Essentials of Business Law 6th Edition Beatty Solutions Manual
Essentials of Business Law 6th Edition Beatty Solutions Manual
CRIME
Unit 1 – The Legal Environment
Chapter 7 – Crime*
Chapter Overview
Chapter Theme
Criminal behavior extends far beyond the street crime that is fodder for television dramas—white collar
crime has a greater economic impact than street crime. Criminal law differs in important ways from civil
law, the subject of most of the text: the state prosecutes the wrongdoer, the wrongdoer can face lengthy
imprisonment or death, and rights embedded in the Constitution protect individuals accused by the state
of criminal behavior.
*Some footnotes added for reference; some footnotes appear in text only.
Chapter 7 Crime 2
In a civil case, the plaintiff must prove her case only by a preponderance of the evidence. But because the
penalties for conviction in a criminal case are so serious, the government must prove its case beyond a
reasonable doubt.
Right to a Jury
Bench trial: There is no jury; the judge decides the case.
A judge or jury decides the facts of a case. A criminal defendant has a right to a trial by jury for any charge
that could result in a sentence of six months or longer. The defendant may demand a jury trial or may
waive that right, in which case the judge will be the fact finder.
A felony is a serious crime, for which a defendant can be sentenced to one year or more in prison. Murder,
robbery, rape, drug dealing, money laundering, wire fraud, and embezzlement are felonies. A
misdemeanor is a less serious crime, often punishable by a year or less in a county jail. Public drunkenness,
driving without a license, and simple possession of one marijuana cigarette are considered misdemeanors
in most states.
Other than prison time, a court can also impose a fine that the government keeps and does not share with
the victim. It can order restitution, meaning that the defendant reimburses the victim for harm suffered.
The government can also limit the rights of convicted criminals in a surprisingly broad manner.
1
561 U.S., 130 S. Ct. 2896 United States Supreme Court, 2010
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Chapter 7 Crime 3
Skilling was charged with a theft of honest services. Traditionally, this federal statute had been used to
prosecute public officials who took bribes or kickbacks. But then prosecutors began to charge employees
under this statute for having generally breached their duty to their employer—and that is what they
decided to do with Skilling. They alleged that his financial shenanigans constituted a theft of honest
services. He was convicted, sentenced to more than 24 years in prison, and ordered to pay $45 million in
restitution. Skilling appealed, arguing that the honest services statute was unconstitutionally vague. The
Fifth Circuit disagreed and affirmed his conviction. The Supreme Court granted certiorari.
Excerpts from Justice Ginsburg’s Decision: To satisfy due process, a penal statute must define the
criminal offense [1] with sufficient definiteness that ordinary people can understand what conduct is
prohibited and [2] in a manner that does not encourage arbitrary and discriminatory enforcement.
According to Skilling, [the honest services statute] meets neither of the two due process essentials. First,
the phrase “the right of honest services,” he contends, does not adequately define what behavior it
bars. Second, he alleges, [the honest services statute’s] standardless sweep allows policemen,
prosecutors, and juries to pursue their personal predilections, thereby facilitating opportunistic and
arbitrary prosecutions.
In the main, prosecutions under this statute involved fraudulent schemes to deprive another of honest
services through bribes or kickbacks. Confined to these paramount applications, [the honest services
statute] presents no vagueness problem. The Government urges us to go further by locating within [this
statute’s] compass another category of proscribed conduct: “undisclosed self-dealing by a public official
or private employee”—i.e., the taking of official action by the employee that furthers his own
undisclosed financial interests while purporting to act in the interests of those to whom he owes a
fiduciary duty.
Reading the statute
to proscribe a wider range of offensive conduct, we acknowledge, would raise the due process concerns
underlying the vagueness doctrine. To preserve the statute without transgressing constitutional
limitations, we now hold that [the honest services statute] criminalizes only the bribe-and-kickback core.
The Government did not, at any time, allege that Skilling solicited or accepted side payments from a
third party in exchange for making these misrepresentations. It is, therefore, clear that Skilling did not
commit honest-services fraud.
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Chapter 7 Crime 4
Voluntary Act
Voluntary Act: a defendant is not guilty of a crime if she was forced to commit it; she is not guilty if she
acted under duress. However, the defendant bears the burden of proving by a preponderance of the
evidence that she acted under duress.
Entrapment
Entrapment: When the government induces the defendant to break the law, the prosecution must prove
beyond a reasonable doubt that the defendant was predisposed to commit the crime.
Conspiracy
Conspiracy: If the police discover a plot to commit a crime, they can arrest the defendants before any
harm has been done. A defendant can be convicted of taking part in a conspiracy if:
• a conspiracy existed,
• the defendants knew about it, and
• some members of the conspiracy voluntarily took a step toward implementing it.
The magistrate will issue a warrant only if there is probable cause. Probable cause means that, based on
all of the information presented, it is likely that evidence of a crime will be found in the place to be
searched.
Searches without a Warrant
There are seven circumstances under which police may search without a warrant:
• Plain View.
• Stop and Frisk.
• Emergencies.
• Automobiles.
• Lawful Arrest.
• Consent.
• No Expectation of Privacy.
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Chapter 7 Crime 5
Technology and social media have created new challenges for the courts in determining what is a
reasonable expectation of privacy. For example:
• DNA Tests.
• Heat Seeking Devices.
• Digital Cameras.
• Cellphones.
• Computers.
• Email.
• Websites.
• Chats.
• Social Media.
