White Collar Crime

What Constitutes a White Collar Crime?

Definition

White collar crimes are criminal offenses typically committed against an employer or business by a professional, employee, businessperson or public official. Typically, white collar crimes are nonviolent crimes usually committed in money making situations for financial gain. White collar crimes include both felony and misdemeanor offenses which can be filed in state or federal court. However, most charges are felonies that are prosecuted in federal court. Applying a traditional definition to white-collar crime, white-collar crimes are those criminally illegal acts committed during the course of one's job.

Synopsis

The phrase "white-collar crime" was coined in 1939 during a speech given by Edwin Sutherland to the American Sociological Society. Sutherland defined the term as "crime committed by a person of respectability and high social status in the course of his occupation."  Many white-collar crimes are especially difficult to prosecute because the perpetrators use sophisticated means to conceal their activities through a series of complex transactions. According to the Federal Bureau of Investigation, white-collar crime is estimated to cost the United States more than $300 billion annually. Although the government typically charges individuals for white-collar crimes, the government has the power to sanction corporations as well for these offenses. The penalties for white-collar offenses could include imprisonment, fines, home detention, community confinement, paying the cost of prosecution, forfeiture of real property and personal property including cash, restitution, and supervised release which is similar to parole. However, sanctions can be reduced if the defendant takes responsibility for the crime, engages in “cooperation” and assists the government or the authorities in their investigation or prosecution. For more information on this, visit ~ http://www.law.cornell.edu/wex/index.php/White-collar_crime

Determining the extent of white-collar crime is no simple task. Two factors make it particularly difficult to accurately determine how often white-collar crimes occur. First, many white-collar crimes are not reported to formal response agencies. One study found that just one third of white-collar crime victims notify the authorities about their victimization (Kane & Wall, 2006). The 2005 National White-Collar Crime Center (NW3C) Victimization Survey is the most recent, and most comprehensive, white-collar crime victimization survey available. The results of this survey, a phone interview with 1,605 adults in the United States, found that 46.5% of households and 36% of individuals reported experiencing forms of white-collar crime in the prior year (Kane & Wall, 2006).(resource: http://www.sagepub.com/upm-data/43839_2.pdf)

Characteristics of White Collar Crimes

  • Deliberate acts motivated by profit
  • Corporate Culture
  • Element of Learning, Peer support, Rationalization and Neutralization
  • Victimization: Can be diffuse
  • Lack of reporting and defining at times
  • Civil vs. criminal violations
  • Sociological in nature at times
  • Sanctions: can vary from small fines to years of imprisonment
  • Investigation: can vary from jurisdiction to jurisdiction and agency to agency (ie. Northern vs Southern and State vs Federal)
  • Activity hidden in normal business routines-secrecy (Medical Doctors vs. Psychiatrists)
  • Many investigations can be reactive rather than pro-active
  • White-collar crime tends to be made up of complex, sophisticated, and relatively technical activities.
  • White-collar crime tends to be intermingled with legitimate behavior
  • Victimization tends to be diffuse. Harm is not always conceptualized or identifiable, sometimes due to the substantial number of victims.
  • The monetary sums that are involved can be quite large. i.e. Bernie Madoff, Michael Milken, Ken Lay
  • White-collar crime may be accomplished by manipulating symbols rather than objects
  • White collar crime may occur over an extended period of time
  • With respect to perception and prosecution, evidence indicating that they have taken place is not as clear-cut as with street crime.
  • Media coverage can be substantial
  • Corporate criminals are not as heavily stigmatized

Potential Defenses

  • Intent to commit the crime in question is always an issue in White Collar cases, especially in fraud-related cases.  One usually has to have the specific intent to commit the illegal act in question including the specific intent to defraud in a fraud-related case.
  • Duress has been used as a defense in white collar criminal cases.  If the defendant engaged in the criminal activity as a result of their will being overcome by a serious threat of death or serious bodily harm which is threatened by another person, then a defense of duress may be viable.
  • Entrapment can be used as a defense to White Collar crimes in certain cases.  If a normally law-abiding person is coerced into committing the crime as a result of the acts of undercover law enforcement officers, there may be a successful defense of entrapment.  Attorney Seth Chazin has won a full acquittal in a major fraud-related case in Federal District Court in San Francisco by asserting a successful  entrapment defense.  
    http://www.bayarea-attorney.com/seth-p-chazin-wins-a-major-victory-against-the-federal-government.

