The controversy related to this raid continued well into 2009, with state officials defending their actions and FLDS Church supporters faulting them for acting pursuant to a telephone ca
Trang 1an acceptable site Yucca Mountain, Nevada, is the only place earmarked for a site study
Solid waste pollution has been reduced by recovering resources rather than burying them
Resource recovery includes massive systems that burn waste to produce steam, but it also includes the recycling of glass, metal, and paper from individual consumers and businesses The elim-ination of these kinds of materials from landfills has prevented pollution and extended the period during which landfills can receive waste
Land pollution also involves the accumula-tion of chemicals in the ground Modern agriculture, which has grown dependent on chemical fertilizers and chemicals that kill insects, has introduced substances into the soil that kill more than pests For many years the chemical DDT was routinely sprayed on crops to control pests It was banned when scientists discovered that the chemical entered the food chain and was harming wildlife and possibly humans
Air pollution is regulated by the federal government The CLEAN AIR ACT was originally enacted in 1970 and was extensively amended in
1977 and again in 1990 (42 U.S.C.A §§ 7401–
7626; Pub L No 95-95 [1977 amendments];
Pub L No 101-549[1990 amendments]) Under its provisions, every stationary and mobile pollution source must comply with emission standards as a means of cleaning up the ambient air quality in the area This has meant that automobile emission control systems have been created and improved to meet more stringent air quality standards Coal-burning electric power plants have been required to install filtration systems on their smokestacks, and manufactur-ing facilities have had to install equipment that
“scrubs” polluted air clean
One strategy governmental entities use to control emissions involves emissions trading, or cap-and-trade These programs provide eco-nomic incentives in exchange for reductions in emissions of air pollutants Cap-and-trade has been used in several areas of the United States
Emissions trading is at the center of the Kyoto Protocol to the UNITED NATIONS Framework Convention on Climate Change, a treaty designed to reduce six major types of greenhouse gases The United States is a signatory of the protocol but has never ratified it Thus, the treaty
is not formally binding on the United States
Water pollution has existed longer than any other type of pollution Depositing liquid and
solid wastes in rivers, streams, lakes, and oceans was convenient and inexpensive for a company
or municipality, but it eventually destroyed the ecosystems found in the water Many large rivers became nothing more than sewers Most troubling was the polluting of groundwater, creating serious health hazards for people who drank water containing toxic substances The federal CLEAN WATER ACT (CWA) was originally enacted in 1972 and then amended in
1977 and 1987 (33 U.S.C.A §§ 1251–1387; Pub
L No 95-217[1977 amendments]; Pub L No 100-4[1987 amendments]) The CWA seeks to eliminate the “discharge of pollutants into navigable waters,” to make water safe for people
to fish and swim in, and to end the“discharges
of toxic pollutants in toxic amounts.” The CWA seeks to accomplish these goals through a variety of regulatory strategies
FURTHER READING Gotwold, Gregory 2004 “Cap-and-Trade Systems, with or without New Source Review? An Analysis of the Proper Statutory Framework for Future Electric Utility Air Pollution Regulation ” Vermont Law Review 28 (winter) CROSS REFERENCES
Environmental Law; Environmental Protection Agency; Hazardous Substances; Land-Use Control; Solid Wastes; Toxic Pollutants.
POLYGAMY Polygamy is the offense of willfully and knowingly having more than one wife or husband at the same time The offense of willfully and knowingly entering into a second marriage while validly married to another individual is bigamy
The Crime
The law in every state prohibits a man or a woman from being married to more than one living person at a time The crime of having more than one current spouse is called bigamy (having two spouses), which is a subset of the crime of polygamy (having more than one spouse), and the law makes no practical distinc-tion between the two Even in states that separately criminalize both polygamy and big-amy, either crime is committed when a married person first enters into an unlawful marriage with a second person However, additional marriages beyond the second would support prosecution for additional criminal counts and possibly a longer sentence
28 POLYGAMY
Trang 2Most states base their polygamy laws on
the MODEL PENAL CODE section 230.1, which
provides that a person is guilty of the
third-degree felony of polygamy if he or she
marries or cohabits with more than one spouse
at a time in purported exercise of the right
of plural marriage The crime is punishable
either by a fine, imprisonment, or both,
according to the law of the individual state
and the circumstances of the offense The
crime of polygamy is deemed to continue
until all COHABITATION with and claim of
marriage to more than one spouse terminate
Polygamy laws do not apply to ALIENSwho are
temporarily visiting the United States,
pro-vided that polygamy is lawful in their country
of origin
The existence of a valid marriage entered
into by theDEFENDANTprior to the second valid
marriage is an essential element of the offense in
every jurisdiction No particular type of
cere-mony is required for the first or subsequent
marriage before someone can be prosecuted for
polygamy Even persons who satisfy the
re-quirement for a COMMON-LAW MARRIAGE can be
prosecuted for entering a subsequent marriage
that itself is either another common-law
marriage or a traditional marriage
Cohabitation is not typically a requisite
element of the offense Merely entering into a
second marriage with knowledge that one is
currently married to another living person will
support an INDICTMENT for polygamy An
indictment for polygamy will not be found
unlawful even if the defendant offers proof that
his or her first marriage was a voidable
marriage,, or one that is valid until annulled
If neither party to a voidable marriage
success-fully voids the marriage by obtaining an
ANNULMENT, then the remarriage of either
constitutes polygamy
Ordinarily the state in which the
polyga-mous marriage occurred has jurisdiction over
prosecution of the crime Some statutes,
how-ever, provide that the accused may be convicted
in the state where the polygamous cohabitation
takes place, even though the marriage occurred
elsewhere For example, California law provides