• GPS Tracking.
Case: Rodriguez v. United States 135 S. Ct. 1609 United States Supreme Court, 2015
Facts: Driving along the Nebraska State Highway just after midnight, Dennys Rodriguez briefly swerved
onto the highway shoulder, which is a violation of Nebraska law. At 12:06 a.m., Officer Morgan Struble
pulled Rodriguez over for erratic driving. Struble questioned both Rodriguez and his passenger and ran a
records check on the car registration and their drivers’ licenses. Struble gave Rodriguez a warning ticket.
At 12:27 a.m., Struble finished explaining the warning to Rodriguez and returned the documents to the
two men. He then asked permission to walk his police dog around Rodriguez’s vehicle, but Rodriguez said
no. On the officer’s instructions, Rodriguez exited the vehicle. At 12:33 a.m., Struble led the dog twice
around the SUV. During the second circuit, the dog signaled the presence of drugs. After searching the
car, Struble found methamphetamine, an illegal drug.
At trial, Rodriguez argued that the dog sniff was illegal because Struble had effectively conducted a stop
and frisk after the traffic stop was over. But Struble did not have a clear and specific reason to suspect
criminal activity for a legal stop and frisk. Both the trial court and the appellate court disagreed with
Rodriguez. The Supreme Court granted certiorari.
Beyond determining whether to issue a traffic ticket, an officer’s mission includes ordinary inquiries
incident to the traffic stop. Typically, such inquiries involve checking the driver’s license, determining
whether there are outstanding warrants against the driver, and inspecting the automobile’s registration
and proof of insurance. These checks serve the same objective as enforcement of the traffic code:
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Chapter 7 Crime 6
ensuring that vehicles on the road are operated safely and responsibly. A dog sniff, by contrast, is a
measure aimed at detecting evidence of criminal wrongdoing.
Traffic stops are especially fraught with danger to police officers, so an officer may need to take certain
negligibly burdensome precautions in order to complete his mission safely [such as asking the driver to
exit the car. But] the dog sniff could not be justified on the same basis. Highway and officer safety are
interests different in kind from the Government’s endeavor to detect crime in general or drug trafficking
in particular.
For the reasons stated the case is remanded for further proceedings consistent with this opinion.
Facts: The Washington, D.C. police suspected Antoine Jones of being a drug dealer. Without a valid search
warrant, they attached a GPS tracking device to his car. For 28 days, they used the GPS to determine his
whereabouts. Based on this evidence, Jones was convicted of a conspiracy to deal cocaine and was
sentenced to life in prison. The appellate court reversed his conviction on the grounds that the police
should have obtained a warrant before attaching the GPS. The Supreme Court granted certiorari.
Issue: Was the warrantless use of a GPS an illegal search under the Fourth Amendment?
The Government physically occupied private property for the purpose of obtaining information. We have
no doubt that such a physical intrusion would have been considered a “search” within the meaning of the
Fourth Amendment when it was adopted. [F]or most of our history the Fourth Amendment was
understood to embody a particular concern for government trespass upon the areas (“persons, houses,
papers, and effects”) it enumerates. The judgment of the Court of Appeals for the D.C. Circuit is affirmed.
Question: What language does a car fall under within the text of the Fourth Amendment?
Answer: An “effect.”
2
132 S. Ct. 945 United States Supreme Court, 2012
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Chapter 7 Crime 7
Question: For what purpose did the Government physically occupy private property in this case?
Answer: The purpose of obtaining information.
Exclusionary Rule
Exclusionary Rule: Evidence obtained illegally may not be used at trial.
Under the exclusionary rule, evidence obtained illegally (or any information obtained as a result of this
illegal behavior) may not be used at trial.
enters it. Even if only a tiny percentage of students are carrying drugs, it might prove a good way to catch
criminals. The problem is that all of the innocent people would be forced to endure periodic searches.
Question: What is wrong with being searched if you don’t have anything to hide?
Answer: Being searched is—by definition—invasive. Some people might not mind it, but there are many
who do not want to feel that they live in a police state. Also, to allow police to search without a warrant
is to give them tremendous power, which some officers might abuse. For example, a particular policeman
might choose to search only minorities, or women, or students, or those living in a particular
neighborhood. Ours is supposed to be a society regulated by law, not by personal, police power.
Question: How many people go free because of the exclusionary rule?
Answer: Very few. As the text reports, most studies have shown that less than 1 percent of those
prosecuted go free because evidence is excluded. Courts deny the great majority of motions to suppress,
and in those few cases where they are allowed, the prosecution generally has additional evidence
sufficient to convict.
3
384 U.S. 436; 1966 U.S. LEXIS 2817 SUPREME COURT OF THE UNITED STATES, 1966
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Chapter 7 Crime 9
confession was made voluntarily “with full knowledge of my legal rights, understanding any statement
I make may be used against me.”
At Miranda’s trial, the judge admitted this written confession into evidence over the objection of
defense counsel. The officers testified that Miranda had also made an oral confession during the
interrogation. The jury found Miranda guilty of kidnapping and rape. He was sentenced to 20 to 30
years’ imprisonment. On appeal, the Supreme Court of Arizona affirmed the conviction. In reaching
its decision, the court relied heavily on the fact that Miranda did not specifically request a lawyer. The
Supreme Court of the United States granted certiorari.
Issues: Was Miranda’s confession admissible at trial? Should his conviction be upheld?
