Law Flashcards

Question

Smurfing

Answer 1

Smurfing is the process by which a subject structures a deposit into several transactions, each less than $10,000, to avoid filing a currency transaction report as required under the Bank Secrecy Act. Smurfing is a very common technique for avoiding reporting requirements. To identify smurfing operations, fraud examiners should look for large numbers of cashier’s checks that are in even amounts and that are deposited on a regular basis.

Answer 2

"Placement" of funds is the initial step in the money laundering process. It is the step in which the funds are deposited into a financial institution or taken out of the country. If a money laundering scheme is detected, it is most often detected at this stage. "Layering" involves the creation of numerous transactions to prevent detection, such as moving funds between bank accounts, transferring funds from one form of currency to another, or transferring money between businesses. The final stage in the laundering process is the "integration" of the asset back into the economy in such a way as to make it appear as if it were derived from a legitimate business transaction.

Answer 3

papertrail A money laundering scheme cannot be successful until the paper trail is eliminated or made so complex that individual steps cannot be easily traced. The number of steps used depends on how much distance the money launderer wishes to put between the illegally earned cash and the laundered asset into which it is converted. A greater number of steps increases the complexity of tracing the funds, but it also increases the length of the paper trail and the chance that the transaction will be reported.

Answer 4

Income Statement Laundering: Overstatement of Revenue or Expenses Balance Sheet Laundering: Depositing Cash and Overwriting checks for revenues and expenses

Answer 5

Financial institutions have specific regulations requiring currency transaction reporting, but nonfinancial individuals and entities engaged in business also have currency reporting requirements. Title 31, Section 5331 of the U.S. Code (instituted as part of the USA PATRIOT Act) requires persons engaged in a trade or business and who in the course of such trade or business receive more than $10,000 in cash in one or more related transactions to file IRS Form 8300. Reported transactions include any sale made in a trade or business that is retail in nature, a sale of goods and services, a sale of real property, an exchange of cash for cash, a collectible, a consumer durable, repayment of a loan, and conversion of cash to negotiate instruments. The information required to be reported under Section 5331 is very similar to the information that was already required by the IRS under Section 6050I of the Internal Revenue Code. Because of the similarity between the two statutes, the reports are to be made on the same Form 8300, which is filed jointly with the Financial Crimes Enforcement Network (FinCEN) and the IRS.

Answer 6

Money services businesses (MSBs) refer to non-depository financial service providers operating in one or more of the following capacities: Currency exchangers Check cashers Issuers, sellers, or redeemers of traveler’s checks, money orders, or stored value The United States Postal Service Money transmitters Prepaid access providers or sellers MSBs offer an alternative to depository institutions for both financial services and money laundering. For this reason, an individual unable to transfer illegal funds into the U.S. banking system might turn to MSBs. In addition, MSBs generally operate under less strict regulations than traditional financial institutions. These overall less stringent requirements tend to raise the money laundering risk in certain transactions involving users of MSBs. For example, an MSB might not check a customer’s credit report before opening an account, or it might require less rigorous proof of a customer’s identity than a traditional bank. However, there is a trend to expand certain requirements to MSBs, such as requiring them to maintain anti-money laundering programs and meet certain provisions of the Bank Secrecy Act.

Answer 7

In 2002, FinCEN announced a new rule requiring brokers and dealers in securities to report suspicious activity via the Suspicious Activity Report by Securities and Futures Industries (SAR-SF; FinCEN Form 101). These firms are obligated to report suspicious transactions that are conducted or attempted by, at, or through a broker-dealer and involve or aggregate at least $5,000 in funds or other assets. Brokers and dealers in securities are required to report to FinCEN transactions that fall into one of the four categories below: Transactions involving funds derived from illegal activity, or intended or conducted in order to hide or disguise funds derived from illegal activity Transactions designed, whether through structuring or other means, to evade the requirements of the Bank Secrecy Act Transactions that appear to serve no business or apparent lawful purpose or are not the sort of transactions in which the particular customer would be expected to engage, and for which the broker-dealer knows of no reasonable explanation after examining the available facts Transactions that involve the use of the broker-dealer to facilitate criminal activity

Answer 8

the Bank Secrecy Act (BSA), which went into effect in 1970, was the first major piece of legislation aimed at detecting and preventing money laundering. The purpose of the law as stated in Section 5311 is "to require certain reports or records where they have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings." The BSA sets forth a system of reporting and recordkeeping requirements designed to help track large or unusual financial transactions.

Answer 9

False Owen does not have to file a Form 8300 because, while he received over $10,000 in currency, he did not receive it in the course of his trade or business; he received it as a gift.

Answer 10

False Pursuant to Section 314(b) of the USA PATRIOT Act, the Treasury Department issued a rule allowing financial institutions to share customer information with one another. The term “financial institution” includes any entity that is required to have an anti-money laundering program under the Bank Secrecy Act. In order to share information with another financial institution, the sharing institution must file a prescribed notice form with FinCEN stating that it intends to share customer information.

Answer 11

Treasury Department regulations require citizens of the United States and resident aliens to file a Report of Foreign Bank and Financial Accounts (FBAR) (Treasury Form 90-22.1) when they maintain a financial interest or signature authority over a foreign bank account with a balance of more than $10,000 during the calendar year. Accounts in different foreign countries have to be aggregated.

Answer 12

Alternative remittance systems (also called parallel banking systems) are methods of transferring funds from a party at one location to another party (whether domestic or foreign) without the use of formal banking institutions. These systems are characterized by the lack of direct physical or digital transfer of currency from the sender to the receiver. Instead, in the typical alternative remittance system, the payer will transfer funds to a local broker who has a connection in the region where the payee is located. The latter broker will then distribute the funds to the payee. Transferring funds in this manner is not necessarily illegal (although some jurisdictions require brokers to register with the government). If available, using such systems can be beneficial because the commission that the networked brokers take might be lower than a banking fee for international transactions. Additionally, the payers and payees do not need to have bank accounts to perform the transactions.

Answer 13

The Financial Action Task Force (FATF) is an intergovernmental body that was established at the G-7 Economics Summit in 1989. Its purpose is to develop and promote standards and policies to combat money laundering and terrorist financing at both the national and international levels. The FATF’s Recommendations, revised in 2012, created the most comprehensive standard with which to measure a country’s anti-money laundering, counterterrorism, and nuclear proliferation laws and policies. They serve as a basic framework of laws that its members should have. While the recommendations are not required by members and the FATF acknowledges that following each rule might not be possible, members of the FATF often adopt them. Some of the key measures in the recommendations provide that countries should: Use a risk-based approach when setting anti-money laundering policies. Create policies that increase cooperation and coordination with other countries. Specifically criminalize money laundering and terrorist financing. Enable authorities to trace, freeze, and confiscate assets suspected in laundering and terrorist financing. Require financial institutions to keep certain records and establish anti-money laundering policies.

Answer 14

One of the most common methods of laundering funds is to filter the money through a seemingly legitimate business, otherwise known as a “front” business. A front business can be a very effective way to launder money because it provides a safe place for organizing and managing criminal activity, where the comings and goings of large numbers of people will not arouse undue suspicion. In addition, a front that does legitimate business provides cover for delivery and transportation related to illegal activity. The expenses from illegal activity can be attributed to the legitimate enterprise, and illegal revenues can be easily placed into the enterprise. One disadvantage to this, however, is that launderers end up having to pay taxes on their illegal income.

Answer 15

Section 326 of the USA PATRIOT Act expands the Bank Secrecy Act by requiring financial institutions to implement Customer Identification Programs (CIPs). These CIPs are to be incorporated into financial institutions’ money laundering programs, and at a minimum, they must include reasonable procedures for: Verifying the identity of any person seeking to open an account to the extent reasonable and practicable Maintaining records of the information used to verify a person’s identity, including name, address, and other identifying information Consulting lists of known or suspected terrorists or terrorist organizations to determine if the person seeking to open the account appears on any such list

Answer 16

Substantive law is comprised of the basic laws of rights and duties (contract law, tort law, criminal law, etc.) as opposed to procedural law, which involves rules governing pleadings, evidence, jurisdiction, and so on. If someone says an act is “against the law,” he means substantive law, which includes statutes and ordinances at every level; common law, or case law, from all the various courts; and state and federal constitutions. The mail fraud statute is a criminal statute; therefore, it is most properly characterized as substantive law.

