WhiteCollarCrimeOutline-Podgor

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White Collar Crime OutlineSpring 2004 - Podgor

Page 1 of 56I. Background Information

A. Some definitions have included an organizational or business requirementcomponent.

B. Other definitions have focused more on the type of crime involved.C. Legal arena has focused on type of crime involved.

D. Corporate crime predates white-collar crime.E. Podgors Definition

1. Non-violent crimes for financial or personal gain, typically committed bymeans of deception in the course and under color of legitimate economicactivity.

F. Why is the definition so important?1. Budget/money concerns. Because everything is tied to budgetary or

monetary concerns, it is important to define what constitutes white collarcrime.

G. DoJ priorities tend to change as public sentiment changes.H. What should be the limit of federal government prosecution and what should be

the province of the states.I. Most WCC is constitutionally based in

1. Commere clause2. Postal powers3. Tax powers

J. Prosecutorial Discretion1. Prosecutors have to decide who to prosecute and which offenses are

prosecuted.2. Have great discretion as long as there has not been discrimination.3. Who should prosecute when there are both federal and state offenses.

i. No constitutional problem with both sovereigns (dual sovereignty

rule) prosecuting same offense.ii. Factors

a. Resourcesb. Experience

iii. Federal government uses a rule called the Petite Policya. If the state prosecutes, then the federal government does

not prosecute.b. There are some exceptions, particularly civil rights cases or

local corruption cases.c. This is just a guideline, it is not a requirement.

II. Federal Influence in International Prosecutions

A. United States v. Castle1. Castle was a Canadian official who was bribed by US citizens in return for

favorable treatment of a bid.2. Issue is whether the government can prosecute foreign citizens under the

general conspiracy statute ( 371) for conspiring to violate the FCPA.i. 371 applies if there is a conspiracy to violate any offense

against the United States. Also, a conspiracy to defraud the USgovernment can be prosecuted under 371.


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Page 2 of 563. Could not charge the FCPA against foreign citizens because the intent was

not to reach them.4. FCPA was written to allow government to prosecute US citizens or US

companies.5. When FCPA was originally passed, companies were furious because

foreign competitors could still bribe while the US law put them at adisadvantage.

i. Amended to allow grease payments or if it was legal to bribe incountry, it was OK to bribe.

6. Court holds that government CANNOT prosecute for conspiracy.7. Court points to Supreme Court decision under Mann Act that held that

Congress intended to punish only one party.8. The FCPA was very clear in only applying to US citizens and companies.

B. United States v. Nippon Paper Industries Co., Ltd.1. NPI and other companies in Japan agreed to fix prices on paper for North

American markets.

2. Federal Grand Jury indicted and district court dismissed after NPI arguedthat all conduct took place in Japan.

3. Early cases clearly indicated that civil cases could be brought againstforeign corporations for anti-trust when the conduct was in anothercountry but there were intended and substantial effects in the US.

4. Court extends this to criminal cases.5. Sherman Act allows civil and criminal charges.6. Essentially, government can prosecute criminal charges under Sherman

Act when the conduct is foreign and there are intended and substantialeffects on the US.

7. Rule of Lenity resolves ambiguity in statutory language in favor of

defendant.C. United States v. Tarkoff

1. Medicare fraud involving Tarkoffs client.2. Tarkoff traveled to Israel to move proceeds of Medicare fraud from Israeli

bank to Tarkoffs Israeli bank.3. Tarkoff alleges that since none of the transactions took place in US, he

was not violating the money laundering statute and of conspiracy toviolate the statute.

D. Categories of International Jurisdiction1. Jurisdiction to Prescribe2. Jurisdiction to Adjudicate

3. Jurisdiction to EnforceE. Uniqueness of Criminal Law

1. United States v. Bowman (1922)i. Held that if it is criminal, then you prosecute the conduct where

the act occurs. This is called territorial jurisdiction.ii. Noted that criminal law has presumption of territorial jurisdiction

but carved out exception in some cases.


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Page 3 of 56iii. Distinguished between crimes against private persons/property

which affect peace of community which must be prosecuted bylocal jurisdiction AND criminal statutes not logically dependentupon local jurisdiction but are to defend against obstruction orfraud especially if committed by non-local citizens.

iv. Essentially, this means that personal crimes = territorialjurisdiction and fraud against government = extra-territorialjurisdiction.

2. Post-Bowman Decisionsi. Lower court decisions have extended extra-territorial jurisdiction

even further.3. Ways of Obtaining Extra-Territorial Jurisdiction

i. Statutes focused on international conducta. FCPA is exampleb. Export Administration Act is another example

ii. Statutes with extra-territorial provisions

a. Tarkoff case had an extra-territorial jurisdictionb. Patriot Act has extra-territorial jurisdiction provisions

iii. Judicial interpretationa. Nippon case no provision in Antitrust statute that include

extra-territorial provisions.b. Courts must

1). Determine intent of Congress2). Look at international principles to try to determine

whether statute should be applied extra-territorially.i). International Principles

a). Territorial Principle Objective

Territoriality = if it is somethingthat affects US, the US hasjurisdiction.

b). Nationality nationality of personcommitting crime determines whichjurisdiction. Space law usesnationality jurisdiction. Maritimelaw also.

c). Passive Personality nationality ofthe victim determines jurisdiction.

d). Protective Principle determined by

national security. Is this a situationwhere we have to prosecute conductoutside of jurisdiction to protectpeople in jurisdiction.

e). Universality used when there isviolation of human rights and isbased on physical custody of theoffender.


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Page 4 of 564. Limitations on Jurisdiction

i. Restatementii. Comityiii. Treaties

III. Corporate and Individual Responsibility

A. Stages of Development of Corporate Criminal Liability1. Stage One No corporate criminal liability in that a corporation has no

mind, no body, and cannot be imprisoned.2. Stage Two Corporate criminal liability permitted for regulatory offenses

that are acts of omission (failure to do something one is legallyobligated to do). Since intent is not necessary for these offenses and thereare only fines being given, corporate criminal liability is allowed.

3. Stage Three Corporate criminal liability is extended beyond acts ofomission, but limited still to strict liability offenses. Courts find that thereis no basis for distinguishing between passive and active acts, as long asthe crimes are limited to fines, corporations can be held criminally liable.

4. Stage Four New York Central extends corporate criminal liability to nonstrict liability offenses.

B. Corporate Liability Overview1. New York & Hudson River Railroad Company v. United States

i. Agents of the railroad allegedly violated provisions of the ElkinsAct requiring the filing and publishing of freight rates.

ii. Corporation was charged with the crime, even though it wasemployees who actually committed the acts.

iii. Court uses respondeat superior liability of corporation for theacts of agents during the course of their duties for thecorporation.

iv. This case is different because it added a mens rea component.v. Corporation argued

a. No authority to impute criminal offenses to corporationb. Punishes shareholders and deprives them of due process

lacks opportunity to be heard and the presumption ofevidence. In essence, it is unconstitutional.

vi. Reasons court gives for holding corporation responsible.a. To give corporations immunity would have taken away an

effective means of controlling corporations.vii. Sometimes officers and directors have insurance policies that

cover civil or criminal acts.

viii. Theoretically, corporations could raise prices but long-term, themarket will adjust the price back down.

ix. Will corporate criminal liability serve as a deterrent?a. Other corporations might be deterred in committing

criminal acts if the corporation has liability.b. Individuals associated with criminal acts, as well as

corporations might be harmed.


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Page 5 of 56c. In some instances, corporations convicted of wrongdoing

may be prevented from dealing with the government in thefuture.

C. For the Benefit of the Corporation1. Standard Oil Company of Texas v. United States

i. Standard Oil Companys employees falsified documents to makeit look like oil was coming from wells that were unable to meetquota but was actually coming from higher-producing wells.

ii. Violated Hot Oil Actiii. Employees themselves were acting for themselves they got paid

for falsifying documents.iv. Basic issue is whether Congress intended to subject corporations

to criminal liability.v. Two tests the court uses to impute knowledge

a. A purpose to benefit the corporationb. An act by an agent in line of his duties

vi. In this case, there is no benefit and the court reversed theconvictions.

vii. Rule Corporations do not acquire knowledge through activitiesof unfaithful servants whose conduct was undertaken to advanceinterest of parties other than the corporation.