that “when the second marriage took place out
of this state, proof of that fact, accompanied
with proof of cohabitation thereafter in this
state, is sufficient to sustain the charge” (Cal
Pen Code § 281)
Defenses
Under certain statutes it is not considered polygamous for an individual to remarry after
a certain period of time has elapsed during which the former spouse was absent and thought
to be dead For example, California exempts from its law “any person by reason of any former marriage whose husband or wife by such marriage has been absent for five successive years without being known to such person within that time to be living” (Cal Pen Code
§ 282) Remarriage before the expiration of the statutory period, however, constitutes polygamy, even if it is later learned that the missing spouse
is dead, since the first marriage is still regarded as valid until the statutory period lapses
In some jurisdictions, a sincere and reason-able belief that a validDIVORCEhas been granted is
a defense to polygamy In most jurisdictions, however, it is not a defense It is sometimes said that polygamy is a strict-liability offense because the prosecution need not prove a criminal intent to obtain a conviction, and defendants may not rely on erroneous legal advice, ignorance, or mistake law as a defense
However, prosecutors are more likely to pursue indictments against persons who knowingly enter into a polygamous marriage than against persons who enter a second marriage under aGOOD FAITH belief that their first marriage has been nullified
As mentioned above, a person who success-fully annuls his or her first marriage before entering a second marriage cannot be prose-cuted for polygamy The same rule applies to persons who successfully have their marriage dissolved by divorce or nullified for any other reason before entering the second marriage
Tom Green, shown here with his five wives and 25 children, was found guilty of four counts of bigamy and one count of failure to pay child support in May 2001 The case marked Utah’s first polygamy trial in 25 years.
AP IMAGES POLYGAMY 29
Trang 3However, a divorce or annulment obtained subsequent to a second polygamous marriage is
no defense Nor will a solemnly held religious belief that it is not unlawful to have more than one spouse serve as a defense to an indictment for polygamy In affirming the criminal convic-tion of a Mormon for practicing polygamy, the U.S Supreme Court rejected the argument that
a Utah law prohibiting polygamy violated either the establishment or free exercise clauses of the FIRST AMENDMENT to the federal Constitution (Reynolds v United States, 98 U.S (8 Otto) 145,
25 L Ed 244 (1978)
Origins of Anti-Polygamy Laws
The ban on polygamy originated in English common law In England polygamy was repudi-ated because it devirepudi-ated from Christian norms;
marriage, it was believed, properly existed only between one man and one woman In 1866, for example, in the seminal case of Hyde v Hyde (1 L.R.-P & D.), an English court remarked that
“the law of [England was] adapted to the Christian marriage, and it is wholly inapplicable
to polygamy.” During the nineteenth century, English and U.S law did not recognize polyga-mous marriage in any form Only in the late twentieth century has either nation given limited legal recognition to polygamous partners from other countries
Anti-polygamy laws in the United States also sprang from religious conflict In the mid-1800s widespread public hostility arose toward the practice of polygamy by members of the Church of Jesus Christ of Latter-day Saints (LDS Church), known as Mormons A small religious sect in the territory of Utah, the Mormons believed that their founder and prophet, Joseph Smith, had a divine revelation in 1843 that called for men to marry more than one woman; in
1852, the church announced that the practice was religiously superior to monogamy This position angered critics throughout the United States, ranging from religious leaders to nove-lists, editorianove-lists, and particularly politicians In
1856, the Republican Party’s first national platform denounced polygamy and SLAVERY as
“those twin relics of barbarism.”
Legal controversies over the propriety of prohibiting polygamous marriages persisted in the United States for 150 years and were expected to continue as long as sects within the Mormon religion continued to openly support the practice of plural marriage The LDS Church,
however, disavowed polygamy in 1890 and excommunicates those members who practice plural marriage
A fundamentalist derivative of the Morman Church, known as the Fundamentalist Church
of Jesus Christ of Latter Day Saints (FLDS Church), was formed by former members of the LDS Church, who left after it denounced the practice of plural marriage In a highly publi-cized case in 2007, Warren Jeffs, the leader of the FLDS Church, was convicted of being an accessory to two counts ofRAPE The conviction stemmed from evidence that he forced a teenage girl to marry and have intercourse with her cousin Jeffs was sentenced to a term of 10 years
to life in prison, and he resigned from his position as head of the FLDS Church on the day
he was sentenced
The FLDS Church remained in the head-lines in 2008, when police conducted a large-scale raid at a ranch owned by the church in Texas Based on an apparent tip from a teenager living at the ranch, police entered the property and took custody of over 450 children living there The children were placed in state custody The girl calling authorities indicated that she was suffering abuse at the hands of an adult male, to whom she was spiritually married The police said that they had taken the children upon the belief that they had been abused or were exposed to an immediate risk of abuse The Texas Supreme Court ultimately ruled that the seizure was not justified and that the children should return to their parents The controversy related to this raid continued well into 2009, with state officials defending their actions and FLDS Church supporters faulting them for acting pursuant to a telephone call that was later largely recognized to have been a hoax The admissibility of evidence seized during the Texas raid is a subject of ongoingLITIGATION The evidence is reported to include documents that list plural and underage marriages and pregnancies among sect girls In the wake of the raid, twelve members of the FLDS Church were indicted on charges that include sexualASSAULT
of a child and bigamy The decision on whether
to admit the evidence recovered in the raid is crucial to each of the cases, as FLDS members have been reluctant to testify against the men
FURTHER READINGS Associated Press “FLDS Men Want Seized Evidence Thrown Out ” USA Today May 13, 2009.
