Most white-collar crimes prosecuted as federal violations are based on statutes enacted by Congress under the authority of Article I, Section 8, of the U.S. Constitution, which grants Congress power over postal, bankruptcy, and taxing matters and authority to regulate interstate domestic and foreign commerce.
Of course, state legislatures have broad authority to proscribe such offenses as contrary to the public welfare.
Acts by Corporate Agents
Today, prosecutions of white-collar crime are frequently directed against corporate defendants, and corporations are held criminally liable for the acts of their agents committed within the scope of an agent’s authority.
The Sherman Antitrust Act makes it a crime to enter any contract or engage in any combination or conspiracy in restraint of trade or to monopolize or attempt to monopolize trade.
Among the more common criminal antitrust violations are price fixing and bid rigging.
Price fixing occurs when sellers unlawfully enter into agreements as to the prices of products or services.
Bid rigging involves interference with competitive bidding for the award of a contract.
Antitrust Violations (cont.)
To prove a criminal violation of the Sherman act, the government must establish that
two or more entities formed a combination or conspiracy;
the combination or conspiracy produces, or potentially produces, an unreasonable restraint of trade or commerce;
the restrained trade or commerce is interstate in nature; and
the defendant’s general intent is to violate the law.
The rapid growth of the Internet has opened up new vistas of opportunity for criminals.
Identity theft, theft of intellectual property, and numerous types of fraudulent schemes have been propelled to unprecedented levels by means of the Internet.
In March 2009, the FBI reported that Internet-based crime increased by 33% over the previous year, making 2008 the worst year on record for reported cybercrimes.
Computer Fraud and Abuse Act 18 U.S.C.A. § 1030
Proscribes crimes involving “protected computers,” which are those used in interstate commerce or communications, including computers connected to the Internet.
As amended in 1996, 18 U.S.C.A. § 1030(a)(5)(A) makes it a crime to “knowingly cause the transmission of a program, information, code, or command” in interstate commerce with intent to cause damage to a computer exclusively used by a financial institution or the U.S. government.
Computer Fraud and Abuse Act (cont.)
In addition, the act prohibits “knowingly and with intent to defraud, trafficking in passwords to permit unauthorized access to a government computer, or to affect interstate or foreign commerce.” 18 U.S.C.A. § 1030(a)(6)(A)(B).
Subsection 1030(a)(7) makes it illegal to transmit in interstate or foreign commerce any threat to cause damage to a protected computer with intent to extort something of value.
Virginia Computer Crimes Act
Section 18.2-152.3 provides:
Any person who uses a computer or computer network without authority and with the intent to:
1. Obtain property or services by false pretenses;
2. Embezzle or commit larceny; or
3. Convert the property of another
is guilty of the crime of computer fraud.
Arizona Anti-Spam Law
A person shall not knowingly transmit commercial electronic mail if any of the following apply:
1. The person falsifies electronic mail transmission information or other routing information for unsolicited commercial electronic mail.
2. The mail contains false or misleading information in the subject line.
3. The person uses a third party’s internet address or domain name without the third party’s consent for the purpose of transmitting electronic mail in a way that makes it appear that the third party was the sender of the mail.
Ariz. Rev. Stat. § 44-1372.01(A).
Access Device Fraud
Access devices include:
debit and credit cards
personal identification numbers (PINs)
In many instances, fraudulent use of such devices can be prosecuted under theft or forgery laws, but states have enacted laws specifically criminalizing access device fraud.
The theft or misappropriation of personal identifying information and documents has become a theft offense of major proportions in the United States.
In April 2006 the Bureau of Justice Statistics Bulletin reported that in 2004, 3.6 million households, representing 3% of the households in the U.S., discovered that at least one member of the household had been the victim of identity theft during the previous six months.
Intellectual Property Offenses
Theft of trade secrets
Federal law prohibits falsely affixing or marking in connection with sales or advertising of any imitation of the name of a patentee, a patent number, or using the words “patent,” “patentee,” “patent applied for,” or “patent pending” to falsely convey the status of a patent.
To prove any of the above violations, the prosecution must show the deceitful intent of the defendant.
35 U.S.C.A. § 292.
“ Whoever intentionally traffics or attempts to traffic in goods or services and knowingly uses a counterfeit mark on or in connection with such goods or services shall, if an individual, be fined not more than $2,000,000 or imprisoned not more than 10 years, or both, and, if a person other than an individual, be fined not more than $5,000,000.”
18 U.S.C.A. § 2320.
A copyright affords legal protection to authors of original works which now includes musical, artistic, and architectural works as well as videos, computer software, and databases. For a work created after January 1, 1978, statutory protection is given for the life of the author plus 70 years after the author’s death.
Federal law provides that anyone “who infringes a copyright willfully either (1) for purposes of commercial advantage or private financial gain, or (2) by the reproduction or distribution, including by electronic means of one or more copies or phonorecords … shall be punished…”
17 U.S.C.A. § 506(a)
Theft of Trade Secrets
Controversies concerning the use and misuse of trade secrets are frequently handled in civil courts where state statutes and the common law provide remedies.
