Gale Encyclopedia Of American Law 3Rd Edition Volume 3 P24 docx

1932. Williston on Contracts has been a leading treatise in American contract law since the early 1900s and is still a competitor of Corbin’s treatise. In addition to the Uniform COMMERCIAL CODE, Corbin also contributed to the second Restate- ment of Contracts, the provisions of which represented a considerable shift from the conservative views in the first Restatement. Corbin continued his study and writing well into his later life, stopping work on the second Restatement when he was nearly 90, and only because of failing eyesight. Corbin died in 1967, at the age of 93. The second Restatement was first published in 1981, 14 years after Corbin’s death. To a significant extent, the second Restatement advocates changes in the law of contracts, many of which are based upon Corbin’s views. FURTHER READINGS Gilmore, Grant. 1977. The Ages of American Law. New Haven, Conn.: Yale Univ. Press. Kessler, Friedrich. 1969. “Arthur Linton Corbin.” Yale Law Journal 78. CROSS REFERENCES Legal Realism; Resta tement of Law. CORESPONDENT One of two or more parties against whom a lawsuit is comm enced. A person named with others who must answer claims alleged in a bill, petition, or libel in a judicial proceeding. An individual who is accused of adultery with another’s spouse being sued for divor ce on that ground and who thereby becomes a defendant in the action. CORNER For surveying purposes, the designation given to a particular location formed by the intersection of two boundary lines of real property. The process by which a group of investors or dealers in a particular commodity exploit its market by purchasing it in large quantities and removing it from general sale for a time, thereby dramatically increasing its market price because its limited supply is greatly exceeded by the demand for it. The condition created when a commitment is made to sell at a special time of delivery in the future, a much greater quantity of a commodity than is available in the present market. This type of commitment is known as a futures contract. Frequently, neither buyer nor seller expects actual delivery of the goods. They are solely speculating on the difference between the contract price and market price on a particular date. The market price is affected by various economic factors. When a corner is created, the demand for the commodity far exceeds its supply, thereby driving up market prices. On the date of delivery, therefore, the market price will exceed the contract price if no additional quantities can be delivered by persons other than the seller who has “cor- nered” the market. The buyer must then pay the seller, who had a corner on the specified commodity, the amount by which the marke t price exceeds the contract price. If, however, additional quantiti es of the commodity are available in the market, the seller incurs financial losses because the market price will be less than the contract price at which the market was “cornered.” The COMMODITY FUTURES TRADING COMMISSION is the federal regulatory agency charged with the administration of the Commodity Exchange Act (7 U.S.C.A. § 1 et seq.), which is designed to protect all commodity investors from mani- pulative practices that hinder the free flow of commerce. Anyone who deliberately exploits the commodities market to create a corner may be prosecuted under federal law for commission of a felony, punishable by a fine of not more than $500,000 or imprisonment of not more than five years, or both, plus the costs of prosecution. COROLLARY A consequence or result that can be logically drawn from the existence of a set of facts by the exercise of common sense and reason. CORONER An official of a municipal corporation whose designated functions include the investigation of the cause of any violent or suspicious death that takes place within the geographical boundaries of his or her municipality. The office of the coroner w as established at COMMON LAW and was one of great dignity since coroners dealt primarily with pleas concerning the crown. In the early 2000s, statutes establish the terms and procedure of the coroner’s office, which has been replaced in some states with the office of MEDICAL EXAMINER. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 218 CORESPONDENT The main function of a coroner is to conduct inquests, but other powers and duties may include the duty of acting as sheriff, in the event of the sheriff’s incapacity, as CONSERVATOR OF THE PEACE , or as magistrate. The duties are considered to be either judicial, ministerial, or both. Holding Inquests The purpose of an inquest is to gather evidence that may be used by the police in their exploration of a violent or suspicious death and the subse quent prosecution of a person if death ensued from a criminal act. An inquest is not a trial but rather a criminal proceeding of a preliminary, investiga- tory nature. It is not a criminal prosecution but may result in the discovery of facts justifying one. Statutes mandate that whenever there exis ts reasonable ground to believe that a death resulted from violence, unlawf ul means, or other mysterious or unknown causes, an inquest must be held. Death by disease, natu ral causes, NEGLIGENCE of the deceased, accident, or suicide does not warrant the commencement of an inquest, unless statute so requires. A coroner should not arbitrarily or