2. United States v. Hilton Hotels Corp.i. Association was formed to attract conventions in Portland,

Oregon.ii. Suppliers made contributions of 1% of sales to hotel members.iii. Hotels gave preferential treatment to contributing suppliers.iv. Hotel management testified that this was not allowed and the

purchasing manager.v. Rule A corporation is liable under the Sherman Act for the acts

of its agents in the scope of their employment, even thoughcontrary to general corporate policy and express instructions tothe agent.

vi. The Sherman Act has no mens rea it is a strict liability offense.D. Restricting Corporate Criminal Liability

1. Respondeat Superior Majority approachi. As above

2. Model Penal Code Minority approachi. Adds that the act must be done by a high managerial agent rather

than by a lowly agent in order for their to be criminal liability.E. New Directions in Corporate Criminal Liability

1. United States v. Bank of New Englandi. Bank of New England was convicted of violating the Transaction

Reporting Actii. Act requires banks to file reports within 15 days of customer

transactions exceeding $10,000.iii. Willful failure to file reports is a felony.


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Page 6 of 56iv. McDonough withdrew >$10,000 on 31 different occasions by

using multiple checks each written for less than $10,000 butaggregating over $10,000.

v. Indictment alleged bank willfully failed to file reports.vi. Liability only occurs when the banks conduct in not filing report

is willful and is usually established by circumstantial evidence.vii. Court indicates that Banks knowledge is the sum of the

knowledge of all employees.viii. Rule A Corporation is considered to have acquired the

collective knowledge of its employees and is held responsible fortheir failure to act accordingly.

ix. Court indicates that Supreme Court has endorsed definingwillfulness as a disregard for the governing statute and anindifference to its requirements.

x. Computers have greatly increased criminal liability because oftheir ability to look at aggregate data.

xi. Collective Knowledge theory is relatively new theory.xii. Supreme Court has not affirmed Collective Knowledge theory.

2. Corporate Ethos Theoryi. Whole concept of changing culture within corporation.ii. Corporations have guidelines that indicate what they should do to

avoid criminal liability.3. Corporate Self-Identity

i. Theory is that a large organization is not only a collection ofpeople who shape it and activate it, but also a set of attributes andpositions, which influence, constrain, and at times even define themodes of thinking and behavior of the people who populate it.

F. Different Ways Government Has Settled White-Collar Crime1. Drexel

i. $350 million restitution fund2. Salomon

i. Threat of criminal chargesii. $290 million in sanctions

3. PSIi. Government agreed to defer prosecution for three years and drop

if corporation performed.ii. $330 million restitution fund

4. ADM

i. ADM agreed to plead guilty to criminal conspiracyii. Paid $100 million in fines

5. Anderseni. Charged with obstructionii. Pled not guilty but found guilty and fined $500,000

6. E.F. Huttoni. Pled guilty to 2000 countsii. $2,000,000 in fines and $750,000 in investigative costs


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Page 7 of 567. Not really any instances when the corporation wins.8. Most often resolved through some sort of deal.9. Most often requires corporations to cooperate fully.

G. Federal Prosecution of Corporations1. Corporations should not be treated leniently because of their artificial

nature nor should they be subject to harsher treatment.2. Factors to consider in determining whether to charge corporations

i. In addition to sufficiency of the evidence, the likelihood ofsuccess at trial, probable deterrent, rehabilitative, and otherconsequences of conviction, and the adequacy of non-criminalapproaches:

a. Nature and seriousness of the offense, and applicablepolicies and priorities governing the prosecution ofcorporations for particular categories of crime.

b. The pervasiveness of wrongdoing within the corporation.c. The corporations history of similar conduct.

d. The corporations timely and voluntary disclosure ofwrongdoing and its willingness to cooperate in theinvestigation of its agents.

e. The existence and adequacy of the corporationscompliance program.

f. The corporations remedial actions.g. Collateral consequences, including disproportionate harm

to shareholders and employees not proven personallyculpable.

h. The adequacy of the prosecution of individuals responsiblefor the corporations malfeasance.

i. The adequacy of remedies such as civil or regulatoryenforcement actions.

H. Individual Responsibility1. United States v. Park

i. Acme is a national retail food chain headquartered inPhiladelphia and Park is CEO.

ii. Rodent infestation in warehouse in Baltimoreiii. Acme and Park were charged with violating FDA regulations.iv. Acme pled guilty.v. Park found guilty at trial.vi. Acmes lawyer is chief witness against Park and testified to

Parks responsibilities.vii. Park argued that he was not personally responsible because he

had spoken with others as to fixing the problem.viii. Court is looking at the jury instruction in terms of responsible

share.ix. Supreme Court held that corporate employees who have a

responsible share in the furtherance of the transaction which thestatute outlaws are subject to the criminal provisions of the Act.


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Page 8 of 56x. Possible defense is powerlessness to correct a situation.

a. Defendant has burden of presenting evidence ofpowerlessness.

xi. Dissent argues that instruction does not match the Courtsdecision. The Courts decision basically is a negligence standard.

xii. Why did Park take this all the way to the Supreme Court when itwas only a $250 fine.

a. Possible civil liability stemming from criminal conviction.b. His job became much harder to do if he was convicted.

2. Verdict Consistency Between Individual and Corporationi. There are several arguments when there is inconsistency between

individual and corporate criminal liability.3. A corporations directors now have an obligation to adopt compliance

programs that meet the standards of the Organizational SentencingGuidelines.

4. Problem Two

i. Reasons for going against A, Inc.a. Benefit went to company.b. Company would have more money for restitution.c. Compliance program would be best implemented by

company.d. Should have had a compliance program.

ii. Reasons for proceeding against CEO Pata. CEO assumed the risk of implementing the incentive

program.b. Pat had the means to monitor and correct Angels conduct.

iii. Reasons for proceeding against Manager Angel

a. Criminal activity was for his own personal benefit.iv. There is significant tensions as to prosecuting.v. MPC would require a high managerial agent to prosecute. Lower

level managers and employees are typically not high managerialagents.

IV. Principles of Statutory InterpretationA. White collar crime covers so much material that it is imperative that practitioners

be able to dissect the statutes and be able to apply them.B. Mens rea, more so than any other element tends to separate white collar crime

from street crime.1. Many times, there are claims that person who committed act did not know

act was actually criminal.C. In other cases, terminology used in the statute is very important.D. The Mens Rea Element

1. Ratzlaf v. United Statesi. Ratzlaf owed a casino $160K for blackjack debts.ii. Showed up on due date with $100K in cash.iii. Casino told Ratzlaf that any transaction in cash of over $10K had

to be reported.


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Page 9 of 56iv. Went to several banks getting cashiers checks for just less than

$10K in order to avoid reporting.v. Ratzlaf was charged with structuring transactions under 31

U.S.C. 5322 and 5324.vi. The trial court indicated that the government did not have to

prove that the structuring conduct was unlawful.vii. Ratzlaf was convicted, fined, and sentenced to prison.viii. Statute required the willful violation of the statute.ix. Ratzlaf argued that willful required that he know that the

structuring activity was illegal.x. Supreme Court held that the government must prove that the

defendant must act with knowledge that the conduct wasunlawful in order to be held to have willfully violated thestatute.

xi. If jury had gotten the Supreme Courts version of the instructionas to willfulness, it is likely they still would have convicted.

xii. Complexity of statute and whether the same activity might be theviewed differently under different circumstances play into thedecision.

xiii. Majority decision does not seem to make it impossible to provestructuring.

xiv. Congress amended the statute by taking out the word willfully.a. Does not matter to this case, but other statutes have willful

requirement.b. The point is that willfulness is an important argument.

xv. Dissent argues that willfully requires only the voluntary,intentional violation of a known legal duty.

xvi. This is the second of two cases that have willfully in thestatute.

a. Cheek v. United States1). Airline pilot failed to file income tax returns

because he didnt think wages were income.xvii. Good faith reliance on counsel is also sometimes raised as a

defense.a. Factors on p. 99*******

xviii.If retrying Ratzlaf, would request the following instructiona. In order to find the defendant guilty you must find that the

defendant willfully violated the statute in the context of

this case, willful violation means that the defendant musthave actual knowledge that the conduct in which he wasengaging was unlawful.

xix. Can jury infer the intent of the defendant from the activitiesinvolved?

a. Absolutely each particular action can be used todemonstrate what the defendant intended.

2. Reading in a Mens Rea Element


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Page 10 of 56i. United States v. United States Gypsum Company

a. Legislative history can play a very important part indetermining.

b. Growing trend in using rule of lenity ambiguity isresolved in favor of the defendant

3. Level of Mens Rea in Other Casesi. Cases show a trend in requiring an actual mens rea.

E. Ambiguity in Other Elements1. Dowling v. United States

i. In addition to copyright and mail fraud violations, governmentcharged Dowling with violation of National Stolen Property Act

a. Criminal for anyone to transport in interstate or foreigncommerce, any goods, wares, merchandise, securities ormoney, of the value of $5,000 or more, knowing the sameto have been stolen, converted, or taken by fraud.

ii. Also charged with conspiracy to transport stolen property in

violation of 18 U.S.C. 371a. Includes

1). Offenses against the U.S.2). Defrauding the U.S.

b. Must have normal elements of conspiracy1). Agreement2). Intent

i). To conspireii). To commit unlawful act

c. Must also have overt actiii. Dowling and others made bootleg copies of Elvis recordings

(without paying royalties) for sale and transported them ininterstate commerce.

iv. Dowling claimed that intellectual property was not property forthe purposes of the National Stolen Property Act.

v. Court holds that bootleg recordings are NOT stolen propertywithin the meaning of the statute.

vi. Court justifies by indicating that statute was intended to fill gapbecause of difficulty in state prosecution of stolen propertytransported interstate.

vii. Also, since copyright is federal, Congress would have power tomake this type of activity criminal.