Answer 17

The federal court system uses a three-tier model. • U.S. District Courts conduct trials on criminal charges and civil complaints under federal law. • Courts of Appeals, including the Court of Military Appeals, review trial court decisions. • The U.S. Supreme Court reviews lower court decisions. It is sometimes called the court of last resort. Each federal district has a chief prosecutor, a political appointee, known as the United States Attorney, and a staff of prosecutors, known as Assistant United States Attorneys. Almost all cases are prosecuted by assistants. Criminal cases at the local level are prosecuted by the district attorney’s office or the attorney general’s office. In most cases, appeals from decisions of the U.S. District Courts are heard in the U.S. Court of Appeals for the “Circuit,” which covers a particular geographic area. The United States has 13 Courts of Appeals. There are 11 numbered judicial circuits, plus the District of Columbia, all of which are defined by a geographic area. There is also the U.S. Court of Appeals for the Federal Circuit, which has nationwide jurisdiction over appeals involving certain subject matters. The U.S. Supreme Court is the highest appellate court in the federal system and may hear certain appeals from state courts, particularly on constitutional grounds.

Answer 18

Because of the Fifth Amendment's double jeopardy provisions, only a convicted defendant in a criminal case can appeal a verdict. The government cannot appeal an acquittal on the merits of the case. The prosecution may, however, appeal adverse pretrial rulings on the admissibility of evidence and certain other matters that may temporarily terminate a prosecution (but do not result in a decision on the merits in favor of the defendant). Either party in a civil case may appeal a judgment.

Answer 19

Almost every country can be classified as having either a common law or a civil law judicial system, and knowing the differences between the two is essential to understanding how legal and judicial processes work in foreign jurisdictions. Civil law systems apply laws from an accepted set of codified principles or compiled statutes. Individual cases are then decided in accordance with these basic tenets. Under a civil law system, judges or judicial administrators are bound only by the civil code and not by the previous decisions of other courts. In deciding legal issues, a civil law judge applies the various codified principles to each case.

Answer 20

Most U.S. states use a three- or four-tier court system. • Lower-level trial courts try misdemeanors and hold preliminary hearings for felony cases, as well as civil disputes below a certain dollar amount (e.g., $10,000 or less). • Higher-level trial courts (sometimes called superior courts) try felony cases, as well as civil disputes above a certain amount (e.g., $10,000 or more). • Appellate courts review trial court decisions. • Superior appellate courts, or supreme courts, review lower appellate court decisions. A higher-level trial court would be responsible for trying civil disputes above a certain amount. Superior appellate courts generally do not hold trials; instead, they review lower appellate court decisions.

Answer 21

In common law systems, there are laws established by court decisions (called the common law). As opposed to legislative statutes, the common law is developed on a case–by-case basis. That is, the common law is a system of legal principles developed by judges through decisions made in courts. It consists of the usages and customs of a society as interpreted by the judiciary, and it is often referred to as “judge-made” law. Common law originated as a legal system in England, and some of the principles established hundreds of years ago in court decisions remain influential to contemporary legal issues. Today, common law systems exist in the United Kingdom, the United States, India, Australia, and many other countries that were once part of the British Empire or were influenced by such legal systems. In common law countries, there are two sources of substantive law: statutory law and common law. Statutory law includes statutes passed by the federal or state legislatures (and regulations passed by administrative bodies). Criminal law is statutory, while civil actions can be based on either statutory or common law.

Answer 22

B (Why other answers are wrong) There are two sources of substantive law: statutory law and common law. Statutory law includes statutes passed by the federal or state legislatures (and regulations passed by administrative bodies). The common law consists of the usages and customs of a society as interpreted by the judiciary; it often is referred to as “judge-made” law. Criminal law is statutory, while civil actions can be based on either statutory or common law.

Answer 23

D In general, the judge and jury serve important roles during a trial. In the trial setting, the jury finds the facts and the judge applies the law and rules on evidence. The judge also generally moderates the proceeding to ensure a fair trial. If, however, a jury is waived by the defendant and government, the judge decides both the facts and the law in what is called a bench trial. Appeals involve questions of law or questions involving both law and fact. Most questions of law are decided by precedent; that is, prior court decisions of equal or higher authority that have considered similar cases.

Answer 24

In general, the judge and jury serve important roles during a trial. In the trial setting, the jury finds the facts and the judge applies the law and rules on evidence. The judge also generally moderates the proceeding to ensure a fair trial. If, however, a jury is waived by the defendant and government, the judge decides both the facts and the law in what is called a bench trial. Appeals involve questions of law or questions involving both law and fact. Most questions of law are decided by precedent; that is, prior court decisions of equal or higher authority that have considered similar cases.

Answer 25

Material Securities laws require that the investor receive full and fair disclosure of all material information, and they make it unlawful for anyone to obtain money or property by using a material misstatement or omission in the offer or sale of any securities. As a general rule, to determine materiality, the fraud examiner needs to answer the following question: “Would a reasonable investor wish to know this information to make an informed decision?” If the answer is “yes,” then this information, or the lack thereof, has a high likelihood of being deemed material. (If an actual investor acted based on the misrepresentation, that clearly strengthens the case, but it is not essential that the false or misleading statement influenced an investor, merely that a reasonable investor could have been so influenced.)

Answer 26

Churning is the excessive trading of a customer account to generate commissions while disregarding the customer’s interests. Specifically, churning occurs when an investment professional excessively trades an account for the purpose of increasing his commissions instead of furthering the customer’s investment goals.

Answer 27

The default definition of security is the term investment contract. In the case of SEC v. Howey Co., the Supreme Court established a four-step test for an investment contract. The test, which is known as the Howey test, states that a financial instrument is an investment contract if the following four elements are met: • There is an investment of money or other asset. • The investment is in a common enterprise. • There are expectations of making a profit. • The profits are to be derived solely from the efforts of someone other than the investor. Retirement plans and fixed insurance policies are generally not recognized as securities.

Answer 28

Front running is a type of insider trading. Front running involves the use of the privileged knowledge of a customer's order to buy or sell a large amount of a commodity, option, or security that, because of its size, is likely to move the market

Answer 29

A model act from which many state securities laws are based, certain conditions must be in place before a security can be sold or offered for sale. A registration in place to cover the security, a registered securities professional, and full and fair disclosure of all material information

Answer 30

Securities broker-dealers are prohibited from recommending investments or investment strategies that are unsuitable for their clients. Thus, making unsuitable recommendations (e.g., recommending high-risk options to a senior citizen with limited assets) is prohibited. Essentially, there are two rules relating to suitability: the “know your customer” rule and the suitability rule. The “know your customer” rule provides that securities broker-dealers must know their customer financially to effectively service the customer’s account and to minimize the risk of recommending an inappropriate investment. Thus, this form of suitability violation occurs when a broker recommends an investment or investment strategy to a client without having conducted due diligence to ascertain relevant personal and financial information about the client. In addition to the “know your customer” requirement, there are suitability requirements that broker-dealers must follow when making recommendations to a client. The suitability rule prohibits a broker-dealer from making a recommendation to a client if the broker does not have reasonable grounds for believing that the recommendation is suitable for the client. This form of suitability violation occurs when a broker recommends an investment, recommends an investment strategy, or makes an investment that is inconsistent with the client’s objectives, and the broker knows or should know the investment is inappropriate.

Answer 31

Like Securities Act of 1933, Congress enacted the Securities Exchange Act of 1934 due to concerns over the 1929 stock market crash and the manipulation of the securities markets, but unlike the 1933 Act, the Securities Exchange Act of 1934 mainly deals with post-issuance trading. Simply put, the 1933 Act regulates the issuance of the securities themselves, and the 1934 Act covers subsequent trading of securities through brokers and exchanges.