capri- ciously hold an inquest. The presumption is that when a coroner decides to hold an inquest it is made in exercise of his or her sound discretion, in GOOD FAITH, and for sufficient cause. Most statutes require that a coroner make a preliminary inquiry into the cause of death before summoning a jury. Time and Place The general requirement is that an inquest be held immediate ly upon the notice to the coroner of the death or discovery of the dead body. The inquest may either take place in the territory of the coroner in whose jurisdiction the body was found or where the death itself took place. Summoning and Swearing the Jury If it is public knowledge that the decedent was killed by someone who is already in police custody, then it is not necessary to summon a jury to hold an inquest. A coroner’s jury is usually summoned by warrant but may be summoned personally by the coroner. A juror who refuses to attend an inquest may be subject to a fine and a contempt citation. The general practice is that the jury should be sworn in in the presence of the body. Autopsy Incident to the coroner’s duties is the power to order an autopsy when appropriate and essential to ascertain the circumstances and the nature of death. The reasons underlying this power are numerous—the primary one being that a thorough examination of a body is necessary since an accused person may be acquitted if there is some doubt as to the cause of death. Similarly, a proper examination of the cause of death should exclude all other possible causes that would not support a criminal investigation and subsequent prosecution. Some statutes provid e that a coroner is not authorized to hold an autopsy where no suspicion of foul play exists or where no inquest is being held. A needless autopsy may be considered unreasonable interference with a dead body. If authorized, however, a coroner may hold an autopsy without the consent of the deceden t’s NEXT OF KIN. Civil liability may be imposed upon coroners and their physicians who perform improper or unauthorized autopsies. To examine the body during an autopsy, a coroner may hire an expert physician, the selection of whom is within the coroner’s discretion. This power must be exercised with great caution. During the autopsy, the coroner has the discretionary power to decide who, if anyone, should be present aside from the surgeon or surgeons. Neither a person accused of criminally causing the death nor the jurors have a right to witness the actual dissection of the cadaver. A coroner reviews the results of two autopsies. Coroners have the right to order autopsies to determine the causes of violent or suspicious deaths. AP IMAGES GALE ENCYCLOPEDIA OF AMERICAN LAW, 3 RD E DITION CORONER 219 View of Body Statutes require that the coroner and jury together must have a view of the body except in cases where the body cannot be found or is too decomposed for view. The purpose of this inspection is to ascertain from the appear- ance of the body how the death was caused. The jury also hears the summaries of various medical reports regarding the condition of the body to help it reach its determinations concerning the cause of death. Verdict a nd I nqu isitio n It is the duty of the coroner to accept from the jury the VERDICT, which should identify the deceased, if possible, or state that the deceased is unknown and should include how, when, and where the decedent died. The coroner submits a return of inquest, also known as an inquisition, which is a record of the jury’s finding, that must be executed in accordance with statutory requirements. The effect of the verdict at common law is that it is a sufficient basis for prosecution for MURDER or MANSLAUGHTER so long as the jury finds evidence supporting prosecution. Under some statutes, its effect is not as strong as a finding by a GRAND JURY but has merely been held to render a person accused of illegally causing the death liable to arrest. Many jurisdictions require that the coroner complete a certificate of death showing the cause and probable manner of death subsequent to the termination of the inquest. Arrest It is the power and the du ty of the coroner to have anyone implicated by an inquest in murder or manslaughter to be arrested and held for trial. If a statute gives a coroner magisterial jurisdiction in homicide cases, he or she may issue warrants for the arrest of the person probably chargeable with the crime and hold the person to answer or discharge the charges. Record of Inquest as Evidence Civil Actio ns In general, ev idence given at an inquest has not been permitted to be used against either party in a CIVIL ACTION. There are, however, exceptions to this rule. Some authori- ties hold the testimony of a witness before a coroner to be admissible if used to contradict other testimony given when the person is a witness or party in such an action. Other jurisdictions hold that such evidence by a part y is admissible as an admission against interest. For example, a defendant’s admission at an inquest of driving at an unlawful speed was admissible as an admission against interest in a civil action for negligence. Some jurisdictions allow the coroner’sfind- ings to be used in a civil action to show the cause of death. The general practice in most jurisdic- tions, however, is to allow the verdict to show thatthedeceasedisdeadbutnottoshowthe cause of death. The rationale underlying this rule is