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Criminal Law - Handout
Criminal Law - Handout
In its early days, Enron was one of the largest suppliers of natural gas and electricity.
The company incurred a significant amount of debt when a new law deregulated the sale of
natural gas.
As a result, Enron had to create a new business strategy to generate profit.
Enron's accounts were manipulated whereby huge amounts of debt were 'hidden' from the
company's balance sheet(1).
Organizational culture became increasingly toxic.
The market-to-market (MTM)(2) accounting system, the creation of special-purpose entities
(SPEs)(3) and a high cost of capital all played a role in Enron's hiding of debt and ultimately the
downfall of the company.
The problems began surfacing in 2001 when analysts started looking into Enron's financial
statements. In the third quarter of 2001, Enron announced a $638 million loss and a $1.2
billion reduction in shareholders' equity(4).
The Enron Task Force began investigating the case and ended up convicting over twenty
people.
The Enron scandal eventually led to new regulations in the financial system.
Source: https://www.studysmarter.us/explanations/business-studies/business-case-
studies/enron-scandal/
(1) A balance sheet shows what a company owns and owes to thers. It gives us an overall picture of a
company’s wealth.
(2) Mark-to-market (MTM) measures the fair value of a company's accounts and aims to result in a realistic
appraisal of the company's current financials, however, it can also be manipulated, as in the case of
Enron.
(3) A special purpose vehicle (SPV), or special purpose entity (SPE), is a subsidiary company created by a
parent company to mitigate risks. As the SPE is a separate legal entity from the parent company, it
remains financially secure even if the parent company goes bankrupt.
(4) The value of a company, divided into many equal parts owned by the shareholders, or one of the equal
parts into which the value of a company is divided.
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EXTRA LISTENING 1.
Who is a Victim of White Collar Crime?
1. Which of the following is NOT a characteristic of white collar crime?
A. Financial gain
B. Crime committed against people or corporations
C. Violence
D. Deception
2. Which of the following is an example of a white collar crime? (I. Fraud; II. Embezzlement;
III. Forgery)
A. I only
B. II only
C. I, II, and III
D. II and III only
3. Which of the following might be a victim of a white collar crime? (I. Individuals; II.
Corporations; III. Charities)
A. I only
B. I and II only
C. III only
D. I, II, and III
4. Which of the following people is at HIGHEST risk of being a victim of white collar crime?
A. Jayson, a 30 year old high powered attorney
B. Susan, a 25 year old socialite
C. Juan, who immigrated to the U.S. 10 years ago
D. Jack, a 90 year old man with dementia
5. Which of the following was a major risk factor that allowed Madoff to commit history's
biggest white collar crime?
A. Being a female investor
B. Age
C. Being part of an affinity group
D. Being a corporation
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EXTRA LISTENING 2:
What Is Cyber Crime? - Definition, Types & Examples
Cyber crimes are any crimes that involve a computer and a network. In some cases, the computer
may have been used in order to (1)___________________ the crime, and in other cases, the
computer may have been the target of the crime.
Computer Viruses
Computer viruses are computer programs that, when opened, put copies of themselves into
other computers' hard drives without the users' consent. Creating a computer virus and
disseminating it is a cyber crime. The virus may steal disk space, access personal information,
(2)___________________ data on the computer or send information out to the other computer
user's personal contacts.
The most common way for a virus to infect a computer is by way of an email attachment. An
example would be if you received an email with an attachment. You open this attachment, and
the virus immediately spreads through your computer system. In some cases, if the virus is
opened by a computer on a system (3)___________________, such as your place of employment,
the virus can immediately be spread throughout the network without needing to be sent via
email.
There are numerous reasons that a person would create a virus to send out to another computer
or computers. It may be to steal information or money, to sabotage that system or to
demonstrate the flaws that the other computer system has. In some cases these viruses are able
to be removed from the user's computer system, and in some cases they are not. Therefore, it is
easy for us to understand how these viruses cause significant financial harm every year. The
punishment for those who damage or gain unauthorized access to a protected computer can be
prison time and the repayment of financial losses.
Cyberstalking
Cyberstalking can include harassment of the victim, the obtaining of financial information of the
victim or threatening the victim in order to frighten them. An example of cyberstalking would be
to put a recording or (5)___________________ device on a victim's computer or smartphone in
order to save every keystroke they make so that the stalker can obtain information. Another
example would be repeatedly posting derogatory or personal information about a victim on web
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pages or social media despite being warned not to do so. Cyberstalking has the potential
punishment of a prison sentence.
Identity Theft
Identity theft is a form of stealing someone's personal information and pretending to be that
person in order to obtain financial resources or other benefits in that person's name without their
consent. Identity theft is considered a cyber crime. The personal information stolen can include
the person's name, social security number, birth date or credit card numbers. This stolen
information is then used to obtain new credit cards, access bank accounts or obtain other
benefits, such as a driver's license.
Phishing Scams
Phishing is the attempt to obtain sensitive information, such as usernames and passwords, by
pretending to be a trustworthy entity in an electronic (7)___________________. These scams are
a type of cyber crime. These communications look like they are from a real entity, such as an
individual's bank or online payment processor.
The communication is sent via email or a pop-up while on a website. The communication then
directs the victim to a fake website that looks nearly identical to the real thing. Then, it
encourages the user to 'verify their personal information,' and once it is entered by the user, the
individual that created the phishing scam has obtained it. The damage from phishing scams
usually results in financial loss.
Although a few years old now, this one is quite staggering: between 2013 and 2015, a hacker was
able to send Facebook and Google a slew of fake invoices that were good enough to fool those at
the tech (8)___________________. The companies were scammed out of more than $100 million!
In 2020, we saw more scams, especially revolving around COVID-19 relief, imitators of the CDC,
small business loans, tax deadlines, and holiday charities fraud.