Answer 32

Unlike general partnership interests, interests in limited partnerships are generally held to be securities because this type of structure conforms closely to the definition of an investment contract. A limited partnership is similar to a general partnership, except that in addition to one or more general partners, limited partnerships also have one or more limited partners. In contrast to a general partner, who has unlimited personal liability, a limited partner is a passive investor whose liability is limited to the amount of his investment in the company. Thus, in a limited partnership, the general partners manage the enterprise’s activities, and the limited partners supply the funding. Limited partners do not manage the enterprise’s activities.

Answer 33

Rule 10b-5—which the SEC promulgated pursuant to Section 10 of the Exchange Act—prohibits false statements and other fraudulent activity in connection with the purchase or sale of any security. Rule 10b-5 is often referred to as the Act’s anti-fraud provision. Specifically, Rule 10b-5 states that: “It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange, • To employ any device, scheme, or artifice to defraud, • To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or • To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.”

Answer 34

In some instances, tax violations extend beyond the taxpayer and can result in penalties for those who help prepare tax returns and information. A tax preparer can face penalties if he: • Aids or assists in, procures, or advises with respect to the preparation of any portion of a false return, affidavit, claim, or other document • Knows, or has reason to believe, that the information will be used in connection with any material matter arising under internal revenue laws • Knows that the portion (if so used) would result in an understatement of tax liability for another person

Answer 35

Corporate fraud charges depend on the intent of the corporate officers, Auerbach Shoe Co. v. Commissioner, 21 TC 191; aff'd, 216 F.2d 693, 54-2 USTC P 9673 (1st Cir. 1953).

Answer 36

The general rule is that the taxpayer bears the burden of proof at trial in civil proceedings (e.g., refund claims and civil deficiency claims). The Statutory Notice of Deficiency (90-day letter) generally enjoys the presumption of correctness. This presumption in favor of the IRS requires the taxpayer to come forward with prima facie evidence to prove that the IRS’s determination was erroneous. After successfully rebutting the presumption of correctness, taxpayers have the burden of proving their case by at least a preponderance of the evidence. The rule established under the Reform Act transferred the burden of proof to the IRS in civil court proceedings on income, gift, estate, or generation-skipping tax liability with respect to factual issues that are relevant to determining the taxpayer’s tax liability, provided the taxpayer: (i) provides credible evidence on the factual issue; (ii) keeps records and backs up items as presently required under the Code and regulations; and (iii) cooperates with the IRS in regard to reasonable requests for meetings, interviews, witnesses, information, and documents. However, there is no presumption of correctness when the government alleges civil or criminal tax fraud; the burden is on the government in tax fraud cases.

Answer 37

There are three basic forms, as distinguished from types, of evidence: testimonial, real, and demonstrative. Testimonial evidence refers to the oral statements made by witnesses under oath. Real evidence refers to physical objects that played a part in the issues being litigated. Demonstrative evidence is a tangible item that illustrates some material proposition (e.g., a map, a chart, or a summary). Demonstrative evidence differs from real evidence in that demonstrative evidence was not part of the underlying event; it was created specifically for the trial. Its purpose is to provide a visual aid for the jury. Nonetheless, demonstrative evidence is evidence and can be considered by the jury in reaching a verdict.

Answer 38

Sometimes testimony may be excluded because of the best-evidence rule, which prohibits a party from testifying about the contents of a document without producing the document itself. This rule, however, only applies when an original or copy is being used to prove the contents of a writing, and it does not demand that a party produce the very best evidence to prove a fact in dispute. Also known as the original-writing rule, the best-evidence rule provides that when a witness testifies about the contents of a document, at least a fair copy of the original must be available for inspection. If there is no original, a copy of the proven authentic document will do, but the court must be assured that the copies are reliable and accurate. If the document is lost—no original, no copies—the judge will have to be convinced that there is good reason to forgo the exhibit and admit the testimony.

