What is computer crime?
8-7d Internet Crime
· The unauthorized access computer crimes
§ Electronic Communications Privacy Act of 1986 (See PowerPoint Slide 8-26)
w Prohibits unauthorized access of “live” communications
w Question is whether e-mail would be stored communication and not live communications
§ Stored Communication Act
w Prohibits the unauthorized interception of electronic communications – generally means stored information
w Does not cover ongoing communication – Tweeting, etc.
w Courts have consistently held that employees give consent to monitoring by their employers
CASE BRIEF 8.3
New Jersey v. Riley
988 A.2d 1252 (N.J. 2009)
FACTS: Sergeant Kenneth Riley used videos of a fellow officer, not for training purposes, but for purposes of getting a fellow officer disciplined. He showed the videos to those within the department who would not have authorization to view them. Riley was indicted for unauthorized use of a computer and unauthorized access and disclosure of computer data. Riley moved to have the indictment dismissed.
ISSUE ON APPEAL: Did Riley’s access and use of computer data constitute the crime of unauthorized use of computers?
DECISION: No. The court held that what Riley did was a violation of workplace policies, but did not fit within the criminal conduct intended to be covered by the statute. The judge was concerned about arbitrary definitions and enforcement and a criminal statute being used for retaliatory purposes.
· Unauthorized use of computer resources (See PowerPoint Slide 8-27)
§ Using computers to commit economic espionage
w Covered by Economic Espionage Act (EEA)
w Employees take files from old employer to new employer
w Felony to copy, duplicate, sketch, download, communicate such information
w $500,000 and up to 15 years
§ CAN-SPAM – Controlling the Assault of Non-Solicited Pornography and Marketing
§ FTC has “Do-Not-Call” list, but spam list is in progress
§ Industry groups are working on it – Anti-Spam Technical Alliance Register of Known Spam Operations (ROKSO)
· Using computers to commit fraud (See PowerPoint Slide 8-28)
§ Counterfeit Access Device and Computer Fraud and Abuse Act (CADCFA)
§ Covers new technologies such as scanners, handheld computers, laptops, and smartphones
· The crime of cyberbullying (See PowerPoint Slide 8-29)
§ Cyberbullying, cyberstalking, and privacy
w Criminal prosecution for these activities is now possible under a wide range of state statutes
w Cyberbullying statutes have to balance First Amendment rights with the need for protection of individuals against harassment
w Statutes now exist for prosecution of cyberstalking – the conduct required must be specifically listed in the statute so that the definitions are clear
w Federal antistalking law has been upheld as constitutional and applies to interstate activities with in-state issues being covered by state laws
· Copyright crimes online – See Chapter 15 (See PowerPoint Slide 8-30)
· Crimes online
§ Silk Road example
§ Child pornography (Jared Fogle)
8-7e Criminal Fraud (See PowerPoint Slide 8-31)
· Obtaining money, goods, services, or property through false statements and misleading the other party
· Requires intent to defraud
8-7f Commercial Bribery
· Prohibited in most states
· Incentives for those who report corrupt purchasing agents
8-7g Racketeer Influenced and Corrupt Organization Act (RICO) (See PowerPoint Slide 8-32)
· Complex statute designed to curb organized crime activity
§ Acquiring an interest in any enterprise with income derived from racketeering
§ Conducting affairs of company involved in racketeering activity
§ Conspiring to do any of the above
· Pattern of racketeering activity
§ Commission of two racketeering acts in a ten‑year period
§ Racketeering acts include murder, kidnapping, gambling, arson, robbery, bribery, counterfeiting, pension embezzlement, mail or wire fraud, obstruction of justice, securities fraud, white slavery, transportation of stolen goods, and violations of the Currency Reporting Act
· Carries civil and criminal penalties with civil recovery including treble damages
· Most RICO suits are based on fraud
· Prosecutors can freeze a business’s assets under a RICO charge
· Many states have their own RICO statutes
· Ongoing proposals in Congress for reform of RICO; although definition of racketeering may change, the treble damages rights will remain
8-7h Business Crime and the USA Patriot Act (See PowerPoint Slide 8-33)
· Money Laundering Control Act was predecessor
· Regulation of money laundering
§ Expands controls on money laundering from banks to escrow companies, brokerage firms, travel agents, etc.