Excerpts from Justice Warren’s Decision: Our holding briefly stated it is this: the prosecution may not
use statements, whether exculpatory or inculpatory, stemming from custodial interrogation of the
defendant unless it demonstrates the use of procedural safeguards effective to secure the privilege
against self-incrimination. By custodial interrogation, we mean questioning initiated by law
enforcement officers after a person has been taken into custody or otherwise deprived of his freedom
of action in any significant way. As for the procedural safeguards to be employed, the following
measures are required. Prior to any questioning, the person must be warned that he has a right to
remain silent, that any statement he does make may be used as evidence against him, and that he
has a right to the presence of an attorney, either retained or appointed.
The defendant may waive these rights, provided the waiver is made voluntarily, knowingly and
intelligently. If, however, he indicates in any manner and at any stage of the process that he wishes
to consult with an attorney before speaking there can be no questioning. Likewise, if the individual is
alone and indicates in any manner that he does not wish to be interrogated, the police may not
question him. The mere fact that he may have answered some questions or volunteered some
statements on his own does not deprive him of the right to refrain from answering any further
inquiries until he has consulted with an attorney and thereafter consents to be questioned.
In a series of cases decided by this Court, the police resorted to physical brutality—beating, hanging,
whipping—and to sustained and protracted questioning incommunicado in order to extort
confessions. Only recently in Kings County, New York, the police brutally beat, kicked and placed
lighted cigarette butts on the back of a potential witness under interrogation for the purpose of
securing a statement incriminating a third party.
Unless a proper limitation upon custodial interrogation is achieved there can be no assurance that
practices of this nature will be eradicated in the foreseeable future. Not only does the use of the third
degree involve a flagrant violation of law by the officers of the law, but it involves also the dangers of
false confessions, and it tends to make police and prosecutors less zealous in the search for objective
evidence. As [an official] remarked: ‘If you use your fists, you are not so likely to use your wits.’
[C]oercion can be mental as well as physical, and the blood of the accused is not the only hallmark of
an unconstitutional inquisition. In a serious case, the interrogation may continue for days, with the
required intervals for food and sleep, but with no respite from the atmosphere of domination. It is
possible in this way to induce the subject to talk without resorting to duress or coercion.
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Chapter 7 Crime 10
Even without employing brutality, the very fact of custodial interrogation exacts a heavy toll on
individual liberty and trades on the weakness of individuals. In [this case before the Court], the
defendant was thrust into an unfamiliar atmosphere and run through menacing police interrogation
procedures. It is obvious that such an interrogation environment is created for no purpose other than
to subjugate the individual to the will of his examiner. This atmosphere carries its own badge of
intimidation. To be sure, this is not physical intimidation, but it is equally destructive of human dignity.
The current practice of incommunicado interrogation is at odds with one of our Nation’s most
cherished principles—that the individual may not be compelled to incriminate himself.
All these policies point to one overriding thought: the constitutional foundation underlying the
privilege is the respect a government—state or federal—must accord to the dignity and integrity of
its citizens. To maintain a fair state-individual balance, to respect the inviolability of the human
personality, our accusatory system of criminal justice demands that the government seeking to punish
an individual produce the evidence against him by its own independent labors, rather than by the
cruel, simple expedient of compelling it from his own mouth.
Miranda was not in any way apprised of his right to consult with an attorney and to have one present
during the interrogation, nor was his right not to be compelled to incriminate himself effectively
protected in any other manner. Without these warnings the statements were inadmissible. The mere
fact that he signed a statement which contained a typed-in clause stating that he had “full knowledge”
of his “legal rights” does not approach the knowing and intelligent waiver required to relinquish
constitutional rights.
Right to a Lawyer
As Miranda made clear, a criminal defendant has the right to a lawyer before being interrogated by the
police. The Sixth Amendment guarantees the right to a lawyer at all important stages of the criminal
process. Because of this right, the government must appoint a lawyer to represent, free of charge, any
defendant who cannot afford one.
Indictment
Grand jury: A group of ordinary citizens who decide whether there is probable cause the defendant
committed the crime with which she is charged.
Indictment: The government’s formal charge that the defendant has committed a crime and must stand
trial.
If the grand jury determines that there is probable cause, an indictment issues. Because the grand jury
never hears the defendant’s evidence, it is relatively easy for prosecutors to obtain an indictment.
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Chapter 7 Crime 11
Arraignment
At an arraignment a clerk reads the formal charges of the indictment. The defendant must enter a plea to
the charges. At this stage, most defendants plead not guilty.
Plea Bargaining
Plea Bargain: An agreement in which the defendant pleads guilty to a reduced charge, and the prosecution
recommends to the judge a relatively lenient sentence.
In the federal court system, about 97% of all prosecutions end in a plea bargain. Such a high percentage
has led to some concern that innocent people may be pleading guilty to avoid the risk of tough mandatory
sentences. A judge need not accept the bargain, but usually does.
Discovery
If the defendant does not plead guilty, the prosecution is obligated to hand over any evidence favorable
to the defense that the defense attorney requests. The defense has a more limited obligation to inform
the prosecution.
The prohibition against double jeopardy means that a defendant may be prosecuted only once for a
particular criminal offense. The purpose is to prevent the government from destroying the lives of
innocent citizens with repetitive prosecutions.
