Module 3: Crimes in Business; Corporate Management

Question 1:

George is a software programmer and works as a consultant to Acme Corp. Acme stores all of its confidential corporate documents on a cloud-based system instead of the company’s internal servers. George designed a software program to gain unauthorized access to the cloud-based system and read through the confidential files of Acme’s Chief Financial Officer. George learned that Acme’s 10Q (which was scheduled to be filed with the Securities and Exchange Commission and made public the following week) showed a large drop in Acme’s revenues and earnings. George knew that his friend Mike owned shares of Acme stock and advised Mike to immediately sell the stock. George also found the source code to a new banking software that Acme was in the process of developing and sold this information to a competitor of Acme’s, Soprano Inc. Soprano Inc. was based in London and linked to organized crime. George subsequently helped Soprano Inc. use the banking software to transfer money electronically, undetected to the Cayman Islands. 

Which of George’s actions constitute crimes and what are the federal statutes (discussed in the Module 3 Content and Module 3 assigned readings) that George can be prosecuted under?

Question 2:

William Gurtler was president and a board member of Unichem Corp., which produced and sold chemical laundry products. While president of Unichem, he encouraged his plant manager to leave and join a rival business, which William was going to join in the near future. Moreover, William sold Unichem products to his son, Sam Gurtler, at an amount substantially below Unichem’s normal price and on credit, even though Sam had no credit history. William made the sales with full knowledge that Sam was going to start a rival business. Also at that time, William was aware that his wife was soliciting Unichem employees to join the new Gurtler Chemical Co., and he helped her design the Gurtler Chemical Co. label so that it would look like Unichem’s. William personally guaranteed a $100,000 bank loan for the new Gurtler Chemical Co. with funds to be disbursed after he left Unichem. One month later, he became the president of Gurtler Chemical Co.

Unichem has now sued William for its lost profits. William contends that his sale of Unichem products to Sam guaranteed needed revenue for Unichem and that his actions constituted sound business decisions. William claims he has no liability to Unichem because he is protected by the Business Judgment Rule. 

Is William shielded from liability by the Business Judgment Rule? Apply the IRAC method of legal reasoning by stating the Issue, Rule, Analysis, and Conclusion. (Use the “traditional” Business Judgment Rule as provided on p. 1082 of your textbook.)

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