2. When is it appropriate to limit reach of statute to termsi. Only when it is unambiguous

3. When is it appropriate to add in to the reach of the statutei. When ambiguousii. Would argue policy, legislative history, etc.

4. When there is a general statute covering illegal activity AND a specificstatute covering the same conduct, the trend is to allow charging bothcrimes at the same time.


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Page 11 of 56i. Current mandate is to charge all possible counts.

5. Electronic Espionage Act criminalizes some of the areas that the NationalStolen Property Act does not specifically cover.

F. Going Beyond the Statute1. McCormick v. United States

i. The line that makes something illegitimate is if there is a quid proquo: If payments are made in return for an explicit promise orundertaking an explicit promise or undertaking by the official toperform or not perform an official act.

2. Evans v. United Statesi. Court accepts majority of circuit opinion, which says that no

affirmative act is required.ii. Why does McCormick get conviction reversed and Evans

doesnt? It is necessary to show quid pro quo.iii. Government needs to show that the public official has obtained a

payment to which he was not entitled, knowing that the payment

was made in return for official acts.iv. Inducement: can be a passive acceptance, as opposed to saying,

give me the money and I will take care of your zoning petition; itcan be enough that the individual takes the money and then hasthat quid pro quo and acts upon it.

3. United States v. Sun Diamond Growers of Californiai. Issue: does government have to prove that gratuities were given

because of recipients official position?ii. To establish violation of federal gratuity statute, government

must prove link between thing of value conferred upon publicofficial and a specific "official act" for or because of which it was

given.V. Mail and Wire Fraud

A. Introduction1. Mail Fraud prosecution requires the government to prove

i. A scheme devised or intending to defraud or for obtaining moneyor property by fraudulent means

ii. Use or cause the use of the mails (or private courier) infurtherance of the fraudulent scheme.

2. Originally codified in 1872 as recodification of the Postal Act3. No legislative history or debate4. Mail fraud had been the statute for prosecutors to use when there was not

particularized legislation this would only be a stopgap.5. Limitations to mail fraud

i. Unethical conduct such as puffing, etc. does not rise to level ofmail fraud.

B. Scheme to Defraud1. McNally v. United States

i. Element at issue is scheme to defraud


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Page 12 of 56ii. Public official from Kentucky funneled insurance commissions to

private individuals.iii. Officials basically did a kickback type of scheme.iv. Issue is whether conduct was within the scope of the mail fraud

statute.

v. The government claimed that citizens of Kentucky had intangibleright to effective government and that this scheme deprived themof this right.

vi. In 1909, Congress codified holding of another case, indicatingthat any scheme or artifice to defraud or for obtaining money orproperty by means of false or fraudulent pretenses,representations, or promises.

vii. Court concludes that intangible right to effective government wasnot property under the mail fraud statute.

viii. Court reverses the convictions for mail fraud.ix. Court bases decision on

a. Charge of obtaining money or property must be inindictment

b. Jury charge must include instruction as to obtaining moneyor property

x. Court uses rule of lenity in making its decision.xi. This decision was a bombshell to prosecutors.xii. Courts had to issue writs of coram nobis that allowed persons

previously convicted of mail fraud to re-obtain the rights takenaway by their felony conviction.

xiii. Dissenta. Argues that or is disjunctive in statute and thus should

not require obtaining money or property.b. Probably came from legislative history

xiv. AfterMcNally, prosecutors became very creative in findingsomething to be property.

xv. Additionally, afterMcNally, Congress amended things so thatterm scheme or artifice to defraud includes a scheme or artificeto deprive another of the intangible right of honest services.

xvi. When can a prosecutor still be required to show money orproperty?

a. When it is in the indictment.b. Very rarely will prosecutor charge based on deprivation of

honest services.c. Most will charge for obtaining money or property.

C. What Constitutes Property1. Intangible Property

i. Carpenter v. United Statesa. Winans was a reporter for the Wall Street Journal of a

column called Heard on the Streetb. The column was very well read and had effects on market.


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Page 13 of 56c. Winans revealed information to brokers prior to publishing

and the brokers would trade on this information.d. Carpenter was the runner who carried the information.e. Winans and Carpenter were indicted for mail fraud.f. Here, mail fraud is premised on obtaining property, not on

deprivation of intangible rights.g. In this case, the property is the intangible confidential

business information.h. Thus

1). Intangible rights = no mail fraud McNallydecision

2). Intangible property = mail fraud Carpenterdecision

i. Case would have been more difficult, if not impossible, ifthe WSJ did not have the policy of confidentialinformation.

j. Could they have been charged with mail fraud if theyactually lost money?

1). Loss or gain is irrelevant as to charging mail fraud.2). Mail fraud requires a scheme to defraud, not a

successful scheme to defraud.k. Intangible property

1). Confidential business information2. Licenses

i. Cleveland v. United Statesa. Cleveland was a lawyer who was charged with mail fraud

for making false statements in applying to the Louisiana

State Police for permission to operate video pokermachines.

b. Client owns truck stop and lawyer indicates on applicationthat clients children own truck stop in order to pass goodcharacter requirements.

c. At trial, defendant argued that there was no property takenbecause it was only a license.

d. Supreme Court indicates that until license is issued, it issimply an intangible right and thus does not fall under mailfraud statute.

e. Prosecution did not charge under amended law that allowed

the intangible right of honest services because this waspretty vague and ambiguous.

f. Why is the Court afraid to indicate licenses with property?1). Typically, this is a state area and the Court offers a

federalism argument.D. Intangible Right to Honest Services

1. Amendment added words intangible right of honest servicesi. Some have argued that this term is vague.


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Page 14 of 56ii. Rybicki v. United States, 354 F.3d 124 (2003)

a. Prior to this decision, there was a pretty consistent thoughtthat indicated that the statute was not unconstitutionallyvague.

b. En banc decision in 2nd Circuit was limited to question as to

vagueness of intangible right of honest services term.iii. There is no definitive ruling that indicates how much of pre-

McNally decisions would now fit under the intangible right ofhonest services language.

2. Private Sector Fraudsi. For a private sector defendant to have violated the victims right

to honest services, it is not enough to prove the defendantsbreach of loyalty alone.

ii. The breach of loyalty must contravene, by inherently harming,the purpose of the parties relationship.

E. Intent

1. United States v. DAmatoi. Armand DAmato was an attorney and the brother of Senator

DAmato from New York.ii. DAmato was under contract with Unisys to lobby on their

behalf.iii. DAmato was charged with mail fraud for structuring his billings

to conceal the nature of his relationship with Unisys.iv. DAmato was also charged with mail fraud for failure to provide

reports as he told Unisys.v. Under federal sentencing guidelines, all instances of mail fraud

are combined and amount of loss is factored in.

vi. Key point in this case is that there is a mens rea requirement formail fraud.

vii. Government has two theories for mail fraud chargesa. Right to Control Theory

1). Two pronged testi). Whether corporate management has made

an otherwise lawful decision thatconcealment or a failure to disclose is in thecorporations best interests.

ii). Whether management acted in good faith inmaking, and did not personally profit from,

the decision.2). If an outsider, must go through two-pronged test.3). A person hired to perform services for a corporation

cannot be found to intend to harm a corporation orits shareholders through otherwise lawfulmisleading conduct if he or she follows theinstructions of an appropriate corporate agent whoappears to be unconflicted and acting in good faith.


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Page 15 of 56b. False Pretenses Theory

1). Billed falsely and did not do the work.2). Ramifications are that mail fraud would occur any

time that there was some false billing.viii. Government has to show some harm or injury contemplated by

the schemer or if there is no harm or injury contemplated, thenthey will have to have independent evidence of the allegedscheme to show the defendants fraudulent intent.