Types of White Collar Crimes

 

Computer and Internet Fraud

With the increased use of the Internet, the government continues to devote more and more resources to prosecuting individuals and businesses charged with computer crimes. One common form includes “hacking,” in which a perpetrator uses sophisticated technological tools to remotely access a secure computer or internet location. A second common criminal activity involves illegally intercepting an electronic transmission not intended for the interceptor. This may result in the interception of private information such as passwords, credit card information, or other types of so-called identity theft.

Federal law defines computer fraud as the use of a computer to create a misrepresentation of fact as an attempt to induce another to do or refrain from doing something which causes loss. Fraudulent misrepresentation can occur in a number of ways. First, they can alter computer data without authorization. Employees may embezzle company funds by altering data. Second, criminals can alter or delete stored data. Third, one can rewrite software codes and upload them into a bank's mainframe so that the bank will provide its users' identities. These individuals can then use this information to make unauthorized credit card purchases.

Successful Case Results

Code Sections:

18 U.S.C. § 506 No Electronic Theft Act
http://www.law.cornell.edu/uscode/text/18/506

18 U.S.C. § 1028 Identity Theft and Assumption Deterrence Act of 1998 http://www.law.cornell.edu/uscode/text/18/102818

U.S.C. § 1029 Fraud and Related Activity in Connection with Access Devices http://www.law.cornell.edu/uscode/text/18/1029  

18 U.S.C. § 1030 Fraud and Related Activity in Connection with Computers http://www.law.cornell.edu/uscode/text/18/1030

18 U.S.C. § 1343 Wire Fraud
http://www.law.cornell.edu/uscode/text/18/1343

18 U.S.C. § 1362 Communication Lines, Stations, or Systems
http://www.law.cornell.edu/uscode/text/18/1362

18 U.S.C. § 2511 Interception and Disclosure of Wire, Oral, or Electronic Communications Prohibited http://www.law.cornell.edu/uscode/text/18/2511

18 U.S.C. § 2701 Unlawful Access to Stored Communications
http://www.law.cornell.edu/uscode/text/18/2701

18 U.S.C. § 2702 Disclosure of Contents
http://www.law.cornell.edu/uscode/text/18/2702

18 U.S.C. § 2703 Requirements for Governmental Access
http://www.law.cornell.edu/uscode/text/18/2703

Embezzlement

Embezzlement is the fraudulent seizure of assets by someone to whom it was entrusted. Most often it is associated with stealing money. Embezzlement can occur regardless of whether the defendant keeps the property or gives it to a third party.

Historically, embezzlement became a crime because thefts were occurring in which the elements of larceny could not be met because the thief initially had the right to possess the funds (like a bank teller); thus, the prosecution could not prove the element of a “trespassory taking.” Accordingly, the crime of embezzlement only requires a showing  that either the employee had possession of the funds or goods because of the employee's position or that the employee had the authority to exercise substantial control over the goods or funds and that the employee stole those funds or goods. Courts determine the question of substantial control by considering the employee's job title, job description, the duties the accused undertook and the practices of that particular company.

There are various methods of embezzlement. Some embezzlers “skim off the top” so that they continually acquire a small amount over a particular time interval. This method reduces the likelihood of being caught. On the other hand, some embezzlers steal a very large amount of the goods or funds in a single instance and then disappear.

Believe it or not, the Internal Revenue Service (IRS) requires that individuals who are guilty of embezzlement include embezzled funds in their yearly income taxes. Upon returning the funds or paying restitution, the embezzler becomes eligible for a tax deduction. Failure to report embezzled funds as gross income can result in the bringing of tax evasion charges.

Successful Cases by Seth P. Chazin

Code Sections:

California Penal Code Section 503-515
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=pen&group=00001-01000&file=503-515

15 USC § 80a–36 - Larceny and embezzlement
http://www.law.cornell.edu/uscode/text/15/80a-36

18 USC Chapter 31 – Embezzlement and theft
http://www.law.cornell.edu/uscode/text/18/part-I/chapter-31

Mortgage Fraud

Mortgage fraud is a broad term generally used to describe intentional misrepresentation or omission of information on a mortgage loan application or other documentation at or during any part of the application or lending process. It can occur at any level of a real estate transaction, and can involve parties ranging from the developer or lending institution to the buyer, seller, real estate agent or mortgage broker.