§ “Know thy customer”
§ Required reports on $10,000 cash and above transactions
· Funneling money to terrorist groups: another provision makes it a federal crime for individuals or companies to pay funds to terrorist groups; goal is to prevent funds from flowing into terrorist activities
8-7i Additional Federal Crimes (See PowerPoint Slide 8-34)
· Violations of federal securities statutes
· Violations of the Sherman Act
· Violations of the Internal Revenue Code
· Violations of the Pure Food and Drug Act
· Violations of OSHA
· Violations of Consumer Product Safety laws
8-7j State Crimes
· Cover criminal fraud
· Bribes and kickbacks prohibited
8-8 Procedural Rights for Business Criminals (See PowerPoint Slides 8-35 and 8-36)
8-8a Fourth Amendment Rights for Businesses
· Privacy amendment
· Search warrant procedures controlled by Fourth Amendment
§ Must be based on probable cause; i.e., good reason to believe that instruments or evidence of a crime are present at the business location sought to be searched
§ Must be issued by a disinterested magistrate
§ If searches are done improperly, evidence is inadmissible at trial
§ Cover Arizona v. Gant and the requirements for searching a car
8-8b Exceptions to the Warrant Requirement
· Emergencies and risk of loss of evidence
§ Records are being destroyed (emergencies) – burning warehouse exception
· The plain view exception
§ Can seize items because privacy was not protected – allowed the world access to the items
· Warrants and technology: texts, e-mails, and ISPs
§ Who can get access to what and why?
CASE BRIEF 8.4
U.S. v. King
509 F.3d 1338 (11th Cir. 2007)
FACTS: In February 2003, while serving as a civilian contractor, Michael D. King resided in a dormitory at the Prince Sultan Air Base in Saudi Arabia. During his stay in the dormitory, King kept his personal laptop computer in his room and connected it to the base network. All users of the base network signed agreements indicating that they understood their communications over and use of the base network were subject to monitoring.
An enlisted airman was searching the base network for music files when he came across King’s computer on the network. The airman was able to access King’s hard drive because it was a “shared” drive. The airman discovered a pornographic movie and text files “of a pornographic nature.” The airman reported his discovery to a military investigator who in turn referred the matter to a computer specialist. This specialist located King’s computer and hard drive on the base network and verified the presence of pornographic videos and explicit text files on the computer. She also discovered a folder on the hard drive labeled “pedophilia.” Military officials seized King’s computer and also found CDs containing child pornography.
Two years later, the government obtained an indictment charging King with possession of child pornography. After his arrest, the government searched his residence pursuant to a search warrant and found additional CDs and hard drives containing over 30,000 images of child pornography.
King entered a guilty plea and was sentenced to 108 months in prison. King then appealed his conviction on the grounds that there had been an illegal search and seizure of his computer and files.
ISSUE: Was there an illegal search and seizure of King’s dormitory and computer?
DECISION: No. The court held that there was no Fourth Amendment violation because the investigators did not search King’s files or computer initially to discover the pornographic materials. They merely had to access the universally accessible files of the military base. King had no expectation of privacy in whatever was posted on the shared drive. The search of his home computer and files in his room was with a warrant that was based on probable cause obtained from public access to the files.
· Privileged documents and the Fourth Amendment (See PowerPoint Slides 8-37 and 8-38)
§ Can recover them
§ Third party cannot assert Fourth Amendment rights – must be record owners
8-8c Fifth Amendment Rights for Businesses (See PowerPoint Slide 8-39)
§ Protection against self‑incrimination – “taking the Fifth”
§ Given to natural persons – not to corporations
§ Corporate officers can assert it to protect themselves but not corporate records
FOR THE MANAGER’S DESK − KNOWING WHEN TO HOLD AND WHEN TO FOLD: WHAT TO DO WHEN YOUR COMPANY IS IN BIG TROUBLE
1. Leave when the indictments and/or arrests occur – don’t hang on.
2. Don’t lie on your résumé.
3. Describe your work at the company and others without names and wait until the interview to disclose whom you worked for.
4. Don’t badmouth your former employer in your interview – this is often taken as a sign of guilt; rather explain how difficult it is to be blindsided, something that most managers can identify with because it happens to the best.
· Miranda rights (See PowerPoint Slide 8-40)
§ Given when individual is in “custody”
§ “Custody” means inability to leave – not necessarily jail
§ Right to attorney; right to silence – notice of evidentiary use of statements
· Due process rights (See Exhibit 8.3 and PowerPoint Slides 8-41, 8-42, 8-43, and 8-44 to show steps)
§ Warrant or warrantless arrest begins process: Warrant – you have committed crime and they look for you; warrantless – you are arrested at the scene
§ Initial appearance
w Required within short period (24 hours)
w Charges explained
w Bail terms set; amount; or released on own recognizance
§ Preliminary hearing or grand jury
w Hearing – information issued; defendant is present and can cross‑examine
w Grand jury – indictment; secret proceedings
w Plea is entered
w Trial date is set
§ Discovery – mandatory disclosure of witnesses and evidence
§ Pretrial conference – try to settle some issues if possible
§ Omnibus hearing – challenge evidence admissibility
8-9 Business Crime and International Business
ü Countries now have cross-prosecution agreements and cooperation on investigations
ü Allows for discovery of evidence in international transactions
STRATEGY, ETHICS, & THE LAW: CRIMINAL CHARGES FOR TAX SHELTERS?