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Chapter 7 Crime 12
Punishment
The Eighth Amendment prohibits cruel and unusual punishment. Courts are generally unsympathetic to
claims under this provision. For example, the Supreme Court has ruled that the death penalty is not cruel
and unusual as long as it is not imposed in an arbitrary or capricious manner.4
Another important case under the Eighth Amendment involved California’s “three strikes” law, which
dramatically increases sentences for repeat offenders. Gary Ewing, on parole from a nine-year prison
term, was prosecuted for stealing three golf clubs worth $399 each. Because he had prior convictions, his
crime, normally a misdemeanor, was treated as a felony. Ewing was convicted and sentenced to 25 years
to life. The Supreme Court ruled that this sentence was not cruel and unusual and that the three strikes
law was a rational response to a legitimate concern about crime.5
The Eighth Amendment also outlaws excessive fines. Forfeiture is the most controversial topic under this
clause. Forfeiture is a civil law proceeding that is permitted by many different criminal statutes. Once a
court has convicted a defendant under certain criminal statutes—such as a controlled substance law—
the government may seek forfeiture of property associated with the criminal act.
To determine if forfeiture is fair, courts look at three factors:
• Whether the property was used in committing the crime
• Whether it was purchased with proceeds from illegal acts, and
• Whether the punishment is disproportionate to the defendant’s wrongdoing
7-2a Larceny
Larceny: the trespassory taking of personal property with the intent to steal it.
7-2b Embezzlement
Embezzlement: The fraudulent conversion of property already in the defendant’s possession.
7-2c Fraud
Fraud: Deception for the purpose of obtaining money or property.
Fraud refers to a variety of crimes, all of which involve the deception of another person for the purpose
of obtaining money or property. Types of fraud include wire and mail fraud, insurance fraud, Internet
fraud, auctions, identity theft, and phishing.
4
Gregg v. Georgia, 428 U.S. 153 (S. Ct. 1976).
5
Ewing v. California, 538 U.S. 11 (S. Ct. 2003).
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Chapter 7 Crime 13
Insurance Fraud
One example is a “swoop and squat” fraud scheme in which the perpetrator purposely causes an accident
so that they can collect on the insurance. Often, a dishonest doctor is part of the team.
Internet Fraud
The Internet’s anonymity8 and speed facilitate fraud. Common scams include advance fee scams, the sale
of merchandise that is either defective or nonexistent, the so-called Nigerian letter scam, billing for
services touted as “free,” and so on. Other common forms are:
Auctions – Shilling is an increasingly popular online auction fraud. Shilling means that a seller either bids
on his own goods or agrees to cross-bid with a group of other sellers. It is prohibited because the owner
drives up the price of his own item by bidding on it.
Identity Theft – This is one of the scariest crimes against property. Thieves steal the victim’s social security
number and other personal information such as bank account numbers and mother’s maiden name, which
they use to obtain loans and credit cards. Victims have the difficult task of proving that they were not
responsible for the debts and they may even find themselves unable to obtain a credit card, loan, or job.
Phishing
Phishing: A fraudster sends a message directing the recipient to enter personal information on a website
that is an illegal imitation of a legitimate site.
Spear phishing: Phishing that involves personalized messages that look as if they have been sent by
someone the victim knows.
7-3d Arson
Arson: The malicious use of fire or explosives to damage or destroy real estate or personal property.
7-3e Hacking
Hacking: Gaining of unauthorized access to a computer system.
Hacking is a crime under the federal Computer Fraud and Abuse Act of 1986 (CFAA).6 The CFAA prohibits:
• Accessing a computer without authorization and obtaining information from it,
• Computer espionage,
• Theft of financial information
• Theft of information from the U.S. government,
• theft from a computer,
• Computer fraud,
• Intentional, reckless, and negligent damage to a computer,
• Trafficking in computer passwords, and
• Computer extortion
Courts are now in the process of figuring out how to interpret the CFAA. In the following case, a former
employee clearly violated his company’s policies, but did he commit a crime? You be the judge.
6
18 U.S.C. Section 1030.
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Chapter 7 Crime 14
The government charged Nosal with aiding and abetting his former colleagues in violating a provision of
the CFAA that prohibits employees from exceeding their authorized access to a computer with intent to
defraud. The trial court granted Nosal’s motion to dismiss. The government appealed.
You Be the Judge: Did Nosal commit a crime when he aided and abetted others in violating a workplace
policy on computer use?
Argument for the Defendant: This provision of the CFAA can mean one of two things: (1) either it is a
crime to access unauthorized data or, (2) in a more expansive view, it can apply to anyone who is legally
entitled to access data, but who then uses this data in an unauthorized manner. That is what happened
here. The K/F employees were authorized to access the confidential database, but they were not
permitted to send it to Nosal.
Congress enacted the CFAA primarily to address the growing problem of computer hacking, i.e.,
“intentionally trespassing into someone else’s computer files.” But, under the government’s view,
everyone who uses a computer in violation of company policy, which may well include everyone who
uses a computer, would be a criminal. According to the government, if an employer keeps certain
information in a separate database that can be viewed on a computer screen, but not copied or
downloaded and an employee copies the information to a thumb drive, he could be charged with a
crime.
The computer gives employees new ways to procrastinate, by g-chatting with friends, playing games,
shopping or watching sports highlights. Such activities are routinely prohibited by many computer-use
policies. Under the broad interpretation of the CFAA, such minor violations would become federal crimes.
While it is unlikely that you will be prosecuted for watching cat videos on your work computer, you could
be. How will an employee know the difference between a minor personal use and a criminal act?
