1 Corporate Criminal Liability

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John S. Baker, Jr.Dale E. Bennett Professor of Law,

Paul M. Hebert Law Center, Louisiana State UniversityApril, 2009

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1. History of corporate criminal liability2. Doctrines of corporate criminal liability and

respondeat superior

3. Responsible corporate officerdoctrine

4. Public welfare offenses

5. Criticisms of corporate criminal liability

6. Evolution of white-collar crime prosecutions

7. Organizational sentencing guidelines and DOJcharging policies

8. Corporate criminal liability in other countries(time permitting)

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A. Introduction

Long, complex and controversial history

Current state of U.S. law is far fromtraditional view of corporate criminal liability

The corporation itself may be charged withcommitting a crime, or it may be criminally

liable for the acts of its officers andemployees

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B. English history

Recognized in law as persons

Abstract entities incapable of committing a

crime no soul to damn, no body to bekicked no mens rea

no act

not subject to imprisonment First cases of corporate criminal liability were

for nonfeasance, and later for misfeasance

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C. American history

Developed more slowly than in England

First prosecutions based on nuisance, thennonfeasance and misfeasance

Grows out of strict liability

But could not be criminally liable for offenses

requiring intent

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A. General principles

Tort law incorporated into criminal law

Federal law: corporations are liable for actions of

officers or employees acting within the scope oftheir employment

M.P.C. Section 2.07 (a) if offense language authorizes; or (b) if offense consists of omission to discharge specific

duty; or (c) if offense authorized etc. by Board of Directors or

high managerial agent acting on behalf of thecorporation within the scope of his office or employment

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B. Corporate criminal liability for acts ofemployees

N.Y. Central & Hudson River R.R. Co., 212 U.S.481 (1909) Elkins Act: any agent

Supreme Court holds that Congress has theconstitutional authority to subject a corporationto criminal liability for the actions of its agents

Based on public policy reasons: too difficult to enforce otherwise

corporations predominantly involved in interstatecommerce

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C. Acting on behalf of a corporation whereact is contrary to policy or order

Expansion ofrespondeat superior

U.S. v. Hilton Hotels, 467 F. 2d 1000 (9th Cir.1972) corporation may be held liable even if conduct is

expressly prohibited by company policy or orders

Court presumes to know Congressional intent Court interferes in legislative issues

Court relies on generalizations about corporatebehavior instead of individual culpability

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D. Intention: Collective knowledge Method of imputing knowledge to a

corporation Intended to address difficulties identifying

individuals responsible for misconduct orwhere knowledge/intent is fragmented

U.S. v. Bank of New England, 821 F. 2d 844(1st Cir. 1987)

the acts of a corporation are the acts of itsemployees operating within the scope of theiremployment

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E. Intention: Benefitting the corporation Supposed to be a limit on respondeat

superior only liable if the act benefits thecorporation

U.S. v. Sun-Diamond Growers, 138 F. 3d 961(D.C. Cir. 1998) erosion of the general rule agent/employee does not have to be acting solely,

or even predominantly, with the intent to benefitthe corporation

here the corporation was defrauded by its employee

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Corporate officers are criminally liable for

failure to control the misconduct ofsubordinates or failure to discover or correctmisconduct

Corporate officers criminally liable even ifthey were not personally involved and even if

they were unaware of the conduct

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First arose in prosecutions under Food, Drugand Cosmetic Act strict liability U.S. v. Dotterweich, 320 U.S. 277 (1943)

U.S. v. Park, 421 U.S. 658 (1975)

Expanded to prosecutions underenvironmental laws Clean Water Act, CleanAir Act, hazardous waste legislation U.S. v. Brittain, 931 F. 2d 1413 (10th Cir. 1991)

U.S. v. MacDonald & Watson Waste Oil Co., 933 F.2d 35 (1st Cir. 1991)

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Applies standard of strict liability Rationale for the doctrine:

protects the public welfare

shifts the risk of dangerous activity to those best

able to prevent a mishapjuries ill-suited to decide complex cases

eases the burden on prosecutors

reflects publics intolerance for certain types of

conduct

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U.S. v. International Minerals & ChemicalCorp., 402 U.S. 558 (1971) shipment of dangerous chemicals

Court establishes standard of strict liability

regarding dangerous or deleterious devices orproducts, or obnoxious waste material

rationale is that the probability of regulation is sogreat that anyone who possesses these products,

devices or materials should be aware of theregulations

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Staples v. U.S., 511 U.S. 600 (1994) registration of machinegun

