Welcome Fall 2009 JS 135 Students

Welcome to the Fall 2009 edition of JS 135 (White Collar Crime). The new syllabus will be posted shortly. Please disregard the earlier versions, found below this post. We have a smaller class this term than in the past (only 25 students enrolled so far), so I am looking forward to the opportunity to use a seminar format, rather than less desirable "I stand up there and talk for two hours" lecture format. I look forward to meeting each of you.

Dave Callaway

Fall 2008 Course Syllabus

San Jose State University
College of Applied Sciences and Arts
Justice Studies Department

JS 135 -- White Collar Crime
Fall Semester 2008

Instructor:   David Callaway                          Office Hours: Tuesday 8:45 to 10:00 p.m. 

Office:  MacQuarrie Hall 521                            Cell Phone:  (415) 308-7977

E-mail:     SJSUDavidCallaway@gmail.com        Class Mtgs: Tues. 6:00-8:45 p.m., MH 523

You may also find this syllabus and class handouts on my website, www.SJSUwhitecollarcrime-drc.blogspot.com

Course Description

The course catalog reads: "Growth and development of white collar crime in the United States: crimes at the workplace, computer fraud, swindles, embezzlement, bribery and graft at the corporate and governmental levels."

 

We will be focusing on some of the most interesting crimes that are being committed, many of them in right here in your own back yard, including corporate fraud, securities fraud (including revenue recognition fraud, stock options backdating, and insider trading), trade secret theft, consumer fraud, environmental crime, tax evasion, as well as bribery, embezzlement, and mail and wire fraud committed by individuals. Although I am not sure this qualifies as a "Course Learning Objective," my hope is that you will come to see this area as far more fascinating than so-called "street" crime: anyone can rob a bank (although I wouldn't recommend it); the real challenge is to be able to buy a bank and turn it into your own personal ATM machine. We will explore the nature of white collar crime inductively, by looking at examples of the countless and myriad ways people have devised over the years to cheat one another. The focus of this course will be on the crimes themselves, the criminals who commit them, and how prosecutors and investigators go after them and defense lawyers defend them.

 

Course Learning Objectives

 

By the end of the semester students should know what "white collar" crime is, how it differs from other types of crime, and they (meaning, in this case, "you") should be able to discuss intelligently the characteristics that make this form of crime unique: the kinds of criminals who commit it, the means by which they do so, and how they are prosecuted and defended in court.

Required Texts/Other Readings

Textbooks:

Rosoff, S., Pontell, H., and Tillman, R., Profit Without Honor: White Collar Crime and the Looting of America, Prentice Hall, 4^th ed. (2006) (abbreviated in the syllabus as "PWH").

 

    Johnston, D., Perfectly Legal: The Secret Campaign to Rig Our Tax System to Benefit the Super Rich – and Cheat Everyone Else, Portfolio Trade (2005) (ordered from the SJSU Bookstore, but also available in paperback from Amazon, Barnes & Noble, and other online sites for around ten bucks), ISBN 13: 9781591840695.

 

Additional Reading: There will be additional readings that I will announce at least one class period before they are due. (Many are already embedded in the course syllabus.) All additionally-assigned readings will be available on-line. Links to many of them will be found at the excellent White Collar Crime Prof Blog (abbreviated in the syllabus as "WCC Prof Blog"): http://lawprofessors.typepad.com/whitecollarcrime_blog/ Students who miss a class are responsible for obtaining the assignments from another student or from my website.

Prerequisites:  Upper division standing or instructor consent

 
 

Course Requirements

 

Grades will be based on a combination of four short "pop" quizzes (total value: 20%), a term paper (30%), final exam (40%), and class participation (10%). The quizzes will consist of a single question based on the previous week's class and will call for a one-page answer. The final exam will include both multiple choice and essay questions.

 

The highest grade possible will be an A+. Plus and minus grades will be given for every grade down to a D -. 90% and higher will be an A (with plus and minus grades as follows: 90-93 % = A-, 94-96 = A, 97 and up = A+). The same breakdown will apply to B (80-90%), C (70-80%), and D grades (60-70%). Less than 60% would be an F.

 

I will use the "modified Hungarian" method of curving the grades: that approach (the name of which I just made up) consists of treating the highest grade in the class as 100% and working down from there.

