BUSINESS LAW
TEXT AND CASES
Fourteenth Edition
CLARKSON MILLER CROSS

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 Crime: A wrong against society, defined
in a statute, and punishable by fines,
imprisonment, or—in rare cases—
death.
 Crimes are prosecuted by a public
official and not by the victims.
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 Key Differences between Civil and Criminal
Law:
 Burden of Proof: The government must
prove its case beyond a reasonable doubt
and the jury’s verdict normally must be
unanimous in a criminal case.
 Criminal Sanctions: Punishments are
typically harsher in criminal cases and
include fines as well as incarceration.
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 Civil Liability
for Criminal
Acts: Some
torts provide
a basis for
criminal
prosecution
and civil
action in tort.
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 Classification of Crimes:
 Felony: A crime that carries the most
severe sanction, ranging from one or
more years in prison to forfeiture of
one’s life. 
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 Classification of Crimes:
 Misdemeanor: A less serious crime
punishable by a fine or imprisonment for
up to one year.
 Petty Offense: A subset of misdemeanors
comprised of the least serious criminal
offenses.
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
To be convicted of a crime, a person
must:
 Perform some prohibited act (actus
reus).
 Have a specified state of mind, or
intent (mens rea).
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 The Criminal Act:
 Most crimes require an act of
commission (a person must do
something in order to be accused of a
crime).
 An act of omission can be a crime but
only if the person has a legal duty to
perform the omitted act.
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 State of Mind: The required mental
state (intent) is indicated in the
applicable statute or law:
 Recklessness: A defendant is criminally
reckless if she/he consciously
disregards a substantial and
unjustifiable risk. 
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 State of Mind:
 Criminal Negligence: A mental state in
which the defendant takes an
unjustified, substantial, and foreseeable
risk that results in harm.
• Defendant can be negligent even if
she/he was not actually aware of the
risk but should have been aware of it. 
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 State of Mind:
 Strict Liability and Overcriminalization:
• Federal code lists over 4,000 criminal
offenses but many do not list a
“mental state.”
• Opponents of such laws say that
criminalizing conduct without requiring
intent has led to overcriminalization.
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 Liability of the Corporate Entity:
Corporations are normally held liable for
the crimes committed by their agents or
employees within the scope of their
employment.
 Corporations can be criminally liable for
failing to perform specific duties
imposed by law.
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 Liability of Corporate Officers and
Directors: Under the “responsible
corporate officer” doctrine, corporate
officers and directors are personally liable
for crimes that they commit, or their
subordinates commit—even if officers did
not participate in, direct, or even know of
the criminal violation.
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 Criminal acts generally fall into five broad
categories:
 Violent crime. 
 Property crime. 
 Public order crime. 
 White-collar crime. 
 Organized crime. 
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 Violent crimes are acts against persons
that cause them to suffer harm or death.
Murder, assault, battery, rape, and robbery
are violent crimes.
 Robbery: Forcefully and unlawfully taking
personal property of any value from
another. Aggravated robbery is robbery
with the use of a deadly weapon.
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 Property Crime: The goal of the offender
in these crimes is economic gain or
property damage. 
 Burglary: Unlawful entry into a building
with the intent to commit a felony.
Aggravated burglary occurs when a
deadly weapon is used or when the
building entered is a dwelling.
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 Property Crime:
 Larceny: Wrongfully taking and carrying
away another person’s personal property
with the intent to permanently deprive the
owner of the property.
 Obtaining Goods by False Pretenses: Theft
that involves trickery or fraud in order to
receive property, services, or cash.
• SEE STATE OF WISCONSIN V. STEFFES (2013).
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 Property Crime:
 Receiving Stolen Goods: It is a crime to
receive goods that a person knows (or
should have known) were stolen or illegally
obtained.
 Arson: Willfully and maliciously burning a
building owned by another—or one’s own
personal property to collect insurance
benefits.
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 Property Crime:
 Forgery: Fraudulently making or altering
a writing in a way that changes the legal
rights or liabilities of another.
 False Pretenses: Obtaining goods by
deceiving the person from whom they are
obtained.
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 Public Order Crime: Activity considered
contrary to public values and morals such
as public drunkenness and prostitution.
 These types of crimes are sometimes
referred to as a victimless crimes.
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 White-collar crimes are those that occur
in the business context and use nonviolent means to obtain personal or
business advantage.
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 White-Collar Crime:
 Embezzlement. 
 Mail and Wire Fraud (federal). 
 Bribery. 
 Bankruptcy Fraud (federal). 
 Insider Trading (federal). 
 Theft of Intellectual Property. 
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 White-Collar Crime:
 Embezzlement: Fraudulently
appropriating money or other property
one has been entrusted to handle.
 Mail and Wire Fraud: Any scheme that
uses U.S. mail, commercial carriers, or
wire (telephone, the Internet, e-mail)
with the intent to defraud the public. 
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 White-Collar Crime:
 Bribery: The act of offering to give
something of value to a person in order
to influence that person in a way that
serves a private interest. 
• The crime of bribery occurs when the
bribe is offered—it is not required that
the bribe be accepted.
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 White-Collar Crime:
 Bankruptcy Fraud: A knowing attempt to
evade the effect of federal bankruptcy
law.
 Insider Trading: Buying or selling publicly
traded securities on the basis of inside
information. 
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 Theft of Trade Secrets: The theft of trade
secrets, or knowingly buying or possessing
another’s trade secrets without the
other’s authorization.
