes to the purchasing managers of many of its customers, including Kraft Foods Inc., Frito-Lay Inc., B&G Foods Inc., and Safeway Inc.

Salyer faces a maximum penalty of 20 years in prison if convicted of the racketeering charges and 20 years in prison if convicted of wire fraud and obstruction charges.

Salyer is out of jail on house arrest after friends and family put up $6.3 million is cash and property while he awaits trial tentatively scheduled for January of 2012.by KSBW.com

High-profile Miami accountant Lewis Freeman pleads guilty to

fraud Miami accountant Lewis Freeman, who for years garnered the reputation of a trusted civic

leader, plead guilty and was sentenced in July of 2010 to eight years in federal prison on a fraud charge alleging he embezzled at least $2.6 million from client trust accounts.

Freeman, was accused of stealing the money from as many as 250 victims he was entrusted with protecting as a court-appointed receiver who specialized in recovering assets in fraud and bankruptcy cases.

The University of Miami law school graduate was also accused of filing false financial statements with the courts to conceal the alleged decade-long embezzlement scheme.

Freeman, who cooperated with the U.S. attorney's office since the FBI raided his Miami office in October of 2008, faced between 12 and 15 years in prison at his sentencing.

Before his business crumbled in October, Freeman was known as a friend of the legal establishment, children's causes and his alma mater. But now the ``go-to'' forensic accountant who made his name investigating companies crippled by bankruptcy or fraud is accused of stealing from the very victims he was appointed by judges to protect.

Freeman wrote 162 unauthorized checks to himself totaling about $6 million from the accounts of five failed businesses once under his company's control, but put back about half of the money, according to the case filed by Assistant U.S. Attorney Andrew Levi.

http://www.miamiherald.com/2010/07/23/1743886/miami-accountant-lew-freeman-gets.html

Plea AgreementsDrawbacks

Looks soft on Crime Can give a bad public perception that

the rich get away with their crimes. Might not really match the

punishment to the crimes. Could keep the offender in a position

of being able to re-offend sooner than later.

Overview of Chapter 3 Major corporations have been accused of engaging in the

‘‘pathological’’ pursuit of profit, which for some of the largest corporations adds up to more than $100 billion a year, with sales exceeding the economies of many countries.

Corporate wealth is highly concentrated. Corporate ownership and corporate-generated wealth

have traditionally been concentrated in the hands of relatively few people, with about 1 percent of the population owning about half of the outstanding stock and trust equity in the United States, and two-thirds of the financial securities.

The wealthiest 10 percent own some 90 percent of the stock. Although millions of Americans belong to pension plans that own large blocks of stock, the influence of these Americans over corporate affairs is essentially nonexistent. Trusted Criminals: White Collar Crime in Contemporary Society, 3e, David O. Friedrichs

Chapter 3 Continued Large corporations by their very nature, are especially well

positioned to take advantage of political corruption. The absence of regulatory controls, and the desperation for

economic enterprise characteristic of many developing nations.

Some of the corporate transgressions (harmful although not necessarily illegal actions) associated with transnational’s operating in third-world countries include highly hazardous and dangerous working conditions at industrial facilities; exportation of unsafe products (often banned in developed countries); dumping of toxic wastes and other forms of environmental pollution; bribing and corrupting politicians; massive tax evasion by shifting profits to subsidiaries in countries with favorable corporate tax policies; and complicity in a range of human rights violations, including torture and assassinations, undertaken by repressive third-world governments and military or intelligence entities of developed government.Trusted Criminals: White Collar Crime in Contemporary Society, 3e, David O. Friedrichs

Chapter 3 Continued A power elite of top people in the corporate world,

government, and military have ‘‘interlocks,’’ or a complex network of ties, that enable them to advance their interrelated interests and move easily between high-level private- and public-sector positions.

The corporate elite in particular dominate the state through active pursuit of their own interests, coordinated corporate activities outside the government, and exploitation of economic conditions.

Despite the formidable political power of corporations, they have been relatively free of accountability and traditionally have been able to conceal much of their power-wielding activity.

On all levels of government, powerful corporations play an important, if not always fully visible, role.Trusted Criminals: White Collar Crime in Contemporary Society, 3e, David O. Friedrichs

Chapter 3 Continued Corporations are increasingly controlled by

paper entrepreneurs, or investors who are principally concerned with short-term profit.

These investors are far less likely to be strongly committed to product development or to the local communities in which corporate operations are based.

Corporate takeovers and mergers often enrich top executives and investment bankers to the tune of tens (even hundreds) of millions of dollars, while thousands of company employees get pink slips.Trusted Criminals: White Collar Crime in Contemporary Society, 3e, David O. Friedrichs

Chapter 3 Continued The major distinction is the type of activity; thus, we

will examine corporate violence and corporate abuse of power, fraud, or economic exploitation.

