Florida Law
Florida White Collar Criminal Defense
- White Collar Criminal Defense
White Collar Criminal Defense
Reviewed and edited by Leading Florida Attorney E. C. Deeno Kitchen at the law firm of Kitchen Judkins Simpson & HighBusiness owners need to be increasingly aware of how they might run afoul of criminal laws in the operation of their businesses. Newspapers today are so full of reports of corporate criminal investigations and prosecutions that most business owners do not even realize that business entities were once thought to be incapable of committing crimes. Under the common law, corporations were considered artificial constructs without minds of their own, incapable of forming the intent necessary to be guilty of crimes. All this has changed. During the last two decades, the federal and state governments have increased the number of criminal investigations of businesses and the people who run them. High-profile prosecutions of large corporations have caught the attention of the press and the public.
Today, business owners and corporate executives should have a basic understanding of how criminal laws can impact their businesses. This chapter is designed to acquaint the reader with criminal statutes that most affect businesses and the steps businesses can take to avoid criminal liability. It outlines the fundamentals of corporate criminal law, such as the elements of a crime and some of the different types of corporate felonies and white collar crime.
Criminal Liability of a Corporation
As mentioned earlier, corporations were once thought to be incapable of forming the intent necessary to commit crimes. This attitude now has been erased and corporations have even been found guilty of crimes requiring specific intent. A corporation may be prosecuted for any crime other than a crime that is only committed by a natural person, such as bigamy or rape. The law recognizes that corporations may be reckless and may commit crimes requiring specific intent. For a corporation to be responsible, the action usually must be committed by an agenta director, employee or officer authorized to act on behalf of the corporationacting in the scope of employment. The corporation may also be held responsible for its part in a conspiracy.Criminal Liability of a Corporate Officer or Agent
In addition to the corporation's liability, corporate officers and agents may be found personally liable for their criminal conduct. Some businesspersons mistakenly believe that criminal liability is an "either/or" proposition. That is, they believe that if their actions subject the business to criminal liability, they will be free of personal liability. This belief is incorrect, however, because many criminal statutes allow prosecutors to prosecute both the business and the individuals who run it. Individual and corporate liability are cumulative, not exclusive.
Participation in business criminal activity does not, by itself, make a person criminally liable. Usually the prosecution must show that the participating officer or agent consciously promoted or at least knew about the illicit act. Ordering a subordinate to commit a crime or silently acquiescing to another's commission of a crime will make most officers or agents personally liable for the crime. Some officers within a corporation have even been held responsible for criminal activity of which they were unaware because they had an obligation to ensure compliance with the law or to detect and prevent violations of criminal regulations. The law does not look kindly on corporate officers who claim to have been asleep at the helm while their subordinates were engaging in criminal activity. Especially in the context of environmental regulations, with their substantial penalties, the defenses, "I did not know" and "I was not aware" are insufficient if the court or jury believes the officer should have known or had an obligation to be aware of what was happening in the company.
Classification of Crimes
Under Florida's criminal law, crimes are divided into two major classifications: felony and misdemeanor. A felony is generally defined as any crime punishable by death or more than one year in prison. A misdemeanor is any crime punishable by imprisonment for less than one year. Felonies and misdemeanors are further divided into different degrees, dictating the maximum level of punishment. In addition, punishments vary depending on whether a natural person or a corporation commits the crime.
White Collar Crime
White collar crime is the most common type of business crime. White collar crime is generally used to describe crimes that have cheating or dishonesty as their common basis. These crimes typically are committed by professionals or entrepreneurs under cover of legitimate business activity. Such crimes may be difficult to prosecute because of their complexity. Often, they carry lesser penalties because they are not associated with violence. However, defendants convicted of white collar crimes may incur enormous fines, be ordered to pay restitution, lose professional or business licenses or spend time in jail.As a practical matter, it is impossible to describe every activity that fits within the definition of white collar crime, because white collar crime takes many forms. Some criminal actions are prohibited by specific laws narrowly drawn to outlaw a particular activity. Other actions are not covered by specific laws but instead are prosecuted under one or more catch-all laws that criminalize dishonest behavior.