that a person is not entitled to be represented by counsel at an inquest since it is merely a preliminary investigation. The practical conse- quences of allowing the coroner’sverdicttobe used as evidence of the cause of death is that it could easily become the key piece of evidence in the action. If this were to occur, the judgment awarded in the case would probably end up being a ratification or formal adoption of the coroner’s verdict, thereby depriving the party to the action of his or her rights. That person is entitled to a formal judicial hearing or a “day in court,” with all procedural safeguards, so that an opportunity to dispute the evidence will be given. Criminal Prosecutions The main purpose of a coroner’s inquest is to provide information and evidence for use by the police in their investigation and detection of a crime; there- fore, the proceedings of an inquest are generally inadmissible at a trial for homicide. When a person is either under arrest or accused of a crime at a coroner’s inquest, any testimony that he or she gives cannot subse- quently be used against him or her at a trial that stems from the inquest, unless such testimony was given voluntarily after the party was advised of his or her constitutional rights. If an individual testifies as a witness at an inquest but is subsequently prosecuted, that testimony is admissible in his or her prosecution because it was voluntarily given at the inquest. Generally, the testimony of witnesses at an inquest cannot be used in a trial for homicide unless the witness has died or is otherwise unavailable at the time of the criminal prosecution. Ordinarily, on an indictment for homicide, neither the verdict of the coroner’s jury nor the finding of the coroner can be used as evidence for any purpose. Liabilities of a Coroner A coroner who is acting pursuant to his or her statutory authority is immune for error, GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 220 CORONER mistake, or misconduct in the exercise of judicial functions. A coroner, acting in a ministerial capacity, is answerable for any abuse of those powers. Some statutes make it a criminal offense for a coroner to deliberately hold an inquest when to do so clearly exceed s the scope of his or her powers. FURTHER READINGS Cornwell, Patricia. 2004. Body of Evidence. New York: Pocket. Noguchi, Thomas T. 1984. Coroner. New York: Pocket. ———. 1988. Coroner at Large. New York: Random House Value. CROSS REFERENCES Autopsy; Jury; Presumption. CORPORAL PUNISHMENT Physical punishment, as distinguished from pecu- niary punishment or a fine; any kind of punishment inflicted on the body. Corporal punishment arises in two main contexts: as a method of discipline in schools and as a form of punishment for committing a crime. Corporal punishment, usually in the form of paddling, though practiced in U.S. schools since the American Revolution, was onl y sanctioned by the U.S. Supreme Court in the late 1970s. In Ingraham v. Wright, 430 U.S. 651, 97 S. Ct. 1401, 51 L. Ed. 2d 711 (1977), students from a Florida junior high school had received physical punishment, including pad- dling so severe that one student had required medical treatment. The p laintiffs, parents of students who had been disciplined, brought suit against the school district, alleging that corporal punishment in public schools consti- tuted CRUEL AND UNUSUAL PUNISHMENT in viola- tion of the EIGHTH AMENDMENT to the U.S. Constitution. The plaintiffs also maintained that the FOURTEENTH AMENDMENT required due process before corporal punishment could be administered. The Court rejected the Eighth Amendment claim, holding that the prohibition against cruel and unusual punishment was designed to protect persons who were convicted of crimes, not students who were paddled as a form of discipline. The Court also held that although corporal punishment did implicate a constitu- tionally protected liberty interest, traditional COMMON LAW remedies, such as filing an action in tort, were “fully adequate to afford due process.” Thus, the Court concluded, teachers could use “reasonable but not excessive” corporal punishment to discipline students. Since the Court’s decision in Ingraham, corporal punishment in the schools has been challenged on other constitutional grounds. In Hall v. Tawney, 621 F.2d 607 (4th Cir. 1980), a grade-school student from West Virginia alleged that she had been severely injured after she had been struck repeatedly with a hard, rubber paddle by her teacher while the school principal looked on. She filed suit against the school, claiming that her Eighth Amendment rights had been violated and that she had been deprived of her procedural due process rights. She further alleged that she had been denied SUBSTANTIVE DUE PROCESS under 42 U.S.C.A. § 1983, which provides that a CIVIL ACTION may be brought for a deprivation of constitutional rights. While the case was pending, the U.S. Supreme Court handed down its decision in Ingraham, thus foreclosing the plaintiff’s Eighth Amendment and procedural due process claims. Addressing the remaining constitutional claim, the U.S. Court of Appeals for the Fourth Circuit held that excessive corporal punishment in public schools could violate a student’s constitutional right to substantive due process This 1907 photograph taken in a Delaware prison shows two inmates in a pillory with another receiving a whipping. Such forms of punishment have been outlawed. LIBRARY OF CONGRESS. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3 RD E DITION CORPORAL PUNISHMENT 221 and thus subject school officials to liability under § 1983. The standard to be applied, the court ruled, was whether the force applied were to cause injury so severe and disproportionate to the need for it and were “so inspired by malice or sadism rather than a merely careless or unwise excess of zeal that it amounted to a brutal and inhuman abuse of official power literally shocking to the conscience.” The case was remanded to the lower court so that the plaintiff’s § 1983 claim could be tried in light of the Fourth Circuit’s ruling. Other federal appeals courts have since followed Hall in corporal punishment cases involving schools, although the high standard has proved very difficult for plaintiffs to meet. In cases where plaintiffs have been success- ful, the conduct of the educator is often rather extreme. In Neal ex rel. Neal v. Fulton County Board of Education, 229 F.3d 1069 (11th Cir. 2000), a high-school teacher and football coach, while breaking up a fight, struck one of the fighting students with a metal weight lock. The blow to the student was so severe that it knocked his eyeball out of its socket. The Eleventh CIRCUIT COURT of Appeals found that because the punishment inflicted by the coach had been intentional, and obviously excessive, and that it had created a foreseeable risk of serious injury, the student had stated a claim upon which he could recover. Many other cases, by contrast, have held in favor of educators and school districts because the students who brought suit could not prove the elements necessary to hold the defendants liable. As a result of limited success in the courts, opponents of corporal punishment have turned to the political process and have worked to persuade state legislatures to outlaw the use of corporal punishment in schools. Scientific studies over the past decade have demonstrated that corporal punishment contributes to such behavioral prob lems as increased anger, aggres- sion, tolerance for violence, and lower self- esteem. Partially as a result of these studies, a growing number of groups, including the NATIONAL EDUCATION ASSOCIATION, the American Academy of Pediatrics, the American Academy of Child and Adolescent Psychiatry, and the AMERICAN BAR ASSOCIATION, disfavor corporal punishment and have sought to ban it in public schools. These lobbying efforts have proven successful: Corporal punishment in schools remained legal in just 21 states in 2008, whereas the remaining states specifically prohibit it by state statute or regulation. ILLUSTRATION BY GGS CREATIVE RESOURCES. REPRODUCED BY PERMISSION OF GALE, A PART OF CENGAGE LEARNING. States Banning Corporal Punishment in Schools States that have banned corporal punishment States that allow corporal punishment States with more than half of all students in districts with no corporal punishment HI AK MT WA OR CA NV ID WY UT CO NM AZ ND MN SD NE KS OK TX WI IA MO AR LA IL MI IN OH PA NY WV VA NC KY TN MS. AL GA SC FL ME VT NH MA RI CT NJ DE MD SOURCE: Center for Effective Discipline, “Corporal Punishment and Paddling Statistics by State and Race,” available online at http://www.stophitting.com/index.php?page=statesbanning (accessed on August 12, 2009). GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 222 CORPORAL PUNISHMENT In California, for example, state law pro- vides that “[n]o person employed by … a public school shall inflict, or cause to be inflicted corporal punishment upon a pupil” (Cal. Educ. Code § 49001 [West 1996]). But despite the trend against permitting corporal punishment in schools, public opinion is split on the issue: In a 1995 Scripps Howard News Service Poll, 49 percent of those surveyed favored corporal punishment, and 46 percent opposed it. Like corporal punishment in schools, physi- cal punishment in the United States for committing a crime also dates back to the American Revolution. The CONTINENTAL CON- GRESS allowed floggings on U.S. warships, and confinement in stocks and public hangings were common. Gradually, imprisonment and other forms of rehabilitation began to replace corpo- ral punishment, largely because of the work of reformers who campaigned against its use on convicts and advocated for improved prison conditions. Most states eventually abolished public flo ggings and other forms of physical punishment for crimes, but in some jurisdic- tions “whipping laws” remained in effect until the early 1970s. In addition, courts have held that corporal punishment in prisons can take a variety of forms (e.g., whipping, deprivation of food, and placement in restraints) and is prohibited by the Eighth Amendment. The mid-1990s case of a U.S. teenager convicted of VANDALISM in a foreign country revived a long-dormant debate over whether criminals should be corporally punished. In May 1994, Michael Fay was sentenced to six strokes with a rattan cane and four months in jail for painting graffiti on parked cars and for other acts of vandalism he had committed while living in Singap ore. The case drew immediate international attention. Many U.S . citizens— including President BILL CLINTON, who appealed to the government of Singapore for clemency— were outraged by the sentence. Despite the intervention of the U.S. government and HUMAN RIGHTS groups, the punishment was eventually