Following an intricate and often lengthy investigation, law enforcement officials will file either felony or misdemeanor charges. A majority of mortgage fraud cases are prosecuted as felonies in Federal Court.  Sometimes they are charges as felonies in state court. Penalties are often much greater in federal court, for instance penalties for conviction may include up to 30 years of imprisonment depending on the charges brought.

Successful Cases by Seth P. Chazin

  • Mortgage fraud: A mortgage broker was charged with committing mortgage fraud resulting in tens of thousands of dollars of loss. Client was not a citizen and risked being deported. Aggressive negotiation with the DA and the judge resulted in probation, no actual jail time and no deportation.
  • San Francisco Federal Real Estate Fraud- no charges filed
    http://www.bayarea-attorney.com/realstate-fraud 

Code Section:

18 U.S.C. § 225 http://www.law.cornell.edu/uscode/text/18/225

United States v. Dominguez, 226 F.3d 1235 (11th Cir. 2000).

In Dominguez, the defendant was charged and convicted on multiple accounts involving participation in a cocaine distribution organization and mortgage fraud. The appeal centered on the defendant's assertion that the drug-related charges and the mortgage fraud-related charges were improperly joined in the district court. The court ultimately rejected the defendant's argument because "[c]oncealing money from the drug activity was the motive for the mortgage fraud." pp. 1242. The court relied on the government's closing argument, which centered around the defendant making false statements on a loan application, which brings it under section.  p. 1014 at fn.9.

Credit Card Fraud

Credit Card Fraud is a serious crime that is often connected to identity theft. Identity theft is using the driver's license number, social security number and/or credit card or other form of identification of another person to fraudulently obtain money or property.Credit card fraud schemes generally fall into one of a few categories of fraud: application fraud, theft of credit and account takeover.Application fraud refers to the unauthorized opening of credit card accounts in another person's name. This may occur if a perpetrator can obtain enough personal information about the victim to submit a credit card application in the victim's name, or is able to create convincing counterfeit documents in order to obtain credit.Theft of credit generally refers to the most common form of credit card fraud where the accused is alleged to have obtained a victim's credit card information and charged items on that credit card without authorization.Account takeovers typically involve the hijacking of an existing credit card account, a practice by which the perpetrator obtains enough personal information about a victim to change the account's billing address.  The perpetrator then subsequently reports the card lost or stolen in order to obtain a new card and make fraudulent purchases with it.

Code Sections:

California Penal Code Section 484-502.9
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=pen

18 USC § 1029 - Fraud and related activity in connection with access devices http://www.law.cornell.edu/uscode/text/18/1029

Mail/Wire Fraud

Mail fraud is defined as knowing and willfully using the United States Postal Service as part of a scheme to defraud another or to obtain money or property of another by false pretenses or representations for the purpose of financial gain. It is a crime to use the mail or wire services as part of a "scheme to defraud." The law includes the use of private carriers as well as government mail and wire services.

Code Sections:

18 USC Chapter 63 - MAIL FRAUD AND OTHER FRAUD OFFENSES

§ 1341. Frauds and swindles
http://www.law.cornell.edu/uscode/text/18/1341

§ 1342. Fictitious name or address
http://www.law.cornell.edu/uscode/text/18/1342

§ 1343. Fraud by wire, radio, or television
http://www.law.cornell.edu/uscode/text/18/1343

§ 1344. Bank fraud
http://www.law.cornell.edu/uscode/text/18/1344

§ 1345. Injunctions against fraud
http://www.law.cornell.edu/uscode/text/18/1345

§ 1346. Definition of “scheme or artifice to defraud”
http://www.law.cornell.edu/uscode/text/18/1346

§ 1347. Health care fraud
http://www.law.cornell.edu/uscode/text/18/1347

§ 1348. Securities and commodities fraud
http://www.law.cornell.edu/uscode/text/18/1348

§ 1349. Attempt and conspiracy
http://www.law.cornell.edu/uscode/text/18/1349

§ 1350. Failure of corporate officers to certify financial reports http://www.law.cornell.edu/uscode/text/18/1350

§ 1351. Fraud in foreign labor contracting
http://www.law.cornell.edu/uscode/text/18/1351

Insurance Fraud

Insurance fraud refers to any dishonest act performed with the intent to obtain an improper payment from an insurer or otherwise defraud an insurer.