Employees who call family members from their work phones will become criminals if they send an email
instead. They can read the sports section of USA Today at work, but they’d better not visit ESPN.com. And
Sudoku enthusiasts should stick to printed puzzles, because visiting www.dailysudoku.com from their work
computers might give them more than enough time to hone their Sudoku skills behind bars.
Facebook prohibits its users from sharing login information. Are we going to cart every violator off to
prison? The terms of service on dating websites prohibit inaccurate or misleading information. If you
describe yourself as “tall, dark and handsome,” when you are actually short and homely, could you end up
wearing a handsome orange prison jumpsuit?
7
676 F.3d 854 United States Court of Appeals for the Ninth Circuit, 2012.
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Chapter 7 Crime 15
Argument for the Government: This statute explicitly requires an intent to commit fraud. Therefore, it
has nothing to do with reading ESPN.com, playing Sudoku, checking email, or fibbing on dating sites.
Instead, the K/F employees knowingly exceeded their access to a protected company computer and they
did so with an intent to defraud.
This distinction is not complicated. A bank teller is entitled to access money for legitimate banking purposes,
but not to take the bank’s money for himself. A new car buyer may be entitled to take a vehicle around
the block on a test drive but not to drive it to Mexico on a drug run.
7-3c RICO
Racketeer Influenced and Corrupt Organizations Act (RICO): A powerful federal statute, originally aimed
at organized crime, now used in many criminal prosecutions and civil lawsuits.
Racketeering acts: Any of a long list of special crimes, such as embezzlement, arson, mail fraud, wire fraud,
and so forth.
RICO is one of the most controversial statutes ever written. Congress passed the law primarily to prevent
gangsters from taking money they earned illegally and investing it in legitimate businesses. RICO prohibits
u sing two or more racketeering acts to accomplish any of these goals: (1) investing in or acquiring
legitimate businesses with criminal money; (2) maintaining or acquiring businesses through criminal
activity; or (3) operating businesses through criminal activity.
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Chapter 7 Crime 16
• The prosecutor must show that the defendant committed two or more racketeering acts, which are
any of a long list of specified crimes: embezzlement, arson, mail fraud, wire fraud, and so forth. Thus,
if a gangster ordered a building torched in January and then burned a second building in October, that
would be two racketeering acts. If a stockbroker told two customers that Bronx Gold Mines was a
promising stock, when she knew that it was worthless, that would be two racketeering acts.
• The prosecutor must then show that the defendant used these racketeering acts to accomplish one
of the three purposes listed above. If the gangster committed two arsons and then used the insurance
payments to buy a dry cleaning business, that would violate RICO. If the stockbroker gave fraudulent
advice and used the commissions to buy advertising for her firm, that would violate RICO.
Facts: The reverend Abraham Kennard bilked hundreds of churches out of millions of dollars through a
phony grant scheme. Abraham created the Network International Investment Corporation and then
approached churches and other nonprofits with an offer: for every $3,000 in membership fees that an
organization paid to the Network, the Network would award $500,000 in grants. Abraham told investors
that the grants were possible because he had secured wealthy investors who would provide financing,
and that the Network expected to earn a profit from its Christian resorts. More than 1,600 churches and
other nonprofits paid Abraham over $8.7 million.
Abraham deposited the money into an escrow account in the name of his lawyer, and then transferred
the money into another account in the name of Promotional Times International, Ltd., which was
controlled by Abraham’s brother Laboyce Kennard.
The investors never received their money and Abraham was found guilty of various crimes. Laboyce was
found guilty of money laundering. He appealed, arguing there was insufficient proof that he knowingly
laundered money.
Issue: Was there sufficient evidence that Laboyce knowingly laundered money?
Holding: Yes, conviction affirmed. Laboyce claims that there was not enough evidence for a jury to find
beyond a reasonable doubt either the existence of a criminal agreement or his knowing participation in
it.
To convict Laboyce on the money laundering conspiracy charge, the prosecution had to prove that some
agreement existed to launder the proceeds of Abraham’s fraud scheme, and that Laboyce knowingly
participated in that agreement. The extent of Laboyce’s knowledge of the details in the conspiracy does
not matter if the prosecution can show that he knew the essential objectives of the conspiracy.
There was sufficient evidence to prove that Laboyce knowingly participated in the agreement to launder
the proceeds from Abraham’s fraud. Laboyce set up the Promotional account and made large deposits to
that account of cashier’s checks from Abraham and checks drawn on the escrow account. Laboyce made
most of the withdrawals from the Promotional account including cashier’s checks made payable to
Abraham.
Laboyce was also involved in Network events. For example: Laboyce went with Abraham to a Network
meeting in Charlotte, North Caroline at which Abraham gave Network members fake checks instead of
the promised grant money; Laboyce videotaped Abraham at a fake groundbreaking ceremony for a
Network resort which was used to hold off member complaints; Laboyce “worked security” at a Network
meeting where Abraham told the members their grants would be delayed again; and Laboyce was present
at a meeting where Abraham told him that an FBI investigation of the Network led to a seizure of the
escrow account.
This evidence, according to the court, was enough for a jury to find beyond a reasonable doubt that
Laboyce knowingly participated in the conspiracy to launder the proceeds of the fraud.
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part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected
website or school-approved learning management system for classroom use.
Chapter 7 Crime 18
Compliance Programs
Federal Sentencing Guidelines: The detailed rules that judges must follow when sentencing defendants
convicted of federal crimes.
Compliance program: A plan to prevent and detect improper conduct at all levels of the company.