 

As you can see, class participation will form an important part of your grade. It will be difficult to obtain an "A" without at least some credit for class participation. Woody Allen famously said that "eighty-five percent of life is just showing up." Class participation, though, consists of more than that. It means showing up, staying through the end of class (I expect to call the roll after the break for at least half the classes), and . . . actually participating in a meaningful way: reading the materials ahead of time; having something worthwhile to say.

 

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Information Regarding Term Paper

 

Length and Format: minimum eight pages, typed and double-spaced using twelve-point font. No maximum, but please be aware that "longer" is not necessarily "better." You can write eight pages and get an A, or vomit out 20 pages and get an F. As for format, use either MLA or APA. I don't care which, as long as you are consistent.

 

Topic: discuss a significant white collar case. Examples (by no means exclusive): Ivan Boesky; Michael Milken; Charles Keating; Qwest; Adelphia; Worldcom; Enron; Tycho; Martha Stewart; former San Jose Mayor Ron Gonzales. Describe the background of the perpetrator(s), the nature of the crime, the victims, the losses, the prosecution, defense, and trial (if there was a trial) and whether you believe that, ultimately, justice was done.

 

Due Date: November 11, 2008

 

Grading: the term paper will be worth 40% of your grade, equal to the final exam. Grading will be based on my evaluation of the following:

 

(1) Knowledge: does your paper demonstrate knowledge and understanding of your chosen topic?

 

(2) Quality of Writing and Analysis: do you have a clear thesis? Are the facts and sources well-organized? Is your conclusion supported by the analysis?

 

(3) Quality of Sources: does your work reflect time spent on research? (Hint: citations to Wikipedia don't count.) Are your sources worthy, balanced, and fair?

 

(4) Originality: this is obviously the most subjective category, but I will give reward students who obviously put some real time and effort into coming up with their topics, and didn't just take the easy out of grabbing something from the textbook and dressing it up a little.

 

Library Liaison

 

Your library liaison is Nyle Monday, telephone 808-2041. Nyle.Monday@sjsu.edu.

University Policies

 

Dropping and Adding

 

You are responsible for understanding the policies and procedures about add/drops, academic renewal, etc. found at http://sa.sjsu.edu/student_conduct. You should be aware of the new deadlines and penalties for adding and dropping classes.

 

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Academic Integrity

 

Students are expected to be familiar with the University's Academic Integrity Policy. Please review this at http://sa.sjsu.edu/student_conduct.

 

"Your own commitment to learning, as evidenced by your enrollment at San Jose State University and the University's integrity policy, require you to be honest in all your academic course work. Faculty members are required to report all infractions to the office of Student Conduct and Ethical development."

 

Instances of academic dishonesty will not be tolerated. Cheating on exams or plagiarism (presenting the work of another as your own, or the use of another person's ideas without giving proper credit) will result in a failing grade and sanctions by the University. For this class, all assignments are to be completed by the individual student unless otherwise specified. If you would like to include in your assignment any material you have submitted, or plan to submit for another class, please note that SJSU's Academic Integrity policy F06-1 requires approval of instructors.

Accommodations

 

If you need course adaptations because of a disability, if you have emergency medical information to share with me, or if you need special arrangements in case the building must be evacuated, please make an appointment  as soon as possible or see me during office hours. Presidential Directive 97-03 requires that students with disabilities register with the DRC (Disability Resource Center) to establish a record of their disability."www.drc.sjsu.edu

 

Special accommodations for exams require ample notice to the testing office and must be submitted to the instructor well in advance of the exam date.

Grievances

If you have questions regarding grading policies or any other aspect of the course, please make an appointment with me.  For information about grievance policies/procedures, you can consult the university catalog, the Justice Studies department secretary for appointments with the department chairperson, or the University ombudsman.

SJSU Writing Center

As you can see, your success in this class will be heavily influenced by the quality of your writing. (As someone who works outside of academia, I can assure you that the same is true of your future success in almost any professional or business environment.) If you think that your writing skills could use improvement, you should be aware of the SJSU Writing Center and the services it offers. The center is staffed by professional instructors and upper-division or graduate-level writing specialists from each of the seven SJSU colleges. SJSU's writing specialists have met a rigorous GPA requirement and they are well trained to assist all students at all levels within all disciplines to become better writers.

Course Schedule (JS 135 Fall 2008)

(Note: subject to change with fair notice.)

