BUS 624 Week 2 Discussion 1



Nicolai Caymen worked as a desk clerk at a hotel in Ketchikan, Alaska. After a woman called a Ketchikan business supply store and complained that the store had charged her credit card for a laptop computer she did not purchase, the store discovered that Caymen had used a credit card in placing a telephone order for the laptop and that when he picked up the computer, the store clerk had not asked for identification. Store personnel then contacted the Ketchikan police department to report the incident and to pass along information, acquired from other stores, indicating that Caymen may have attempted similar credit card trickery elsewhere. In order to look for the laptop and other evidence of credit card fraud, the police obtained a search warrant for the house where Caymen rented a room. Caymen, who was present while his room was searched, denied the allegation that he had used someone else’s credit card to acquire the laptop. Instead, he stated that he had bought it with his own credit card. During the search, the police found the laptop and a tower computer. It was later determined that Caymen had rented the tower computer from a store but had never made any of the required payments. In Caymen’s wallet, which the police examined in connection with the search of his room, the officers found receipts containing the names and credit card information of guests who had stayed at the hotel where Caymen was employed. The police seized the laptop and contacted the store where Caymen had acquired it to ask whether officers could examine the laptop’s hard drive before they returned the computer to the store. The store’s owner consented. In examining the laptop’s hard drive for evidence of credit card fraud, the police found evidence indicating Caymen’s probable commission of federal crimes unrelated to credit card fraud. The police then temporarily suspended their search of the hard drive and obtained another search warrant because they had probable cause to believe that Caymen had committed federal offenses. Under that search warrant, officers checked the hard drives and storage media from the laptop and tower computers and found further evidence pertaining to the federal crimes. Caymen was prosecuted in state court for credit card fraud and was indicted in federal court for the separate federal offenses. In the federal proceeding, he asked the court to suppress (i.e., rule inadmissible) the evidence obtained by the police in their examinations of the hard drives of the laptop and tower computers. Caymen based his suppression request on this multipart theory: that the police had no valid warrant for their initial look at the laptop’s hard drive; that in the absence of a valid warrant, his consent (rather than the store owner’s) was needed to justify a search of the laptop’s hard drive; that the evidence obtained during the initial examination of the laptop’s hard drive was the result of an unconstitutional search and was therefore inadmissible; and that the evidence obtained in the later examinations of the hard drives of the laptop and tower computers amounted to inadmissible “fruit of the poisonous tree.” As you read Chapter 5, consider these questions: On what constitutional provision was Caymen basing his challenge to the validity of the searches conducted by the police? 150 Must law enforcement officers always have a warrant before they conduct a search, or are warrantless searches sometimes permissible? If warrantless searches are sometimes permissible, when? What is the usual remedy when law enforcement officers conduct an unconstitutional search? Did Caymen succeed with his challenge to the validity of the searches conducted by the police? Why or why not? What if a guilty person goes free as a result of a court’s ruling that he was subjected to an unconstitutional search by law enforcement officers? From an ethical perspective, how would utilitarians view that outcome? What about rights theorists? LEARNING OBJECTIVES After studying this chapter, you should be able to: 5-1 Describe the difference between a felony and a misdemeanor. 5-2 Explain why the First Amendment may sometimes serve as a defense to criminal liability. 5-3 Identify the constitutional provisions at issue when a criminal law is challenged as being excessively vague. 5-4 Identify the standard of proof that the government must meet in a criminal prosecution, as well as the constitutional sources of that requirement. 5-5 Identify the major steps in a criminal prosecution. 5-6 Describe the basic protections afforded by the Fourth, Fifth, and Sixth Amendments. 5-7 Describe major exceptions to the Fourth Amendment’s usual preference that the government have a warrant before conducting a search. 5-8 Explain what the exclusionary rule is. 5-9 List the components of the Miranda warnings and state when law enforcement officers must give those warnings. 5-10 Identify the elements that the government must prove in a criminal RICO case and that a private plaintiff must prove in a civil RICO case. 5-11 Describe the major elements that must be proven in order to establish a violation of the Computer Fraud and Abuse Act. THE LIST FEATURES FAMILIAR corporate names: Enron, Arthur Andersen, WorldCom, Adelphia, ImClone, Global Crossing, and Tyco. Individuals such as Bernard Ebbers, John and Timothy Rigas, and Dennis Kozlowski also make the list. Don’t forget about Bernie Madoff. These names sometimes dominated the business headlines during recent years, but not for reasons any corporation or executive would find desirable. Instead, they acquired the notoriety associated with widely publicized financial scandals, related civil litigation, and criminal prosecutions that were actually pursued by the government, seriously contemplated by prosecutors, or