Federal Statutory Liability Questions-Wrong Flashcards
Which of the following is true?
A. Mail fraud is a RICO predicate act. B. Wire fraud is a RICO predicate act. C. A and B. D. None of the above.
C. A and B.
Because A and B are both accurate, this is the best answer.
Wrong answer that I selected was
D. None of the above.
Because A and B are both accurate, this answer is necessarily wrong.
Plaintiff (P) came into a huge sum of money. An accounting firm (D) advised P on two tax-planning strategies, opining that they were “more likely than not” to be upheld by the IRS, and helped him implement them. They were known as FLIPs and BLIPs, and involved buying and exchanging warrants, options, and shares of various Swiss and Cayman Islands companies. Ultimately, the IRS audited three years worth of P’s tax returns because these were aggressive tax shelters that the IRS had targeted for prosecution. P sued D and others under RICO for a violation of Sec. 1962(c). Which of the following is true?
A. Because D has not yet been found criminally liable for securities fraud, P cannot pursue its RICO claim.
B. D is probably liable for a 1962(c) violation.
C. A and B.
D. None of the above.
Because choice A is right, this choice is necessarily wrong.
A. Because D has not yet been found criminally liable for securities fraud, P cannot pursue its RICO claim.
When a RICO claim is predicated upon claims of securities fraud, as here (since these bogus strategies involved options, warrants, and shares of stock), no RICO civil suit can be brought until defendant has been criminally convicted. That is not true of any of the other RICO “predicate acts,” but it is true of securities fraud. This case was dismissed.
Wrong answer that I selected was
D. None of the above.
Because choice A is right, this choice is necessarily wrong
To establish a “pattern” of racketeering activity, a plaintiff must show which of the following?
A. That individual acts of racketeering are “related.”
B. That defendant’s racketeering acts threatened continued racketeering activity.
C. A and B.
D. None of the above.
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C. A and B.
Because both A and B are accurate choices, C is the best answer.
Wrong Answer that I selected was
D. None of the above.
Because both A and B are accurate choices, this choice is necessarily wrong.
Zing was chairman of China Construction Bank (CCB), a firm owned largely by the Chinese government. Zing loved golf and took a golf trip with two friends to California. Watkins, an employee of FIS, Inc., charged more than $10,000 on his corporate credit card to pay for the golf. He also paid Zing’s son’s education expenses in London. Soon thereafter, Zing awarded a $176 million contract to provide information services to CCB to Albany Co., a privately held company on whose behalf Watkins had been acting. Albany’s books carried the payments made by Watkins as legitimate business expenses paid to a third-party consultant. The SEC launched an FCPA investigation. Which of the following is true?
A. Albany is in trouble under the FCPA’s antibribery provisions.
B. Albany is in trouble under the FCPA’s accounting provisions.
C. A and B.
D. None of the above.
A. Albany is in trouble under the FCPA’s antibribery provisions.
Bribing an official of a company controlled by the Chinese government in exchange for a contract is the essence of what the FCPA’s antibribery provisions are trying to stop
Wrong Answer
C. A and B.
Because the B choice is inaccurate, this choice cannot be right.
Because Albany is not an SEC-registered firm, the FCPA’s accounting provisions do not apply to it, so B is not an accurate choice.
The government of Kazakhstan hired Mercator Co., controlled by Giffen, to aid it in negotiating oil deals with Western oil companies. After Mobil Oil received a slice of the pie in 1996, it paid a $51 million “success fee” to Giffen, who funneled that fee and $22 million from other oil companies to Kazakh government officials in the form of speedboats, jewelry, snowmobiles, and direct cash payments. Mobil characterized these transfers as “loans” on its financial statements. Which of the following is true?
A. Mobil is liable for violating the antibribery provisions of the FCPA.
B. Mobil is liable for violating the accounting provisions of the FCPA.
C. A and B.
Because both A and B are accurate, this answer is the best choice.
D. None of the above.
C. A and B.
Because both A and B are accurate, this answer is the best choice.
Wrong answer
A. Mobil is liable for violating the antibribery provisions of the FCPA.
Accurate, but not the best answer. When a big public corporation, like Mobil, pays bribes, such as these, and tries to cover them up through phony accounting entries, both parts of the FCPA are violated.
Waxo, Inc., is a small, privately held corporation that was caught paying bribes to foreign heads of state in order to secure government contracts. Waxo hid these transactions, in part, by falsifying its accounting records. Which of the following is true?
A. Waxo violated the antibribery provisions of the FCPA.
B. Waxo violated the accounting provisions of the FCPA.
C. A and B.
D. None of the above.
A. Waxo violated the antibribery provisions of the FCPA.
By paying these bribes, Waxo violated the antibribery
provisions of the FCPA. These provisions apply to almost all American companies.
Wrong Answer
C. A and B.
Because choice B is wrong, this choice is necessarily wrong.
Because Waxo is not an SEC-registered firm, the FCPA’s accounting provisions do not apply to it, so B is not an accurate choice.
In a RICO 1962(c) case brought by a major university, an accounting firm (D) had provided audit, accounting, and consulting services for a company that became insolvent. The plaintiff claimed that D firm had issued false audit reports, provided other accounting services, and attended board meetings of the insurer. Which of the following is true?
A. The case will probably be dismissed, because D did not conduct or participate in the conduct of the fraudulent enterprise.
B. The university will probably recover.
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C. A and B.
D. None of the above.
A. The case will probably be dismissed, because D did not conduct or participate in the conduct of the fraudulent enterprise.
Defendants are liable under 1962(c) only if they “conduct or participate in the conduct” of the racketeering enterprise. Even if all of the other elements of a 1962(c) violation are present here, D did not become involved in managing the firm. It stuck to accounting activities. Even if it did them wrongfully, or even fraudulently, it cannot be liable under RICO.
Wrong Answer that I selected was
B. The university will probably recover.
The university did not recover because the accountant did not meet the “conduct or participation” element of a 1962(c) RICO claim.