Police and prosecutors typically refer to an insurance fraud scheme as either “hard fraud” or “soft fraud.” Hard fraud, the rarer of the two forms, occurs when a criminal deliberately brings about the destruction of property for the purpose of collecting on the insurance policy. Soft fraud,occurs when a policyholder exaggerates an otherwise legitimate claim or when an individual applies for an insurance policy and lies about certain conditions or circumstances to lower the policy's premium.

One common form of insurance fraud occurs when the insurance policy amounts to a greater value than the value of the insured property. In this situation the policy-owner has the incentive to commit insurance fraud by destroying the property and making it look like an accident in order to collect.

Sometimes the accused are alleged to file insurance claims for accidents that never actually occurred. Owners of life insurance policies have feigned their own deaths in order for their families to collect on the policy. Then, the accused receives money from the family while secluded in a remote or foreign location.

Health care insurance fraud also occurs commonly and can be perpetrated by either physicians or patients. Physicians commit fraud when they misrepresent the type of treatment received by the patient so that the patient receives coverage or when they alter the treatment's costs so as to receive more money than to which they are entitled. Patients commit healthcare fraud when providing false information during the application process of certain programs and services, when forging or selling prescription drugs, when using medical benefits for non-medical related purposes, and when loaning or using another's insurance card.

Successful Case Results

Code Sections:

California Penal Code Section 548-551
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=pen&group=00001-01000&file=548-551

18 USC § 1035 - False statements relating to health care matters http://www.law.cornell.edu/uscode/text/18/1035

18 USC § 1040 - Fraud in connection with major disaster or emergency benefits http://www.law.cornell.edu/uscode/text/18/1040

Financial Fraud

Financial Institution Fraud (FIF) involves fraud or embezzlement occurring within or against financial institutions that are insured or regulated by the U.S. Government. Financial institutions are threatened by a wide array of frauds, including commercial loan fraud, check fraud, counterfeit negotiable instruments, mortgage fraud, check kiting, false applications, and a variety of traditional and non-traditional FIF scams.

Forgery is usually defined as fraudulent making, creation or altering of a written document, done to intentionally harm the interests of another or to fraudulently make a profit. Many documents can be forged. These include airplane tickets, corporation stock certificates, deeds, prescriptions, wills, contracts, stamps, money and bonds.

Counterfeiting occurs when someone copies or imitates an item without having been authorized to do so and passes the copy off for the genuine or original item. While counterfeiting is most often associated with money, it can also be applied to designer clothing, handbags and watches and other consumer goods.

Code Sections:

18 USC § 471
http://www.law.cornell.edu/uscode/text/18/471

18 USC § 473
http://www.law.cornell.edu/uscode/text/18/473

Phone and Telemarketing Fraud

Phone and telemarketing fraud refers to any type of scheme in which the accused communicates with the potential victim via the telephone. Since many companies use telemarketing to conduct business, criminals can often effectively use this method as a way to obtain a victim's credit card information or identity and then use this information to make unauthorized purchases elsewhere.

One type of telemarketing fraud is the advance fee scam. This involves encouraging the victim to loan large sums of money with the hope of receiving more money in return. One example is the Nigerian Letter scam in which the victim is convinced to give out credit card information to help purchase travel tickets for a Nigerian Prince to escape persecution and flee to America. This scam promises to give a large sum of the prince's fortune to the victim in exchange for the travel help. The criminal then uses the credit card information to make unauthorized purchases and the victim never sees a cent from the “fortune.”

Pyramid schemes over the phone often occur as well. A pyramid scheme requires the victim to pay an initial sum of money and is promised in return to receive sums of money from a number of different people that will exponentially increase the initial investment. While those that join the scheme in the beginning may profit, those at the bottom of the scheme who cannot find any followers will receive no such return.