Antitrust
Businesspersons with experience in antitrust law have learned that antitrust laws are complicated, covering the laws of mergers and acquisitions, pricing policy, terms of trade, customer and territory selection, bundling of services and advertising and sales technology. An experienced antitrust attorney who stays abreast of current developments in this area is able to adequately advise businesses how to avoid antitrust problems. Persons found in violation of certain aspects of the Sherman Antitrust Actthe primary federal antitrust lawmay be fined or jailed. Violations of this Act include making contracts that unreasonably restrain trade, and attempting to form and maintain a monopoly in an industry. In practice, however, these violations generally are handled by civil, rather than criminal, lawsuits.
Bribery and Extortion
A number of federal statutes prohibit bribery and extortion. A common goal of most bribery statutes is to prevent people from seeking preferential treatment from public officials and to prevent public officials from using their office for personal gain. Under a statute prohibiting bribery of federal government officials, the official and the person offering the bribe are subject to prosecution if the official is offered or seeks anything of value for himself or herself in exchange for:
*Being influenced to perform any official act
*Committing, aiding or conspiring a fraud, or allowing a fraud to be committed upon the United States
*Being induced to do or omitting to do anything in violation of his or her official duty
Since promises and offers are equally prohibited, there is no requirement that the bribe actually occur. A separate federal statute, known as the Foreign Corrupt Practices Act, prohibits bribery of foreign officials.
Computer Crime
Computer crime is an area of the law in which the government appears to be playing catch-up with the growth in new technologies. Some variations of computer crime are so new that there are no specific laws to address them, and general laws in existence do not seem adequate in proscribing the particular illicit activities.
Conduct specifically outlawed by federal statute includes:
*Knowingly accessing a computer without authorization or exceeding authorization, and thereby obtaining confidential national security information
*Intentionally accessing a computer without authorization or exceeding authorization, and thereby obtaining the financial information of a financial institution or a credit card issuer
*Intentionally accessing without authorization a computer of a federal department or agency used exclusively by that department or agency or affecting the government's use thereof
*Knowingly, and with intent to defraud, accessing a federal interest computer without authorization or exceeding authorization, to further a fraud or obtain anything of value
*Intentionally accessing a federal interest computer without authorization to alter, damage or destroy information and thereby causing a loss of $1,000 or, if medical information is affected, any amount
*Knowingly, and with intent to defraud, trafficking in any password or similar information through which a computer is accessed without authorization if such computer affects interstate or foreign commerce or is used by or for the government
Florida statutes also include provisions covering computer crime and related illegal acts. In addition to various credit card or access card crimes, it is illegal to obtain telecommunications services without payment, to publish a credit device code or number with intent to avoid lawful charges, or to receive cable television services without authorization. Florida computer crimes include willfully, knowingly and without authorization:
*Modifying or destroying data, programs or supporting computer documentation
*Modifying computer equipment or supplies
*Destroying, taking or damaging computer equipment or supplies
*Accessing or causing to be accessed any computer, computer system or computer network
*Denying or causing the denial of computer system services owned by, under contract to, or operated for, on behalf of, or in conjunction with another
*Introducing a contaminant into a computer, computer system or computer network
Conspiracy
Conspiracy is the term for a broad category of crimes involving multiple actors coming together to engage in concerted criminal activity. A person or business generally is guilty of conspiracy to commit a crime if that person or business does one of the following:
*With the purpose of facilitating or promoting its commission, agrees with another person or business to engage in conduct that constitutes a crime or an attempt or solicitation of a crime
*Agrees to aid another person or business in planning, committing or attempting to solicit a crime
The agreement forming the basis for conspiracy need not be written, oral or even explicit, but often is inferred from the facts of the specific case. If the parties meet and reach an understanding to work for a common purpose, there is an agreement. For example, if the producers of a particular product meet to exchange information on prices and later they set identical prices, a prosecutor may be able to prove they conspired to set prices even though there was never an explicit agreement to do so. Most criminal conspiracy statutes also require that at least one of the parties has committed an overt act in furtherance of the conspiracy.
A procedural issue of great importance to parties accused of conspiracy is whether government prosecutors try to frame the conspiracy as a hub-and-spoke conspiracy or as a chain conspiracy. In a hub-and-spoke conspiracy, many parties (the spokes) conspire with one person (the hub) but not with other defendants. In contrast to a hub-and-spoke conspiracy, a chain conspiracy involves several parties as links in one long criminal chain. Defendants in chain conspiracies are responsible for the actions of all participants in the chain, even if they never met some of the other participants in the chain.