Answer 39

``` Impeachment is the practice of bringing out matters that attack a witness’s credibility. There are numerous ways an attorney might impeach a witness, but the most common ways include efforts to show that the witness: • Is influenced by bias or self-interest • Has an impaired ability to observe • Made prior inconsistent statements • Has been convicted of a felony • Has a reputation for untruthfulness ```

Answer 40

There are two basic types of admissible evidence: direct evidence and circumstantial evidence. Direct evidence is evidence that tends to prove or disprove a fact in issue directly, such as eyewitness testimony or a confession. Circumstantial evidence is evidence that tends to prove or disprove facts in issue indirectly, by inference.

Answer 41

The primary reason for maintaining the chain of custody on an item of evidence is to establish that the evidence has not been altered or changed. If evidence is subject to change over time, or is susceptible to alteration, the offering party may need to establish that the evidence has not been altered or changed from the time it was collected through its production in court. This is done by establishing a chain of custody. The chain of custody is both a process and a document that memorializes 1) who has had possession of an object and 2) what they have done with it.

Answer 42

Work product protection applies only to documents and things prepared in anticipation of litigation or for trial. Documents and tangible things prepared in the course of an in-house or other pre-litigation investigation, even if at the direction of an attorney, may not be privileged if they were not prepared in anticipation of litigation. Just because there is a possibility of future litigation does not mean that the investigation is in anticipation thereof. Litigation must be actually planned and the work for which protection is sought must have been undertaken for the specific purpose of preparing for that litigation. However, if the work to be protected was done in anticipation of litigation, then it does not matter in most jurisdictions that no lawsuit has been filed yet.

Answer 43

The Fourth Amendment covers illegal searches and seizures by the government, and because every person has a reasonable expectation of privacy in their residences, The Fourth Amendment to the U.S. Constitution guarantees the right of all citizens to be free from unreasonable searches and seizures and permits reasonable searches. The general rule is that a reasonable search is one that is carried out pursuant to a valid search warrant (i.e., a court order that grants authorities the right to search a person or place for evidence of a crime). Thus, in some circumstances, the Fourth Amendment requires that the government obtain a warrant before it conducts a search.

Answer 44

To recover for defamation, the plaintiff must prove the following elements: • The defendant made an untrue statement of fact. • The statement was communicated (published) to third parties. • The statement was made on an unprivileged occasion. • The statement damaged the subject’s reputation. Defamation is made up of two torts: libel (written form) and slander (defamatory remarks that are only spoken) Elements of libel and slander are the same.

Answer 45

Invasion of privacy laws concern a person’s right to keep his life private and free from intrusion. There are two relevant torts of invasion of privacy: (1) intrusion upon seclusion and (2) public disclosure of private facts. Intrusion upon seclusion occurs when an individual intentionally intrudes into an area where another individual has a reasonable expectation of privacy and the intrusion would be highly offensive or objectionable to a reasonable person. The tort of public disclosure of private facts occurs when one party makes public statements about another party’s private life that are not of public concern. Unlike defamation claims, the public disclosure of private facts cause of action can arise even if the statements at issue are true. The key to this cause of action is that the information must be private in nature and not a matter of public interest.

Answer 46

Spoliation of evidence is broadly defined as the act of destroying evidence or making it otherwise unavailable. The act of spoliation can surface in just about any type of case, criminal or civil, and by any party, plaintiff, or defendant. The theory behind spoliation of evidence presumes that the individual who makes evidence unavailable following the probable initiation of a lawsuit is aware of its detrimental effect upon a case. Although few jurisdictions have a separate cause of action for spoliation of evidence, almost every jurisdiction allows for sanctions resulting from such acts. To impose sanctions for spoliation, some courts require the spoliation to be intentional, though others merely require negligence or reckless spoliation. Thus, spoliation sanctions can arise from intentional acts and negligent acts.

Answer 47

Designed to protect an individual’s Fifth Amendment right against self-incrimination and Sixth Amendment right to an attorney, Miranda warnings advise suspects that they have the right not to answer questions and the right to legal counsel during interrogations. Miranda warnings are required only if a person is being interrogated by public authorities in a custodial setting. Custodial setting refers to questioning initiated by government agents after a person has been taken into custody, or otherwise deprived of his freedom or action in any significant way. As a result, both private and public employers may interview employees in noncustodial settings without giving Miranda warnings. In the context of employee interviews by public employers, the answer to whether Miranda warnings are legally required depends on the applicability of the Fifth Amendment to the employee interviews. When a public employee is being questioned by his employer, he is being questioned by the government; therefore, the Fifth Amendment applies to employee interviews that are related to potentially criminal conduct. And because the Fifth Amendment’s protection against self-incrimination applies to internal investigations conducted by government employers, public employers must give Miranda warnings to employees being subjected to custodial interviews (i.e., employees in custody and subject to interrogation). That is, public employers must give Miranda warnings to employees being interviewed about a potentially criminal matter if the government (or its agent) has arrested the employee or deprived him of action in a significant way.

Answer 48

There are a number of recognized exceptions to the warrant requirement, principally: • Workplace searches by government employers • Searches performed as an incident to arrest • Searches of motor vehicles • Searches in exigent or emergency circumstances, to prevent the destruction of evidence, or while in “hot pursuit” of a suspect • Searches conducted pursuant to valid, voluntary consent • Searches when the evidence is in “plain view” • Border, customs, and prison searches

Answer 49

Consent is a recognized exception to the warrant requirement. Individuals are always free to waive their Fourth Amendment rights. If a subject consents to a search or seizure by a government agent, this eliminates the need for a warrant. Thus, the government does not need a warrant to perform a search if a person with proper authority consents to a search. But to constitute an effective waiver of Fourth Amendment rights, an individual’s consent to a search or seizure must be voluntary. Consents to searches by government agents obtained by deceit, bribery, or misrepresentations are generally held to be involuntary and, therefore, do not waive the consenting parties’ Fourth Amendment rights. Also, government agents do not have to warn subjects that they have a right to refuse to consent to searches.

Answer 50

Probable cause has been defined as those facts and circumstances sufficient to cause a person of reasonable caution to believe that a crime has been committed and that the accused committed it. Probable cause requires more than mere suspicion or hunch, but less than virtual certainty. “Reasonable grounds to believe” is probably as good a definition as any.

Answer 51

False imprisonment is the restraint by one person of the physical liberty of another without consent or legal justification. To recover for a claim of false imprisonment, the plaintiff must prove all of the following elements: • The defendant used words or actions intended to restrain the plaintiff. • The defendant’s words or actions resulted in the restraint of the plaintiff without the plaintiff’s consent (i.e., against the plaintiff’s will) and without legal justification. • The plaintiff was aware that he was being restrained. A claim of false imprisonment might arise if an employee is detained in any way during a search or interview. Generally, an employer is entitled to question an employee at work about a violation of company policy without incurring liability as long as the employee submits to the questioning voluntarily; that is, not as a result of threats or force.

Answer 52

Under the exclusionary rule, which is in effect in all federal and state courts, evidence seized in violation of the Fourth Amendment will be suppressed—that is, it becomes inadmissible—in any criminal prosecution against the suspect except under a few limited exceptions. In addition, all evidence that is obtained as a result of the illegally obtained evidence will also be excluded. An unlawful search and seizure does not mean the suspect cannot be prosecuted, and it does not invalidate a conviction based on other evidence. But it does prevent the wrongfully obtained evidence and all evidence derived from it from being presented at trial.

Answer 53

In Daubert v. Merrell Dow Pharmaceuticals, Inc., the Supreme Court set forth the following nonexclusive list of factors to assess reliability: • Whether the expert’s theory or technique can be or has been tested • Whether the expert’s theory or technique has been subjected to peer review and publication • Whether the expert’s theory or technique enjoys general acceptance within the relevant scientific community • Whether there are standards governing the method used by the expert • Whether the expert’s technique has a high error rate

Answer 54

There are two basic kinds of testimony. The first is lay testimony (sometimes called factual testimony), where witnesses testify about what they have experienced firsthand and their factual observations. The second kind is expert testimony, where a person who, by reason of education, training, skill, or experience, is qualified to render an expert opinion concerning certain issues at hand. A lay witness (or fact witness) is anyone who provides nonexpert testimony. Note, however, that an expert witness might also provide lay testimony. Typically, a fraud examiner who worked on a case will be capable of providing lay testimony based on observations made during the investigation. When a trial involves issues that are complex or unfamiliar to most people, as is common in incidents of fraud, expert testimony is appropriate to help the judge and jury understand these issues.

Answer 55

Rule 702 of the Federal Rules of Evidence provides that the judge must make three determinations before allowing an expert to testify before the jury: • Is the person qualified as an expert witness? • Will the expertise of the witness assist the jury in understanding the evidence or determining a fact at issue? In other words, is the testimony relevant to the facts of the case? • Is the testimony reliable?

Answer 56