Successful Case Results

  • Federal Identity Theft Case- Client admitted loss of $100,000-minimal jail time

Code Sections:

18 U.S.C. §§ 2325-2327 Telemarketing Fraud
http://www.law.cornell.edu/uscode/text/18/2325

18 U.S.C. § 1343 (Wire Fraud)
http://www.law.cornell.edu/uscode/text/18/1343

18 U.S.C. § 1341 (Mail Fraud)
http://www.law.cornell.edu/uscode/text/18/1341

Money Laundering

Money laundering is the process of disguising money obtained by illegal means to appear as if it came from a legitimate transaction. Due to the seriousness of these crimes, the penalties can be severe and may include steep fines and prison time. Additionally, money laundering charges often accompany other serious criminal charges. For example, someone may be charged with money laundering in connection with distributing narcotics, conspiracy or operating a drug ring.

In a pair of 2008 decisions, the U.S. Supreme Court clarified the federal statute criminalizing money laundering. Cuellar v. United States (06-1456) determined that to prove money laundering, prosecutors must show that concealment of money must be for the purpose of concealing ownership, source, or control rather than for some other purpose. In United States v. Santos (06-1005), the Court held that the word “proceeds” in the federal laundering statute referred only to criminal profits and excluded criminal receipts. Thus, the Court reversed a pair of convictions based on money laundering involving the pay out of winnings in an illegal gambling ring.

Successful Case Results by Attorney Seth P. Chazin

Money laundering: Defendant in major federal wiretap, money laundering and extortion ring — case dismissed.

Drug Ring: International Narcotics ring- reduction of charges
http://www.bayarea-attorney.com/international-narcotics-ring

Code Sections:

18 U.S.C. 1956 Money Laundering
http://www.law.cornell.edu/uscode/text/18/1956

California Penal Code § 186-186.8
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=pen&group=00001-01000&file=186-186.8

Extortion, Blackmail, Bribery

Charges of extortion involve obtaining goods or services through threatening behavior, such as threats to commit a violent crime or to accuse a victim of actually committing a crime. Blackmail is a form of extortion that occurs when a person threatens to disclose another person's or organization's secret, causing damage. Bribery is another form of extortion, attempting to influence a person by giving money or items of value.

The Hobbs Act was the first statute to define extortion: obtaining the property of another with his/her consent, "induced by wrongful use of actual or threatening force, violence or fear, or under color of official right.”

Code Section:

18 USC § 1951 - Interference with commerce by threats or violence http://www.law.cornell.edu/uscode/text/18/1951

Tax Evasion

Tax evasion involves using illegal measures to avoid paying taxes. Tax evasion usually involves a person or business misrepresenting their income to the Internal Revenue Service (IRS). Falsification can take the form of underreporting income, inflating deductions, or hiding money and or other assets.

Individuals often take part in tax evasion because reporting their true personal incomes would serve as an admission of guilt and could result in criminal charges.  Individuals who try to report these earnings as coming from a legitimate source can face money laundering charges.

In the United States, tax evasion may give rise to substantial monetary penalties, imprisonment, or both.  Section 7201 of the Internal Revenue Code reads, “Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.”

Code Sections:

26 USC Part I- Tax Crimes

§ 7201. Attempt to evade or defeat tax
http://www.law.cornell.edu/uscode/text/26/7201

§ 7202. Willful failure to collect or pay over tax
http://www.law.cornell.edu/uscode/text/26/7202

§ 7203. Willful failure to file return, supply information, or pay tax http://www.law.cornell.edu/uscode/text/26/7203

§ 7204. Fraudulent statement or failure to make statement to employees http://www.law.cornell.edu/uscode/text/26/7204

§ 7205. Fraudulent withholding exemption certificate or failure to supply information http://www.law.cornell.edu/uscode/text/26/7205

§ 7206. Fraud and false statements
http://www.law.cornell.edu/uscode/text/26/7206

§ 7207. Fraudulent returns, statements, or other documents
http://www.law.cornell.edu/uscode/text/26/7207

§ 7208. Offenses relating to stamps
http://www.law.cornell.edu/uscode/text/26/7208

§ 7209. Unauthorized use or sale of stamps
http://www.law.cornell.edu/uscode/text/26/7209

§ 7210. Failure to obey summons
http://www.law.cornell.edu/uscode/text/26/7210

§ 7211. False statements to purchasers or lessees relating to tax http://www.law.cornell.edu/uscode/text/26/7211