Specific federal anticonspiracy statutes are found throughout the United States Code. Florida statutes also contain anticonspiracy laws. In recent years, a growing number of white collar criminal prosecutions have included allegations of conspiracy.
Embezzlement
S2To embezzle means to take another's money and property through abuse of an official job or position of trust. Embezzlement can take many forms. An accountant might use sophisticated methods to falsify records and skim profits, while a bank teller might take $20 from his or her drawer. Florida has combined the crimes of larceny, embezzlement, false pretenses and receiving stolen property into the category of theft. Theft of property valued at $100,000 or more is grand theft in the first degree and a first degree felony. Theft of property valued at $20,000-100,000 is grand theft in the second degree and a second degree felony. Theft of property valued at $300-20,000 is grand theft in the third degree and a third degree felony. Theft of any other property is petit theft and a second degree misdemeanor.
Fraud
Fraud is intentionally lying in order to induce someone into relying on the lie to part with something of value. Like embezzlement, fraud can be either complex or simple. The federal government has three general antifraud statutes for mail fraud, bank fraud and wire fraud.
Mail fraud is a broad crime with two elements: 1) a scheme, devised and intended to obtain property or money by fraudulent means, and 2) using the mail in furtherance of that fraudulent scheme. The "scheme to defraud" element of mail fraud is deliberately broad. It encompasses a wide variety of criminal activity, including credit card fraud, securities fraud, medical drug fraud and fraud based on political malfeasance. Because the mail fraud statute uses such broad language and because it is relatively easy to prove, mail fraud is one of the most common charges brought by federal prosecutors. Charges of mail fraud frequently are made even in cases in which more specific crimes have been charged.
The federal wire fraud statute is similar to the mail fraud statute, but requires an interstate or foreign transmittal of a communication by wire, radio or television. This interstate requirement sets wire fraud apart from mail fraud. An intrastate mailing is sufficient to trigger liability for mail fraud, while an intrastate wire, radio or television communication is insufficient for wire fraud liability.
The federal bank fraud statute criminalizes the conduct of any party who "knowingly executes, or attempts to execute, a scheme or artifice to defraud a financial institution, by means of false or fraudulent pretenses, representations or promises." The federal bank fraud statute is newer than the mail fraud and wire fraud statutes, so it has not received a great deal of interpretation in the courts. Because its language is so similar to that used in the mail and wire fraud statutes, however, it is expected to be broadly applied and interpreted.
Hobbs Act
Under the federal Hobbs Act, it is a crime for anyone to obstruct, delay or affect commerce by extortion, robbery or threats of physical violence. The terms robbery and violence are broadly defined to cover a wide variety of violent actions against people or property.
Obstruction of Justice
Obstruction of justice is a category of offenses of interfering with one of the three branches of government. Obstruction of justice can take many forms, including assaulting a process server, improperly influencing a juror, stealing or altering a record of process or obstructing a criminal investigation by officers of a financial institution. Picketing, parading or using sound amplification devices in front of a courthouse, building or residence occupied by a judge, juror, witness or court officer may also be prosecuted as obstruction of justice.
Perjury
Federal perjury laws penalize anyone who willfully or knowingly makes false statements under oath. The sworn statements may be written or oral and need not be made in court; a person may perjure himself or herself in deposition or written testimony. A related law against subornation of perjury makes it illegal for anyone to procure another person to commit perjury.
Racketeer Influenced and Corrupt Organizations Act
The Racketeer Influenced and Corrupt Organizations Act (RICO) was established to fight the influence of organized crime on legitimate businesses. Under federal criminal law, defendants may be found guilty of violating RICO if they engage in "racketeering activity" under the auspices of an enterprise that affects interstate commerce, or if they are involved in the collection of an unlawful debt. There are nine state and 35 federal offenses specifically listed as racketeering activity. The nine listed state offenses are murder, kidnapping, gambling, robbery, arson, bribery, dealing in obscene materials and dealing in narcotics or other dangerous drugs. While drug smuggling, murder, bribery and extortion of "protection money" are examples of the activities to which RICO was originally applied, more recently RICO has been used to prosecute an increasing variety of criminal actions.