Court attempts to set out a framework

doctrine limited to potentially harmful or injurious

items government must still prove the defendant knew

the item was regulated, so not absolute strictliability

Court attempts to prevent statute from coveringinnocent conduct

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U.S. v. Weitzenhoff , 35 F. 3d 1275 (9th Cir.1993) (en banc) violation of Clean Water Act for discharging

pollutants into the ocean

illustrates difficult issues raised in public welfarecases regarding criminal liability and mens rea

example of how courts struggle to make sense outof vague laws that do not give sufficient guidance

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Criticisms of public welfare offenses judges rather than legislators are deciding what is

innocent conduct and what isnt based on their ownmoral standards

deciding what is criminal behavior and what isntshould be up to Congress, not the federal courts

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Objectives of tort law and criminal law are

completely different

Respondeat superioris inconsistent withbasic premise of criminal law

Criminal sanctions should be a last resort

Is contrary to traditional view of mens rea and

what it means to have a guilty mind

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U.S. v. Gypsum Co., 438 U.S. 422 (1978)

offenses under the Sherman Act

illustrates the difficulties with mens rea in the

context of corporate crime

Bryan v. U.S., 524 U.S. 184 (1998) willfully dealing in firearms without a license

example of different viewpoints on mens rea and

federal criminal law

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Mens rea is even more important today

because most new crimes are malumprohibitum

Many federal crimes are really regulations

If traditional requirement of mens rea isweakened, then it undermines unique

features of criminal law

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A. Origin and interpretation of the termwhite-collar crimeProfessor Edwin H. Sutherland coined the term

in a 1939 speech and his1949 book White

Collar CrimeBased on status of the offender, not on the

crime committedOrdinary protections of the criminal law, such

as presumption of innocence, should not apply

Sociologists have changed definition of crimeto focus on harm caused, socioeconomicstatus, occupation

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B. RICO Example of expansion of sociological

redefinition of crime to include enterpriseliability

Passed in 1970 to fight organized crime Prosecutors and civil litigants aggressively

use RICO against corporations RICOs potential application is nearly

boundless Blurring between white-collar crime and

organized crime

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C. Trends in prosecutionsDriven by the media, public outrage over

corporate scandals and public perception thatmost corporations and corporate officers aregreedy and corrupt

Many new federal laws are reactions byCongress in the wake of corporate scandals

and high-profile prosecutions Enron, WorldCom, Martha Stewart, Bernie Ebbers

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U.S. Sentencing Commission

Regulating corporate behavior complianceagreements

Justice Departments charging policies

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A. U.S. Sentencing Commission Established in 1984 to address problem of

disparity in sentences U.S. v. Booker, 543 U.S. 220 (2005), held that

the sentencing guidelines are advisory only Commission has, without clear statutory

authority, arrogated the power to regulatecorporate governance

Located in judicial branch, which raisesserious separation of powers issues Mistretta v. U.S., 488 U.S. 361 (1989)

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B. Regulating corporate behavior

Federal criminal law is now more aboutregulating corporations so they will begood citizens

Federal regulation has expanded with the

expansion of commerce across state lines Blurring of regulation vs. criminalization

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B. Regulating corporate behaviorCompliance programs are now seen as a

mandatory legal obligation to forcecorporations to be good citizens

Standard of what constitutes an effectivecompliance program is uncertain andevolving

Prosecutors, rather than courts, effectively

decide what is an acceptable complianceprogram through deferred prosecutionagreements

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C. Justice Departments charging policies

DOJ regards self-reporting to be mandatory Holder Memo, 1999 compliance programs

and corporation cooperation are factors thatfederal prosecutors should consider when

deciding whether or not to indict

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C. Justice Departments charging policies

Thompson Memo, 2003 Bush Administration

expanded on what constitutes corporatecooperation

Prosecutors to consider, inter alia, thecorporation's timely and voluntary disclosure ofwrongdoing and its willingness to cooperate in

the investigation of its agents, including, ifnecessary, the waiver of corporate attorney-clientand work product protection

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C. Justice Departments charging policies McNulty Memo, 2006

response to opposition to Holder and ThompsonMemos and Congressional action

waivers of attorney-client privilege and workproduct protections are not prerequisite to afinding that corporation has cooperated

gives some guidance to prosecutors when

requesting waivers or production of corporatedocuments

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Time permitting

The End

1 Corporate Criminal Liability

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