Direct examination is the initial questioning of a witness by the side that called the witness. Most of the time, direct examination is a nonconfrontational questioning aimed at exposing the facts and issues of the case. During direct examination, expert witnesses present their findings in various ways, such as narratives, hypotheticals, specialized materials, and special exhibits. Experts are commonly asked to answer narrative questions, which are all but forbidden to lay witnesses. Narrative questions are broad, open-ended questions that allow experts to present their opinions in their own words with minimal prompting from the lawyer. Fraud cases, with their divergent paths of activity and intrigue, can require complex summarizing for the facts to make any sense. The average group of jurors has never considered how someone could manipulate store inventories to drive up the company’s stock price and then make millions on the phony surge. The expert witness in cases dealing with such issues often will begin testimony by recounting the narrative background of a case, the tests and experiments that were performed during the investigation, and a summary of the findings based on his professional expertise. For example, during a direct examination, counsel for the party presenting the expert witness would likely ask open questions such as “Could you please tell us about the background of this case?” or “What procedures did you perform in your examination?” In contrast, a cross-examining attorney needs to control the flow of testimony and would not likely ask an expert witness a narrative question.

Answer 57

Each party may remove any number of prospective jurors for cause. The defendant also may challenge the entire jury pool—called the venire—if the selection process systematically excludes certain groups, such as minorities, women, or young people.

Answer 58

An information is a charging document stating that the person or persons named or described committed an offense. An information may be signed only by the prosecutor without the involvement of the grand jury. A misdemeanor may be charged by either an indictment or information.

Answer 59

In a motion to suppress evidence, the defense argues that evidence was improperly obtained, is impertinent or unduly prejudicial, or violates some other right such as the privilege against self-incrimination. In many cases, motions to exclude evidence—decided at a suppression hearing, where the judge (without a jury) rules on the propriety of the government’s conduct—are more important than the trial itself. If the defense is able to exclude illegally seized narcotics, a tainted confession, or critical books and records, the prosecution might be forced to dismiss the charges (at least temporarily) for lack of adequate proof. On the other hand, an unsuccessful suppression motion might be followed by renewed interest by the defendant in a plea bargain.

Answer 60

The prosecutor is held to a particularly high standard during the closing arguments. He may not misstate the evidence, express a personal opinion as to the defendant's guilt or the credibility of witnesses, or otherwise make prejudicial or inflammatory remarks. The prosecutor is expected to stick to the facts and to the reasonable inferences that may be drawn therefrom.

Answer 61

An indictment is an accusation in writing of a serious (that is, indictable) offense and is brought in the name of the government. Under Rule 7 of the Federal Rules of Criminal Procedure, the indictment must contain a plain, concise, and definite statement of the essential facts constituting the charge(s) against the defendant. In the federal system, all offenses punishable by death must be charged by indictment; all felonies (generally crimes punishable by imprisonment for a year or more) must be prosecuted by indictment, unless the defendant waives the requirement, in which case the prosecution may proceed by filing an “information.” An information is a charging document stating that the person or persons named or described committed an offense. An information may be signed only by the prosecutor without the involvement of the grand jury. A misdemeanor may be charged by either an indictment or information. The arraignment takes place in open court and consists of the reading of the charges in the indictment or information. The defendant may plead guilty, not guilty, or nolo contendere.

Answer 62

Probation is the suspension of an offender’s sentence in return for a promise of good behavior. Many laypersons confuse probation with parole. Although parole is functionally similar to probation, parole occurs after the offender has served at least part of his lawful sentence. Probation typically is a sentence imposed prior to (and instead of) incarceration. Probation laws vary from state to state, but the offender typically is placed under the control and guidance of a probation officer, who is to see to it that the conditions that are established are met.

Answer 63

A grand jury may be used only to obtain evidence of possible violations of the criminal law, and its process may not be used as a ruse to obtain evidence for parallel civil actions. However, the grand jury, with the appropriate court order, can make evidence available to the proper government authorities for a civil proceeding, as long as the primary purpose of the grand jury inquiry was to enforce the criminal laws. Access by private parties to grand jury proceedings is difficult and unlikely.

Answer 64

The grand jury hearing is a nonadversarial proceeding. The accused has no right to be informed of its deliberations, to know the evidence against him, or to confront the accusers. The accused also has no absolute right to appear before the grand jury, and if he does, he may not be accompanied by counsel. The accused may, however, periodically leave the grand jury to consult with his attorney.

Answer 65

After both sides have presented their evidence, they make their closing arguments to the jury. The closing arguments provide the jury with a final opportunity to hear each side’s position. The prosecution delivers its closing argument first, the defense follows, and the prosecution has the opportunity for final rebuttal. Closing arguments are not evidence, but are the attorney's summaries of the evidence presented during the trial. The remarks in closing arguments are limited to issues pertinent to the case and confined to evidence presented during the trial.

Answer 66

Generally, deferred prosecution agreements occur when prosecutors file criminal charges against a company, but then agree not to prosecute the claims as long as the company successfully complies with the deferral agreement’s terms. These requirements typically focus on getting the business to reform its policies and reduce the risk of illegal practices. Essentially, deferred prosecution agreements help companies avoid indictment, trial, and conviction while providing prosecutors with another channel for disposing of a corporate case that punishes malfeasance and effectuates changes in a company’s culture. In a plea bargaining agreement, the defendant pleads guilty to a violation in exchange for some sort of leniency; deferred prosecution agreements can result in no conviction if the agreement is fulfilled.

Answer 67

Once the jury is selected and sworn, and after some introductory remarks by the judge, the actual trial begins with the opening statement by the prosecution. In it, the prosecutor usually explains the charges, outlines the evidence he intends to produce, and tells the jury that the prosecution will ask for a verdict of guilty. The prosecutor is not permitted to argue the case at this point; that will be done at the end.

Answer 68

Most criminal cases are tried by a jury of 12 with at least two alternates, but the parties may stipulate to a lesser number. The jury is expected to be impartial. The parties or the court may ask questions of the prospective jurors to determine their suitability. Each party may remove any number of prospective jurors for cause, such as admitted bias or prejudice, and each side has a limited number of peremptory challenges, depending on the offense charged, under which a party may strike a prospective juror without having to provide a reason. The prosecution may not use its peremptory challenges, however, in a way solely influenced by racial factors. The defendant also may challenge the entire jury pool—called the venire—if the selection procedures systematically exclude certain groups, such as minorities, women, or young people.

Answer 69

In the pretrial discovery phase of criminal litigation, if the defendant requests disclosure of the prosecution’s documents and tangible objects, reports of examinations and tests, and its expert witnesses, then the prosecution is correspondingly entitled to disclosure of these items from the defense. The prosecution is not, of course, entitled to disclosure of the defendant’s work product, nor is it entitled to statements made by prospective witnesses to the defendant or his attorneys.

Answer 70

False The grand jury has the right to subpoena witnesses and documents, and refusals to appear or produce may be punishable as contempt, with fines or jail terms until the subpoena is complied with or the grand jury term expires. A witness or target of the grand jury retains the Fifth Amendment right against self-incrimination.

Answer 71

In Terry vs. Ohio, 392 U.S. 1 (1968), the Supreme Court held that police may briefly detain and question a person for investigative purposes if there are specific "articulable" reasons to do so. The decision imposes a lesser standard than probable cause

Answer 72

Interrogatories are questions that are submitted to an opposing party in a suit; they are something like a written deposition. Interrogatories are submitted to the party in writing. If the receiving party thinks that a question is improper, then he may object to the question. If no objection is given, then the party must answer the question in writing. Some parties will try to provide as little information as possible but still give a “truthful” answer. However, that tactic can backfire—if the answering party does not provide the information requested, that party cannot introduce evidence on those issues at trial and can be sanctioned by the court.

Answer 73

A civil action begins with the filing of a complaint in the appropriate court, usually in the jurisdiction in which the defendant resides or where the claim arose. In some limited circumstances, cases may occasionally be filed where the plaintiff resides, but the document would still be called a “complaint,” not an information. The federal rules provide that the complaint should be a “short and plain statement” showing the court’s jurisdiction to hear the case, the grounds for relief, and a demand for judgment. Indictments and informations are filing documents used in criminal cases, and a writ is a formal order by a court or other judicial body.

Answer 74

In civil trials, the plaintiff usually offers its evidence first. In most cases, the civil plaintiff must prove his case only by the preponderance of the evidence, meaning that there must only be slightly more evidence in favor than against. Like criminal trials, civil trials begin with the opening statements, starting with the party that bears the burden of proof. Thus, civil trials begin with the plaintiff’s counsel speaking first. As in criminal trials, the opening is devoted to introducing the parties, stating the nature of the dispute, and outlining the evidence the party expects to produce. The arraignment is part of the criminal justice process; it is not part of civil litigation.

Answer 75