In the first years after it was passed, RICO was rarely used. Today RICO charges are quite common, largely because its provisions have been expansively interpreted to cover many situations in which there is no allegation that the defendant has any connection to organized crime.
In addition to its criminal provisions, RICO gives private parties and the federal government civil causes of action against violators. Because RICO prosecutions have grown so unpredictably in recent years, some people have called for the law to be redrafted more narrowly, particularly its civil provisions.
Securities Fraud and Insider Trading
A broad range of illegal behavior is prosecuted under securities fraud statutes. Criminal prosecutions require the prosecutor to show that the accused acted willfully; if the accused is found in violation, he or she is subject to criminal penalties, civil penalties or both. The securities fraud statutes recognize that deception may take many forms and thus are worded broadly to prohibit "any device, scheme or artifice to defraud" in securities sales.
There are two general categories of securities fraud. The first involves the sale of securities to investors for far more than their actual value. An example of this type of fraud is selling shares in dry oil wells. The second involves the sale of legitimate securities for illegal purposes, such as the sale of legitimate stock by a broker who conceals information about his or her own involvement with the brokerage company. These acts are prohibited by rules established by the Federal Securities and Exchange Commission.
Insider trading prosecutions have been some of the most publicized white collar prosecutions of the 1980s and 1990s. Surprisingly, insider trading is not defined in any specific statute; it is a term used to describe insiders, such as officers of a corporation, taking unfair advantage of information to make money or avoid losing money in securities. Generally, insider trading means that an insider with material, nonpublic information engages in trading without disclosing that information to the public first. These crimes typically are prosecuted under the Securities and Exchange Act of 1934.
Prosecutors are not confined to using specific securities fraud statutes to prosecute securities fraud. General antifraud statutes may be used instead of, or in addition to, specific securities fraud laws. For example, parties engaged in securities fraud may also be charged with violating mail and wire fraud statutes, discussed previously.
Travel Act
Under the federal Travel Act, it is a criminal offense to use interstate travel or facilities in interstate commerce to distribute the proceeds from any unlawful activity, to commit a crime of violence to further any unlawful activity or otherwise to promote or facilitate unlawful activity.
Avoiding White Collar Criminal Liability
It is challenging for a company to ensure that none of its employees will violate the law in any way. Some laws are so complex that even knowing one's legal responsibilities can be difficult. However, there are ways in which business owners and executives can avoid white collar criminal liability.
Businesses should establish internal procedures including training, documentation and thorough accounting and auditing to prevent wrongdoing by employees. They should ensure that mechanisms are in place for officers and managers to become aware of problems at an early stage. An attorney experienced in the regulatory area can be an excellent source of information for helping managers understand their responsibilities for overseeing corporate employees' actions and reporting accidents or wrongdoings.
Internal investigations are an integral part of the defense in many corporate criminal proceedings. When a company learns that it may be the subject of a criminal prosecution, it is important to notify management quickly and to act to resolve the situation. Sometimes a business can avoid criminal liability altogether if it shows that it took proper action to correct a situation as soon as managers were made aware of the problem. The internal investigation carries risks of its own, however. It may be wisest to have the investigation conducted by outside legal counsel. Attorney-client privilege and the work product doctrine may prevent the corporation's officers from being required to reveal the contents of a final report to prosecutors or from being used at trial as evidence against the company.
No business should ever obstruct a government investigation into its affairs; such action could be perceived as a coverup or obstruction of justice. If secrecy is necessary, being honest with all employees and fully explaining their responsibilities can be excellent preventive medicine against criminal liability. Any employee asked to keep anything secret for reasons he or she does not understand may assume his or her employer is involved in illegal activity and testify later to that effect.
Resources
Business Crime: Criminal Liability of the Business Community, Stanley S. Arkin, et al., Matthew Bender, New York, NY, 1994.Internal Corporate Investigations: Conducting Them, Protecting Them, Brad D. Brian and Barry F. McNeil, eds., American Bar Association, Chicago, IL, 1992.
Liability of Corporate Officers and Directors, William E. Knepper and Dan A. Bailey, Michie, Charlottesville, VA, 5th ed., 1993.
The publication, If You Are Arrested in Florida, is available at no charge from The Florida Bar, 650 Apalachee Parkway, Tallahassee, FL 32399-2300, (904) 561-5834.