F. Materiality1. Neder v. United States

i. Attorney and real estate developer.ii. Basically, he schemed to swindle banks out of loan proceeds by

making false statements and misleading banks to lend himmoney.

iii. Indicted for mail fraud, wire fraud, and filing false tax returns.iv. Neder argued that jury was not instructed that materiality of the

statements was necessary and that failure to instruct was error.v. Supreme Court indicated that materiality of falsehood is an

element of the federal mail fraud, wire fraud, and bank fraudstatutes.

vi. Rationale was that statute is presumed to include common lawelements unless Congress indicates otherwise.

a. In this case, materiality was included at common law.G. Mailing

1. Mail fraud requires a mailing.2. Mailing includes or deposits or causes to be deposited any matter or thing

whatever to be sent or delivered by any private or commercial interstate

carrier.3. No longer limited to U.S. Postal Service.

H. In Furtherance1. Schmuck v. United States

i. Used car distributor who rolled back odometers on cars he sold toother dealers.

ii. Mailing in the case occurred when Schmuck would submit titleapplication on behalf of the retail customers.

iii. Jury convicted and 7th Circuit reversed.iv. Supreme Court affirmed the reversal, but indicated that mailings

WERE made in furtherance of the scheme to defraud.

v. Rationalea. Not incident to scheme to defraud, but was integral part of

the overall scheme.b. Unless the mailing was done, Schmuck would lose dealers

business and thus the mailing was a requirement.vi. Rule Relevant question at all times is whether the mailing is

part of the execution of the scheme as conceived by theperpetrator at the time, regardless of whether the mailing later,


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Page 16 of 56through hindsight, may prove to have been counterproductive andreturn to haunt the perpetrator of the fraud.

vii. Three previous decisionsa. Maze Case

1). Scheme had reached fruition and the mailing was

after the fact.viii. Causing to be mailed is enough to constitute mailing.

a. Agents of defendant can qualify.b. If in ordinary course of business the items would be mailed,

it will be held to have been mailed.ix. Limitations to In Furtherance Element

a. Prior to SchmuckCase There Were Four types ofLimitations

1). Mailings that conflicted with the scheme to defraud,that aided in detection, or that were diametricallyopposed to the defendant acting with an evil mens

rea.i). Schmuck expressly overruled this theory.

2). Mailings that were part of an imperative duty to thestate were not considered to be in furtherance of thescheme to defraud.

3). Mailing that were prior to the commencement of thescheme to defraud were not in furtherance of thescheme.

4). Mailings after the fruition of the scheme to defraudwere not considered to be in furtherance of thescheme.

I. Wire Fraud and Other Frauds1. United States v. Bryant

i. Defendants appealed convictions for wire fraud.ii. Defendants alleged that government could not prove that

defendants knew or could reasonably foresee that the telegramsinvolved were sent interstate.

iii. Government argued that there is no requirement for knowledge orforeseeability.

iv. Many courts have held that a scheme to defraud requires specificintent.

v. Interstate element is jurisdictional and is strict liability.

vi. This court indicates that knowledge or foreseeability of interstatetransmission is not necessary under the statute.

vii. Hypoa. Telephone lines running all over country. Does in-state call

qualify as wire fraud because of telephone system.1). Probably government would still have to prove that

call was actually interstate. This might change astechnology evolves.


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Page 17 of 56J. Bankruptcy Fraud

1. United States v. Gellenei. Attorney indicted for bankruptcy fraud because he left major

creditor off of the declaration list.ii. Attorney claimed he had no fraudulent intent.

iii. In some circuits, intent to deceive is not sufficient, there must bean intent to defraud.

iv. In this case, the court indicates that intent to deceive and intent todefraud are synonymous.

v. Key language for materiality is whether the communicationinfluences a decision-making body.

vi. Materiality will be determined by the jury it is not a legaldecision.

K. Computer Fraud1. United States v. Czubinski

i. Defendant was convicted of wire fraud and computer fraud.

ii. Defendant worked for the IRS and browsed the tax returns ofpersons on his computer terminal.

a. People on the David Duke presidential campaignb. District Attorney prosecuting his fatherc. Girlfriend

iii. Defendant argued that he did not use the information.iv. Government based its case on two theories

a. Defrauded IRS of their propertyb. Defrauded IRS and public of intangible right of his honest

services.v. Court indicates that mere browsing is not sufficient for wire or

computer fraud.vi. Violation of Workplace Rules can be a breach of fiduciary duty.vii. Precedent supports the conclusion that to deprive a person of

their intangible property interest in confidential information,either some articulable harm must befall the holder of theinformation as a result of the defendants activities, or somegainful use must be intended by the person accessing theinformation, whether or not this use is profitable in the economicsense.

viii. Court cautions that the wire fraud and mail fraud statutes are verybroad and must be used carefully just because conduct is

morally wrong, does not mean it is criminal.ix. Computer fraud does not mirror the other fraud statutes it is

completely differenta. Seven different types of conduct suffices for computer

fraud1). Knowingly accessed computer without

authorization or exceeding authorization forespionage.


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Page 18 of 562). Intentionally accessing computer without

authorization or exceeding authorization3). Intentionally accessing any nonpublic computer of a

department or agency of the US.4). Knowingly and with intent to defraud accesses a

protected computer without authorization5). Knowingly or intentionally accessing computers for

computer viruses or other damage causing reasons.6). Trafficking in passwords.7). Intent to extort using a computer.

L. Other Scheme to Defraud Statutes1. Health Care Fraud2. Bank Fraud3. Travel Fraud

M. Money Laundering1. United States v. Powers

i. Powers was employed by gas marketer, Oryx.ii. One of Powers customers was ISP.iii. Powers and person at ISP set up a third company, Long Valley.iv. Oryx would sell gas to Long Valley who would sell to Cowboy

Pipeline who would then sell to ISP.v. Government charged Powers with money laundering.vi. Government must show that defendant desired to create the

appearance of a legitimate wealth or otherwise to conceal thenature of funds so that the money could enter the economy aslegitimate funds.

vii. Powers argued that he was open and notorious with his actions

and thus should not be charged with money laundering.viii. Previous case had held that transactions that are open and

notorious would not support money laundering conviction.2. Money laundering has become a significant tool used by prosecutors in

white collar cases.VI. Racketeer Influenced and Corrupt Organization Act (RICO)

A. Introduction1. Major Statutory Provisions

i. 18 U.S.C. 1961a. Definitions

1). Racketeering Activity

2). Enterprise3). Pattern of Racketeering Activity

ii. 18 U.S.C. 1962a. Prohibited Activities

1). Elements differ depending upon the activityperformed.

b. Subsection (d) is the RICO conspiracy provision.iii. 18 U.S.C. 1963


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Page 19 of 56a. Criminal Penalties

1). Possibility of asset forfeiture is a big part of thissection.

iv. 18 U.S.C. 1964a. Civil Remedies

1). Can use criminal statutes to proceed in civil actionsinvolving RICO.

B. Department of Justice Guidelines1. Congressional intent was to construe the statute broadly.2. RICO actions brought by the government require prior approval from the

Criminal Division.3. It is the policy of the DOJ that RICO be selectively and uniformly used.4. Basic reason is to avoid misuse of the statute.5. Civil RICO actions are not so constrained; however, Congress has put

limitations on civil RICO actions.6. Policy of DOJ is not controllable by courts.

C. Elements1. Prohibited Activities

i. 1962a. (a) using income from a pattern of racketeering activity to

acquire an interest in an enterprise engaged in, or theactivities of which affect interstate or foreign commerce

b. (b) acquiring or maintaining through a pattern ofracketeering activity an interest in an enterprise engaged

c. (c) conducting or participating in the conduct, through apattern of racketeering activity, of such affairs of anenterprise that affect interstate or foreign commerce

d. (d) conspiring to further any of the activities listed in a, b,or c.

2. Enterprisei. Includes any

a. 1. Individual, partnership, corporation, association, orother legal entity

b. 2. And any union or group of individuals associated in factalthough not a legal entity

ii. United States v. Turkettea. Criminal case.b. This is brought under (d) and is a conspiracy to commit

activities prohibited under other provisions of RICO.c. Turkette was convicted after a 6 week trial and was given 2

20-year concurrent sentences + a 2-year special parole on adrug count.

d. Turkette argued that RICO statute was designed only toprotect legitimate business enterprises from infiltration byracketeers and since his activity was purely illegal, it wasnot covered by RICO.