argued for by the public and political figures of varying stripes. For instance, former WorldCom CEO Ebbers was sentenced to 25 years in prison for his role in an $11 billion accounting and securities fraud. The Rigases were sentenced to substantial prison terms because of their involvement in bank and securities fraud while serving as high-level executives at Adelphia. Kozlowski, convicted of financial wrongdoing in connection with his former position as Tyco’s CEO, also faced incarceration. Madoff received a lengthy prison sentence and extensive public scorn after being convicted of crimes associated with the Ponzi scheme through which he defrauded investors. Criminal convictions because of financial shenanigans led to the above-mentioned notoriety of certain individuals and the corporations with which they were affiliated, but other sorts of business-related activity may also result in criminal charges. In 2012, for instance, the oil company BP pleaded guilty to offenses connected with the Deepwater Horizon oil-drilling disaster that occurred off the Gulf Coast and caused the deaths of 11 persons as well as extensive environmental damage. A criminal fine of approximately $1.3 billion was imposed on BP, along with even more in civil penalties. In 2014, Toyota and the federal government entered into a deferred prosecution agreement that headed off criminal charges against the automaker for allegedly concealing material information from federal regulators about component parts that may have caused certain vehicles to 151 accelerate suddenly and excessively, with serious accidents sometimes then occurring. Under the deferred prosecution agreement, Toyota became obligated to pay $1.2 billion. During recent years, the U.S. Justice Department considered whether to file criminal charges against General Motors for allegedly misleading federal regulators, or allegedly failing to make adequate required disclosures to them, regarding an ignition switch problem that led to crashes in which persons were injured or killed. Volkswagen pleaded guilty in 2017 to criminal charges in connection with its employees’ scheme to install devices in Volkswagen vehicles so that the cars would receive false and deceptively positive results on government-required emissions tests. The BP, Toyota, GM, and Volkswagen sagas also featured civil consequences because of regulatory penalties and lawsuits, but there seems little doubt that criminal charges or the possibility of them weighed especially heavily on the minds of those companies’ executives and employees. In an earlier edition of this text, the first paragraph of Chapter 5 noted the importance of studying criminal law as part of a business manager’s education but conceded that “[w]hen one lists legal topics relevant to business, criminal law comes to mind less readily than contracts, torts, agency, corporations, and various other subjects dealt with in this text.” That statement, of course, was written approximately 25 years ago. Given the media, public, and governmental attention devoted to recent corporate scandals, it might be argued that criminal law now comes to mind more readily than certain other subjects on the list of legal topics relevant to business. At the very least, recent events involving high-profile firms and executives have demonstrated that business managers create considerable risk for themselves and their firms if they ignore the criminal law or lack a working understanding of it. Role of the Criminal Law This century has witnessed society’s increasing tendency to use the criminal law as a major device for controlling corporate behavior. Many regulatory statutes establish criminal and civil penalties for statutory violations. The criminal penalties often apply to individual employees as well as to their employers. Advocates of using the criminal law in this way typically argue that doing so achieves a deterrence level superior to that produced by damage awards and other civil remedies. Corporations may be inclined to treat damage awards as simply a business cost and to violate regulatory provisions when doing so makes economic sense. Criminal prosecutions, however, threaten corporations with the reputation-harming effect of a criminal conviction. In some cases, the criminal law allows society to penalize wrongdoing employees who would not be directly affected by a civil judgment against their employer. Moreover, by alerting private parties to a violation that could also give rise to a civil lawsuit for damages, criminal prosecutions may increase the likelihood that a corporation will bear the full costs of its actions. Our examination of the criminal law’s role in today’s business environment begins with consideration of the nature and essential components of the criminal law. Next, the chapter discusses procedural issues in criminal prosecutions and explains constitutional issues that may arise in such cases. The chapter then explores various problems encountered in applying the criminal law to the corporate setting. Nature of Crimes Describe the difference between a felony and a misdemeanor. Crimes are public wrongs—acts prohibited by the state or federal government. Criminal prosecutions are initiated by a prosecutor (an elected or appointed government employee) in the name of the state or the United States, whichever is appropriate. Persons convicted of crimes bear the stigma of a criminal conviction and face the punitive force of the criminal sanction. Our legal system also contemplates noncriminal consequences for violations of legal duties. The next two chapters deal with torts, private wrongs for which the wrongdoer must pay money damages to compensate the harmed victim. In some tort cases, the court may also assess punitive damages in order to punish the