Minnesota Law
Minnesota White Collar Criminal Defense
- White Collar Criminal Defense
White Collar Criminal Defense
A myriad of regulatory laws can trip up even a conscientious business owner or manager. This chapter is designed to acquaint the reader with criminal statutes that most affect businesses and the steps that businesses can take to avoid criminal liability.
Criminal Liability of a Corporation
Additionally, the Minnesota Supreme Court has held that for a corporation to be vicariously liable for the actions of one of its employees, the employee's actions must not have been a personal aberration on the part of the employee acting alone, but must, in some way, reflect a corporate policy. It is possible, however, that the corporation can be held criminally liable even if the employee was acting contrary to corporate policies at the time of the infraction. This corporate responsibility applies in cases in which the employee was acting to benefit the corporation and the corporation was not the victim of the crime.
Criminal Liability of a Corporate Officer or Agent
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 the illicit scheme. Ordering a subordinate to commit a crime or silently acquiescing to another's commission of a crime can make almost any officer or agent personally liable for the crime. In addition, some officers within a corporation have 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" fall on deaf ears 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.
White Collar Crime
Specific White Collar Criminal Laws
Some criminal actions are prohibited by specific laws narrowly drawn to outlaw a particular activity.
Antitrust
Persons found in violation of certain aspects of the Sherman Antitrust Act -- the primary antitrust law -- can be fined or jailed. Violations of this Act include making contracts that unreasonably restrain trade and attempts to form and maintain a monopoly in an industry. In practice, however, these violations are generally handled with civil, rather than criminal, lawsuits.
Securities Fraud and Insider Trading
A broad range of illegal behavior is prosecuted under securities fraud statutes. Persons who violate securities laws can be subject to criminal penalties, civil penalties, or both; criminal prosecutions require the prosecutor to show that the accused acted willfully. The securities fraud statutes recognize that deception can take many forms and thus are broadly worded as 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. The second involves the sale of legitimate securities for illegal purposes. An example of the first type of fraud is selling shares in dry oil wells. An example of the second type of fraud is a brokerage house selling a legitimate stock but concealing information about its own involvement with the company, thus acting in violation of rules established by the 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 colloquial term used to describe a category of wrong-doings whereby insiders take unfair advantage of information to make money or avoid losing money in securities. Generally, insider trading means that an insider (such as an officer of a corporation) with material, non-public information engages in trading without first disclosing that information to the public. Insider trading cases are typically prosecuted under the Securities and Exchange Act of 1934. Further information about that act can be found in the Securities & Venture Finance Law chapter.
Prosecutors are not confined to using specific securities fraud statutes to prosecute securities fraud. General anti-fraud statutes are frequently used instead of, or in addition to, specific securities fraud laws. For example, parties engaged in securities fraud can be charged with violating mail and wire fraud statutes, discussed below in this chapter.
Computer Crime
Computer crime is an area of the law in which the government appears to be perpetually playing catch-up with the growth in new technologies. Some variations of computer crime are so new that laws drafted specifically to address them do not exist and more general laws without a computer emphasis fit the facts poorly. Today, six types of conduct are specifically outlawed by federal statute:- 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 of a credit card issuer
- Intentionally, without authorization, accessing 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 $1000 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.
- Intentionally damaging a computer or computer system, network, software, or other property
- Intentionally altering a computer or computer system, network, software, or other property, with the intent to injure or defraud
- Intentionally distributing a destructive computer program
Catch-All White Collar Criminal Laws
Some actions are not covered by one of the above specific laws but instead are prosecuted under one or more "catch-all" laws criminalizing dishonest behavior generally. Most of these laws have parameters so broad that they can be made to fit a wide variety of dishonest actions.
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 can perjure himself or herself in depositions and written testimony. A related law against subornation of perjury makes it illegal for anyone to procure another person to commit perjury.
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 to otherwise promote or facilitate unlawful activity.
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 very broadly defined to cover a wide variety of violent actions against people or property.
Racketeer Influenced and Corrupt Organizations Act
The Racketeer Influenced and Corrupt Organizations Act (RICO) was established to counteract the influence of organized crime on legitimate businesses. Under federal criminal law, defendants can be found guilty of violating RICO if they are found to have engaged 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. RICO has a civil law dimension that accompanies its criminal provisions. While drug smuggling, murder, bribery, and extortion of "protection money" are examples of the activities to which RICO was originally applied, more recently it has been used to prosecute a bewildering variety of criminal actions.In the first years after it was passed, RICO was a rarely used criminal law. Today, RICO charges are quite common, largely because its provisions have been interpreted expansively to cover many situations where there is no allegation whatsoever 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 in recent years, calls are frequently heard to redraft the law more narrowly. Civil RICO provisions especially have received extensive criticism.
