Corporate Criminal Responsibility

too big too fail

the idea that a business has become so large that a government will provide assistance to prevent its failure b/c the effect on the economy would be devastating.

Arthur Andersen

"I am Arthur Andersen" Moved folks to critically think about issue of moral agency Argument that corporations lack the capacity for emotion (affect) and therefore cannot be subject to criminal law or punishment

Proactive Fault (PCF)

- A corporation's practices and procedures are inadequate to prevent the commission of a crime - To what extent did corporate officials exercise due diligence to prevent the offense from occurring

SAC Capital Case

- Insider trading - When so many people in a firm have engaged in insider trading its clear there was widespread failure within the firm o Deep roots of unethical conduct

What makes a firm legally culpable

- Locus of wrongdoing in firm - Seriousness of offense - Decision Making - Culture - Policies - Proactive Action to prevent unethical acts (codes, programs, etc.) - Reaction to the discovery of acts (timely/voluntary disclosure) - Extent of complicity/pervasiveness - History of comparable acts - Remedial acts

When to resort to criminal law for corporations

- When we feel as if the criminal law plays a role (deterrence) - Degree of wrongdoing - Track record of wrongdoing

What should corporations do if an offense occurs?

1. Respond reasonably -- investigate! 2. Cooperate with Govt. 3. Accept responsibility 4. Show Remorse 5. Terminate culpable agents 6. Invest more in compliance

4 tracks of justice

1. Small private companies convincted 2. Med-large corporations (civil) 3. NPA, OPA, CIA (small) 4. Largest corporations prosecuted

1991 Sentencing Guidelines (seven steps to organizational due diligence)

1. Standards and procedures reasonably capable of preventing criminal conduct 2. Oversight of standards by high level personnel 3. Care in the delegation of substantial managerial authority to individuals 4. Effective communication of standards and procedures to employees 5. reasonable steps taken to achieve compliance 6. Enforcement of disciplinary mechanisms 7. Appropriate responses after the detection of an effect

Corporate Criminal Process

1. Wrongdoing 2. Jurisdiction 3. Charging 4. Liability 5. Conviction 6. Sentencing 7. Sanction

Go to trial

95% of firm convicted were small (50 or fewer employees, CEO knew of wrongdoing)

Reactive Fault (RCF)

A corporation's failure to undertake adequate corrective measures in response to the discovery an offense - to what extent did the corporate officials react reasonably

Critcisims

Attenuation - how can one employee expose the whole corporation to criminal liability o More relevant to smaller companies

Models of Genuine Fault

Corporate Ethos: the personality of the organization (goals/policies) encourages corporate agents to commit a crime Corporate Policy: a corporate policy encouraged or resulted in the commission of a crime Constructive Corporate Fault (CF)

CIA

Corporate Integrity Agreement

Liability Rules for Federal Courts

Corporation may be held criminally liable for acts committed by its employees if they were acting within the scope of their authority and for the benefit of the corporation - even if such such acts were against corporate policy or instructions o This rule extends corporate criminal liability to acts committed by: Officers and directors Managers and supervisors Subordinate employees Independent contractors

DPA

Deferred Prosecution agreement

Vicarious Liability

Legal doctrine under which a party can be held liable for the wrongful actions of another party. - Supervisor parties bear responsibility for actions of those beneath them - An employer of an employee who injures someone through negligence while in the scope of employment (doing work for the employer) is vicariously liable for damages to the injured person

Corporate Rea

Mind of Corporation - Authorship of corporation -Challenge in constructing responsibility b/c of decision making, culture, policies, pro-active actions to prevent acts, reaction to discovery of acts

Plea Agreements

NPA DPA CIA

NPA

Non-prosecution agreement

The carrot

The likelihood of criminal investigation, indictment, aggressive prosecution, conviction, and significant fines are reduced significantly by evidence of seven steps of corporate compliance

Carrot and Stick

corporate compliance movement

The stick

those companies that have no invested in compliance will face criminal investigation and prosecution along with significant fines and penalties