carried out, although the number of strokes was reduced to four. In the wake of the publicity surrounding the Fay case, polls indicated that a surprising number of U.S. citizens supported the sentence. Unconvinced that current penalties provide a sufficient deterrent, many believed that the long-standing prohibi tion against physical pun- ishment should be reconsidered, at least with respect to juvenile offenders. In some states, lawmakers introduced legislation to provide for corporal punishment of juveniles who were convicted of certain crimes. In California, for example, a bill requiring paddling of juvenile graffiti vandals was proposed (199 5 California Assembly Bill No. 7, California 1995-96 Regular Session). Proposed measures in other states have not limited the use of corporal punishment to juveniles. In Tennessee, for instance, a bill was introduced in 1995 providing for floggings for property crimes such as BURGLARY, vandalism, and trespassing. The measure would further provide for the punishment to be administered by the county sheriff on the courthouse steps of the county where the crime was committed. According to the bill’s sponsor, “[p]eople that follow a life of crime generally get started in the area of property crimes … if you knew they were going to … whale the living daylights out of you, you might think twice about it.” This bill, like other measures proposed for physically punishing juveniles, failed to pass the state legislature. In 2009 Ohio became the thirtieth state to ban corporal punishment in schools. In response to renewed calls for physical punishment for criminals, critics have argued that such measures may meet a “revenge” need on the part of the public but that they do nothing in the long term to address the deeper issue of why crime occurs. Groups such as the AMERICAN CIVIL LIBERTIES UNION, in lobbying against corporal punishment, maintain that state legislators, law enforcement personnel, criminologists, and social scientists should instead direct their efforts to determining what can be done to prevent crime in the first place. FURTHER READINGS Bloom, Scott. 1995. “Spare the Rod, Spoil the Child? A Legal Framework for Recent Corporal Punishment Propo- sals.” Golden Gate University Law Review 25. Dayton, John. 1994. “Corporal Punishment in Public Schools: The Legal and Political Battle Continues.” Education Law Reporter 89. Dillon, Sam. 2009. “Disabled Students Are Spanked More.” New York Times (Aug. 10). Donnelly, Michael, and Murray Straus. 2005. Corporal Punishment of Children in Theoretical Perspective. New Haven, Conn.: Yale Univ. Press. New York Times (editorial). 2007. “Lashing Justice.” New York Times (Dec. 3). GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION CORPORAL PUNISHMENT 223 Parkinson, Jerry R. 1994. “Federal Court Treatment of Corporal Punishment in Public Schools: Jurisprudence that Is Literally Shocking to the Conscience.” South Dakota Law Review 39. CROSS REFERENCE Juvenile Law. CORPORATE Pertaining to or possessing the qualities of a corporation, a legal entity created—pursuant to state law—to serve the purposes set out in its certificate of incorporation. A corporate officer is an individual who is charged with the management of a corporation by virtue of a position as its pre sident, VICE PRESIDENT , treasurer, or secretary. CORPORATE FRAUD During the 2000s, a series of scandals involving several large U.S. corporations shocked Amer- icans. In most of these instances, corporate executives fraudulently concealed debts and engaged in other forms of unethical account- ing practices, often with the goal of missta ting profits and net worth to drive stock prices higher. When these companies collapsed, share- holders, investo rs, creditors, and employees lost billions of dollars. Enron On October 16, 2001, Enron, the seventh largest corporation in the United States, announced a $638 million loss in third-quarter earnings. On November 8, 2001, the company publicly admitted to having overstated earnings for four years by $586 million and to having created Enron: An Investigation into Corporate Fraud T he collapse of Enron Corporation in 2001 led to massive investiga- tions involving allegations of a range of criminal activities perpetrated by some of the company’s top executives. In January 2002 the U.S. JUSTICE DEPARTMENT an- nounced that it had formed an Enron Task Force consisting of a team of federal prosecutors and under the supervision of the department, agents of the FEDERAL BUREAU OF INVESTIGATION , and agents of the criminal division of the INTERNAL REVENUE SERVICE . The scandal developed into a case study of corporate fraud, poor management decisions, and faulty ac- counting practices. Enron had built itself into the seventh largest company in the United States, with annual revenues of $100 billion. In December 2000, the company’sstocksold for as much as $84.87 per share. However, stock prices fell throughout much of 2001. In October, the company an- nounced that it had overstated its reven- ues, claiming losses of $638 million during the third quarter of 2001 alone. Stock prices then plunged, hurting inves- tors and employees with retirement plans that were tied into company stock. By the beginning of December, Enron’sstock prices had fallen to below $1 per share. Enron filed for Chapter 11 BANKRUPTCY protection on December 2, 2001. To date, the event constituted the