wrongdoer. Only the criminal sanction, however, combines the threat to life or liberty with the stigma of conviction. Crimes are typically classified as felonies or misdemeanors. A felony is a serious crime such as murder, sexual assault, arson, drug-dealing, or a theft or fraud offense of sufficient magnitude. Most felonies involve significant moral culpability on the offender’s part. Felonies are punishable by lengthy confinement of the convicted offender to a penitentiary, as well as by a fine. A person convicted of a felony may experience other adverse consequences, such as disenfranchisement (loss of voting rights) and disqualification from the practice of certain professions (e.g., law or medicine). A misdemeanor is a lesser offense such as disorderly conduct or battery resulting in minor physical harm to the victim. Misdemeanor offenses usually involve less—sometimes much less—moral culpability than felony offenses. As such, misdemeanors are punishable by lesser fines and/or limited confinement in jail. Depending on their 152 seriousness and potential for harm to the public, traffic violations are classified either as misdemeanors or as less serious infractions. Really only quasi-criminal, infractions usually are punishable by fines but not by confinement in jail. Purpose of the Criminal Sanction Disagreements about when the criminal sanction should be employed sometimes stem from a dispute over its purpose. Persons accepting the utilitarian view believe that prevention of socially undesirable behavior is the only proper purpose of criminal penalties. This prevention goal includes three major components: deterrence, rehabilitation, and incapacitation. Deterrence theorists maintain that the threat or imposition of punishment deters the commission of crimes in two ways. The first, special deterrence, occurs when punishment of an offender deters him from committing further crimes. The second, general deterrence, results when punishment of a wrongdoer deters other persons from committing similar offenses. Factors influencing the probable effectiveness of deterrence include the respective likelihoods that the crime will be detected, that detection will be followed by prosecution, and that prosecution will result in a conviction. The severity of the probable punishment also serves as a key factor. A fundamental problem attending deterrence theories is that we cannot be certain whether deterrence works because we cannot determine reliably what the crime rate would be in the absence of punishment. Similarly, high levels of crime and recidivism (repeat offenses by previously punished offenders) may indicate only that sufficiently severe and certain criminal sanctions have not been employed, not that criminal sanctions in general cannot effectively deter. Deterrence theory’s other major problem is its assumption that potential offenders are rational beings who consciously weigh the threat of punishment against the benefits derived from an offense. The threat of punishment, however, may not deter the commission of criminal offenses produced by irrational or unconscious drives. Rehabilitation of convicted offenders—changing their attitudes or values so that they are not inclined to commit future offenses—serves as another way to prevent undesirable behavior. Critics of rehabilitation commonly point to high rates of recidivism as evidence of the general failure of rehabilitation efforts to date. Even if rehabilitation efforts fail, however, incapacitation of convicted offenders contributes to the goal of prevention. While incarcerated, offenders have much less ability to commit other crimes. Prevention is not the only asserted goal of the criminal sanction. Some persons see retribution—the infliction of deserved suffering on violators of society’s most fundamental rules—as the central focus of criminal punishment. Under this theory, punishment satisfies community and individual desires for revenge and reinforces important social values. As a general rule, state laws on criminal punishments seek to further the deterrence, rehabilitation, and incapacitation purposes just discussed. State statutes usually set forth ranges of sentences (e.g., minimum and maximum amounts of fines and imprisonment) for each crime established by law. The court sets the convicted offender’s sentence within the appropriate range unless the court places the defendant on probation. Probation is effectively a conditional sentence that suspends the usual imprisonment and/or fine if the offender “toes the line” and meets other judicially imposed conditions for the period specified by the court. It is sometimes granted to first-time offenders and other convicted defendants deemed suitable candidates by the court. In deciding whether to order probation or an appropriate sentence within the statutory range, the court normally places considerable reliance on information contained in a presentence investigation conducted by the state probation office. Figure 1 explains how federal law approaches the proper determination of a convicted offender’s punishment. Figure 1 The Federal Sentencing Guidelines and the Booker Decision The federal approach to sentencing closely resembled the typical state approach discussed in the text until the Federal Sentencing Guidelines took effect in the mid-1980s. The significantly different sentencing model contemplated by the Sentencing Guidelines was largely upended, however, by the U.S. Supreme Court’s decision in United States v. Booker, 543 U.S. 220 (2005), and decisions that followed it. To understand Booker, one must first know how the Sentencing Guidelines operated for the approximately 20 years preceding the Supreme Court’s decision. In the Sentencing Reform Act of 1984, Congress created the U.S. Sentencing Commission and authorized