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website or school-approved learning management system for classroom use.
Chapter 7 Crime 19
The Federal Sentencing Guidelines are the detailed rules that judges must follow when sentencing
defendants convicted of crimes in federal court. The guidelines instruct judges to determine whether, at
the time of the crime, the corporation had in place a serious compliance program, that is, a plan to prevent
and detect criminal conduct at all levels of the company.
Chapter Conclusion
Crime has an enormous impact on society. Companies are victims of crimes, and sometimes they commit
criminal actions. Successful business leaders are ever-vigilant to protect their company from those who
wish to harm it, whether from the inside or out.
2. The police are not required to obtain a warrant before conducting a search if:
A. a reliable informant has told them they will find evidence of a crime in a particular location.
B. they have a warrant for part of a property and another section of the property is in plain view.
C. they see someone on the street who could possibly have committed a criminal act.
D. someone living on the property has consented to the search.
Answer: D.
4. Henry asks his girlfriend, Alina, to drive his car to the repair shop. She drives his car all right—to Las
Vegas, where she hits the slots. Alina has committed:
A. fraud
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Chapter 7 Crime 20
B. embezzlement
C. larceny
D. a RICO violation
Answer: C.
Case Questions
1. You Be the Judge: WRITING PROBLEM. An undercover drug informant learned from a mutual
friend that Philip Friedman “knew where to get marijuana.” The informant asked Friedman three
times to get him some marijuana, and Friedman agreed after the third request. Shortly thereafter
Friedman sold the informant a small amount of the drug. The informant later offered to sell Friedman
three pounds of marijuana. They negotiated the price and then made the sale. Friedman was tried for
trafficking in drugs. He argued entrapment. Was Friedman entrapped?
Argument for Friedman: The undercover agent had to ask three times before Friedman sold him a
small amount of drugs. A real drug dealer, predisposed to commit the crime, leaps at an opportunity
to sell. If the government spends time and money luring innocent people into the commission of
crimes, all of us are the losers.
Argument for the Government: Government officials suspected Friedman of being a sophisticated
drug dealer, and they were right. When he had a chance to buy three pounds, a quantity only a dealer
would purchase, he not only did so, but bargained with skill, showing a working knowledge of the
business. Friedman was not entrapped—he was caught.
Answer: Friedman argued entrapment, claiming that there was no evidence of his predisposition to
traffic in drugs. The Alabama Supreme Court ruled against him. The court noted that Friedman
admitted to occasional use of marijuana, that he had been able quickly to locate marijuana to resell
to the agent, and that he showed a sophisticated knowledge of the drug when bargaining over the
price of three pounds. The court held that there was no evidence of entrapment. Friedman v. State,
654 So.2d 50, 1994 Ala. Crim. App. LEXIS 179 (1994).
2. Conley owned video poker machines. Although they are outlawed in Pennsylvania, he placed them in
bars and clubs. He used profits from the machines to buy more machines. Is he guilty of money
laundering?
Answer: Yes. It is money laundering to take the proceeds of illegal acts and either conceal them or,
as he did, use them to promote additional crimes.
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part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected
website or school-approved learning management system for classroom use.
Chapter 7 Crime 21
3. Shawn was caught stealing letters from mailboxes. After pleading guilty, he was sentenced to two
months’ in prison and three years’ supervised release. One of the supervised release conditions
required him to stand outside a post office for eight hours wearing a signboard stating, “I stole mail.
This is my punishment.” He appealed this requirement on the grounds that it constituted cruel and
unusual punishment. Do you agree?
Answer: The appeals court affirmed the sentence on the grounds that it did not violate standards of
decency. United States v. Gementera, 379 F.3d 596 (2004).
4. While driving his SUV, George Xinos struck and killed a pedestrian. He then fled the scene of the
crime. A year later, the police downloaded information from his car’s onboard computer which they
were able to use to convict him of the crime. Should this information have been admissible at trial?
Answer: A California court ruled that Xinos did have a reasonable expectation of privacy and the
data was not admissible in court. because the computer had simply been recording his movements
on a public road. People v. Xinos, 192 Cal. App. 4th 637 (Cal. App. 6th Dist. 2011).
5. Police arrested Hank on a warrant issued in a neighboring county. When they searched him, the
police found drugs and a gun. Only later did the police discover that when they had used the
warrant, it was not valid because it had been recalled months earlier. The notice of recall had not
been entered into the database. Should the evidence of drugs and a gun be suppressed under the
exclusionary rule?
Answer: No. The police conduct at issue here comes under one of the exceptions to the
exclusionary rule –the good faith exception. The police acted under what appeared to be a valid
warrant, and there was no indication that it had been recalled.
Discussion Questions
1. Under British law, a police officer must now say the following to a suspect placed under arrest: “You
do not have to say anything. But if you do not mention now something which you later use in your
defense, the court may decide that your failure to mention it now strengthens the case against you.
A record will be made of anything you say and it may be given in evidence if you are brought to trial.”
What is the goal of this British law? What does a police officer in the United States have to say, and
what difference does it make at the time of an arrest? Which approach is better?
Answer: Answers will vary.
2. ETHICS You are a prosecutor who think it is possible that Naonka, in her role as CEO of a brokerage
firm, has stolen money from her customers, many of whom are not well-off. If you charge her and her
company with RICO violations, you know that she is likely to plea bargain because otherwise her assets
and those of the company may be frozen by the court. As part of the plea bargain, you might be able
to get her to disclose evidence about other people who might have taken part in this criminal activity.