False Both sides may appeal from an adverse verdict, either as to liability or damages. As in the criminal system, the appellate court is largely limited to reviewing the legal decision of the court rather than the factual determination of the jury. The appeals court may reverse and remand for a new trial on some or all of the issues, may order that a certain portion of the awarded damages be remitted, or may enter final judgment, if legal grounds are clear, in favor of either party.

Answer 76

A motion for summary judgment asks a judge to decide the case, without a trial, based on the evidence contained in the complaint and answer. A motion for summary judgment will be granted if the court determines that the pleadings and proof clearly demonstrate that there is no genuine material issue of fact involved in the proceedings and that the moving party is entitled to judgment as a matter of law. Either side in a lawsuit can file for summary judgment. The motion is granted unless it can be shown that some of the facts as presented are in dispute.

Answer 77

A defendant may file a cross-claim against one of its co-defendants. A cross-claim is simply an action between co-parties (i.e., claims between two defendants or two plaintiffs).

Answer 78

The fidelity bond claim is an often-overlooked method of recovery for losses due to internal fraud. A fidelity bond is a policy issued by many large insurance companies under which the insured entity is covered against losses caused by the dishonest or fraudulent acts of its employees. It is often helpful for organizations to have a fidelity bond, since general liability insurance and many other policies will not cover damages from intentional acts like internal fraud.

Answer 79

If the deposing attorney wishes to inspect or refer to certain documents in the witness’s possession during the proceedings, these can be demanded by a subpoena duces tecum, a legal order for the witness to produce the documents for reference during the deposition.

Answer 80

D There are several possible defenses to tax fraud. The taxpayer can assert the affirmative defense of reliance on an attorney or accountant if all of the following conditions are met: The taxpayer specifically relied on the advice. The expert is qualified, which is determined by a facts and circumstances test (having board certification or being a CPA are neither strictly required nor automatically qualifying). The taxpayer gave full disclosure of the facts to the expert.

Answer 81

F When the Internal Revenue Service investigates a suspected tax fraud, it may then refer it to the Department of Justice for criminal prosecution. However, there is no presumption of correctness afforded the government when it alleges civil or criminal tax fraud. Therefore, the government has the burden of proving tax fraud.

Answer 82

D Embezzled money is taxable income to the embezzler, even though he is under a duty to repay it; however, upon repayment, the embezzler gets a deduction for the repayment. For example, in Stephens v. Commissioner, 905 F.2d 667 (7th Cir. 1990), a taxpayer embezzled about $530,000 from his employer and recorded it on his tax return as "consulting income." The taxpayer was ordered to pay restitution to the employer plus interest. He was allowed deductions under IRS Code 165 (c) (2), relating to ordinary and necessary business expense, for the restitution amount in the year paid. But the court did not allow a deduction for the interest.

Answer 83

D The general rule is that the taxpayer bears the burden of proof at trial in civil proceedings (e.g., refund claims and civil deficiency claims). The Statutory Notice of Deficiency (90-day letter) generally enjoys the presumption of correctness. This presumption in favor of the IRS requires the taxpayer to come forward with prima facie evidence to prove that the IRS’s determination was erroneous. After successfully rebutting the presumption of correctness, taxpayers have the burden of proving their case by at least a preponderance of the evidence. The rule established under the Reform Act transferred the burden of proof to the IRS in civil court proceedings on income, gift, estate, or generation-skipping tax liability with respect to factual issues that are relevant to determining the taxpayer’s tax liability, provided the taxpayer: (i) provides credible evidence on the factual issue; (ii) keeps records and backs up items as presently required under the Code and regulations; and (iii) cooperates with the IRS in regard to reasonable requests for meetings, interviews, witnesses, information, and documents. However, there is no presumption of correctness when the government alleges civil or criminal tax fraud; the burden is on the government in tax fraud cases.

Answer 84

A Willfulness can be inferred from conduct such as: Keeping a double set of books (not to be confused with GAAP and tax records) Making false entries or alterations or creating false invoices or documents Destroying books or records Concealing assets (illicit income) Covering up sources of income Avoiding making records that are typical in transactions of the kind Acting in ways that mislead or conceal (Spies v. U.S., 317 U.S., 492 (1943))

Answer 85

False A tax return is considered fraudulent if the responsible party willfully attempts to defraud the government of owed tax dollars. A good faith or legitimate misunderstanding of the law based on the law’s complexity negates willfulness [U.S. v. Cheek, 111 U.S. 604 (1991)]. The case held, however, that the belief that taxes are in violation of the Constitution was not relevant to willfulness.

Answer 86

A Unless there is a reasonable cause for an understatement and the preparer acted in good faith, a penalty will be assessed against any person who is a preparer, who knew or reasonably should have known that a position taken on a return was: Not realistically possible of being sustained on its merits Not disclosed under Title 26, U.S.C., § 6662(d)(2)(B)(ii) A frivolous position

Answer 87

A | Fraud penalties survive the death of the taxpayer, meaning the deceased’s estate will still be liable.

Answer 88

True Taxpayers with a tax deficiency may be subject to civil or criminal penalties. Although the burden of proving fraud is on the IRS, the primary determinant of whether the IRS pursues a civil rather than a criminal fraud charge is what the available evidence can prove. While the IRS itself can file a civil action, it refers criminal tax prosecutions to the Department of Justice. There might be budgetary and staffing constraints at either agency that might dictate whether a suit is pursued civilly or criminally. The difference between civil and criminal violations in the view of the IRS is that a civil case never ripens into a crime, and a criminal offense involves behavior too insidious to be disposed of on a civil basis. Failure to cooperate might raise a civil case to a crime because it might demonstrate willful intent.

Answer 89

False The fidelity bond claim is an often-overlooked method of recovery for losses due to internal fraud. A fidelity bond is a policy issued by many large insurance companies under which the insured entity is covered against losses caused by the dishonest or fraudulent acts of its employees.

Answer 90

False Both sides may appeal from an adverse verdict, either as to liability or damages. As in the criminal system, the appellate court is largely limited to reviewing the legal decision of the court rather than the factual determination of the jury. The appeals court may reverse and remand for a new trial on some or all of the issues, may order that a certain portion of the awarded damages be remitted, or may enter final judgment, if legal grounds are clear, in favor of either party.

Answer 91

T To comply with Rule 26 of the Federal Rules of Civil Procedure, organizations should create "litigation hold" procedures. These are the steps taken to notify employees to suspend the destruction of potentially relevant records. The duty to issue a litigation hold arises when litigation is "reasonably anticipated." Whether an organization should “reasonably anticipate” litigation is determined based on the facts and varies from case to case. Common triggers for anticipation are notices sent by government agencies, unequivocal threats of litigation for credible issues, receiving a summons or complaint, and many others. Vague rumors of litigation generally do not trigger litigation holds, but it is best to contact experienced legal counsel when faced with threats of litigation to determine whether such procedures are necessary.

Answer 92

False Under the Federal Rules of Civil Procedure, only information that is admissible at trial can be obtained through discovery.

Answer 93

False Mediation is the process whereby an impartial third person assists the parties in reaching a resolution to the dispute. The mediator does not decide who should win, but instead works with the parties to reach a mutually agreeable settlement.

Answer 94

T To comply with Rule 26 of the Federal Rules of Civil Procedure, organizations should create "litigation hold" procedures. These are the steps taken to notify employees to suspend the destruction of potentially relevant records. The duty to issue a litigation hold arises when litigation is "reasonably anticipated."

Answer 95

D Under federal rules, either party may take discovery regarding any matter, not privileged, that is relevant to the subject matter of the action or that might lead to admissible evidence. Thus, even information that is not admissible at trial can be obtained through discovery.

Answer 96

B Interrogatories are questions that are submitted to an opposing party in a suit; they are something like a written deposition. Interrogatories are submitted to the party in writing. If the receiving party thinks that a question is improper, then he may object to the question. If no objection is given, then the party must answer the question in writing. Some parties will try to provide as little information as possible but still give a “truthful” answer. However, that tactic can backfire—if the answering party does not provide the information requested, that party cannot introduce evidence on those issues at trial and can be sanctioned by the court.

Answer 97

D Depositions are probably the most popular and useful form of civil discovery. A deposition is sworn testimony given by a party or witness upon questioning by counsel for one of the parties before trial and outside of court, usually in a lawyer’s office. Opposing counsel and a stenographer, who administers the oath and transcribes the testimony, also are present. Deposition testimony may be used to obtain evidence about the party’s own case or the opponent’s, or to preserve testimony for trial.

Answer 98

A Alternative dispute resolution usually involves one of two types of methods: mediation or arbitration. Mediation is the process whereby an impartial third person assists the parties in reaching a resolution to the dispute. The mediator does not decide who should win, but instead works with the parties to reach a mutually agreeable settlement. Any mediation agreement will be enforced as a binding contract. Arbitration is the process whereby a dispute is submitted to an impartial third person (known as an arbitrator) who then decides the outcome of the case (i.e., which party should win). The arbitrator acts as a judge or jury by deciding the case on its merits. Arbitration can be either “binding” or “nonbinding.” If the arbitration is binding, then the decision of the arbitrator is final, and the parties cannot later submit their dispute to a judge or jury for determination. Conversely, if the arbitration is nonbinding, the arbitrator’s determination is not binding upon the parties.

Answer 99