Within these two broad categories a further differentiation is made by type of victim.

Accordingly, for corporate violence, we have corporate violence against the public, corporate violence against consumers, and corporate violence against workers.

Within the category of corporate abuse of power, fraud, or economic exploitation, we have crimes against citizens, against consumers, against employees, against competitors, against franchisees and suppliers, and against owners or creditors.Trusted Criminals: White Collar Crime in Contemporary Society, 3e, David O. Friedrichs

Chapter 3 Continued Corporate violence differs from conventional

interpersonal violence in several ways. First, it is indirect in the sense that victims are not

assaulted by another person. Corporate violence results from policies and actions,

undertaken on behalf of the corporation, that result in the exposure of people to harmful conditions, products, or substances.

Second, the effects of corporate violence are typically quite removed in time from the implementation of the corporate policy or action that caused the harm, and the causal relationship between the corporate action and the injury to health (or death) cannot always be clearly and definitively established. Trusted Criminals: White Collar Crime in Contemporary Society, 3e, David O. Friedrichs

Chapter 3 Continued Third, typically in corporate violence a large

number of individuals acting collectively, rather than a single or very few individuals, are responsible for the actions that result in physical injury or death.

Fourth, corporate violence, virtually by definition, is motivated by the desire to maximize corporate profits (or survival) and minimize corporate overhead. The violence is a consequence rather than a specifically intended outcome of such motivations.

Finally, corporate violence has traditionally inspired a far more limited legal and justice system response than has conventional interpersonal violence.Trusted Criminals: White Collar Crime in Contemporary Society, 3e, David O. Friedrichs

Chapter 3 Continued

Corporations’ contributions to poisoning Corporations’ contributions to poisoning the environment may well be the most the environment may well be the most common form of corporate violence, common form of corporate violence, although such crime has to date received although such crime has to date received rather little attention from rather little attention from criminologists.criminologists.

Obviously the lack of proper disposal of Obviously the lack of proper disposal of wastes contributed to highly unsanitary wastes contributed to highly unsanitary living conditions, the prolific spread of living conditions, the prolific spread of disease, and premature death.disease, and premature death.


Chapter 3 Continued

An estimated one-quarter of the U.S. An estimated one-quarter of the U.S. population, or 56 million people, will develop population, or 56 million people, will develop cancer, and by some (admittedly cancer, and by some (admittedly controversial) estimates, 70 to 90 percent of controversial) estimates, 70 to 90 percent of all cancers may be environmentally related.all cancers may be environmentally related.

The dumping of toxic wastes by cruise ships is The dumping of toxic wastes by cruise ships is another form of polluting the waters. In a another form of polluting the waters. In a recent year, the Royal Caribbean cruise line recent year, the Royal Caribbean cruise line pleaded guilty to routinely dumping toxic pleaded guilty to routinely dumping toxic waste and paid a fine of $18 million.waste and paid a fine of $18 million.Trusted Criminals: White Collar Crime in Contemporary Society, 3e, David O. Friedrichs

Chapter 3 Continued

Only a handful of businessmen have ever Only a handful of businessmen have ever been sent to prison in pollution cases. In been sent to prison in pollution cases. In one such case, Russell Mahler, president one such case, Russell Mahler, president of Hudson Oil Refining Company, was of Hudson Oil Refining Company, was sentenced to one year in prison and fined sentenced to one year in prison and fined $750,000 for violations of 22 counts of $750,000 for violations of 22 counts of the Clean Streams Act. Mahler’s the Clean Streams Act. Mahler’s operation illegally dumped those wastes operation illegally dumped those wastes in city landfills, sewers, and other such in city landfills, sewers, and other such locations.locations.Trusted Criminals: White Collar Crime in Contemporary Society, 3e, David O. Friedrichs

Ford Pinto

In the early 1970s, after the Ford Pinto In the early 1970s, after the Ford Pinto had been widely marketed, several Pintos had been widely marketed, several Pintos were involved in rear-end collisions in were involved in rear-end collisions in which the gas tank exploded, burning which the gas tank exploded, burning some people to death. One such case, some people to death. One such case, involving three Midwestern schoolgirls, involving three Midwestern schoolgirls, led to the criminal prosecution of Ford. led to the criminal prosecution of Ford. Investigation of the company in revealed Investigation of the company in revealed that Ford had made a calculated that Ford had made a calculated decision:decision:Trusted Criminals: White Collar Crime in Contemporary Society, 3e, David O. Friedrichs