Embezzlement
To 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 simply walk home with an extra $20 from his or her drawer.
Fraud
Fraud is intentionally lying in order to induce someone into relying upon the lie to part with something of value. Like embezzlement, fraud can be complex or simple. The federal government has three general anti-fraud statutes for mail fraud, bank fraud, and wire fraud.Mail fraud is a broad crime punished under the United States Code. Mail fraud has two elements: (a) a scheme devised or intending to defraud or for obtaining property or money by fraudulent means; and (b) using the mails in furtherance of that fraudulent scheme.
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. Sometimes notorious criminals suspected of committing heinous crimes are charged with mere mail fraud, but procedurally, it is easier to get a conviction under the mail fraud statute than under more complex criminal statutes. Charges of mail fraud are frequently brought even in cases in which more specific charges are brought. The two can exist side by side. 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 frauds based on political malfeasance.
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 grounds 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 much newer than either the mail fraud or wire fraud statutes, so it has not received a great deal of interpretation in the courts. Because its language is so similar to that which is used in the mail and wire fraud statutes, it is expected to be similarly broadly applied and interpreted.
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 is generally guilty of conspiracy to commit a crime if that person or business either (a) 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; or (b) agrees to aid another person or business in planning, committing, or attempting to solicit a crime. Specific federal anti-conspiracy statutes can be found throughout the United States Code. Minnesota statutes also contain many anti-conspiracy laws. In recent years, a growing number of white collar criminal prosecutions have included allegations of conspiracy.Bringing a conspiracy charge offers the prosecution several distinct advantages. Prosecutors usually learn of a conspiracy while it is in an early stage; thus, they can prosecute before the underlying crime takes place. In addition, prosecutors often are able to charge many defendants simultaneously and present evidence against the group. When several defendants stand trial together, juries often perceive individual defendants to be guilty by virtue of their association with the others. Several technical procedural rules also give prosecutors distinct advantages against defendants in conspiracy cases.
Often the key element in prosecuting a defendant for conspiracy is proving the agreement. The agreement that forms the basis for conspiracy need not be written, oral, or even explicit, but is often 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 a "chain conspiracy." In a hub-and-spoke conspiracy, many parties (the spokes), conspire with one person (the hub) but not with other defendants. It is advantageous for a defendant to have its actions characterized as part of a hub-and-spoke conspiracy because that means that the conspiracies are separate and disconnected.
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.
Obstruction of Justice
Obstruction of justice is a category of offenses interfering with 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, obstructing a criminal investigation by officers of a financial institution, and picketing, parading, or using sound amplification devices in front of a courthouse, or a building or residence occupied by a judge, juror, witness, or court officer.
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 improperly from public officials and to prevent public officers from using their office for personal gain. Under a statute prohibiting bribery of federal government officials, both 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, conspiring, or allowing a fraud to be committed upon the United States; or being induced to do or omitting to do anything in violation of his or her official duty. Promises and offers are equally prohibited, so 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.
Avoiding White Collar Criminal Liability
In the area of white collar crimes, an ounce of prevention is worth a pound of cure. Attorneys experienced in handling white collar criminal matters can be a good source of information for helping businesses establish internal procedures to prevent wrongdoing by employees. 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 and wrongdoing.
Internal investigations are an integral part of the defense of almost all businesses accused of criminal wrongdoing. Whenever 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 can show that it took proper action to correct a situation as soon as managers were made aware of a problem. Prosecutors often treat leniently companies that can show they acted responsibly after being informed of a problem in the organization.
The internal investigation carries risks of its own, however. It may be wisest to have the investigation conducted by outside legal counsel. Using an attorney from outside the company can prevent the ultimate report from being used at trial as evidence against the company. Attorney-client privilege and the work product doctrine may ensure that the corporation's officers will not be required to reveal the contents of the final report to prosecutors.
No business should ever try to obstruct a government investigation into its affairs by using a tactic that could conceivably look like a cover-up or obstruction of justice. Being honest with all employees, if secrecy is necessary, and fully explaining the employees' 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 so testify later.
Resources
Internal Corporate Investigations -- Conducting Them, Protecting Them (Brad D. Brian and Barry F. McNeil, eds., American Bar Association, Chicago, IL, 1992).
Eliot G. Disner, Antitrust for Business: Questions & Answers (Federal Legal Publications, Inc., New York, NY, 1989).