§ 7212. Attempts to interfere with administration of internal revenue laws http://www.law.cornell.edu/uscode/text/26/7212

§ 7213. Unauthorized disclosure of information
http://www.law.cornell.edu/uscode/text/26/7213

§ 7213A. Unauthorized inspection of returns or return information http://www.law.cornell.edu/uscode/text/26/7213A

§ 7214. Offenses by officers and employees of the United States http://www.law.cornell.edu/uscode/text/26/7214

§ 7215. Offenses with respect to collected taxes
http://www.law.cornell.edu/uscode/text/26/7215

§ 7216. Disclosure or use of information by preparers of returns http://www.law.cornell.edu/uscode/text/26/7216

§ 7217. Prohibition on executive branch influence over taxpayer audits and other investigations http://www.law.cornell.edu/uscode/text/26/7217

Environmental Law Violations

The United States government regulates activities that impact the environment through a complex scheme of statutes and agency regulations.

The Environmental Protection Agency (EPA) bears the responsibility for carrying out the regulations set forth in Congressional legislation but also wields the authority to promulgate additional regulations of its own. These regulations impact the depth and course of streams, plant life, wildlife habitats, animals, soil quality, air quality, water quality, control of hazardous waste, limits on greenhouse gas emissions, and effects on recreational locations.

However, compliance with environmental regulations usually requires the expenditure of significantly increased overhead for businesses. In an attempt to avoid these additional costs, some businesses will refuse to comply with the regulations. Sometimes, businesses openly refuse to comply and will pay governmental fines rather than pay the compliance costs, which surpass the total costs of the fines. Other businesses, however, will try to hide their noncompliance, such as by dumping hazardous waste into rivers, streams, oceans, or otherwise secluded areas rather than paying to have it taken to a chemical treatment plant. Other common types of environmental law violations include littering; improper waste disposal; etc.

If convicted, violators face fines, probation, imprisonment, or some combination thereof. Typically, a sentence of imprisonment is used when dealing with individuals, while corporations face stiff fines.

Bankruptcy Fraud

Bankruptcy fraud occurs when debtors conceal assets to avoid handing them over to the government. Second, individuals file false or incomplete forms, or some individuals file multiple forms in several states. Bankruptcy fraud also includes bribing of a court appointed trustee. Usually, the criminal will couple one of these forms of fraud with another crime, such as identity theft, mortgage fraud, money laundering, and public corruption.

Nearly 70% of all bankruptcy fraud involves the concealment of assets. Creditors can only liquidate those assets listed by the debtor; thus, if the debtor fails to reveal certain assets, the debtor can keep the assets despite having an outstanding debt. To further conceal the assets, businesses or individuals may transfer these unrevealed assets to friends, relatives,etc.

Bankruptcy fraud penalties are severe, and the IRS prosecutes bankruptcy related scams and fraud in an extreme manner. In fact, in 2008 the IRS boasted a 93.8% incarceration rate on bankruptcy fraud cases. In the last six months, the IRS sentenced a father and a son who ran company to a combined 81 months in prison and fines of over $380,000. The IRS also sentenced a man convicted of bankruptcy fraud to 108 months in jail and millions of dollars in fines and asset seizures as well as other penalties.

Code Sections:

18 USC Chapter 9

§ 151. Definition
http://www.law.cornell.edu/uscode/text/18/151

§ 152. Concealment of assets; false oaths and claims; bribery http://www.law.cornell.edu/uscode/text/18/152

§ 153. Embezzlement against estate 
http://www.law.cornell.edu/uscode/text/18/153

§ 154. Adverse interest and conduct of officers
http://www.law.cornell.edu/uscode/text/18/154

§ 155. Fee agreements in cases under title 11 and receiverships http://www.law.cornell.edu/uscode/text/18/155

§ 156. Knowing disregard of bankruptcy law or rule
http://www.law.cornell.edu/uscode/text/18/156

§ 157. Bankruptcy fraud
http://www.law.cornell.edu/uscode/text/18/157

§ 158. Designation of United States attorneys and agents of the Federal Bureau of Investigation to address abusive reaffirmations of debt and materially fraudulent statements in bankruptcy schedules http://www.law.cornell.edu/uscode/text/18/158

Economic Espionage

Economic espionage is the unlawful or clandestine targeting or acquisition of sensitive financial, trade or economic policy information; proprietary economic information; or technological information.