largest bank- ruptcy in U.S. history. Much of the early investigation into the Enron fiasco focused on the com- pany’s financial reporting practices. Though the company followed GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP), these practices gave the false impression that the company was more profitable and more secure than it really was. The company reported revenues that were actually funds flowing through transi- tional transactions with related compa- nies. Moreover, the company hid its losses and debts in partnerships that did not appear on Enron’s financial statements. The first criminal charges were filed against Enron’s accounting firm, Arthur Andersen, L.L.P. The Justice Department brought charges that the accounting firm had destroyed thousands of documents, including computer files, related to its dealings with Enron. Anderson was also convicted for doctoring a memo and misstating a news release related to Enron. The company was found guilty of OBSTRUC- TION OF JUSTICE in June 2002—an appeal is still pending as of September 2003. It was placed on probation for five years and required to pay a fine of $500,000. Analysts questioned whether the account- ing firm would survive after the co nviction. In addition toits role as accountant, Arthur Andersen had served as a consultant to Enron for a number of years, thus raising conflicts of interest questions. Because the Justice Department had not moved forward with criminal indict- ments against Enron officials, several critics charged that the federal govern- ment under President GEORGE W. BUSH was GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 224 CORPORATE limited partnerships to hide $3 billion in debt. As investors lost confidence in the company, Enron stock, which had been worth as much as $90 per share in 2000, plummeted to less than $1 per share. Thousands of Enron employees lost their jobs and retirement savings, which had been invested in corporate stock through a 401(k) retirement plan. Banks and lenders lost millions of dollars in loans made to Enron based on the fraudulent earnings reports. Enron Corpora tion started as a pipeline company in Houston, Texas, that delivered gas at market price. Over the next 15 years, Enron expanded into an energy power broker that traded electricity and other commodities, such as water and broadband INTERNET services. Enron became one of the nation’s most successful companies, employing 21,000 people in more than 40 countries. The senior executives at Enron attributed their success to their corporate strategy, which was to be light in assets but heavy in innovation. The innovative business practices of over- stating profits and concealing debt increased the company’s stock value, thus allowing the company to borrow more money and to expand. It also led to some top executives selling their stock and making over one billion dollars. Thos e former executives were later indicted and convicted for FRAUD, MONEY LAUN- DERING , and conspiracy, and they also face dozens of civil lawsuits filed by pension funds and former employees. The company ’s account- ing firm, Arthur Andersen, admitted to having shredded Enron documents after it had learned that the SECURITIES AND EXCHANGE COMMISSION (SEC) was conducting an investiga tion of the corporation. The accounting firm was convicted protecting top Enron executives. Several of these executives were questioned by the Senate Commerce Committee in Febru- ary 2002, but no charges were filed. Several of Enron’s senior executives reportedly had personal interests in cer- tain risky transactions. These executives even sold Enron stock while at the same time convincing employees to hold their stock. Th e BOARD OF DIRECTORS of the company also allegedly failed to provide significant oversight regarding the audit- ing and reporting by the company. The first major criminal charges involving an Enron executive were brought against Michael Kopper, who had served as an aide to chief financial officer Andrew Fastow. Kopper pleaded guilty to charges of MONEY LAUNDERING and conspiracy to commit FRAUD in August 2002. Kopper implicated Fastow, claiming that Fastow had conducted transactions on behalf of Enron for the benefit of third-party partnerships owned by Fastow. The Justice Department then focused its attention on Fastow, who allegedly had $12.8 million in funds and was construct- ing a $2.6 million house. The government alleged that Fastow and Kopper had accumulated $22 million from illegal Enron deals. In November 2002, the Justice Department indicted Fastow on 78 counts, including fraud, money laun- dering, and obstruction of justice. The criminal indictment did not include former CEO Kenneth Lay, former CEO Jeffrey Skilling, or any other top execu- tives. The Justice Department also an- nounced that it could file a superseding indictment with additional charges. This superseding i ndictment might name ad- ditional defendants as well. Fastow appeared before the SECURITIES AND EXCHANGE COMMISSION in December 2002 but invoked his FIFTH AMENDMENT PRIVILEGE AGAINST SELF -INCRIMINATION.In several trade publications in the late 1990s, Fastow had discussed his account- ing practices at Enron, including methods for keeping funds off of Enron’sbooks. According to several commentators, Fas- tow could represent a “fall guy” for the Enron fiasco, as it was probable that other executives and members of the board were aware of these reporting practices. Others involved in Enron transac- tions were also brought up on criminal charges. In July 2002 three British bank- ers were charged with wire fraud for their dealings with Enron. The Justice Depart- ment subsequently focused its attention on Enron Broadband Services, an INTERNET division of the company. The Houston Chronicle reported in April 2003 that executives of that branch were likely to be indicted for INSIDER TRADING, fraud, and money laundering. As of the end of April 2003, twelve charges had been filed relating to the Enron fiasco, though only seven were filed against company insiders. FURTHER READINGS Baird, Douglas G., and Robert K. Rasmussen. 