30 POLYGAMY
Trang 4Altman, Irwin 1996 “Polygamous Family Life: The Case of
Contemporary Mormon Fundamentalists ” Utah Law
Review (spring).
Dane, Perry 1996 “The Public, the Private, and the Sacred:
Variations on a Theme of Nomos.” Cardozo Studies in
Law and Literature 8 (spring-summer).
Forbes, Stephanie 2003 “Why Just Have One? An Evaluation
of the Anti-polygamy Laws under the Establishment
Clause ” Houston Law Review 39 (spring).
Gordon, Sarah Barringer 2001 The Mormon Question:
Polygamy and Constitutional Conflict in
Nineteenth-Century America Chapel Hill, N.C.: Univ of North
Carolina Press.
CROSS REFERENCES
Aliens; Common Law; Marriage; Mormon Church.
POLYGRAPH
An instrument used to measure physiological
responses in humans when they are questioned
in order to determine if their answers are truthful
Also known as a “lie detector,” the
poly-graph has a controversial history in U.S law
First developed in the late nineteenth century,
its modern incarnation is an electromechanical
device that is attached to a subject’s body during
an interview The discipline of polygraphy is
based on the theory that by recording
involun-tary physiological changes in the subject, the
polygraph yields data that can be interpreted to
determine whether the subject is telling the
truth Supporters of the scientific validity of the
polygraph claim that results are approximately
90 percent accurate For much of the twentieth
century, however, polygraph evidence was
in-admissible in criminal cases on grounds of
unreliability Polygraph evidence was admissible
in civil cases, however, and it was also used
widely in law enforcement, government, and
industry
Polygraphy uses a variety of formats Until
the 1950s the format was the relevant/irrelevant
(R/I) test; it rested on the now discredited belief
that a subject produces a specific identifiable
physiological response when lying The R/I test
has been replaced by the control question (CQ)
format, the only format routinely used in
forensic tests Typically, a trained examiner fits
a subject with sensors to measure respiration,
heart rate and blood pressure, and perspiration,
which the polygraph records using pens on
graph paper The examiner asks a series of
questions, including control questions that are
designed to provoke anxiety and denial Later,
another examiner compares these answers with
answers pertaining to the matter at hand This
is known as numerical CQ testing So-called global CQ testing includes a more subjective component: one examiner scores the test while also factoring in the subject’s observable physi-cal responses, such as movement, expression, and voice
In U.S courts, the use of the polygraph was first addressed in 1923 In refusing to admit polygraph evidence in a murder case, the Court
of Appeals for the District of Columbia created
a legal standard that would last for nearly 70 years (Frye v United States, 54 App D.C 46,
293 F 1013[1923]) This standard came to be known as the Frye rule, or general acceptance test To be admissible in court, novelSCIENTIFIC EVIDENCE first must have gained general accep-tance in its scientific field
The Frye rule applied broadly to all scientific evidence, including polygraph evidence Other appellate courts followed the court’s standard throughout most of the century, primarily because polygraphy never gained widespread acceptance among scientists Nonetheless, poly-graph evidence was used in civil lawsuits, and police agencies, businesses, and government offices continued to use the polygraph regularly
to provide evidence, screen job applicants, and investigate security risks
Advances in polygraphy helped spur a judicial reevaluation, but more important was the adoption of theFEDERAL RULES OF EVIDENCEin the 1970s Rule 702 set an important new standard for the admission of scientific evidence:
If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert
by knowledge, skill, experience, training, or education, may testify thereto in the form of
an opinion or otherwise
Over the next two decades, appellate courts authorized use of polygraph evidence in a few state courts, a trend followed by the U.S Court
of Appeals for the Eleventh Circuit and the military courts Then, in 1993, in a case not specifically related to the polygraph, the U.S
Supreme Court held that Rule 702 replaced the Frye test (Daubert v Merrell Dow Pharmaceu-ticals, Inc., 509 U.S 579, 113 S Ct 2786, 125
L Ed 2d 469) In essence, the Court said that the standard of general scientific acceptance was not as important as whether EXPERT TESTIMONY
POLYGRAPH 31
Trang 5can assist jurors Soon thereafter, several federal courts reconsidered their long-standing ban on polygraph evidence and determined that they now had the discretion to permit its introduc-tion at trial
Congress also reexamined the use of the polygraph in industry In 1988 lawmakers responded to civil liberty concerns about the abuse of polygraph testing in private industry by passing the Employee Polygraph Protection Act (29 U.S.C.A §§ 2001 et seq.) The law bars pre-employment testing in banking, retail, and other private industries and also makes it illegal for employers to fire, discriminate against, or discipline employees who refuse to submit to polygraph tests The act exempts government employers, private industry when an employee