Lessons learned from KPMG case:
1. Instruct employees on whom counsel for firm represents.
2. Clarify that representation and privilege rules apply to both inside and outside counsel for the firm.
3. Develop a policy on reimbursement for attorneys’ fees for employees.
4. Explain when an employee is entitled to his or her own attorney.
5. Develop processes for negotiating settlements with the government.
6. Create a code of ethics and means for employees to raise concerns about company practices and policies.
7. Revisit compensation systems to see if employees are crossing ethical lines and pushing the envelope to get results.
8. If programs for clients are in the gray area, continue to revisit them to see government changes in policy.
9. Go through a root-cause analysis to see how the situation occurred in the first place (Laura Nash types of questions from Chapter 2).
U.S. v. KPMG, 316 F.Supp.2d 30 (D.D.C. 2004).
SUPPLEMENTAL READINGS (Not Required)
Allison, Bridget, et. al, “Racketeer Influenced and Corrupt Organizations,” 35 AM. CR. L. REV. 1103 (1998).
Andreoff, Christopher A., “A Primer on Federal Criminal Procedure,” 72 MICH B. J. 60 (1993).
“’Are We Really Getting Tough on White Collar Crime?’ (June 19, 2002), Part 2,” 15 FED. SENT. R. 237, 2003 WL 22016895 (April, 2003).
Constantin, Tiffany Britton, “Editor’s Note,” 40 AM. CRIM. L. REV. 217 (Spring, 2003).
Dickerson, Brian and Klodiana Basko, “Confusion in Defining ‘Proceeds’ Under the Money-Laundering Statute: A Survey of Circuit Opinions,” 57 FED. LAW. 23 (June 2010).
Green, Stuart P., “Moral Ambiguity in White Collar Criminal Law,” 18 NOTRE DAME J.L. ETHICS & PUB. POL’Y 501 (2004).
Grindler, Gary W., et al., “Practical Aspects of Representing a Corporation During the Early Stages of a Criminal Investigation,” 29 GEORGIA STATE B. J. 99 (1992).
Harig, Lisa Ann, “Ignorance is Not Bliss,” 42 DUKE L. J. 145 (1992).
Hughes, Alexander, “Drawing Sensible Borders for the Definition of ‘Foreign Official’ Under the FCPA,” 40 AM. J. CRIM. L. 253 (Summer 2013).
Jara, Gabriela, “Following on the Foreign Corrupt Practices Act: The Dynamic Shareholder Derivative Suit,” 63 DUKE L.J. 199 (October, 2013).
Katz, Deborah M., “Constitutional Law – Fourth Amendment Protection for Homeless Person’s Closed Containers in an Outdoor Home,” 26 SUFFOLK UNIV. L. REV. 279 (1992).
Kropp, Steven H., “Corporate Governance, Executive Compensation, Corporate Performance, and Worker Rights in Bankruptcy: Some Lessons From Game Theory,” 57 DEPAUL L. REV. 1 (2007).
Levi, Michael, “Combating the Financing of Terrorism: A History and Assessment of the Control of ‘Threat Finance’,” 50 BRIT. J. CRIMINOLOGY 650 (July 2010).
Mark, Gideon, “RICO’s Extraterritoriality,” 50 AM. BUS. L.J. 543 (Fall, 2013).
McNulty, Shaela Ann, “Constitutional Law – Fourth Amendment Protection on the Wane,” 26 SUFFOLK UNIV. L. REV. 248 (1992).
Moohr, Geraldine Scott, “An Enron Lesson: The Modest Role of Criminal Law in Preventing Corporate Crime,” 55 FLA. L. REV. 937 (September, 2003).
Neiberger, Ellis, “Honest Services Fraud: Federal Prosecution of Public Corruption at the State and Local Levels,” 84 FLA. B.J. 82 (June 2010).
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Palermo, Thomas N., “Going ‘Cocoanuts’: Looking at Modern Mortgage Fraud,” 57 FED. LAW. 38 (June 2010).
Paulsen, Erik, “Imposing Limits on Prosecutorial Discretion in Corporate Prosecution Agreements,” 82 N.Y.U. L. REV. 1434 (2007).
Romero, Leo, “Procedures for Investigating and Prosecuting White Collar Crime,” 11 U.S.-MEX. L.J. 165 (Spring, 2003).
Silberfarb, Michael D., “Justifying Punishment for White-Collar Crime: A Utilitarian and Retributive Analysis of the Sarbanes-Oxley Act,” 13 B.U. PUB. INT. L.J. 95 (Fall, 2003).
“Some Company Policies and Procedures Relating to the FCPA,” 9 INT’L QUARTERLY 120 (1996).
Swisher, Keith, “Pro-Prosecution Judges: ‘Tough on Crime,’ Soft on Strategy, Ripe for Disqualification,” 52 ARIZ. L. REV. 317 (Summer 2010).
Wen, Shuangge, “The Achilles Heel That Hobbles the Asian Giant: The Legal and Cultural Impediments to Antibribery Initiatives in China,” 50 AM. BUS. L.J. 483 (Fall, 2013).
West, George E., II, “A Prosecutor’s Duty to Disclose: Beyond Brady,” 73 TEX. B.J. 546 (July 2010).
Winship, Peter, “International Commercial Transactions,” 52 BUS. LAWYER 1643 (1997).