it to develop the Sentencing Guidelines. Congress took this action to reduce judicial discretion in sentencing and to minimize disparities among sentences imposed on defendants who committed the same offenses. Although pre–Sentencing Guidelines statutes setting forth sentencing ranges for particular crimes generally remained on the books, the Sentencing Guidelines developed by the Sentencing Commission assumed a legally controlling status under provisions of the 153 Sentencing Reform Act. The Guidelines contain a table with more than 40 levels of seriousness of offense. Where an offender’s crime and corresponding sentence range are listed on the table depends on the offender’s prior criminal history and on various factors associated with the offense. The Sentencing Reform Act established that federal courts were bound by the table and usually were required to sentence convicted defendants in accordance with the range set in the table for the crime at issue. However, if the court found the existence of certain additional circumstances to be present (such as a leadership role in a crime committed by more than one person or similar facts seeming to enhance the defendant’s level of culpability), the Guidelines required the court to sentence the defendant to a harsher penalty than would otherwise have been the maximum under the Guidelines. Many federal judges voiced displeasure with the Guidelines because their mandatory nature deprived judges of the sentencing discretion they believed they needed in order to do justice in individual cases. In another key effect, the Guidelines led to the imposition of more severe sentences than had previously been imposed. Although the prospect of probation for certain offenses was not eliminated, the Guidelines led to an increased use of incarceration of individuals convicted of serious crimes. (A special subset of rules known as the Corporate Sentencing Guidelines, discussed later in the chapter, pertains to the sentencing of organizations convicted of federal crimes.) Approximately 20 years ago, questions arose concerning the constitutionality of the Sentencing Guidelines. The questions focused on the cases in which the Guidelines effectively required—if the requisite additional circumstances were present—a sentence going beyond what would otherwise have been the maximum called for by the Guidelines. These cases were troublesome because nearly always the additional circumstances triggering the enhanced sentence were identified by the trial judge on the basis of evidence submitted to him or her at a post-trial sentencing hearing. The jury, on the other hand, would have heard and seen only the evidence produced at the trial—evidence that went toward guilt and presumably the standard range of punishment, but not toward an enhanced punishment harsher than the usual maximum. All of this was problematic, critics contended, in view of criminal defendants’ Sixth Amendment right to a jury trial. United States v. Booker provided the Supreme Court an opportunity to address the concerns raised by critics of the Guidelines. A jury had convicted Booker of the offense of possessing, with intent to distribute, at least 50 grams of crack cocaine. The evidence the jury heard at trial was to the effect that Booker possessed approximately 90 grams of crack. The Sentencing Guidelines called for a sentence of 20 to 22 years in prison for possessing at least 50 grams. However, evidence presented to the judge at the post-trial sentencing hearing indicated that Booker possessed some 650 grams. Possession of a much larger amount of crack than the amount for which he was convicted was a special cir- cumstance that, under the Guidelines, necessitated a harsher sentence. Upon finding by a preponderance of the evidence that Booker possessed 650 grams (rather than the smaller quantity about which the jury heard evidence), the judge was required by the Guidelines to sentence Booker to at least 30 years in prison—even though the evidence presented to the jury would have justified a lesser sentence of 20 to 22 years. The judge imposed a 30-year sentence on Booker, who contended on appeal that the enhanced sentence required by the Guidelines violated his Sixth Amendment jury trial right. In the 2005 Booker decision, the Supreme Court held that in view of the Sixth Amendment, any facts calling for the imposition of a sentence harsher than the usual maximum must be facts found by a jury rather than merely a judge (unless a jury has been validly waived by the defendant). The Federal Sentencing Guidelines and the statute contemplating their creation were thus unconstitutional insofar as they mandated a sentence going beyond the usual maximum if a judge’s factual findings supporting such a sentence were made on the basis of evidence that the jury had not heard and seen. To remedy the constitutional defect, the Court determined it was necessary to excise certain Sentencing Reform Act sections that made the Sentencing Guidelines mandatory. The elimination of those statutory sections caused the Sentencing Guidelines to become advisory to judges as they make sentencing decisions. Judges must still consider what the Guidelines call for in regard to sentencing, but they are not required to impose the particular sentences specified in the Guidelines. The Court also stated in Booker that when a judge’s sentencing decision is challenged on appeal, the governing standard will be one of reasonableness. After Booker, lower courts were faced with determining what the “reasonableness” standard of review meant, as well as how far trial courts’ discretion regarding the Guidelines really extended. In Rita v. United States, 551 U.S. 338 (2007), the Supreme Court held that it was permissible for courts of appeal to adopt and apply a presumption of