is under investigation for economic injury suffered by the employer, and all security services and industries that manufacture, dis-tribute, or dispense controlled substances
In military trials, the situation was different
In United States v Scheffer, 523 U.S 303, 118
S Ct 1261, 140 L Ed 2d 413 (1998), the Supreme Court addressed the claim of airman Edward G Scheffer that prohibiting the intro-duction of polygraph evidence during hisCOURT -MARTIAL (military criminal trial) violated his constitutional rights Under Military Rule of Evidence 707, polygraph evidence is not allowed
in court-martial proceedings So, although Scheffer, who was accused of, among other things, taking illegal drugs, passed a polygraph, it was inadmissible as evidence A federal court of appeals reversed the court-martial, stating that excluding the polygraph evidence did, in fact, violate Scheffer’s right to present a defense as guaranteed by the SIXTH AMENDMENT Upon review, the Supreme Court upheld Military Rule
of Evidence 707 In the opinion of the Court,
“State and federal governments unquestionably have a legitimate interest in ensuring that reliable evidence is presented to the trier of fact in a criminal trial.” However, “there is simply no consensus that polygraph evidence is reliable.”
FURTHER READINGS Arendell, Robert L., and Stephen C Peters 1996 “Revisiting the Admissibility of Polygraph Evidence after Daubert ” Colorado Lawyer 25 (February).
McCall, James R 1996 “Misconceptions and Reevaluation—
Polygraph Admissibility after Rock and Daubert ” Univ.
of Illinois Law Review 2.
Segrave, Kerry 2003 Lie Detectors: A Social History.
Jefferson, NC: McFarland.
Sleek, Scott 1998 “Psychologists Debate Merits of the Polygraph ” APA Monitor (June) Available online
at http://www.apa.org/monitor/jun98/lie.html; website home page: http://www.apa.org (accessed August 17, 2009).
PONZI SCHEME
A fraudulent investment plan in which the investments of later investors are used to pay earlier investors, giving the appearance that the investments of the initial participants dramatically increase in value in a short amount of time
A Ponzi scheme is a type of investmentFRAUD that promises investors exorbitant interest if they loan their money As more investors parti-cipate, the money contributed by later investors
is paid to the initial investors, purportedly as the promised interest on their loans A Ponzi scheme works in its initial stages but inevitably collapses as more investors participate
A Ponzi scheme is a variation of illegal pyramid sales schemes In a pyramid sales plan,
a person pays a fee to become a distributor Once the person becomes a distributor, he receives commissions not only for the products
he sells but also for products sold by individuals
he brings into the business These new distribu-tors are beneath the person who brought them into the pyramid scheme, so they are“under the pyramid.” In illegal pyramid schemes, only the people at the top of the pyramid make substan-tial money because they get a commission from the products sold by everyone below them As more people become distributors, the persons lower in the pyramid have less chance to make money
A Ponzi scheme was once was called a
“bubble,” but it was renamed in 1920 after Charles Ponzi and his Boston-based company had collected almost $10 million from 10,000 investors by selling promissory notes that claimed to pay 50 percent profit in 45 days When the scheme was exposed, a Boston bank collapsed, and investors lost most of their money
Ponzi, an Italian immigrant, thought of profiting from the widely varying currency exchange rates for International Postal Reply Coupons (IPRCs), which were redeemed for stamps IPRCs were intended to facilitate the sending of international mail The sender put an IPRC, rather than a stamp, on a piece of mail going to another country, and the recipient
32 PONZI SCHEME
Trang 6exchanged the IPRC for the appropriate stamp
in her country
Ponzi contended that he could pay a small
amount for IPRCs in weak-currency countries
and then redeem them at a substantial profit in
the United States He correctly noted that a
stamp transaction might yield a 400 percent
profit, but the amount of profit in real terms
was very small Nevertheless, he promoted his
idea through his Boston-based Securities
Ex-change Company In March 1920 he began
soliciting funds for purchasing the IPRCs with a
promised 40 percent return in 90 days Bank
interest rates at the time were just five percent
Investors started loaning Ponzi their money,
and within a short time he increased the
promised return on 45-day notes to 50 percent
He also promised a 100 percent return on funds
loaned to him for 90 days He pledged to refund
money on demand to any investor before the
loan period was up
Money soon flooded Ponzi’s offices By
July 1920, he was taking in $1 million per week
Ponzi made an arrangement with the Hanover
TRUST COMPANY of Boston to deposit his funds
Hanover officials soon realized that Ponzi was
not paying his initial investors with interest
income but with the deposits of the new
investors Nevertheless, the bank eagerly sold
Ponzi a large amount of its stock
On August 2, 1920, a Boston newspaper