B In many instances, particularly in fraud litigation, a judgment might go uncollected because the defendant has already squandered or secreted the assets. In such circumstances, a plaintiff may conduct post-judgment discovery, including a deposition of the defendant, in an attempt to locate assets to satisfy a judgment.

Answer 100

True During a deposition, the deponent or counsel can object to particular questions as in a trial, but even if an objection is made, the deponent must answer the questions. The evidence is taken subject to the objections. This means that if an objection is made to a particular question asked during a deposition, the objection is duly noted, and if the depositional evidence is presented at trial, the judge will be asked to rule on the objection before that part of the deposition is read to the jury

Answer 101

The prosecutor has an ethical responsibility not to use evidence that is false and must correct testimony that he knows is false. In 1963, the Supreme Court (in the case of Brady v. Maryland, 373 U.S. 83) expanded the prosecution’s duty further. Under Brady, the prosecution must disclose all evidence requested by the defendant that is material to guilt or punishment (i.e., evidence that would tend to exculpate him or reduce his penalty). The government is expressly forbidden from concealing evidence that would call the charges into question.

Answer 102

C Serious criminal charges and most felony fraud charges may be accomplished by a grand jury indictment. The grand jury consists of 16 to 23 people sworn as jurors who meet in secret deliberation, usually in biweekly or monthly sessions, to hear witnesses and other evidence presented by prosecutors and to vote on indictments. An indictment or true bill must be concurred by at least 12 jurors voting without the prosecutor present. The grand jury hearing is a nonadversarial proceeding, and the accused has no absolute right to appear during a grand jury hearing.

Answer 103

A A defense is an assertion by a defendant in a criminal or civil suit that seeks to explain away guilt or civil liability for damages. The facts indicate that Baron lacked the intent to evade taxes, and that his underreporting was a mistake. In some situations, mistake may be used as a defense. Other common defenses in criminal cases include: alibi, consent, de minimis infraction (trivial), duress, entrapment, ignorance, mistake, insanity, necessity, protection of property, self-defense, public duty, legal impossibility, and protection of others. Also pertinent in the matter of defense are questions involving statutes of limitations, proper venue, and proper jurisdiction.

Answer 104

F | A decision to immunize a witness is solely within the discretion of the defense.

Answer 105

F In the pretrial discovery phase of criminal litigation, if the defendant requests disclosure of the prosecution’s documents and tangible objects, reports of examinations and tests, and its expert witnesses, then the prosecution is correspondingly entitled to disclosure of these items from the defense. The prosecution is not, of course, entitled to disclosure of the defendant’s work product, nor is it entitled to statements made by prospective witnesses to the defendant or his attorneys.

Answer 106

A Generally, an appeal may be made only for errors of law to which the defendant made timely objection at trial or in pretrial proceedings. The failure to object is said to waive any claims of error. A timely objection theoretically would permit the trial judge to correct the error at the time, eliminating the delay and expense of an appeal and possible new trial. Only very serious errors that affect substantial rights of the defendant may be raised on an appeal without the necessity for an earlier timely objection. In this case, even if the defendant made a timely objection, the fact that his appeal is based solely on an issue of fact will likely make his appeal unsuccessful.

Answer 107

F | An appellate court will reverse the conviction of a criminal defendant based on any reasonable error in the records.

Answer 108

TGenerally, an appeal may be made only for errors of law to which the defendant made timely objection at trial or in pretrial proceedings. The failure to object is said to waive any claims of error. A timely objection theoretically would permit the trial judge to correct the error at the time, eliminating the delay and expense of an appeal and possible new trial. Only very serious errors that affect substantial rights of the defendant may be raised on an appeal without the necessity for an earlier timely objection

Answer 109

A After both sides have presented their evidence, they make their closing arguments to the jury. The closing arguments provide the jury with a final opportunity to hear each side’s position. The prosecution delivers its closing argument first, the defense follows, and the prosecution has the opportunity for final rebuttal. Closing arguments are not evidence, but are the attorney's summaries of the evidence presented during the trial. The remarks in closing arguments are limited to issues pertinent to the case and confined to evidence presented during the trial. The prosecutor is held to a particularly high standard in closing arguments. He may not misstate the evidence, express a personal opinion as to the defendant’s guilt or the credibility of witnesses, or otherwise make prejudicial or inflammatory remarks. The prosecutor is expected to stick to the facts and to the reasonable inferences that can be drawn therefrom. In most cases, the defense's closing argument focuses on attacking the motives and credibility of the government’s witnesses and emphasizes the heavy burden of proof the government bears.

Answer 110

C A decision to immunize a witness is solely within the discretion of the prosecution. If the prosecution decides to immunize a witness, it applies for a court order compelling testimony from the witness under a grant of immunity. If the application meets statutory requirements, the court must grant the order.

Answer 111

D In the pretrial discovery phase of criminal litigation, if the defendant requests disclosure of the prosecution’s documents and tangible objects, reports of examinations and tests, and its expert witnesses, then the prosecution is correspondingly entitled to disclosure of these items from the defense. The prosecution is not, of course, entitled to disclosure of the defendant’s work product, nor is it entitled to statements made by prospective witnesses to the defendant or his attorneys.

Answer 112

B The Fifth Amendment provides that an individual cannot be compelled to give information that might incriminate him. But the Fifth Amendment does not protect corporations and other entities from compelled self-incrimination. The constitutional right to jury trial in criminal cases is addressed by the Sixth Amendment.

Answer 113

B The arraignment takes place in open court and consists of the reading of the charges in the indictment or information. The defendant may plead guilty, not guilty, or nolo contendere.

Answer 114

C Both the defendant and prosecution have statutory rights to certain pretrial discovery. Upon the defendant’s request, the government must allow the defendant to inspect and copy any results or reports of physical or mental examinations, scientific tests, or experiments that are material to the preparation of the defense or that the government plans to use as evidence at trial. The defendant does not have a right to the work product of the state, which includes reports, memoranda, and other internal documents created by the government attorney in preparing for and prosecuting the case. In addition, the defendant does not have a right to inspect statements made by government witnesses prior to the time the witness actually testifies.

Answer 115

False Prior to trial, the defendant may see all relevant statements made by him. The defendant does not have the right, however, to see copies of witness statements against him until a witness testifies. In many cases, however, the government might voluntarily produce these statements before trial. This is especially common in fraud prosecutions where there is less risk of reprisal or tampering with witnesses.

Answer 116

D A defense is an assertion by a defendant in a criminal or civil suit that seeks to explain away the defendant's guilt or civil liability for damages. For instance, the increased use of the undercover approach in criminal investigations has led to an increase in the use of entrapment defenses. Entrapment occurs when law enforcement officers or government agents induce a person to commit a crime that he is not previously disposed to commit. Other common defenses in criminal cases include: alibi, consent, de minimis infraction (trivial), duress, entrapment, ignorance, mistake, insanity, necessity, protection of property, self-defense, public duty, legal impossibility, and protection of others. Also pertinent in the matter of defense are questions involving statutes of limitations, proper venue, and proper jurisdiction.

Answer 117

False Generally, an appeal may be made only for errors of law to which the defendant made timely objection at trial or in pretrial proceedings. The failure to object is said to waive any claims of error. A timely objection theoretically would permit the trial judge to correct the error at the time, eliminating the delay and expense of an appeal and possible new trial. Only very serious errors that affect substantial rights of the defendant may be raised on an appeal without the necessity for an earlier timely objection.

Answer 118

True Most criminal cases are tried with a jury of 12, with two alternates, but the parties may stipulate to a lesser number. During a process called voir dire, the parties or the court may ask questions of the prospective jurors to determine their suitability or impartiality. Each party may remove any number of prospective jurors for cause, and each side has a limited number of "peremptory challenges," depending on the offense charge, under which a party may strike a prospective juror without having to give any reason.

Answer 119

False In the U.S. federal system, all offenses punishable by death must be charged by indictment; all felonies (generally crimes punishable by imprisonment for a year or more) must be prosecuted by indictment, unless the defendant waives the requirement, in which case the prosecution may proceed by the filing of an “information.” An information is a charge signed only by the prosecutor, without the involvement of the grand jury. A misdemeanor may be charged by either an indictment or information.

Answer 120

A Both the defendant and prosecution have statutory rights to certain pretrial discovery. The defendant may inspect copies of all relevant statements made by him (or of a corporation by its employees) in the custody of the government; a copy of the accused's prior criminal record; and all documents, items, test results, and other evidence the government intends to introduce at a trial or that are necessary to the defense. The defendant does not, however, have an absolute right to see copies of prior statements made by a witness against him until that witness testifies at trial. In many cases, however, the government might voluntarily produce these statements before trial. This is especially common in fraud prosecutions where there is less risk of reprisal or tampering with witnesses.

Answer 121

C The prosecutor is held to a particularly high standard during the closing arguments. He may not misstate the evidence, express a personal opinion as to the defendant's guilt or the credibility of witnesses, or otherwise make prejudicial or inflammatory remarks. The prosecutor is expected to stick to the facts and to the reasonable inferences that may be drawn therefrom.

Answer 122