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Page 20 of 56e. Court of Appeals reversed based on this argument.f. Supreme Court construed the RICO statute broadly.

iii. Courts have permitted state and local government offices to bethe enterprise in a RICO case.

iv. Even husband and wife could be an enterprise under an

association in fact theory.v. Association in Fact Enterprise

a. General Agreement that this requires1). Common purpose2). Function as a continuing unit

b. United States v. Bledsoe1). Court of Appeals held that the enterprise has to be

an ascertainable structure.c. United States v. Perholtz

1). Organization could coalese with the pattern ofracketeering activity.

d. United States v. Riccobene1). Middle ground in that there must be an existence

beyond that which is necessary merely to committhe predicate racketeering offenses.

e. United States v. Console1). Law firm and medical practice were an enterprise

when they conspired to obtain money throughpersonal injury cases.

f. Chang v. Chen1). Required the organization, formal or informal, to be

an entity separate and apart from the pattern of

racketeering activity in which it engages.g. Must Have Three Things

1). Defendant2). Commission of Racketeering Activity3). Enterprise

h. Question is whether racketeering activity and enterprisehave to be separate entities.

vi. Distinctiveness of the Enterprise and the Defendanta. Cedric Kushner Promotions, Ltd. v. King

1). RICO case2). 1962(c) Conducting or participating in the

conduct, through a pattern of racketeering activity,of such affairs of an enterprise that affect interstateor foreign commerce.

3). Question is whether you can participate or conductenterprise when you are the enterprise.

4). Appeals Court held that person and corporationwere not distinct entities and thus there was noperson, distinct from the enterprise, who improperly


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Page 21 of 56conducted enterprises affairs and 1962(c) did notapply.

5). Person and corporation are two distinct entities.6). Rule When a corporate employee unlawfully

conducts the affairs of the corporation of which he

is the sole owner whether he conducts thoseaffairs within the scope, or beyond the scope ofcorporate authority, the need for two distinct entitiesis satisfied.

vii. Hyposa. X Corp and Y Corpb. A works for X and B works for Yc. Bribery between A/B and otherd. Possible Enterprises

1). A and B2). X Corp

3). Y Corp4). X Corp and Y Corp5). X Corp and B6). Y Corp and A7). A8). B9). X Corp and A

10). Y Corp and B11). X Corp and Y Corp And A and B12). X Corp and Y Corp and B13). A B and X Corp

14). A B and Y Corpe. Point is that there is a great deal of choice in which

enterprise can be charged.f. Choice would depend on many factors

1). Venue/Jurisdiction/Burden of Proof/Evidenceconsiderations.

i). Sentencing would no longer be a factorbecause of uniformity under federalguidelines.

2). Forfeiture of enterprise is allowed in cases of illegalenterprises.

g. The enterprise itself is not necessarily the illegal actor but ithas negative connotations.

viii. United States v. Noriegaa. Difficult to ascertain the structureb. Activity coalescing with individuals to create the

enterprise.ix. United States v. Tokars

a. Illegitimate enterprise


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Page 22 of 56b. Made up of drug traffickers from all over the country.c. Has to be an association in fact because it is not a legal

entity.x. Gold Club Case

a. Association in fact

b. Enterprise included members of Gambino crime family,Delta Airlines, owner of night club, etc.

xi. Economic Motivea. National Organization for Women v. Scheidler

1). Issue is whether RICO requires an economicpurpose for the racketeering enterprise or thepredicate acts of racketeering.

2). Petitioners sued groups opposing abortion allegingviolations of the Sherman Act and RICO.

3). Claims under RICO were brought under (a), (c), and(d).

4). District Court dismissed, indicating that there wasan economic motive requirement.

5). Court of Appeals affirmed.6). Supreme Court reversed, indicating that RICO does

not have an economic motive requirement.3. Engaged In, or the Activities of Which, Affect Commerce

i. Pattern of Racketeeringa. Prohibited Activities

1). 1962i). (a) using income from a pattern of

racketeering activity to acquire an interest in

an enterprise engaged in, or the activities ofwhich affect interstate or foreign commerce

a). In this subsection, as a result offraudulent activity, they obtainmoney to purchase an interest in anenterprise.

b). Own dry cleaner but it is not alegitimate business it is a front. If Isell dry cleaners and use income tobribe public officials, it is subsection(a).

c). Enterprise is the victim under thissubsection.

ii). (b) acquiring or maintaining through apattern of racketeering activity an interest inan enterprise engaged in, or the activities ofwhich affect interstate or foreign commerce


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Page 23 of 56a). Fraud is committed and money is

obtained to obtain an interest in theenterprise.

b). Enterprise is the victim.iii).(c) conducting or participating in the

conduct, through a pattern of racketeeringactivity, of such affairs of an enterprise thataffect interstate or foreign commerce

a). You are a part of the enterprise andare conducting the racketeeringactivity.

b). Enterprise in this instance is notnecessarily the victim.

iv). (d) conspiring to further any of the activitieslisted in a, b, or c.

b. H.J. Inc. v. Northwestern Bell Telephone Company

1). Petitioners claimed that NW Bell bribed MPUC(governmental agency) to set prices.

2). Issue is what pattern of racketeering entails.3). Court looks at statute and indicates that there is a

precedent for interpreting the statute broadly.4). Pattern of Racketeering Activity

i). Requires at least two acts of racketeeringactivity.

a). Statute of limitations is long 10years.

5). Court notes that two acts might not be sufficient

because it does not necessarily form a pattern.i). Sporadic activity is not sufficient for a

pattern.6). Court indicates that formula for determining pattern

of racketeering activity isi). CONTINUITY + RELATIONSHIP

7). Relationship Definitioni). Criminal conduct forms a pattern if it

embraces criminal acts that have the same orsimilar purposes, results, participants,victims, or methods of commission, or

otherwise are interrelated by distinguishingcharacteristics and are not isolated events.

8). Continuity Definitioni). Continuity is both a closed- and open-ended

concept, referring either to a closed periodof repeated conduct, or to past conduct thatby its nature projects into the future with athreat of repetition.


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Page 24 of 56a). Closed

i. Series of related predicatesextending over a substantialperiod of time.

b). Open

i. Requires continuing threat.9). Concurrence

i). Concurrence indicates that there is apossible vagueness/ambiguity argument.

c. Racketeering Activity1). Must have

i). At least two actsa). Predicate Actsb). Predicate Acts are listed in 1961(1)c). Includes state and federal offenses.d). Courts have held that what state calls

the offense is irrelevant.ii). Continuity + Relationship as defined above.

d. Hypo1). Bone, Inc.2). Attorney is doing outside work for Bone, Inc.3). Attorney does a few things that cross the line.

i). Bribes judge 3/15/01ii). Bribes judge 3/15/02iii).Commits mail fraud 3/15/03

4). Proving RICOi). Need two predicate acts

a). 2 acts of bribery and mail fraud.ii). Continuity + Relationship

a). Relationshipi. Bone, Inc. gets benefit.

b). Continuityi. Both open or closed because

it covers a substantial periodof time.

ii. The Nexus Requirementa. Reves v. Ernst & Young

1). Brought under 1962(c)

2). Issue is what does conduct and participatemean.

3). Court looks to dictionary meanings.4). Court concludes that conduct requires an element of

direction.i). Court indicates the operation or

management test is used.


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Page 25 of 565). Only time this is an issue is when case is brought

under subsection (c).6). Court indicates that

i). To conduct or participate, directly orindirectly, in the conduct of such

enterprises affairs, one must participate inthe operation or management of theenterprise itself.

7). Court also indicates that an enterprise might beoperated or managed by outsiders if bribery isinvolved.

iii. Interstate Commerce Elementa. United States v. Robertson

1). Robertson was charged with narcotics and RICO (1962(a)) for investing the proceeds of unlawfulnarcotic activities in a gold mine.

2). Robertson was convicted and Court of Appealsreversed, indicating that activity did not affectinterstate commerce.

3). Predicate acts in this case were the drug deals.4). Robertson then invested the proceeds to acquire an

interest in an enterprise affecting interstatecommerce.

5). Supreme Court indicates that interstate commerce inRICO statute is made up of two components

i). Engaged in interstate commerceii). Affecting interstate commerce

6). Court says that prosecutor can bring under eithertheory.

7). Court indicates that the mine was engaged ininterstate commerce.

i). Mine hired out of state workers.ii). Mine bought equipment out of state.iii).Gold was taken out of state.

8). Meeting the engaged in interstate commercecomponent is less stringent than the affectinginterstate commerce.

D. RICO Conspiracy

1. Different from general conspiracy statute (18 U.S.C. 371)i. General conspiracy statute requires an overt act in furtherance of

conspiracy.ii. RICO does not require an overt act.

a. If two or more people get together and decide to useincome from pattern of racketeering activity to acquireinterest in enterprise that engages in interstate commerce;however, they have not made any act in furtherance of it.


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Page 26 of 561). This would be sufficient under RICO conspiracy

provisions.b. Supreme Court found that since Congress did not explicitly

state that an overt act was required, it was not required just like other federal conspiracy statutes that do not require

overt act.2. Covered in 1962(d)

i. Two or more people involved in either 1962 (a), (b), or (c).E. RICO Forfeiture

1. Enormously powerful provision2. 19633. Three categories for forfeiture

i. Interests acquired or maintained through racketeering;ii. Interests in or providing a source of influence over the

racketeering enterprise;iii. Proceeds from racketeering activity.