revealed the fraud and reported that Ponzi was
hopelessly insolvent Thousands of victims
immediately demanded refunds Ponzi paid as
many as he could but exhausted his funds in a
week He then declared BANKRUPTCY In
bank-ruptcy, the court ordered all of the persons who
had been paid by Ponzi during the life of the
scheme to return the proceeds to the bankruptcy
trustee, who distributed the money on aPRO RATA
basis to all of the other victims Ponzi was
eventually convicted of fraud in both state and
federal court and imprisoned for several years
The Ponzi scheme did not end with Charles
Ponzi It has proved to be a reliable scam in
which persons are lured into giving their money
to con artists who promise enormous financial
returns The early cycle of a Ponzi scheme
appears to confirm the reliability of the
invest-ment, as some investors are paid the promised
returns The scheme is doomed to collapse when
not enough new money exists to pay old
obligations
Gullible individuals are not the only victims
of Ponzi schemes In the early 1990s, John G
Bennett, Jr and his Foundation for New Era Philanthropy lured many U.S universities and nonprofit groups into investing millions of dollars in the foundation Bennett promised these organizations that they would double their money in six months with the help of anony-mous philanthropists In May 1995 Prudential Securities, Inc., where most of the funds were deposited, discovered that New Era was under federal investigation and froze its accounts
The action triggered New Era’s bankruptcy
Bennett was later charged with 82 counts of fraud, MONEY LAUNDERING, and income TAX EVASION As with the original Ponzi scheme, defrauded investors agreed to be reimbursed for
up to 65 percent of their losses, with the money coming from groups that had deposited money with New Era early in the scheme and made a profit
In one of the biggest fraud cases in history, investors lost as much as $65 billion in a massive Ponzi scheme run by respected Wall
A Ponzi scheme is a type of investment fraud that promises investors exorbitant interest returns on their loans The scheme takes its name from Charles Ponzi, who in 1920 sold nearly $10 million in promissory notes before declaring bankruptcy and, ultimately, being sentenced for fraud BETTMANN/CORBIS PONZI SCHEME 33
Trang 7Street investor Bernard Madoff The victims ranged from international banks to large charitable organizations to ordinary individuals who depended on those investments for in-come Madoff pleaded guilty to several charges related to the scheme and was sentenced in 2009
to 150 years in prison
Madoff opened his firm, Bernard L Madoff Investment Securities LLC., in 1960 He was a pioneer in the business known as market making A market maker is a firm that buys and sells a particular stock at a publicly stated price A market maker is an essential function of
a market such as NASDAQ, which does not have an actual trading floor where buyers and sellers can trade face-to-face A firm such as Madoff’s would act as a middle man between buyers and sellers of stock Madoff was instrumental in the development of NASDAQ and served as its chairman
Some outside analysts began to question Madoff’s methods In 2000 Massachusetts
financial analyst named Harry Markopolos asked the SECURITIES AND EXCHANGE COMMISSION
to investigate Madoff’s firm The SEC largely ignored Markopolos’s claims despite his re-peated efforts Others were also allegedly in-formed that Madoff was running a scheme For instance, papers filed by New York University in
a civil suit filed against J Ezra Merkin of Gabriel Capital Group suggested that Merkin has been told several times in the 1990s that Madoff’s claimed returns were not possible Merkin revealed in 2008 that he had lost $2.4 billion to Madoff in the Ponzi scheme
As theSTOCK MARKETplunged in 2008, Madoff continued to claim that his funds were earning money By November 2008, investors were beginning to panic and sought redemptions from Madoff During November and December, Madoff allegedly mailed about $1 million worth
of jewelry and other heirlooms to relatives and friends His wife, Ruth, withdrew more than
$15 million from a brokerage firm linked to him
A Ponzi Epidemic
Though Bernard Madoff captured
the headlines in 2008 and 2009
for his massive Ponzi scheme, he was not
the only person misleading investors
with claims of high returns and low risk
The downturn in the U.S economy that
started in 2008 appeared to put pressure
on a string of Ponzi scheme operators
They could not continue to attract
enough new investors to fund the returns
for their earlier investors By 2009, the
magnitude of Ponzi scheme FRAUD was
staggering, as a number of multi-billion
dollar funds crashed and burned, leaving
investors with nothing Many of the
more trusting investors put all their
money in these investment schemes,
which compounded their misery
In late 2009 the Associated Press
published a study that revealed Ponzi
scams in all 50 states had resulted in the
loss of more than $16.5 billion in 2009
Approximately 150 Ponzi schemes fell apart in 2009, compared to only 40 in