Week	Date	Topics, Readings, Assignments, Deadlines
1	8/26	Syllabus and handouts; Student questionnaire; Introduction and Course Overview
2	9/2	Overview of federal white collar statutes: Conspiracy (18 U.S.C. 371); Mail and Wire Fraud (18 U.S.C. 1341 and 1343). Reading: January 22, 2008 entry in the WCC Prof Blog: http://lawprofessors.typepad.com/whitecollarcrime_blog/2008/01/honest-services.html, and also the opinion in United States v. Urciuoli (link provided at the bottom of that page, but also here): http://lawprofessors.typepad.com/whitecollarcrime_blog/files/us_v_urciuoli_first_circuit_opinion_jan_18_2008.pdf

 

3	9/9	Mortgage fraud. Guest speaker: loan broker Robert W. Callaway (no relation*) will discuss the sub-prime mortgage mess and how it came about. *unless you count your brother as a "relation"
4	9/16	Consumer fraud; telemarketing fraud; false advertising; PWH, Chapter 2, plus these articles on various scams: Canadian Lottery Scam: http://phoenix.about.com/cs/seniors/a/canadianlottery.htm; Chinese Inheritance Scam: http://sanfrancisco.fbi.gov/dojpressrel/2007/sf101607.htm and Nigerian Scam: http://www.snopes.com/crime/fraud/nigeria.asp
5	9/23	Computer crime, trade secret theft, and export enforcement; PWH Ch. 12; guest speakers: Matthew Parrella, Chief, Computer Hacking and Intellectual Property (CHIP) Unit for the U.S. Attorney's Office; Assistant United States Attorney Jeff Nedrow; and Stephen Adams, Senior Director, Global Litigation and Confidential Asset Management Group for Applied Materials, Inc.
6	9/30	Corporate and Securities fraud: revenue recognition, insider trading, and stock options backdating fraud; PWH Chapter 6. White Collar Crime Prof blog discusses restitution issue here: http://lawprofessors.typepad.com/whitecollarcrime_blog/2008/01/sentencing-reye.html See also SEC complaint against Gregory Reyes, et al. here: http://www.sec.gov/litigation/complaints/2006/comp19768.pdf And Government's Sentencing Memorandum: http://lawprofessors.typepad.com/whitecollarcrime_blog/files/us_v_reyes_government_sentencing_memo_jan_10_2008.pdf; and, to show I'm fair, defendant's sentencing memorandum is here: http://lawprofessors.typepad.com/whitecollarcrime_blog/files/us_v_reyes_defendant_sentencing_memo_jan_10_2008.pdf
7	10/7	Securities and corporate fraud continued (possible guest speaker)
8	10/14	United States Sentencing Guidelines; please review Chapter 1 (all); Chapter 2 (only Section 2B1.1, including all commentary); Chapter 3-5 (all). The Sentencing Guidelines are available here: http://www.ussc.gov/2007guid/tabcon07_1.htm. (From there you can download and read the individual subsections; section 2B1.1 sometimes loads slowly, so please be patient)
9	10/21	No class (Spring Break) (so you should have plenty of time to read everything assigned for next week, and get a jump on that term paper)
10	10/28	Crimes by government/Public Corruption: PWP Chapter 9. Also: read http://www.commondreams.org/views06/1004-30.htm and http://www.antiwar.com/engelhardt/?articleid=9851, for insights from former AUSA Elizabeth De la Vega on the Plame case; But, just to keep things bipartisan, let's take a look at how former President Bill Clinton abused his pardon power: http://www.time.com/time/nation/article/0,8599,99302,00.html
11	11/4	Public corruption; PWH Chapter 10; see also these articles regarding the 2006 indictment on (and ultimate dismissal of) bribery charges against former San Jose Mayor Ron Gonzales: http://www.bayareanewsgroup.com/multimedia/mn/news/archive/norcal/mn_grandjury_norcal_2005.pdf (Civil Grand Jury Report); http://www.bayareanewsgroup.com/multimedia/mn/news/archive/norcal/norcal_gonzales_indictment_062206.pdf (criminal indictment); http://bayareanewsgroup.com/multimedia/mn/news/gonzales_courtruling_061307.pdf (court order dismissing indictment)
12	11/11	Fiduciary fraud: Crime in the banking, insurance, and pension fund industries; PWH Chapter 8. Term Papers Due
13	11/18	Tax evasion, tax avoidance, and plain old tax "planning." Johnston, Perfectly Legal (see Required Texts, above)
14	11/25	More on tax evasion; also money laundering; possible guest speaker; readings TBA
15	12/2	Health care fraud; PWH Chapter 11
16	12/9	Overflow (TBA); Preview of final exam
17	12/16	Final Exam (1800 to 2015)

Make-up Opportunity for Mid-Term Exam

For those of you who were not present at last night's class (or who ducked out after the break), I wanted to make you aware of an opportunity I announced to the class to re-submit certain portions of your mid-term exam. This opportunity is limited, so please read this over carefully:

If there were any questions or sections on the exam that you failed to answer or, alternatively, that you really blew (by which I mean you received less than half-credit for your answer) you may re-submit those answers only to me at the next class session (this coming Tuesday, May 13th). Please submit your original mid-term exam along with any revised answers.