Ford Pinto Continued

It would be cheaper to pay civil damages It would be cheaper to pay civil damages arising out of these accidents than to arising out of these accidents than to recall the car and make it safe. Further, recall the car and make it safe. Further, installation of a rubber bladder (cost: $5) installation of a rubber bladder (cost: $5) would have prevented the gas tank would have prevented the gas tank explosions. Ultimately Ford had to pay explosions. Ultimately Ford had to pay millions of dollars of judgments in civil millions of dollars of judgments in civil lawsuits and had to recall the Pinto at lawsuits and had to recall the Pinto at great expense, at a total cost estimated great expense, at a total cost estimated at some $100 million.at some $100 million.Trusted Criminals: White Collar Crime in Contemporary Society, 3e, David O. Friedrichs

Chapter 3 Continued Corporate abuse of power in the form of Corporate abuse of power in the form of

corruption of the political process has economic corruption of the political process has economic consequences for ordinary citizens. Corporations consequences for ordinary citizens. Corporations obtain favorable treatment on such matters as obtain favorable treatment on such matters as reducing their tax liability and increasing their reducing their tax liability and increasing their freedom to raise prices or underpay workers.freedom to raise prices or underpay workers.

Corporations also use their immense economic Corporations also use their immense economic clout to distort the political process in a system clout to distort the political process in a system that claims to be democratic, and as a that claims to be democratic, and as a consequence, much policy ends up favoring the consequence, much policy ends up favoring the interests of corporations over those of ordinary interests of corporations over those of ordinary citizens.citizens.Trusted Criminals: White Collar Crime in Contemporary Society, 3e, David O. Friedrichs

Chapter 3 Continued

Defense contract frauds have been Defense contract frauds have been especially numerous and costly. especially numerous and costly.

1980s, media widely publicized the 1980s, media widely publicized the Defense Department’s gross overpayments Defense Department’s gross overpayments for spare parts and tools. Paid $110 for a for spare parts and tools. Paid $110 for a diode, actual cost 4 cents; $1,118 for a diode, actual cost 4 cents; $1,118 for a navigator’s stool cap, actual cost $10; navigator’s stool cap, actual cost $10; $2,043 for a nut worth 13 cents; and $2,043 for a nut worth 13 cents; and $9,606 for an allen wrench available for 12 $9,606 for an allen wrench available for 12 cents at hardware stores.cents at hardware stores. Trusted Criminals: White Collar Crime in Contemporary Society, 3e, David O. Friedrichs

Chapter 3 Continued

Tens of thousands of Americans are Tens of thousands of Americans are alleged to die annually from product-alleged to die annually from product-related accidents, and millions more related accidents, and millions more suffer disabling injuries at a cost of suffer disabling injuries at a cost of more than $100 billion in property more than $100 billion in property damage, lost wages, insurance, damage, lost wages, insurance, litigation, and medical expenses.litigation, and medical expenses.Trusted Criminals: White Collar Crime in Contemporary Society, 3e, David O. Friedrichs

Chapter 3 Continued

In recent years, federal officials have In recent years, federal officials have estimated that medical fraud estimated that medical fraud accounted for 10 percent of the accounted for 10 percent of the annual $1 trillion U.S. health care annual $1 trillion U.S. health care bill, or approximately $100 billion a bill, or approximately $100 billion a year; taxpayers footed a significant year; taxpayers footed a significant proportion of this bill Major proportion of this bill Major corporations cost.corporations cost.Trusted Criminals: White Collar Crime in Contemporary Society, 3e, David O. Friedrichs

Chapter 3 Continued Price Fixing Much of fixing prices does not involve a

specific conspiracy but rather takes the form of parallel pricing, wherein industry ‘‘leaders’’ set inflated prices and supposed competitors adjust their own prices accordingly. Parallel pricing, which is virtually beyond the reach of law, has been estimated to cost consumers more than $100 million annually.Trusted Criminals: White Collar Crime in Contemporary Society, 3e, David O. Friedrichs

Chapter 3 Continued

Price Gouging and Manipulation Charges of price gouging, or systematic overcharging, have also been directed at various industries and corporations when they take advantage of especially vulnerable classes of consumers or circumstances such as shortages. The pharmaceutical industry has long been accused of price gouging with huge markups. This industry has a long history of promoting more-expensive brand name drugs over less-expensive, equivalent generic drugs.Trusted Criminals: White Collar Crime in Contemporary Society, 3e, David O. Friedrichs

Jeff [email protected]

AIM Screen Name: JeffCollins1198Office Hours – Thursday Evenings 8:00

PM – 10:00 PM Eastern TimeSeminar Time, Thursday nights at 10:00

PM Eastern Time

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Seminar 2 CJ264 White Collar Crime Jeff Collins. Welcome Jeff Collins [email protected] AIM Screen...

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