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 Organized crime operates illegitimately
by providing illegal goods and services.
 Money Laundering: Engaging in
financial transactions that conceal the
identity, source, or destination of
illegally gained funds through a
legitimate business enterprise.
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 Organized Crime:
 Racketeering: To curb organized crime’s
entry into the legitimate business world,
Congress enacted the Racketeer Influenced
and Corrupt Organizations Act (RICO).
• The broad language of RICO can apply in
cases that have little or nothing to do with
organized crime.
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 Justifiable Use of Force: Self-defense is
the legally recognized privilege to protect
one’s self or property against injury by
another.
 This privilege only protects acts that are
reasonably necessary to protect one’s
self or property, using nondeadly (rather
than deadly) force whenever possible.
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 Necessity: The criminal act was necessary
to prevent greater harm.
 Insanity: A person with a mental illness
may be incapable of the state of mind
required to commit a crime. Courts use
tests to determine the defendant’s state of
mind.
 Modal Penal Code
 M’Naghten and Other State Rules. 
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 Mistake: A mistake of fact (as opposed to
a mistake of law) can normally excuse
criminal responsibility if it negates the
mental state necessary to commit a crime.
 Duress: Wrongful threat induces another
to commit a crime that she/he would not
have otherwise done. 
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 Entrapment: A defense in which the
defendant claims that she/he was induced
by a public official to commit a crime that
he or she would otherwise not have
committed. 
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 Statute of Limitations: Most criminal
prosecutions must be brought within a
specified period of years after the crime.
 Immunity: An option given to a defendant
that allows him not to be prosecuted (or
to be prosecuted for a lesser charge) in
exchange for information given to the
state.
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 The U.S. Constitution provides specific
safeguards for those accused of crimes
at federal and state levels.
 Criminal procedures are designed to
protect against the arbitrary use of
power by the government. 
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 Fourth Amendment Protections:
 No warrant for a search or an arrest can
be issued without probable cause.
 Scope of Warrant: Warrants must have a
specific description of what is to be
searched or seized.
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 Fourth Amendment Protections:
 Reasonable Expectation of Privacy: A
person is only protected against
searches that violate a reasonable
expectation of privacy.
• SEE CASE IN POINT 10.2 STATE OF OKLAHOMA V.
MARCUM (2014).
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 The Exclusionary Rule: Evidence obtained
in violation of the accused’s Fourth, Fifth,
or Sixth Amendment rights—as well as
any evidence derived from illegally
obtained evidence—is not admissible at
trial.
 Purpose: To deter police from
conducting warrantless searches and
following other improper procedures.
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 The Miranda Rule is based on the 1966
Miranda v. Arizona case. An individual who
is arrested must be informed of certain
constitutional rights.
 Exception: A “public safety” exception
allows certain statements to be admitted
even if the defendant was not given
Miranda warnings.
• SEE MIRANDA V. ARIZONA (1966).
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 Criminal Process: Procedures in a criminal
prosecution differ significantly from those
in a civil case in order to safeguard the
rights of the individual against the state. 
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 Criminal Process:
 Arrest: Must be made based upon
probable cause.
 Indictment or Information: Before they
may be brought to trial, individuals must
be formally charged with one or more
specific crimes. 
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 Criminal Process:
 Trial: The state bears the burden of
proving beyond a reasonable doubt that
the accused is guilty of the crimes
charged.
• The accused is not required to testify,
although the accused is permitted to do
so. 
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 Criminal Process:
 If there is reasonable doubt as to whether
the defendant committed the crime, then
the verdict must be “not guilty.”
• A “not guilty” verdict is not the same as
stating that the defendant is innocent.
 At the conclusion of the trial, a convicted
defendant will be sentenced by the court.
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 Computer crime is any violation of
criminal law that involves knowledge of
computer technology for its
perpetration, investigation, or
prosecution. 
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 Cyber Fraud: Fraud committed over the
Internet (e.g., Nigerian letter scam).
 Advance Fee and Online Auction Fraud
Examples:
• Consumers order and pay for items that
are never delivered.
• A person lists an expensive item for
auction and refuses to send the product
after receiving payment.
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 Cyber Theft: Stealing data that are stored
in a networked computer.
 Identity Theft (stealing someone’s
personal information to gain access to his
financial resources).
 Password Theft (often performed as part
of identity theft in order to gain access to
a victim’s financial resources). 
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 Cyber Theft:
 Phishing: Online fraud in which
criminals pretend to be legitimate
companies by using e-mails or malicious
Web sites that trick individuals and
companies into providing useful
information.
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 Hacking:
 A hacker is someone who uses one
computer to break into another.
 Hackers are more dangerous because
of botnets (computer networks that
have been appropriated by hackers
without the knowledge of their
owners).
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 Malware: A program—often a worm or
a virus—that harms a computer or
information stored on a computer.
 Service-Based Hacking: A “software as a
service” distribution method used by
cyber criminals who rent the online
services of cyber criminals to do work
for a small price. 
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 Cyberterrorism: Using a computer to
damage, alter, disrupt, or shut down—
or to threaten to damage, alter, disrupt,
or shut down—a critical network
system.
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 Prosecuting Cyber Crime:
 Jurisdiction and Identification
Challenges: There are no geographic
boundaries in cyberspace and no
physical evidence of crimes. 
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 Prosecuting Cyber Crime:
 The Computer Fraud and Abuse Act
subjects a person to criminal
prosecution for accessing (or attempting
to access) a computer online in order to
obtain classified, restricted, or protected
data without authority.
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