Economic Espionage is defined as the theft or misappropriation of a trade secret that will benefit any foreign government as stated in the Economic Espionage Act of 1996: The act of receiving, purchasing, or possessing a trade secret known to have been stolen or misappropriated, as well as any attempt or conspiracy to commit economic espionage are punishable as a federal crime under the Economic Espionage Act.

Code Section:

18 USC Chapter 90 Protection of Trade Secrets
http://www.law.cornell.edu/uscode/text/18/part-I/chapter-90

Insider Trading

Insider trading refers to the trading of a company's stocks or other securities by individuals with access to confidential or non-public information. Taking advantage of this privileged access is considered a breach of the individual's fiduciary duty.

The United States requires that a company report trading by corporate officers, directors, or other company members with significant access to privileged information to the Securities and Exchange Commission or be publicly disclosed. United States federal law defines “insider” as a company's officers, directors, or someone in control of at least 10% of a company's equity securities. Congress has criminalized these insiders' use of non-public information under the theory that the use fraudulently violates a fiduciary duty with which the company has charged the insider. From an economic public policy perspective, scholars consider insider trading socially undesirable because it increases the cost of capital for securities traders and therefore depresses economic growth.

Dirks v. SEC was a breakthrough U.S. Supreme Court decision regarding this type of insider trading. In Dirks, the Court held that a prosecutor could charge tip recipients with insider trading liability if the recipient had reason to believe that the information's disclosure violated another's fiduciary duty and if the recipient personally gained from acting upon the information. 463 U.S. 646 (1983). Dirks also created the constructive insider rule, which treats individuals working with a corporation on a professional basis as insiders if they come into contact with non-public information. Id.

The recent emergence of the misappropriation theory of insider trading has paved the way for passage of §10(b)-5, which permits criminal liability for an individual who trades on any stock based upon the misappropriated information. Previously, the prosecutor could only charge the insider if the stock of the insider's company had been traded. While proof of insider trading can be difficult, the Securities and Exchange Commission actively monitors trading, looking for suspicious activity.

Code Section:

15 USC § 78u–1 - Civil penalties for insider trading
http://www.law.cornell.edu/uscode/text/15/78u-1

Securities Fraud

Securities fraud includes theft from manipulation of the market, theft from securities accounts, and wire fraud. This is a type of serious white-collar crime in which a person or company, such as a stockbroker, brokerage firm, corporation or investment bank, misrepresents information that investors use to make decisions. Securities Fraud can also be committed by independent individuals (such as by engaging in insider trading). The types of misrepresentation involved in this crime include providing false information, withholding key information, offering bad advice, and offering or acting on inside information.

The securities statutes create criminal penalties for corrupt actions such as:

  • willful violation of securities laws or regulations,
  • making untrue statements or omissions regarding material facts related to securities,
  • making false or misleading statements on any document or report required by securities law to be filed.

Successful Cases by Attorney Seth P. Chazin

  • Securities fraud: Client confessed to a major stock/securities fraud involving more than $800,000 — no charges filed.

Code Sections:

15 USC Chapter 2A, Subchapter I - DOMESTIC SECURITIES http://www.law.cornell.edu/uscode/text/15/chapter-2A/subchapter-I See

18 USC § 1348 Securities and Commodities fraud
http://www.law.cornell.edu/uscode/text/18/1348

 

Antitrust

Trusts and monopolies occur when economic power is in the hands of a few. By law this control injures individuals and the public because it takes away from competition in the economy and is in an effort to obtain total control of an industry. Anti-competitive practices then lead to price controls and diminished individual initiative. These results in turn cause markets to stagnate and depress economic growth.

In the 1800s monopolies dominated America's free market economy, as a result Congress passed the Sherman Antitrust Act in 1890 to combat anti-competitive practices, reduce market domination by individual corporations, and preserve unfettered competition as the rule of trade. Today there are laws like this that prevent the anti-competitive behavior within interstate commerce.