2002. “Four (or Five) Easy Lessons from Enron.” Vanderbilt Law Review 55 (November): 1787–812. Flood, Mary, and Tom Fowler. 2003. “Five Men Could Be Charged.” Houston Chron- icle (April 26). Fox, Loren. 2003. Enron: The Rise and Fall. Hoboken, N.J.: Wiley. Salem, Christina R. 2003. “The New mandate of the Corporate Lawyer after the Fall of Enron and the Enactment of the Sarbanes-Oxley Act.” Fordham Journal of Corporate & Financial Law 8 (summer): 765–87. Swartz, Mimi, with Sherron Watkins. 2003. Power Failure: The Inside Story of the Collapse of Enron. New York: Doubleday. CROSS REFERENCES Accounting; Bankruptcy; Embezzlement; Fraud. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION CORPORATE FRAUD 225 of OBSTRUCTION OF JUSTICE, lost hundreds of clients and employees, and went out of business. After the Enron scandal became public knowledge, many wondered how such an overstatement could have escaped notice. What the public soon would learn was that Enron was only one among many such stories. WorldCom In March 2002 it became known that World- Com, the second largest long-distance phone company in the United States, had overstated profits by listing $3.8 billion in normal operat- ing expenses (which were basically routine maintenance costs) as capital expenses. This move allowed the company to spread the expenses out over several years, thereby mak ing profits look much larger and artificially inflating the company’s value in order to meet Wall Street’s expected earnings. WorldCom stock, which was valued as high as $60 per share in 1999, dropped to 20 cents per share in response to the news. Approximately 17,000 WorldCom employees lost their jobs. The JUSTICE DEPART- MENT secured indictments against the former chief financial officer, Richard Breeden, for bank fraud, SECURITIES fraud, conspiracy and false statements in SEC filings. Four other former WorldCom executives pleaded guilty to securities fraud and agreed to cooperate with the prosecution. The SEC filed a civil suit against the company. As of 2003, the SEC had uncovered more than $9 billion in bogus accounting. In July 2002, WorldCom filed the world’s largest BANKRUPTCY. Other Scandals At the same time that Enron’s and WorldCom’s fraudulent accounting practices became public knowledge, news of more corporate accounting scandals came flooding in. In February 2002, Global Crossing was caught inflating revenue and shredding documents that contained ac- counting information. In April 2002 Adelphia Communications made headlines amidst the discovery that $3.1 billion worth of secret loans had been made to the company’s founding family—some of whom were later arrested— and earnings were overstated. In May 2002 Tyco International, Ltd., accused three former senior executives of having fraudulently taken out loans from the company without permis- sion and without paying them back. The men also allegedly issued bonuses to themselves and other employees witho ut approval from the company’s BOARD OF DIRECTORS. The SEC has since charged the three for fraud and THEFT and is investigating whether the company had knowledge of this conduct. In July 2002 it was revealed that AOL Time Warner had inflated sales figures. Amid further investiga- tions, the company admitted to having possibly overstated revenue by $49 million. Other companies in the spotlight for corporate accounting scandal allegations include Bristol- Myers Squibb, Kmart, Qwest Communications International, and Xerox. In addition to corpo- rate scandal, television person ality and home decorating maven Martha Stewart was indicted for allegedly selling 3,928 shares of stock in ImClone Systems, thus making about $227,824, based on an INSIDER TRADING tip that she had received from the company’s founder, Samuel Waksal. Many fraudulent accounting practices arose beginning in the 1990s, when energy, telecommunication, and other industries were expanding rapidly, and competition was espe- cially fierce. The STOCK MARKET ind ices were reaching all-time records, and investors were looking for short-term earnings targets. Many corporate executives d id whatever was neces- sary to meet the quarterly expectations of the analysts on Wall Street, thereby increasing the price of their stock. This practice often allowed their companies to borrow more money to grow and compete. Because most top executives also enjoyed stock options that rose in value with their companies’ stock prices, they had the added incentive of making significant profits by selling their stocks at the higher prices. This activity resulted in a considerable transfer of money from individual share- holders to corporate managers. However, the individual investors were still making profits and, therefore, not paying attention to conflicts of interest and fraudulent practices, thus allowing the executives to go almost unchecked in their actions. Corrective Actions Following the collapse of Enron and World- Com, several corrective actions were taken. The New York Stock Exchange made improvements in its accounting, auditing, and corporate governance rules for corporations that want to list their stock on the exchange. Congress approved the Sarbanes-Oxley Act, Pub. L. No. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 226 CORPORATE FRAUD 107-204, 116 Stat. 745, which created the Public Accounting Oversight Board to monitor public accountants, made changes in auditing rules, and authorized an increase in criminal penalties for more white-collar crimes. On July 9, 2002, President GEORGE W. BUSH established the Corporate Fraud Task Force. The goal of this task fo rce was “to strengthen the efforts of the DEPARTMENT OF JUSTICE and Federal, State, and local agencies to investigate and prosecute sig nificant financial crimes, recover the proceeds of such crimes, and ensure just and effective punishment of those who perpetrate financial crimes” (Exec. Order 13271). More than a dozen federal departments, commissions, and agencies, along with several U.S. attorneys’ offices and divisions within the Justice Department. As a result of the task force’s activities, the Justice Department was able to obtain nearly 1,300 corporate fraud convictions between 2002 and 2008. FURTHER READINGS Patsuris, Penelope. “The Corporate Scandal Sheet.” August 26, 2002. Available online at http://www. forbes.com/2002/07/25/accountingtracker_print.html (accessed June 25, 2009). The President’s Corporate Fraud Task Force. Available online at http://www.usdoj.gov/dag/cftf/ (accessed June 25, 2009). CROSS REFERENCE Securities and Exchange Commission. CORPORATE PERSONALITY The distinct status of a business organization that has complied with law for its recognition as a legal entity and that has an independent legal existence from that of its officers, directors, and share- holders. Corporate person ality encompasses the ca- pacity of a corporation to have a name of its own, to sue and be sued, and to have the right to purchase, sell, lease, and mortgage its property in its own name. In addition, property cannot be taken away from a corporation without DUE PROCESS OF LAW. CORPORATIONS Artificial entities that are created by state statute, and that are treated much like individuals under the law, having legally enforceable rights, the ability to acquire debt and to pay out profits, the ability to hold and transfer property, the ability to enter into contracts, the requirement to pay taxes, and the ability to sue and be sued. The rights and responsibilities of a corpora- tion are independent and distinct from the people who own or invest in them. A corpora- tion simply provides a way for individuals to run a business and to share in profits and losses. History The concept of a CORPORATE PERSONALITY traces itsrootsto ROMAN LAW and found its way to the American colonies through the Britis h. After gaining independence, the states, not the federal government, assume d authority over corporations. Although corporations initially served only limited purposes, the Industrial Revolution spurred their development. The corporation became the ideal way to run a large enterprise, combining centralized control and direction with moderate investments by a potentially unlimited number of people. The corporation in the early twenty-first century remains the most common form of business organization because, theoretically, a corporation can exist forever and because a corporation, not its owners or investors, is liable for its contracts. But these benefits do not come free. A corporation must follow many formali- ties, is subject to publicity, and is governed by state and federal regulations. Many states have drafted their statutes governing corporations based upon the Model Business Corporation Act. This document, prepared by the ABA Section of Corporate, Banking, and Business, Law and approved by both the AMERICAN BAR ASSOCIATION and the American Law Institute, provides a framework for all aspects of corporate governance as well as other aspects of corporations. Like other MODEL ACTS , the Model Business Corporation Act is not necessarily designed to be adopted wholesale by the various states, but rather is designed to provide guidance to states when they adopt their own acts. Types of Corporations Corporations can be private, nonprofit, munic- ipal, or quasi-public. Private corporations are in business to make money, whereas nonprofit corporations generally are designed to benefit GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION CORPORATIONS 227 . procedure of the coroner’s office, which has been replaced in some states with the office of MEDICAL EXAMINER. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 218 CORESPONDENT The main function of a. in a Delaware prison shows two inmates in a pillory with another receiving a whipping. Such forms of punishment have been outlawed. LIBRARY OF CONGRESS. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3 RD. Watkins. 20 03. Power Failure: The Inside Story of the Collapse of Enron. New York: Doubleday. CROSS REFERENCES Accounting; Bankruptcy; Embezzlement; Fraud. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E