But you do not have any hard evidence at this point. Would such an indictment be ethical? Do the
ends justify the means? Is it worth it to harm Naonka for the chance of protecting thousands of
innocent investors?
Answer: Answers will vary.
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website or school-approved learning management system for classroom use.
Chapter 7 Crime 22
3. Officer Trottier stopped Marie Winfield for driving 20 miles over the speed limit. He then became
suspicious because her son would not make eye contact and she was eating a Powerbar in a
“hurried manner.” The officer asked for and Winfield granted him permission to search her car.
During the search, he found a letter, which he read. Has he committed an illegal search?
Answer: The court ruled that it was illegal – permission to search a car does not mean permission to
read a letter. Winfield v. Trottier, 710 F.3d 49 (2d Cir. 2013).
4. Mickle pleaded guilty to rape. The judge sentenced him to prison for five years and also ordered that
he undergo a vasectomy. Was this cruel and unusual punishment?
Answer: The appeals court ruled that this sentence was cruel and unusual. Although the operation in
itself is not cruel (indeed, many men voluntarily undergo it), when imposed as punishment, it is
degrading and in that sense cruel. It is also an unusual punishment. Mickle v. Henrichs, 262 F. 687
(1918).
5. Ramona was indicted on charges of real estate fraud. During a legal search of her home, the police
found a computer with encrypted files. Would it be a violation of her Fifth Amendment right against
self-incrimination to force her to unencrypt these files?
Answer: The courts are divided on this topic. This court did order Fricosu to unencrypt the files on
the theory that she was already incriminated because the police knew the laptop was hers. United
States v. Fricosu, 841 F. Supp. 2d 1232 (D. Colo. 2012). But a different court ruled that a man suspected
of having child pornography on his computer did not have to unencrypt the files. United States v. Doe,
670 F.3d 1335 (11th Cir. Fla. 2012)
6. Suppose two people are living together: the suspect and a tenant. If the tenant consents to a police
search of the premises, then the police are not required to first obtain a warrant. What if the
suspect and the tenant disagree, with the tenant granting permission while the suspect forbids the
police to enter? Should the police be required to obtain a warrant before searching? Or what if the
suspect denies permission to enter but the police go back later and the tenant consents?
Answer: In the first situation, the S. Ct. ruled that if the suspect is standing there and denies consent,
the police may not conduct a search. Georgia v. Randolph, 547 U.S. 103 (U.S. 2006). As for the 2nd
situation, in 2014, the S. Ct. refused to extend Georgia v. Randolph’s requirement of a co-occupant
consent to a situation where the objecting occupant is absent from the property. The decision has
implications for people who live with others. Co-occupants should be aware that their fellow co-
occupants may consent to a police search if they are not there, even if they previously objected to the
consent search. Fernandez v. California, 34 S.Ct. 1126 (2014).
7. Hiring relatives of foreign officials for no-show jobs is a violation of the FCPA. But what about hiring
children of government officials into real jobs? Is that also a violation? The U.S. government is
investigating JPMorgan Chase & Co.’s practice of hiring the children of top Chinese officials in Hong
Kong. What are the rules in this situation? What should they be?
Answer: According to the WSJ, “Factors that would help a company fend off bribery inquiries would
include proof that there was a vacant position to start with (as opposed to the company having
created a new position for the official's relative); that the relative was qualified to fill it; and that the
relative performed the duties of the position satisfactorily, legal experts said.” Of concern would be
any evidence of a quid pro quo around the time of hiring.
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Chapter 7 Crime 23
8. A police officer in North Carolina stopped Nick’s car because it had a broken brake light. Nick
allowed the officer to search the car and, during the search, the officer found cocaine. It turns out
that the original stop was invalid because drivers in North Carolina are allowed to drive with only
one brake light. The cop did not know the law. Does the exclusionary rule prevent the cocaine from
being admissible in court?
Answer: If the original stop was illegal, then the search following from it, even though Nick gave
permission, cannot stand. The exclusionary rule will apply.
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during our stay amongst the ice. When I say “in a rush” it is only
relatively speaking. For a rush was impossible in our circumstances.
The pilot’s room offered good sleeping accommodation for two people
if they went to bed quietly and carefully. There were so many uprights,
struts, and pipes that our bedroom had the appearance of a birdcage.
The making of a miscalculated movement landed one against a pipe or
a strut, sometimes both. In addition to this one could not stand at full
height. To speak of a rush under such conditions is therefore stupid.
The sight which met us when we put our heads through the trap-door
was interesting, but not altogether inviting. It was interesting to note
how much four desperate men can straighten out. The pool we had
made was now covered with ice in the center of which N 25 was stuck.
The pressure was tremendous and a catastrophe seemed
unavoidable. Gathering all his strength, Riiser-Larsen sprang like a
tiger. He jumped high in the air in order to land anywhere on the ice
which jammed the seaplane. The result was always the same. The ice
broke under him without resistance. Omdal had got hold of a tool (I
don’t know which one) and helped his comrade splendidly with its aid.
Larsen pushed for all he was worth against the seaplane’s nose and
tried to free it from the ice pressure. By this united work they managed
to loosen the machine about 45° and thereby lighten the pressure
against the sides. In the meantime Ellsworth and I were occupied in
putting the provisions and equipment on the old ice. We were masters
of the situation at last, but it was a near thing that time.