Congress passed the Sherman Antitrust Act in 1890 in order to defeat any anti-competitive practices, reduce monopolization, and preserve competition within the market. This act forms the basis for federal antitrust regulation. The courts found activities that fell outside the lines of the Sherman Antitrust Act so they passed the Clayton Antitrust Act in 1914. This act outlawed price discrimination, conditioning sales on exclusive dealing, mergers and acquisitions when they may significantly reduce competition and serving on the board of directors for two different companies.

The Robinson-Patman Act of 1936 amended the Clayton Act. The amendment aimed to outlaw certain practices in which manufacturers discriminated in price between equally-situated distributors to decrease competition.

Violations under the Sherman Act take one of two forms - either as a per se violation or as a violation of the rule of reason. Section 1 of the Sherman Act characterizes certain business practices as a per se violation. A per se violation requires no further inquiry into the practice's actual effect on the market or the intentions of those individuals who engaged in the practice. Some business practices, however, at times constitute anti-competitive behavior and at other times encourage competition within the market. For these cases the court applies a totality of the circumstances test and asks whether the challenged practice promotes or suppresses market competition. Courts often find intent and motive relevant in predicting future consequences during a rule of reason analysis. An assumption exists in favor of the rule of reason for uncertain cases.

In 1914 The Federal Trade Commission Act reinforced the Sherman Act and Clayton Act by providing that the Federal Trade Commission (FTC) could proactively and directly protect consumers rather than only offer indirect protection by protecting business competitors. This helped fight against any loopholes in antitrust law or to stop new business practices that have not yet surfaced.

The following anti-competitive practices are prohibited due to federal antitrust laws:

  • Monopolization -  an individual or company taking over an industry.
  • Price-fixing -  when a company or companies within a market artificially set the price of goods or services at a certain level, opposed to the free market.
  • Collusive bidding -  when two or more competitors agree to change the bids they otherwise would offer absent the garment.
  • Tying arrangement - an arrangement by a part to sell on product only on the condition that the buyer agrees to buy different products from the seller or not to buy different products from another seller.

Statues for Antitrust Laws

15 USC Chapter 1

§ 1. Trusts, etc., in restraint of trade illegal;penalty
http://www.law.cornell.edu/uscode/text/15/1

§ 2. Monopolizing trade a felony; penalty
http://www.law.cornell.edu/uscode/text/15/2

§ 3. Trusts in Territories or District of Columbia illegal; combination a felony http://www.law.cornell.edu/uscode/text/15/3

§ 4. Jurisdiction of courts; duty of United States attorneys; procedure http://www.law.cornell.edu/uscode/text/15/4

§ 5. Bringing in additional parties
http://www.law.cornell.edu/uscode/text/15/5

§ 6. Forfeiture of property in transit
http://www.law.cornell.edu/uscode/text/15/6

§ 6a. Conduct involving trade or commerce with foreign nations http://www.law.cornell.edu/uscode/text/15/6a

§ 7. “Person” or “persons” defined
http://www.law.cornell.edu/uscode/text/15/7

§ 8. Trusts in restraint of import trade illegal; penalty
http://www.law.cornell.edu/uscode/text/15/8

§ 9. Jurisdiction of courts; duty of United States attorneys; procedure http://www.law.cornell.edu/uscode/text/15/9  

§ 10. Bringing in additional parties
http://www.law.cornell.edu/uscode/text/15/10

§ 11. Forfeiture of property in transit
http://www.law.cornell.edu/uscode/text/15/11

§ 12. Definitions; short title
http://www.law.cornell.edu/uscode/text/15/12

§ 13. Discrimination in price, services, or facilities
http://www.law.cornell.edu/uscode/text/15/13

§ 13a. Discrimination in rebates, discounts, or advertising service charges; underselling in particular localities; penalties
http://www.law.cornell.edu/uscode/text/15/13a

§ 13b. Cooperative association; return of net earnings or surplus http://www.law.cornell.edu/uscode/text/15/13b

§ 13c. Exemption of non-profit institutions from price discrimination provisions http://www.law.cornell.edu/uscode/text/15/13c

§ 14. Sale, etc., on agreement not to use goods of competitor
http://www.law.cornell.edu/uscode/text/15/14

 

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Seth P. Chazin is a San Francisco Bay Area Criminal Defense Lawyer with over 25 years experience.

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