2008 Other statistics were illuminating as well: The FBI had 650 agents working on high-yield investment fraud cases in 2009, and theSECURITIES AND EXCHANGE COMMIS-SION (SEC) issued 82 percent more restraining orders against Ponzi schemes and securities fraud than in 2008 The Commodities Futures Trading Commis-sion (CFTC) even filed 31 civil actions in
2009 against Ponzi schemes But for the
2008 recession, many law enforcement officials believe the schemes would largely have remained undetected
In December 2009 Tom Petters was convicted on 20 counts of fraud by a Minnesota federal court jury Petters built
an empire that included the Polaroid camera company and Sun Country Airlines by using a $3.65 billion Ponzi scheme He tricked investors using Petters
Company as a front; investors thought he was using their money to buy consumer electronics for resale to retailers such as Costco The investors included hedge funds, money managers, and grass-roots investors such as church groups The government proved that Petters never bought the goods (usually electronics) but used the money to buy other companies and support an extravagant lifestyle He was well known in Minnesota for his philan-thropy, giving a number of colleges large sums for buildings Since his conviction the colleges have either taken the Petters name off the building or returned the money The saga of Allen Stanford’s Ponzi scheme drew worldwide attention in 2009 Stanford’s companies included Antiguan-based Stanford International Bank (SIB), Houston-based broker-dealer and invest-ment adviser Stanford Group Company (SGC), and investment adviser Stanford
34 PONZI SCHEME
Trang 8The scheme finally came to an end when
Madoff, on December 10, 2008, attempted to
give his two sons a bonus Both sons worked for
their father, but neither worked with his asset
management business Madoff’s sons questioned
him about how he could pay them their bonus
when he was unable to pay his investors At that
point, Madoff admitted to his sons that his firm
had been running a giant Ponzi scheme One day
later, his sons alerted authorities about Madoff’s
business Agents with the FEDERAL BUREAU OF
INVESTIGATION visited Madoff and asked whether
there was an “innocent explanation” for what
Madoff had told his sons Madoff responded,
“There is no innocent explanation.” He told
agents that he “paid investors with money that
wasn’t there” and expected to go to prison
The New York Times called the scheme the
first worldwide Ponzi scheme Madoff attracted
investors from Europe, Asia, and Middle East
Several prominent Jewish executives and
orga-nizations were Madoff’s clients, including
Yeshiva University and charities set up by the likes of director Steven Spielberg Other inves-tors included Hall of Fame pitcher Sandy Koufax as well as actors John Malkovich, Kyra Sedgwick, and Kevin Bacon Madoff admitted to prosecutors that he lost more than $50 billion to investors, though by some estimates, the amount reached closer to $65 billion
FURTHER READINGS Dunn, Donald H 1975 Ponzi!: The Boston Swindler New York: McGraw-Hill.
Gandel, Stephen 2008 “Wall Street’s Latest Downfall:
Madoff Charged with Fraud ” Time (Dec 12).
Henriques, Diana B 2008 “Madoff Scheme Kept Rippling Outward ” New York Times (Dec 19).
“Treatment of Investors in Ponzi Scheme.” 2003 Tax Management Memorandum (April 21).
Weisman, Stewart L 1999 Need and Greed: The Story of the Largest Ponzi Scheme in American History Syracuse, N.Y.: Syracuse Univ Press.
CROSS REFERENCES Criminal Law; White Collar Crime.
Capital Management In February 2009,
the SEC filed a complaint in federal court
in Dallas, alleging that acting through a
network of SGC financial advisers, SIB had
sold approximately $8 billion of so-called
certificates of deposit (CDs) to investors by
promising improbable and
unsubstanti-ated high interest rates These rates were
supposedly earned through the SIB unique
investment strategy, which purportedly
allowed the bank to achieve double-digit
returns on its investments for the past
15 years
Stanford and his associates
repre-sented to CD purchasers that their
deposits were safe, claimed that the bank
reinvested client funds primarily in liquid
financial instruments (the portfolio)
Stanford also claimed that the portfolio
was monitored by a team of over 20
analysts, and it was subject to yearly audits
by Antiguan regulators After the Madoff
funds collapsed, SIB tried to reassure its
own investors by claiming the bank had
no “direct or indirect” exposure to the
Madoff scheme The SEC alleged that
none of these claims was true By the time
the fraud was revealed, Stanford had
recruited 31,000 investors
A Houston GRAND JURY indicted Stanford in June 2009 on 21 counts of fraud He was immediately jailed The criminal INDICTMENT alleged that Stan-ford and other executives at his firm falsely claimed to have grown $1.2 billion in assets in 2001 to roughly
$8.5 billion by the end of 2008 Even as Stanford announced healthy returns for his investors, the indictment alleged that he was secretly diverting more than
$1.6 billion in personal loans to himself
Stanford, unlike Madoff, protested his innocence and denied he ran a Ponzi scheme As of early 2010 he awaited trial
Another large Ponzi scheme in-volved a religious broadcaster In late