Again, please do not completely re-do the test. For example, if you got 6 points or higher on the first question, leave it alone. However, if you received:

5 points or less on Questions 1 or 2;
8 points or less on Question 3;
13 points or less on Question 4; or
10 points or less on Questions 5 or 6,

then feel free to submit revised answers to those questions only.

Sorry, gang, but the point of this is not to give everyone in the class another shot at the mid-term. (It was hard enough reading 45 of them the first time around.) I realize that all of you -- well, almost all of you (there was one perfect score) -- would be able, after reviewing my comments on your exam and having me go over the test in class, to submit better answers that would raise your grade. That is not the point of this make-up opportunity. My objective, instead, is to give those of you who really screwed up the exam a chance to put yourselves on a better footing to come out OK in the class.

Please note that this opportunity is not available to anyone whose grade was docked for failing to credit your sources. I do not believe that it would be consistent with the University's Policy on Academic Integrity simply to give those of you who violated that policy another shot at it. If you copied your answer from Wikipedia, or wherever, and I caught it, then you are simply out of luck as far as the mid-term goes. (I already gave everyone a chance to turn their term papers in a week later, in order to accomodate any of you who might have had any "misunderstandings" about the propriety of lifting your answers from a website and failing to credit the source.)

Is this fair? I am sure that the approach I am taking will be construed as unfair by some: why am I giving a student who got a C-minus the chance to raise his grade, when someone else who received, say, a B-plus, isn't receiving the same opportunity to raise hers? The answer, frankly, is that there were 17 grades (out of 45 total) of straight "C" or lower, including 7 that were in the "D" range (60-69) and two "F" grades (not counting three students who did not turn in the mid-term at all). I am trying to give that group a chance to get back into the game. The rest of you are fine: you can still ace the class based on your performance on the term paper, final, and overall class participation. The mid-term was, after all, worth only 25% of your total grade.

TERM PAPER -- Due Date Extended

By popular demand, the due date for the term paper has been extended by one week: it shall now be due in class on April 29, 2008.

Also, please note that I will not be holding office hours tomorrow, April 18th, as MacQuarrie Hall will be closed for a SJSU police training exercise. If you would like to make an appointment to meet me somewhere else, please feel free to call. (A reminder on office hours: having wasted too many lunch hours sitting alone in an empty office, I reserve the right to skip my office hour if no one has advised me ahead of time that he or she would like to see me.)

Spring 2008 Mid-Term Exam

JS 135 B WHITE COLLAR CRIME SPRING SEMESTER 2008

Instructions

As those of you who have attended class already know, this midterm examination is open book and open note. (It is not, however, Aopen friend,@ so please do your own work.) The exam may be completed any time between April 4 and when it is due in class on Tuesday, April 15^th. Please note that, contrary to the Course Schedule, there will be no class session held on Tuesday, April 8^th, as I will be out of the country. (This exam takes the place of that class.)

Please type your answers, and note clearly the question to which the answer responds (e.g., AQuestion 6: Sentencing Guidelines@).

Please doublespace your answers, and use oneinch margins all around. Your answer should be no longer than the maximum length indicated for each question. (If you really cannot confine your answer to the limit, you may cheat down to 1.5 spacing, but please do not singlespace your answers.) Do not, however, feel that you have to Awrite to the limit.@ Brevity may not be the soul of wit, but a good short answer is preferable to a longer, but bad, one.

If you are quoting from the textbook, please use quotation marks and cite the textbook as APWH at [page number].@

Finally, before getting started, I apologize for the screwy formatting of the exam. I have tried, but this is the best I can do. Blogging is obviously not something I should pursue full-time.