The Economic Espionage Act of 1996 prohibits foreign governments from stealing trade secrets (18 U.S.C.A. § 1831) and criminalizes domestic trade secret theft (18 U.S.C.A. § 1832).
Defined as the knowing and fraudulent concealment of assets, avoiding distribution of nonexempt assets, taking false oaths, and related conduct in connection with bankruptcy proceedings.
18 U.S.C.A. § 152.
To convict, the government must prove the defendant acted willfully; however, one who acts with willful blindness can be found to have acted with the requisite criminal intent.
Although the statute does not expressly state a materiality requirement, it has been construed “to require that [a] false oath be given in relation to some material matter.”
The Federal False Statements Act
18 U.S.C.A. § 1001 prohibits knowingly and willfully making a false statement that is material to a matter within the jurisdiction of any department or agency of the United States.
When proceeding under the False Statements Act, the government must prove that the accused knowingly and willfully submitted to a government agency or department a statement that was false and material.
Medicare and Medicaid fraud are the most common forms of this offense.
To prove Medicare or Medicaid fraud under the False Claims Act, the government must prove that (1) the defendant presented a claim seeking reimbursement from the government for medical services or goods, (2) the claim was false or fraudulent, and (3) the accused knew of the claim’s falsity.
The Federal Mail Fraud Statute, 18 U.S.C.A. § 1341, makes it a crime to use the mail to defraud.
Mail fraud consists of
(1) a scheme devised or intended to defraud or to obtain money or property by fraudulent means and
(2) the use of or causing to use the mails in furtherance of the fraudulent scheme.
The crime of disguising illegal income to make it appear legitimate.
Prohibited by the Money Laundering Control Act of 1986, 18 U.S.C.A. §§ 1956, 1957.
To convict a defendant of money laundering, the government must show that
(1) the defendant took part in a financial transaction and knew that the property in the transaction involved proceeds of illegal activity;
(2) that the property involved was in fact proceeds of illegal activity; and
(3) that the defendant knew that the transaction was designed in whole or part to conceal or disguise the nature, source, location, ownership, or control of illegal proceeds.
Other Currency Violations
31 U.S.C.A. § 5313 requires financial institutions to file currency transaction reports with the Secretary of the Treasury for cash transactions in excess of $10,000.
31 U.S.C.A. § 5324 prohibits a person from causing or attempting to cause a financial institution from making the required reports or from structuring or assisting in structuring a transaction with one or more institutions to evade the requirement.
A variety of federal and state statutes criminalize conduct involving misrepresentations, omissions, insider trading, and other aspects of fraud in securities dealing.
Not all misrepresentations or omissions involving securities give rise to criminal violations.
The government must prove the accused’s willful intent to commit a substantive fraud in connection with the purchase or sale of a security or in the offering or sale of a security.
Courts uniformly hold that to sustain a conviction, the omission or misrepresentation must be material and be made in reckless disregard for the truth or falsity of the information provided.
A form of securities fraud in which investors are paid abnormally high rates of return using money from new investors.
The funds are never really invested so the scheme must constantly bring in new money in order to pay the initial investors the promised high returns.
The scheme is named for Charles Ponzi, who ran a notorious pyramid scheme in the early 20th century.
In 2008, Wall Street icon Bernard Madoff was charged by federal authorities with operating a Ponzi scheme that defrauded investors of more than $50 billion.
Tax Fraud (Tax Evasion)
Although the government can employ a wide variety of federal criminal statutes to prosecute those who commit tax fraud, most prosecutions are based on the Internal Revenue Code.
Some of the more common violations include
underreporting or omitting income
overstating deductions, exemptions, and credits
Whether violations are felonies or misdemeanors, to obtain a conviction the government must prove the defendant’s willfulness to commit the proscribed act.
Racketeering and Organized Crime
Organized crime involves offenses committed by persons or groups who conduct their business through illegal enterprises.
Under its power to regulate foreign and interstate commerce, Congress enacted the Organized Crime Control Act of 1970.
Title IX of the act is entitled “Racketeer Influenced and Corrupt Organizations” and is commonly referred to by the acronym RICO.
The law prohibits infiltration of legitimate organizations by racketeers where foreign or interstate commerce is affected. In addition to increased criminal penalties, the new RICO statute provides for forfeiture of property used in criminal enterprises and permits the government to also bring civil actions against such enterprises.
Prohibitions of the RICO Act
RICO makes it a crime for any person “who has received any income derived, directly or indirectly, from a pattern of racketeering activity or through collection of an unlawful debt ... to use or invest [in] any enterprise which is engaged in interstate or foreign commerce.”
It makes it unlawful for any such person to participate, directly or indirectly, in the conduct of the enterprise’s affairs through a “pattern of racketeering.”
It makes it a crime for any person “employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.”
Finally, the act prohibits conspiracies to violate any of these proscriptions.