4. Relation-Back Doctrinei. Money can be related back to its original source.

5. Two Types of Forfeiturei. In personam

a. Going after the personii. In rem

a. No criminal actionb. Civil forfeiture actionc. Much lower burden to prove civil

6. Supreme Court has held that an owners lack of knowledge of the factthat her home had been purchased with proceeds of illegal transactions

i. Bona fide purchasers are protected.ii. The holding above indicates that there may even be protection

beyond a bona fide purchaser.7. Excessiveness

i. Alexander v. United Statesa. Alexander owned stores and theatres dealing in sexually

explicit materials.b. Convicted of obscenity and RICO violations.c. Sentenced to prison, fined, and order to forfeit certain

assets.d. Alexander argued that this violated 1st and 8th Amendment.

e. Supreme Court rejected free speech issue.f. Court agreed that case should be analyzed under excessive

fines clause.g. Remanded to Court of Appeals to determine if there was

excessive fines.ii. United States v. Bajakajian

a. Supreme Court held that the forfeiture of the entire$357,144 that respondent failed to declare on a customs


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Page 27 of 56reporting form to be grossly disproportionate to the gravityof his offense.

b. Court stated that this was a punitive forfeiture that violatedexcessive fines clause.

VII. Regulatory Offenses

A. Crimes involving a violation of government regulation.B. Sometimes, may involve public welfare offenses. However, this is not all of the

crimes.C. Voluntary Disclosure

1. If you voluntarily disclose to government that you have violatedregulation, the DOJ guidelines offer several factors to be considered indetermining whether to proceed with criminal prosecution.

i. Voluntary disclosureii. Cooperationiii. Preventive measures and compliance programsiv. Pervasiveness of noncompliance

v. Internal disciplinary actionvi. Subsequent compliance efforts

2. This will often help mitigate the penalty imposed.D. Prosecutorial Discretion

1. There is a great deal of discretion in what prosecutor can bring.2. If you are going after a corporation, however, there may be some limits.

i. Thompson Memoa. Regulatory Offenses are often charged against corporation

and not an official.b. Cooperation and Voluntary Disclosure are specifically

mentioned as mitigating penalties.

E. Mens Rea Element1. Strict Liability

i. United States v. White Fuel Corporationa. White Fuel operated a tank farm near a cove of Boston

Harbor.b. Oil was leaking into the harbor and it was determined that

the oil was leaking from White Fuels property.c. White Fuel was convicted under Refuse Act.d. White Fuel argued that government had to prove a mens rea

element.e. Question is whether this is a strict liability crime.

f. White Fuels Arguments1). Not Covered under Refuse Act because they did not

discharge, throw, or deposit oil.i). Court finds that statute does cover this type

of seepage.2). Mens Rea must be proven


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Page 28 of 56i). Court says that Refuse Act is termed a strict

liability offense because it falls into thecategory of public welfare offenses.

3). Government must prove negligence.i). Court says that facts inferring negligence

were there but Congress did not requirenegligence in the statute.

g. There are defenses available1). Someone else is responsible.2). Acts of God3). Independent contractors acting outside defendants

control2. Willfulness

i. United States v. Dye Construction Companya. Workman died in a trench cave-in.b. Dye was charged with willfully failing to shoresides of

trenches sufficient to protect employees.1). Violation of OSHA.

c. Tried by jury.d. Dye claimed that jury should have been instructed that

willfulness instruction should have included an evil intentelement.

e. Question is how willfully is defined.f. Supreme Court has said that evil intent is necessary for

moral turpitude offenses, but not for acts that are not inthemselves wrong.

g. Statute here does not require moral turpitude; thus, there is

no evil intent requirement.h. Still have to know that what you are doing is wrong,

however, there is no requirement that there is evil intent.ii. No Knowledge Proviso

a. A violation of the Securities Exchange Act can become afelony offense when the defendant acts willfully. The Actspecifically indicates that if there is no knowledge of therule or regulation violated, the defendant cannot beimprisoned.

iii. Mens Rea determined by Misdemeanor or Felonya. The mens rea for acts under the FDCA may depend on the

level of the offense.b. Misdemeanor would not have conscious fraud.c. Felony would have conscious fraudulent activity.

3. Knowinglyi. United States v. Bronx Reptiles, Inc.

a. Issue is what must the extent of the defendants knowledgebe to permit conviction when a criminal statute rendersunlawful an act knowingly undertaken by the defendant.


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Page 29 of 56b. Bronx Reptiles was convicted of violating the Lacey Act

making it a misdemeanor for any person to knowingly tocauseany wild animalto be transportedto theU.S.under inhumane or unhealthful conditions

c. Bronx Reptiles argued that the government did not prove

that defendant knew conditions were inhumane orunhealthful.

d. Court indicates that knowledge of conditions was required.e. Rationale

1). If knowingly did not apply to language abouttreatment, a vast range of behavior is criminalized.

2). Nothing in structure of statute that indicatesknowingly does not apply to phrase of inhumane orunhealthful.

3). Criminal statutes are presumed to contain a mensrea element. If Congress had meant to impose strict

liability, it could have said so.4). Court also indicates that this is not a public welfare

offense involving harmful or injurious itemsbecause frogs are not that type of article.

f. Dissent argues that this is a public welfare statute andshould be affirmed.

4. Willful Blindnessi. United States v. Buckley

a. Buckley was convicted of Clean Air and CERCLAviolations when asbestos was released during a demolitionproject.

b. Both statutes have specific requirement of knowledge.c. Buckley argued that the jury instructions as to the

knowledge requirement made the offense strict liability.d. The instructions indicated that Buckley could be found to

have knowledge by finding that he acted with a consciouspurpose to avoid learning the truth about the presence ofasbestos.

e. Rule Government can establish knowledge by provingthat defendant closed his eyes to obvious facts or failed toinvestigate when facts demanded investigation.

5. Negligently

i. United States v. Hanouseka. Clean Water Act has different levels of intent includes

both knowledge and negligence standards.b. Hanousek was a roadmaster with a railroad company that

was also responsible for a quarry project.c. While working at the quarry, a contractor backhoe operator

ruptured a pipeline and it resulted in discharge of 1-5,000gallons of heating oil.


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Page 30 of 56d. Hanousek was convicted of CWA violations by negligently

discharging a harmful quantity of oil into navigable waters.e. Hanousek appealed, arguing that the statute required

criminal negligence as opposed to the ordinary negligenceinstruction given at trial.

f. Court indicates that plain language of statute indicates thatordinary negligence is appropriate.

g. Congress had ability to define the negligence at a higherlevel, but chose not to.

h. Court also says that it is well established that a publicwelfare statute may subject a person to criminal liability forhis or her ordinary negligence without violating dueprocess.

6. Advice to give to legislature in drafting statutes is that you should clearlyset out the mens rea requirements or the courts will set it for you.

F. Individuals Liable

1. Persons in Chargei. Apex Oil Company v. United States

a. Apex Oil transported and stored oil.b. The company was convicted of failing to notify

government authorities of a known oil spill.c. Company argues that person in charge language of the

statute should not be read in the same manner as personis defined in same statute.

d. This case came down before the collective knowledgetheory had been accepted in lower courts.

ii. United States v. Carr

a. Question becomes who has the responsibility of reportingenvironmental violations and who to report the violationsto.

2. Responsible Corporate Officeri. United States v. MacDonald & Watson Waste Oil Company

a. Appellants were convicted of violating RCRA andCERCLA.

b. RCRA Cradle to grave Act dealing with waste disposal.1). Very comprehensive statute.

c. President of company contended that there was anerroneous jury instruction.

d. Jury instructions indicated that knowledge that could beshown by responsible corporate officer doctrine.

e. Three Criteria for Responsible Corporate Officer Doctrine1). The person is an officer of the corporation, not

merely an employee.2). The officer had direct responsibility for the

activities that are alleged to be illegal.


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Page 31 of 563). The officer must have known or believed that the

illegal activity of the type alleged occurred.ii. United States v. Iverson

a. Violations of CWAb. Act defines person, among other things, as a responsible

corporate officer.c. Rule Under CWA, a person is a responsible corporate

officer if the person has authority to exercise control overthe corporations activity that is causing the discharges. Norequirement that the officer in fact exercises such authorityor that the corporation expressly vest a duty in the officer tooversee the activity.

3. Aiding and Abettingi. United States v. Doig

VIII. Perjury, False Statements & ObstructionA. Lawyers must be very aware of potential perjury issues.

B. Questions for lawyers to ask when client is called before grand jury.1. Is my client a target?

i. If a target, client will more than likely be indicted.ii. Must explain to client the repercussions of pleading the 5th

Amendment.2. Is my client a subject?3. Is my client a witness?