To return to our old quarters was unthinkable, so we looked round
for a safe place somewhere else. We lay in a favorable position for
crossing to N 24 and decided it might be wise to pursue this course.
There was a possibility that we might reach it by way of the new ice,
but this seemed unlikely after our last experience. However we would
try our best to get over because it would be an advantage to be able to
use N 24’s petrol without transporting it. Moreover it appeared that
conditions across there were calmer and offered a safer resting place.
That this was not the case we shall see later.
Thus we began again to hack and to level and by breakfast time
the track was finished. Exactly as though we ourselves had dispersed
it the fog lifted, and we could soon start. This reminds me of an
amusing occurrence, amusing for others, but not exactly for me. On
account of the small accommodation in the machines it was necessary
for us always to move about in tabloid form, bent, drawn together and
compact. The result of this was cramp, sometimes in the legs, in the
thighs, in the stomach, in the back. These attacks came on at the most
inopportune moments and the martyr was a never-failing object of
general amusement. Everything was ready that morning for departure
and I suddenly remembered my glasses which I had forgotten in the
mess and which I now rushed to fetch. But it was a mistaken move on
my part. My first hasty jerk gave me cramp in both thighs with the
result that I could not move from the spot. I heard titters and giggles
and notwithstanding the infernal pain I could not do otherwise than join
in the general amusement.
The second start was not more fortunate than the first. The ice
broke all the way and N 25 became famous as an icebreaker. One
good result came from it, however, namely, that we got near to the
other machine. That presented a sad appearance as it lay there lonely
and forlorn with one wing high in the air, and the other down on the ice.
They had been lucky enough to get its nose up on to a grade of the old
ice floe, but the tail lay right out in the ice.
The conditions here seemed quite promising. We had an open
waterway about 400 meters long with fine new ice quite near. The third
attempt to start was undertaken the same afternoon but without result.
We decided to join up the waterway and the new ice. It was possible
that the great speed one could attain on the waterway would carry one
up onto the ice and if that happened there was a big chance of rising in
the air as the track would then have become about 700 meters long. At
2 a.m. on the 4th June we started the work, continuing all day. As by
eventide we had got the track finished, down came the fog and
prevented us from starting. A little later the ice got rather lively,
beginning to screw during the night. Fortunately it was only the new-
frozen ice, but even it was eight inches thick. There were pipings and
singings all round us as the ice jammed against the machine. The
methods and tools we now used were most original. Dietrichson armed
himself with a four-yard-long aluminium pole with which he did
wonderful work. Omdal used the film camera tripod, which was very
heavy, ending in three iron-bound points. Every blow therefore was
trebled and was most effective. Riiser-Larsen was the only one who
had brought rubber boots with him; these reached to his waist. As the
ice encroached it was met by ringing blows. The battle against it
continued the whole night and by morning we could once again look
back upon a conquest. Meantime the old ice had crept up nearer to us.
It now appeared as though the “Sphinx” was taking aim at us; this was
an ugly forbidding iceberg, formed in the shape of the Sphinx. The
movements of the ice had caused the sides of the waterway to set
together and our starting place was ruined again. The fog lay thick on
the 5th of June while fine rain was falling. The ice cracked and piped
as though it would draw our attention to the fact that it still existed.
Now what should one do?
With his usual energy Riiser-Larsen had gone for a walk that
afternoon amongst the icebergs accompanied by Omdal; they wished
to see if they could find another place which could be converted into a
starting place. They had already turned round to return home, as the
fog was preventing them from seeing anything, when suddenly it lifted
and there they stood in the center of the only plain which could be
used. This was 500 meters square and not too uneven to be made
level by a little work and patience. They came back happy and full of
hope and shouted to the “Sphinx”: “You may be amused and smile
even when others despair—even when the position is hopeless we still
sing with pleasure aha! aha! aha! Things are improving day by day.”
The “Sphinx” frowned! It did not like this!
COLLECTING SNOW BLOCKS FOR A RUN-WAY
The way to the plain which the two men had found was both long
and difficult, but we lived under conditions where difficulties frightened
us no more. First of all the machine must be driven there—about 300
meters through new ice to a high old plain. Here we would have to
hack out a slide to drive the machine up. From here the road crossed
over to the Thermopylæ Pass, which was formed by two moderately
sized icebergs, and ended in a three-yards-wide ditch over which the
machine must be negotiated on to the next plain. On the other side
one could see the last obstacle which must be overcome in the form of
an old crack about five yards wide with sides formed of high icebergs
and loose snow—rotten conditions to work in. Early on the morning of
the 6th the work was started. After breakfast we took all our tools and
attacked the old ice where the grade should be built. In order to get to
this spot we had to pass round a corner which took us out of sight of
N 25. Under general circumstances one would not have left the
machine unattended, but conditions were otherwise than general and
we had no man we could spare. Singing “In Swinemunde träumt man
im Sand,” the popular melody associated with our comfortable days in
Spitzbergen, we used our knives, axes, and ice-anchor to the best
advantage, and fragments of ice flew in all directions. It is with pride
and joy that I look back on these days, joy because I worked in
company with such men, proud because our task was accomplished.
Let me say quite frankly and honestly that I often regarded the
situation as hopeless and impossible. Ice-walls upon ice-walls raised
themselves up and had to be removed from our course; an
unfathomable gulf seemed to yawn before us threatening to stop our
progress. It had to be bridged by cheeky heroes who, never grumbling,
tackled the most hopeless tasks with laughter and with song.