2009, the SEC and the CFTC filed separate complaints against Minnesota residents Trevor Cook, a self-proclaimed money manager, and Patrick Kiley, a radio personality On his radio show, Follow the Money, which was broadcast
in more than 200 markets and on Christian shortwave radio, Kiley touted the pair’s investment plan They prom-ised returns of 10 to 12 percent on investments that were supposedly based
on trading foreign currencies At the time the complaints were filed, 1,000 investors were allegedly duped out of about $190 billion As with so many Ponzi schemers, Cook bought a fancy, historic mansion in Minneapolis and gambled away $2.8 million Investigators estimated the pair helped themselves to over $40 million dollars and lost another
$40 million in high-risk currency trad-ing Many of the victims were SENIOR CITIZENSwho were“unsophisticated and inexperienced in financial matters,” the SEC stated in its lawsuit.“Some victims liquidated their retirement accounts to invest in Cook’s and Kiley’s venture.” The lure of high returns at minimal risk is enticing for sophisticated and unsophisticated investors alike As Mad-off, Petters, and Stanford illustrate, even money managers andHEDGE FUND man-agers can be convinced to jettison their common sense Though this wave of Ponzi schemes was expected to play themselves out over the subsequent few years, there was little doubt that other individuals would discover the Ponzi scheme and begin the inevitable rise and fall
PONZI SCHEME 35
Trang 9POPULAR NAME TABLES Reference charts that aid in locating statutes, if the names by which they are commonly referred to are known
For example, one can discover the official name and location of the SHERMAN ANTI-TRUST ACT (15 U.S.C.A § 1 et seq.) from a popular name table
PORNOGRAPHY The representation in books, magazines, photo-graphs, films, and other media of scenes of sexual behavior that are erotic or lewd and are designed
to arouse sexual interest
Pornography is the depiction of sexual behavior that is intended to arouse sexual excitement in its audience During the twentieth century, Americans debated whether porno-graphic material should be legally protected or banned Those who believe pornography must be protected argue that the FIRST AMENDMENTto the U.S Constitution guarantees freedom of expres-sion, including sexual expression Traditional opponents of pornography raise moral concerns, arguing that the First Amendment does not protect expression that corrupts people’s behav-ior Toward the end of the century, some feminists advocated suppressing pornography because it perpetuates gender stereotypes and promotes violence against women
Pornography has been regulated by the legal standards that govern the concept ofOBSCENITY, which refers to things society may consider disgusting, foul, or immoral, and may include material that is blasphemous Pornography is limited to depictions of sexual behavior and may not be obscene
The U.S.SUPREME COURT has established that obscenity is not protected by the First Amend-ment The more troublesome question has been defining what is and is not obscene In 1957 the U.S Supreme Court, in Roth v United States, 354 U.S 476, 77 S Ct 1304, 1 L Ed 2d 1498, stated that obscenity is“utterly without redeeming social importance” and therefore is not protected by the First Amendment The Roth test for obscenity is
“whether to the average person, applying contem-porary community standards, the dominant theme of the material taken as a whole appeals
to a prurient[lewd or lustful] interest.” The Roth test proved difficult to use because every term in it eluded a conclusive definition
The Supreme Court added requirements to the definition of obscenity in a 1966 case involving the English novel Memoirs of a Woman of Pleasure, more commonly known
as Fanny Hill In A Book Named “John Cleland’s Memoirs of a Woman of Pleasure” v Attorney General, 383 U.S 413, 86 S Ct 975, 16 L Ed 2d
1, the Court concluded that to establish obscenity, the material must, aside from appeal-ing to the prurient interest, be“utterly without redeeming social value” and “patently offensive because it affronts contemporary community standards relating to the description of sexual matters.” The phrase “utterly without redeeming social value” allowed a loophole for pornogra-phers Expert witnesses testified that there was at least a shred of social value in the novel’s depiction of sexual behavior and social relations The Supreme Court established the basic legal standard for pornography in Miller v California,
413 U.S 15, 93 S Ct 2607, 37 L Ed 2d 419 (1973) Chief JusticeWARREN E.BURGERstated in Miller that pornographic material would be classified as obscene if it met three criteria: (1) the work, taken
as a whole by an average person applying contemporary community standards, appeals to the prurient interest; (2) the work depicts sexual conduct in a patently offensive way; and (3) the work, when taken as a whole, lacks serious literary, artistic, political, or scientific value
Burger emphasized in Miller that only hard-core pornography could be designated as patently offensive He listed examples of patently offensive descriptions or representations, including repre-sentations of“ultimate sex acts” and “masturba-tion, excretory functions, and lewd exhibition of the genitals.”