C. Perjury1. United States v. Bronston

i. Bronston was the owner of a company that produced movies inEuropean countries.

ii. Company filed Chapter 11 and during questioning, Bronstonindicated that the company had bank accounts in Switzerland.

iii. However, the question was whether he himself had accounts.iv. The answer was literally true.v. Perjury statutes

a. 18 U.S.C. 1621 - Perjuryb. 18 U.S.C. 1623 False Statements

vi. Government alleged that Bronstons unresponsive statement wasperjury.

vii. From this case, a prosecutor should get that they should alwaysget the answer do not let the witness be unresponsive to the

question.viii. Court found that Bronston did not commit perjury because he did

not make an untrue statement.ix. Rule The perjury statute is not to be loosely construed, nor the

statute invoked simply because a wily witness succeeds inderailing the questioner so long as the witness speaks the literaltruth.

x. Elements of Perjury


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Page 32 of 56a. Having taken an oath before a competent tribunal, officer,

or person;b. Willfully and contrary to such oath;c. States or subscribes any material mater;d. That he does not believe to be true.

2. Sufficiency of the evidence in a perjury charge requires two witnesses.i. Does not require specifically two witnesses.ii. Can be one witness and corroborating evidence.iii. Circuits are split as to what qualifies as corroborating evidence.

3. U.S. v. Shottsi. Shotts seems to take position very similar toBronston case.

4. U.S. v. DeZarni. DeZarn court allowed external evidence when questioner used

the wrong date.ii. Court indicated thatBronston was distinguished because

Bronston dealt with an unresponsive answer in this case, the

answer is responsive.5. 1623 is different from perjury

i. No two-witness rule requirementii. Retraction is permittediii. Limited to judicial and grand jury proceedings.

D. False Statements 10011. United States v. Hixon

i. Hixon worked for TVA and was injured.ii. He filed for disability and on the forms, he indicated that he was

not self-employed.iii. TVA investigated and found that Hixon was operating a

corporation that provided, planned, and booked hunting andfishing trips.

iv. Hixon was the sole stockholder, president, treasurer, and memberof the board.

v. Hixon told investigators that it was his wifes business but thiswas false.

vi. Hixon was charged with making false statements.vii. False Statements

a. Not under oath.b. Typically to an investigator.

viii. Hixon argues that he did not make a false statement when he

indicated that he was not self-employed because working for acorporation is not self-employment.

ix. Court held that when one works for a corporation, a distinctentity, they are not self-employed.

x. Court indicates that he was not charged with other falsestatements that Hixon could have been convicted of.

2. Exculpatory No Doctrinei. Used to apply to 1001 prosecutions


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Page 33 of 56ii. Doctrine was when a person denied criminal involvement.iii. Supreme Court rejected exculpatory no defense.

E. Obstruction of Justice1. United States v. Baum

i. Baum was a criminal defense attorney charged with conspiracy,

obstruction of justice, false statements, and perjury.ii. Baum devised a scheme to make money from client by having

government file a Rule 35 motion on behalf of the client toreduce his sentence.

iii. 18 U.S.C. 1503 is the main obstruction of justice statute.a. 1503 reaches any person who corruptly influences,

obstructs, or impedes, or endeavors to influence, obstruct,or impede, the due administration of justice.

b. 1512 and 1513 were added in later amendments.iv. Baum alleged that obstruction required a pending proceeding and

since the client was already convicted, there was no pending

proceeding.v. Court refused to dismiss the obstruction charge, indicating that

client was eligible for Rule 35 motion and thus, there was apending proceeding.

vi. Additionally, the court indicated that there were broader publicpolicy considerations.

2. 1512 was added to prohibit the destruction, alteration, or concealment ofrecords related to an official proceeding.

i. Official proceeding need not be pending or about to be institutedat the time of the offense.

3. 1519 and 1520 were added by Sarbanes-Oxley Act and cover similar

ground and relate to destruction or concealment of documents andinvolvement of auditors.

IX. Grand Jury InvestigationsA. In white collar crime cases, the police do not do all of the investigating FBI/US

Attorney/Grand Jury also investigate.B. Grand Jury is the basic way to bring in evidence and evaluate it.C. Grand Jury is a way to get compulsory process to make individuals testify.

1. If they do not want to testify before grand jury, the witness can be grantedimmunity from prosecution then they must talk or they sit in jail oncharges of contempt.

D. Target: when they call that individual before grand jury

1. You can almost bet thats the person they want to indict2. Rare for them to testify in front of the grand jury.3. US Attorneys office has policy to give a target an advice of rights form

like Miranda form telling them that anything they say can/will be usedagainst them.

4. Only time they will is if theyve been granted immunity, theyre not atarget anymore, and theyre switched to the witness category.


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Page 34 of 565. DOJ not required to give this form, but they do because Congress may

figure something worse out. Although its not reversible error if theydont.

E. Subject: government just not sure about this person yet not a target, but dontknow which category to put them in.

1. Very rare that an attorney will have a subject testify unless its so clear cutthat the person is just a witness.

2. In those cases attorney will ask for immunity.F. Witness: attorney will ask for immunity.

1. Never know what could be said or where something might go.2. Usually government will grant it.3. Perjury isnt covered by the immunity statute.

G. Subpoenas1. Types

i. Duces tecum (asking for documents)ii. Ad testificandum (subpoena to get person there to testify)

2. 17(c)3. Webster Hubbell - #2 person in Attorney Generals office under Clinton

i. Subpoena they issued to him in the bookii. Very extensiveiii. This led to Supreme Court case that reversed his conviction.

4. R. Enterprises5. In re Carrato Brothers Case

H. Problem #11. Advantages to using a grand jury:

i. Dont need probable cause to get documentsii. Secrecy easier to get employees to testify

iii. Can just be investigating matter dont have to be sure of resultsiv. Compulsory nature making people talk, getting documents in

therev. No time constraints except outside SOLvi. Efficient and economical use of resources

2. Disadvantages of using grand jury:i. May reveal some of case to people who testifyii. Tip off subject of inquiry who might destroy evidence (could still

get them on obstruction)iii. May be seen as political attack against company

I. Problem #2

1. Defense arguments:i. Carroto standards: length of time unreasonable (note suggests

anything over 10 years unreasonable)ii. Proprietary information in corporate records (R. Enterprise case

suggests this may be grounds for an exception)iii. (c) is public record readily available to government; defendant

shouldnt be burdened


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Page 35 of 56iv. (d) and (e) no reasonable particularity overbroad and

burdensomev. Irrelevance

2. Prosecution arguments:i. Corporate books unsure when/where noncompliance began and

who needs to be charged need to figure that outii. Names of employees terminated need to find out if theres

whistleblower readily availableiii. Tax returns what kind of capital expenditures.iv. Easy accessv. Health records probably have access, would want to know if

there are any medical problems with employees due to productsthere

vi. Email communications easily accessible.X. Challenges to the Grand Jury Process

A. Supervisory Power Over the Conduct of the Grand Jury

1. United States v. Williamsi. Issue is whether prosecution has to offer exculpatory evidence to

the grand jury.ii. Under Brady v. Maryland, prosecutors must disclose to defense

counsel exculpatory evidence of the accused.iii. Rule Courts have no authority to prescribe that the prosecution

offer exculpatory evidence in grand jury proceedings pursuant totheir inherent supervisory authority over their own proceedings.

iv. In grand jury proceedings, the prosecution has no obligation topresent exculpatory evidence.

v. Although it is not required, all it will do is increase your failure

rate as a prosecutor if you do not present to grand jury underBrady, would have to give exculpatory evidence at trial.

B. Challenges to the Use of the Grand Jury1. United States v. Arthur Anderson, LLP

i. Court found no abuse of grand jury process.ii. As a prosecutor, once you indict, you CANNOT use the grand

jury any longer for the purpose of getting information for thecase.

iii. However, if you still have some defendants that you areinvestigating, you can use the grand jury process.

C. Grand Jury Secrecy

1. Barry v. United Statesi. Former mayor of Washington, DC, Marion Barry filed a

complaint arguing that there was unlawful disclosure ofinformation related to the grand jury proceedings.

ii. Rule of secrecy for grand jury is Rule 6(e)iii. Court came up with a two-step analysis to determine if a

violation of Rule 6(e)(2).


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Page 36 of 56a. District Court must determine whether the plaintiff has

established a prima facie case.1). Assessment of news articles

b. If the court determines that a prima facie case has beenestablished, the burden shifts to the government to attempt

to explain its actions in a show cause hearing.iv. Witnesses are not necessarily subject to secrecy rules.v. Officers of the court are bound to secrecy.