reasonableness if the sentence imposed by the trial court fell within the range set by the Guidelines. Gall v. United States, 552 U.S. 38 (2007), made clear, however, that the converse was not true. The Court held there that courts of appeals cannot apply a presumption of unreasonableness to a sentence that departed from the range set by the Guidelines. Instead, according to Gall, consideration of the Guidelines is only “the starting point and the initial benchmark” for the trial judge as he or she makes an “individualized assessment” based on the facts and circumstances. Appellate courts are to give “due deference” to the trial judge’s sentencing determinations, regardless of whether the sentence fell within or outside the Guidelines’s range. In Kimbrough v. United States, 552 U.S. 85 (2007), a companion case to Gall, the Court underscored this standard of review and expressed disapproval of appellate court micromanagement of trial judges’ sentencing decisions. 154 The Court also suggested in Kimbrough—and made explicit in Spears v. United States, 555 U.S. 261 (2009)—that considerable deference to the trial judge’s sentencing determinations remains appropriate even if it appears that the sentence departed from the Guidelines because of the judge’s policy disagreement with the Guidelines. Booker and its progeny have restored to trial judges most of the sentencing latitude they had prior to the Guidelines. This latitude is subject to two constraints: First, the sentence must be consistent with relevant statutes (as opposed to the now-advisory Guidelines), and second, the sentence must be based upon facts found by the jury (or by the judge, if a jury was waived). Essentials of Crime To convict a defendant of a crime, the government ordinarily must (1) demonstrate that his alleged acts violated a criminal statute; (2) prove beyond a reasonable doubt that he committed those acts; and (3) prove that he had the capacity to form a criminal intent. Crimes are statutory offenses. A given behavior is not a crime unless Congress or a state legislature has criminalized it.1 Courts also carefully scrutinize, and narrowly construe, criminal statutes in an effort to make certain that they sweep in only those behaviors specifically prohibited by the relevant legislature. In Sekhar v. United States, which follows, the U.S. Supreme Court conducts such an examination of the Hobbs Act in order to determine whether the defendant’s actions constituted extortion in violation of that federal statute. Sekhar v. United States 133 S. Ct. 2720 (U.S. Sup. Ct. 2013) New York’s Common Retirement Fund is an employee pension fund for the State of New York and its local governments. The State Comptroller chooses Common Retirement Fund investments. When the Comptroller decides to approve an investment, he issues a “Commitment.” Giridhar Sekhar was a managing partner of FA Technology Ventures (FATV). In 2009, the Comptroller’s office was considering whether to invest in a fund managed by that firm. The office’s general counsel recommended that the Comptroller decide not to invest in the FATV-managed fund. The Comptroller followed the recommendation, decided not to issue a Commitment, and notified an FATV partner about the decision. This partner had previously heard rumors that the general counsel was having an extramarital affair. The general counsel then received a series of anonymous e-mails demanding that he recommend moving forward with the investment in the FATV-managed fund. The e-mails also threatened that if the general counsel did not so recommend, the sender would disclose information about his alleged affair to his wife, government officials, and the media. The general counsel contacted law enforcement, which traced some of the e-mails to Sekhar’s home computer and other e-mails to FATV offices. Sekhar was later indicted for attempted extortion in violation of the Hobbs Act, which subjects a person to criminal liability if he “in any way or degree obstructs, delays, or affects commerce or the movement of any article or commodity in commerce, by robbery or extortion or attempts or conspires so to do.”18 U.S.C. § 1951(a). The act defines extortion to mean “the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.” § 1951(b)(2). On the verdict form used at Sekhar’s trial, the jury was asked to specify the property that Sekhar attempted to extort (1) “the Commitment,” (2) “the Comptroller’s approval of the Commitment,” or (3) “the General Counsel’s recommendation to approve the Commitment.” The jury chose only the third option in convicting Sekhar of attempted extortion. The U.S. Court of Appeals for the Second Circuit affirmed Sekhar’s conviction. The Second Circuit held that the general counsel “had a property right in rendering sound legal advice to the Comptroller and, specifically, to recommend—free from threats—whether the Comptroller should issue a Commitment.” In addition, the Second Circuit concluded that Sekhar not only attempted to deprive the general counsel of his “property right” but also “attempted to exercise that right by forcing the general counsel to make a recommendation determined by [Sekhar].” The U.S. Supreme Court agreed to decide the case. Scalia, Justice We consider whether attempting to compel a person to recommend that his employer approve an investment constitutes “the obtaining of property from another” under 18 U.S.C. §1951(b)(2). Whether viewed from the standpoint of the common law, the text and genesis of the statute at issue here, or the jurisprudence of this Court’s prior cases, what was charged in this case was not extortion. 155 It is a settled principle of interpretation that, absent other indication, “Congress intends to incorporate the well-settled meaning of the common-law terms it uses.” [Citation omitted.] …