Based on Miller, the law distinguishes between hard-core pornography and soft-core porno-graphy, which involves depictions of nudity and limited and simulated sexual conduct Because it is not as graphic or explicit as hard-core pornography, soft-hard-core pornography is protected under the First Amendment
CHILD PORNOGRAPHY, whether hard-core or soft-core, is treated severely under the law In
1982 the Supreme Court, in New York v Ferber,
458 U.S 747, 102 S Ct 3348, 73 L Ed 2d 1113, held that child pornography is not a form of expression protected under the Constitution
It found that the state of New York had a compelling interest in protecting children from SEXUAL ABUSE and found a close connection
36 POPULAR NAME TABLES
Trang 10Section of Popular Name Table
Revenue Act of 1942
Oct 21, 1942, ch 619, 56 Stat 798
Revenue Act of 1943
Feb 25, 1944, ch 63, 58 Stat 21
Revenue Act of 1945
Nov 8, 1945, ch 453, 59 Stat 556
Revenue Act of 1948
Apr 2, 1948, ch 168, 62 Stat 110
Revenue Act of 1950
Sept 23, 1950, ch 994, 64 Stat 906
Revenue Act of 1951
Oct 20, 1951, ch 521, 65 Stat 452
Revenue Act of 1962
Pub L 87–834, Oct 16, 1962, 76 Stat 960
Short title, see 26 U.S.C 1 note
Revenue Act of 1964
Pub L 88–272, Feb 26, 1964, 78 Stat 19
Short title, see 26 U.S.C 1 note
Revenue Act of 1971
Pub L 92–178, Dec 10, 1971, 85 Stat 497
Short title, see 26 U.S.C 1 note
Revenue Act of 1978
Publ L 95–600, Nov 6, 1978, 92 Stat 2763
Short title, see 26 U.S.C 1 note
Revenue Act of 1987
Pub L 100–203, title X, Dec 22, 1987, 101 Stat 1330–382
Short title, see 26 U.S.C 1 note
Revenue Adjustment Act of 1975
Pub L 94–164, Dec 23, 1975, 89 Stat 970
Short title, see 26 U.S.C 1 note
Revenue Adjustments Act of 1980
Pub L 96–499, title XI, Dec 5, 1980, 94 Stat 2660
Revenue and Expenditure Control Act of 1968
Pub L 90–364, June 28, 1968, 82 Stat 251
Short title, see 26 U.S.C 1 note
Revenue Forgone Reform Act
Pub L 103–123, title VII, Oct 28, 1993, 107 Stat 1267
Short title, see 39 U.S.C 101 note
Revenue Reconciliation Act of 1989
Pub L 101–239, title VII, Dec 19, 1989, 103 Stat 2301
Short title, see 26 U.S.C 1 note
Revenue Reconciliation Act of 1990
Pub L 101–508, title XI, Nov 5, 1990, 104 Stat 1388–400
Short title, see 26 U.S.C 1 note
Revenue Reconciliation Act of 1993
Pub L 103–66, title XIII, ch 1 (§13001 et seq.),
Aug 10, 1993, 107 Stat 416
Short title, see 26 U.S.C 1 note
Revised Continuing Appropriations Resolution, 2007
Pub L 110–5, Feb 15, 2007, 121 Stat 8
Revised Organic Act of the Virgin Islands
July 22, 1954, ch 558, 68 Stat 497 (48 U.S.C 1541 et seq.) Short title, see 38 U.S.C 1541 note
Revolutionary War and War of 1812 Historic Preservation Study Act of 1996
Pub L 104–333, div I, title VI, §603, Nov 12, 1996, 110 Stat 4172 (16 U.S.C 1a–5 note)
Reynolds Aviation Training Act
See Army Aviation Cadet Act
Rhinoceros and Tiger Conservation Act of 1994
Pub L 103–391, Oct 22, 1994, 108 Stat 4094 (16 U.S.C.
5301 et seq.) Short title, see 16 U.S.C 5301 note
Rhinoceros and Tiger Conservation Act of 1998
Pub L 105–312, title IV, Oct 30, 1998, 112 Stat 2959.
Short title, see 16 U.S.C 5301 note
Rhinoceros and Tiger Conservation Reauthorization Act of 2001
Pub L 107–112, Jan 8, 2002, 115 Stat 2097 Short title, see 16 U.S.C 5301 note
Rhode Island Indian Claims Settlement Act
Pub L 95–395, Sept 30, 1978, 92 Stat 813 (25 U.S.C.
1701 et seq.) Short title, see 25 U.S.C 1701 note
Rice Production Act of 1975
Pub L 94–214, Feb 16, 1976, 90 Stat 181 Short title, see 7 U.S.C 428c note
Richard B Russell National School Lunch Act
June 4, 1946, ch 281, 60 Stat 230 (42 U.S.C 1751 et seq.) Short title, see 42 U.S.C 1751 note
Richmond National Battlefield Park Act of 2000
Pub L 106–511, title V Nov 13, 2000, 114 Stat 2373 (16 U.S.C 423l –1 et seq.)
Ricky Ray Hemophilia Relief Fund Act of 1998
Pub L 105–369, Nov 12, 1998, 112 Stat 3368 (42 U.S.C.
300c–22 note)
RICO
See Racketeer Influenced and Corrupt Organizations Act (RICO)
Riegle Community Development and Regulatory Improvement Act of 1994
Pub L 103–325, Sept 23, 1994, 108 Stat 2160 Short title, see 12 U.S.C 4701 note
Riegle-Neal Amendments Act of 1997
Pub L 105–24, July 3, 1997, 111 Stat 238 Short title, see 12 U.S.C 1811 note
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
Pub L 103–328, Sept 29, 1994, 108 Stat 2338 Short title, see 12 U.S.C 1811 note
Right of Way Act of 1891
Mar 3, 1891, ch 561, §18, 26 Stat 1101
Right to Financial Privacy Act of 1978
Pub L 95–630, title XI, Nov 10, 1978, 92 Stat 3697 (12 U.S.C 3401 et seq.)
Short title, see 12 U.S.C 3401 note
A sample section from
a popular name table ILLUSTRATION BY GGS CREATIVE RESOURCES REPRODUCED BY PERMISSION OF GALE,
A PART OF CENGAGE LEARNING.
POPULAR NAME TABLES 37