2. In re: Sealed Case No. 99-3091i. Issue is what constitutes matters occurring before the grand

jury in terms of secrecy requirements.ii. Where the general public is already aware of the information

contained in the prosecutors statement, there is no additionalharm in the prosecutor referring to such information.

D. Attorneys Fees for the Governments Misconduct1. United States v. Braunstein

i. Defendant argued that government is required to pay hisattorneys fees because the prosecution was vexatious, frivolous,or in bad faith under the Hyde Amendment.

ii. Hyde Amendment and McDade Amendment subject governmentto ethics rules and sanctions for vexatious, frivolous, or in badfaith.

iii. Test for deciding when you are entitled to attorneys fees iswhether the governments prosecution was vexatious, frivolous,or in bad faith.

iv. What you learn as a prosecutor is that caution must be exercisedin bringing actions to grand jury and look at any exculpatory

evidence offered by the defendant.v. What you learn as a defendant is that there is an incentive to give

information to the government because if case is still brought anddefendant is acquitted, attorneys fees might be obtained.

XI. Fourth AmendmentA. Why would search warrant be preferable to subpoena?

1. Immediacy and prevention of possible destruction of documents.2. Also, there might be other information in plain view.3. Avoid any 5th Amendment privilege issues.4. Surprise5. Ability to question employees during the search.

6. Disruptive impact of a search.7. Conveys to the public that prosecutors are adopting tough stance.8. No secrecy requirements for search, as opposed to grand jury subpoenas.9. People might speak more freely and there might not be attorneys present.

10. If warrant had good faith, there is an exception to exclusion if there is adefect in the warrant.

B. Why subpoena instead of a warrant?1. Time and cost considerations.


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Page 37 of 562. No need for particularity of description and location and probable cause.3. Must get judicial approval for search.4. Lack of secrecy could tip off other perpetrators.5. Possibility of evidence suppression if warrant is invalid.

C. United States v. Gray

1. Issue is whether evidence of child pornography discovered during a searchof defendants computer files authorized by an unrelated warrant must besuppressed as beyond the scope of the warrant.

2. Rule In searching computer files, government has the right to inspectfiles to determine if they contain information they are looking for underthe search warrant.

D. United States v. Abbelland United States v. Mittleman1. Cases involved searches of law offices.2. Government has issued guidelines for searches of law offices.

i. Use what is referred to as taint teams.ii. Documents are taken under warrant and Court appoints team of

disinterested persons to look through documents.iii. Only the things that would fall under search warrant are handed

over to the government.iv. In some cases, the government uses people within the

government on the taint team this issue is hotly contested.XII. Parallel Proceedings

A. Introduction1. Where the civil or administrative proceedings and the criminal

proceedings appear likely to produce an overlap, they are commonlydescribed as parallel proceedings.

B. Prosecution Discovery from Parallel Proceedings

1. Under Rule 26(c)(6) of the Federal Rules of Civil Procedure, the districtcourt may issue an order that discovery material remain under seal wheresuch an order would serve to secure the just, speedy, and inexpensivedetermination of the suit by encouraging full disclosure of all relevantevidence.

2. Some circuits have rejected this view, concluding that the grand jurysubpoena always trumps a district courts protective order.

3. Undoubtedly the most restrictive provisions on the sharing of agency fileswith federal prosecutors are those contained in 6103 of the InternalRevenue Code.

i. Section establishes a general prohibition against IRS disclosure

of return information and taxpayer return information.ii. There are several exceptions allowing for disclosure to other

governmental officials for specified purposes.a. Broadest exception allow for disclosure to the DOJ for the

purposes of investigating or preparing a proceeding relatingto the administration of the tax laws.

C. Delaying the Parallel Civil or Administrative Proceeding


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Page 38 of 561. Though recognizing that individuals who are the targets of parallel civil

and criminal proceedings face certain perils when required to respond tothe civil action in advance of the criminal proceeding, the Supreme Courthas concluded that there is no Constitutional mandate that dual targets berelieved of those perils by the issuance of a stay of the discovery in the

civil proceeding.2. The Court held open the possibility that certain circumstances might

produce a due process violation either in denying a stay or in allowing thegovernment to use in a criminal case the fruits of its civil discovery.

3. Although a stay may not be Constitutionally mandated, the federal districtcourt has discretion to grant a stay, as does an administrative agency.

i. In determining whether to grant a stay, courts and agencies tendto apply a balancing test, weighing

a. The harm that will be suffered by the moving party fromthe failure to grant the stay;

b. The interest of the opposing party in proceeding

expeditiously;c. The concerns of interested persons who are not a party to

the litigation;d. The interests of the court in maximizing judicial efficiency.

D. Asserting the Self-Incrimination Privilege1. A person may claim the privilege against self-incrimination in a civil case

or administrative proceeding if the persons testimony realistically couldprovide the government with a link in the chain of evidence needed toprosecute for a crime.

2. In the civil case, the privilege may be claimed not only as to questionsposed at trial or in depositions, but also to interrogatories, requests for

admissions, and subpoenas to produce documents.3. The privilege is not available to entities.4. Perhaps the most common response to the exercise of the privilege, in

both civil and administrative proceedings, is to allow the finder of fact todraw an adverse inference as to the information not received.

5. Ordinarily, when a non-party witness invokes the privilege, no adverseinference may be drawn; however, where the witness is so closelyconnected to the party as to be within its control and has particularknowledge of its activities, an adverse inference may be drawn against thatparty.

E. Grand Jury Matter

1. Insofar as information obtained by the prosecution during a criminalinvestigation is governed by the Rule 6(e)(2) provision on grand jurysecrecy, the prosecution can only share that information with potentiallitigants in parallel proceedings where the conditions prescribed in Rule6(e)(3) are met.

2. When the information is not governed by Rule 6(e)(2), the prosecution isordinarily free to share the information if it deems sharing to be in thepublic interest.


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Page 39 of 563. Rule 6(e)(2) applies to all matter occurring before the grand jury.

i. Does not have to be literally before the grand jury but can beduring the grand jurys investigation.

F. The Preliminary To Requirement1. Under Rule 6(e)(3), grand jury matter may be disclosed to others under six

basic exceptions to grand jury secrecy.i. Four of the exceptions relate to disclosure to implement criminal

law enforcement.ii. A fifth exception is limited to a criminal defendant seeking

dismissal of an indictment against him.iii. The sixth exception provides for disclosure directed by a court

preliminarily to or in connection with a judicial proceeding.a. Where the parallel proceeding is a civil action and is

already underway, it will meet the in connection withstandard.

b. Where the civil action is readily anticipated, that is

sufficient under the preliminary to standard.c. The major hurdle arises where the proceeding first

anticipated is an administrative proceeding, since the Rulerefers only to a judicial proceeding.

G. Particularized Need1. Disclosure under the grand jury secrecy exception also requires that the

party seeking disclosure establish a particularized need establish that theneed for disclosure is greater than the need for continued secrecy and thatthe request is structured to cover only material so needed.

2. A variety of factors will be weighed by the court to determineparticularized need.

i. Status of the investigation that produced the requested grand jurymaterial.

a. Once the grand jury is finished, the need for secrecy hasdeclined.

ii. Whether the third party seeks disclosure that might subject grandjury witnesses to retribution or social stigma.

iii. Narrowness of the disclosure requested.iv. Where the request for disclosure comes from a governmental

agency, many courts have required a somewhat lesser showing ofparticularized need.

H. Collateral Estoppel

1. A defendant who goes to trial in a criminal case must consider the dualperils of disclosure and collateral estoppel as they relate to subsequentparallel civil and administrative actions.

2. Even if the parallel civil proceeding involves precisely the same issue andis brought by the government, that lower proof standard means theacquitted defendant cannot use the doctrine of collateral estoppel.

3. On the other hand, should the defendant be convicted by trial or by guiltyplea, in the subsequent civil or administrative action, collateral estoppel


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Page 40 of 56will treat that conviction as conclusive as to any issue determined by thecriminal case.

4. A criminal conviction based on a plea of nolo contendere, however, istreated differently.

i. A defendant who has pleaded nolo contendere is not estopped

from denying in a subsequent civil proceeding the facts on whichthe criminal charge was based, and the conviction based on anolo plea is not evidence that the defendant committed the crime.

ii. For a criminal defendant more concerned about the consequencesof anticipated parallel proceedings (often the case for an entity),the preferred strategy may be to enter a plea of nolo contendererather than provide discovery and risk both a conviction andcollateral estoppel by contesting guilt at trial.

iii. The nolo contendere plea, however, can be entered only with theapproval of the district court.

a. The plea is more likely to be accepted where the

government does not object, but that lack of objection mayrequire negotiated concessions by the defendant relating torestitution and other remedial orders.

XIII. Self-Incrimination Privilege TestimonyA. The Privilege Against Self-Incrimination

1. Availability of the

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