F The U.S. securities and futures markets are regulated through a combination of self-regulation by self-regulatory organizations (SROs) and direct federal regulation. SROs in U.S. securities and futures markets are subject to federal regulation. Securities and futures laws authorize the Securities Exchange Commission (SEC), which regulates the U.S. securities industry, and the Commodity Futures Trading Commission (CFTC), which has authority over U.S. futures markets, to delegate authority to and oversee SROs, empowering authorized SROs to regulate the markets in which securities and futures are traded. There are several SROs in U.S. securities and futures markets, including: * The national exchanges: The national exchanges that operate the markets where securities and futures are traded (e.g., the New York Stock Exchange, American Stock Exchange, and the Chicago Board Options Exchange) are SROs. * The Financial Industry Regulatory Authority (FINRA): FINRA, which is overseen by the SEC, regulates all firms selling securities in the United States. * The Municipal Securities Rulemaking Board (MSRB): The MSRB, which is overseen by the SEC, regulates the

Answer 123

F Section 1001 prohibits a person from lying to or concealing material information from a federal official. A statement is false for the purposes of Section 1001 if it was known to be untrue when it was made, and it is fraudulent if it was known to be untrue and was made with the intent to deceive a government agency. For a violation to occur, the agency need not actually have been deceived, nor must it have in fact relied upon the false statement. Also, to establish a violation, the government does not have to show that it suffered a loss. The statement must have been capable, however, of influencing the agency involved. The elements of a typical Section 1001 violation are set forth below: • The defendant knowingly and willfully (or with reckless disregard for truth or falsity) • Made a false statement (or used a false document) • That was material • Regarding a matter within the jurisdiction of any agency of the United States • With knowledge of its falsity

Answer 124

F Defamation is an unprivileged publication of a false statement about a person that causes harm to that person's reputation. To recover for defamation, the plaintiff must prove the following elements: • The defendant made an untrue statement of fact. • The statement was communicated (published) to third parties. • The statement was made on an unprivileged occasion. • The statement damaged the subject's reputation. To be defamatory, a statement must be a statement of fact (not opinion) and be untrue. Thus, truth is an absolute defense to defamation. Here, Walsh’s statement that Brock was cheating on his wife with a coworker was true, and thus the statement was not defamatory. Accordingly, Brock’s suit for defamation will not succeed.

Answer 125

F Evidence that the accused has committed other crimes is not usually admissible to prove that the defendant is generally a bad person, and therefore is likely to have committed the crime with which he is charged. But such evidence may be admitted to show something else, such as proof of motive, opportunity, or intent to commit an act.

Answer 126

F The anti-bribery provisions of the FCPA make it unlawful to bribe a foreign official for business purposes. Only regulated persons are subject to FCPA jurisdiction, and such persons include all of the following: • A domestic concern, which is any citizen, national, or resident of the United States, or any business entity that has its principal place of business in the United States or that is organized under the laws of a state, territory, possession, or commonwealth of the United States • An issuer, which is a corporation that has issued securities that have been registered in the United States or an entity that is otherwise required to file periodic reports with the SEC • The agents, subsidiaries, or other representatives of domestic concerns and issuers • A foreign national or business that takes any act in furtherance of a corrupt payment within U.S. territory Also, the FCPA’s anti-bribery provisions extend only to corrupt payments made to foreign officials. Although the UK private company is attempting to influence a foreign official, the UK company did not violate the FCPA because it is not subject to FCPA jurisdiction. The UK company does not have its principal place of business in the United States, and it is not organized under the laws of the United States. Also, the UK company is a private company, so it is not an issuer. Moreover, the UK company did not take any act in furtherance of a corrupt payment within U.S. territory; the $60,000 transfer was made to a Chinese public official. Therefore, the $60,000 transfer does not violate the FCPA.

Answer 127

T After the trial court enters its decision, a party may file an appeal with a higher court. Appeals involve questions of law or questions involving both law and fact. Most questions of law are decided by precedent—that is, prior court decisions of equal or higher authority that have considered similar cases.

Answer 128

F In the U.S. federal system, all offenses punishable by death must be charged by indictment; all felonies (generally crimes punishable by imprisonment for a year or more) must be prosecuted by indictment, unless the defendant waives the requirement, in which case the prosecution may proceed by the filing of an “information.” An information is a charge signed only by the prosecutor, without the involvement of the grand jury. A misdemeanor may be charged by either an indictment or information.

Answer 129

F An illegal gratuity charge doesn’t require proof that the gratuity was given for the purpose of influencing an official act. That is, an illegal gratuity charge only requires that the gratuity be given for, or because of, an official act.

Answer 130

F Rule 10b-5—which the SEC promulgated pursuant to Section 10 of the Exchange Act—prohibits false statements and other fraudulent activity in connection with the purchase or sale of any security. Rule 10b-5 is often referred to as the Act’s anti-fraud provision. Specifically, Rule 10b-5 states that: “It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange, • To employ any device, scheme, or artifice to defraud, • To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or • To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.”

Answer 131

D Although the work undertaken by a fraud examiner may be protected by the work product doctrine, to receive protection, the work must be done in anticipation of litigation and at the attorney's direction. Here, even if Black's work was done at the attorney's direction, her work was not prepared in anticipation of litigation because no litigation was actually planned.

Answer 132

C Under Rule 702 of the Federal Rules of Evidence, a witness qualified as an expert by “knowledge, skill, experience, training or education” may testify in the form of an opinion or otherwise to “scientific, technical or other specialized knowledge” if such testimony will “assist the trier of fact to understand the evidence or to determine the fact in issue.” The determination of whether a witness is qualified as an expert or whether expert testimony is needed is left to the discretion of the trial judge. There is no particular educational requirement for expert testimony; a witness with no formal education may be qualified based on training or experience.

Answer 133

F Sometimes testimony may be excluded because of the best-evidence rule, which prohibits a party from testifying about the contents of a document without producing the document itself. This rule, however, only applies when an original or copy is being used to prove the contents of a writing, and it does not demand that a party produce the very best evidence to prove a fact in dispute. Also known as the original-writing rule, the best-evidence rule provides that when a witness testifies about the contents of a document, at least a fair copy of the original must be available for inspection. If there is no original, a copy of the proven authentic document will do, but the court must be assured that the copies are reliable and accurate. If the document is lost—no original, no copies—the judge will have to be convinced that there is good reason to forgo the exhibit and admit the testimony.

Answer 134

False Before December 1, 2010, draft reports—preliminary reports that attorneys requested from experts hired to testify—were discoverable. Such preliminary reports would often reflect the parties’ mental impressions of the case, which might reveal sensitive information. As a result, attorneys would usually hire one “consulting expert” (a nontestifying expert witness whose draft report was not discoverable) and later retain a testifying expert witness. Of course, this process ended up costing more time and money than hiring just one expert. Therefore, Rule 26 was amended to make draft reports protected under the work product doctrine. The amendments to Rule 26 also extended work product protection to most communications between experts and attorneys relating to the report. However, there are a few exceptions to this protection. The following communications are not protected by Rule 26(b)(4): Communications relating to compensation for the expert’s study or testimony Communications that identify facts or data that the party’s attorney provided and the expert considered in forming the opinions Communications that identify assumptions that the party’s attorney provided and that the expert relied on in forming the opinions

Answer 135

False | Both FCPA and UK Bribery Act make it a crime

Answer 136

False The FCPA has two major parts. The first part criminalizes the bribery of a foreign public official to obtain or retain business. The second part pertains to accounting procedures, requiring publicly traded companies to keep accurate books and records and adopt internal controls to prevent diversion of assets or other improper use of corporate funds.

Answer 137

F Insurance policies are designed to protect assets (as well as life and health), but they are also assets in their own right. As is the case with most assets, they can become part of a money laundering scheme. This scenario is a redemption scheme. A person can redeem some insurance policies, such as life insurance, before the event that triggers the insurance occurs. In other words, the insurer agrees to pay the beneficiary of the policy an amount less than what the payout on a claim occurrence (in the case of life insurance, the death of the insured) would be. Using illicit assets, launderers can purchase life insurance or other redeemable contracts for themselves or their associates. If the investigator did not know that the launderer bought the insurance policy with illicit assets, the redemption payout would appear legitimate. In an insurance prepayment scheme, the launderer makes advance payments on insurance premiums. For instance, if a health insurer allowed $10,000 in advance premium payments, then the launderer could use the illicit assets to “store” those funds. Perhaps the launderer was going to buy that health insurance anyway; now illicit assets have taken care of that bill.

Answer 138

A In the U.S. federal legal system, all offenses punishable by death must be charged by an indictment; all felonies (crimes punishable by imprisonment for more than one year or at hard labor) must be charged by indictment unless indictment is waived by the defendant. If the indictment is waived, the prosecution may proceed by filing an information. Misdemeanor crimes may be charged by indictment or information.

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