Exam Questions

1. Discuss Professor Sutherland=s definition of white collar crime and compare it to the FBI definition we discussed in class (if you missed that class, Google the FBI definition). (maximum answer length: 1 page)
   

   
   

2. What is a Ponzi scheme? Why is it also called a Apyramid scheme@? Please provide an example of such a scheme, either from the textbook or from a class discussion. (maximum: 1 page)
   

   
   

3. Describe what kinds of white collar crimes may have contributed to the current subprime mortgage mess. Discuss the roles of buyers, Astraw buyers,@ brokers, and lending institutions in creating the problem. (maximum: 3 pages)
   

   4. Securities Fraud (maximum for all subquestions: four pages)
   

   A. What is Ainsider trading@?
   

   B. What is Astock manipulation@?
   

   -- Describe a Apump and dump@ scheme
   

   -- What is revenue recognition fraud?
   

   C. What is meant by a Afiduciary duty@?
   

   D. What is Astock options backdating@? Who is hurt by it?
   

   5. Corporate Fraud (maximum length: three pages)
   

   1. Describe how Enron used limited partnerships and
      

      socalled Aspecial purpose entities@ to manipulate their financial statements.
      

   B. How were these entities used to hide debt?
   

   C. Why did Enron want to hide debt?
   

   D. Explain the phrase, ABeyond a certain point, complexity is fraud.@
   

   6. Sentencing Guidelines (maximum length: three pages): Please prepare a sentencing guidelines calculation for Defendant Smith using the following fact pattern. Include the base offense level, your proposed upward adjustment for loss, and any other upward or downward adjustments you believe might apply.
   

   
   

   Defendant Smith works as a purchasing agent for Supplied Materials, a Santa Clarabased worldwide manufacturer of semiconductor chips. As part of his duties, Smith orders precious metals used in the fabrication process. Those orders can range anywhere from $100,000 to $10 million. Smith does not believe that his salary of $80,000 per year, plus stock options, adequately reflects either his intrinsic worth or the great value he brings to the company. He therefore decides to supplement his income by entering into the following conspiracy:
   

   
   

   Smith purchases a domain name, ASuppliedMaterialsInc.com,@ that is strikingly similar to the true domain name for his company (ASuppliedMaterials.com@). Smith, posing as the guy in the next cubicle, sends an email using the Aspoofed@ domain name to place an order for $2.8 million worth of gold and palladium with a precious metals supplier, PM Corporation (PMC). Instead of having PMC ship the product to Supplied Materials at its headquarters address, Smith tells the PMC representative that Supplied Materials has opened a new warehouse in Sacramento, and directs PMC to ship the product to that address.
   

   Meanwhile, Smith has recruited five friends to help with the scheme. One friend rents a warehouse in Sacramento and sets it up to appear to be a legitimate Supplied Materials address. Another agrees to sit behind a desk at the bogus warehouse on the day of the delivery and pretend to be a receptionist. Another friend agrees to act as a security guard, while two others agree to play the roles of truck driver and loading dock worker, so that when the truck arrives from PMC with the product it will appear that another delivery is also taking place (lending a greater appearance of legitimacy to the facility).
   

   A supervisor at PM Corp. reviews the transaction and decides that, because Supplied Materials is a new customer, PMC will not ship the product all at once, as originally agreed, but rather will break it up into four equal shipments of $700,000, and not make the second shipment until after the first has been paid for.
   

   This turns out to have been a wise move by the PMC supervisor as, on March 31, 2008, an armored truck delivers $700,000 worth of gold and palladium to the bogus warehouse. The Aloading dock worker@ signs for the shipment. After the PMC truck drives away, the conspirators close down the warehouse, remove all traces of their occupancy, and sell the precious metals to a Afence@ for $350,000.
   

   The five codefendants plead guilty. Two of them agree to cooperate and testify against Smith, the only defendant going to trial. Two weeks before trial, Smith sends an emissary to the two cooperating defendants, offering them $5,000 each to testify that Smith did not have anything to do with the conspiracy.

Additional Reading for Next Week (March 18th)

Please read Chapter 7 (Corporate Fraud) of the Profit Without Honor textbook for next week. I'm still working on a guest speaker for that class, but for now please assume that we will not have one. Thanks.

Additional readings on Mortgage Fraud

Folks,

I am sorry that I did not get these posted in time for you to review these articles for tonight's class. However, please do read them, as I reserve the right to include questions from them on an exam. Thanks.

http://ehgroup.net/popularscamspartii.html

http://ehgroup.net/popularscamsparti.html