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

Hebert Law Center, Louisiana State University April, 2009

1. History of corporate criminal liability 2. Doctrines of corporate criminal liability and

respondeat superior

3. 4. 5. 6. 7.

Responsible corporate officer doctrine Public welfare offenses Criticisms of corporate criminal liability Evolution of white-collar crime prosecutions Organizational sentencing guidelines and DOJ charging 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 from traditional view of corporate criminal liability The corporation itself may be charged with committing a crime, or it may be criminally liable for the acts of its officers and employees

B. English history Recognized in law as persons Abstract entities incapable of committing a crime no soul to damn, no body to be kicked
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, then nonfeasance and misfeasance Grows out of strict liability But could not be criminally liable for offenses requiring intent

A. General principles Tort law incorporated into criminal law Federal law: corporations are liable for actions of officers or employees acting within the scope of their 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 the corporation within the scope of his office or employment

B. Corporate criminal liability for acts of employees N.Y. Central & Hudson River R.R. Co., 212 U.S. 481 (1909) Elkins Act: any agent Supreme Court holds that Congress has the constitutional authority to subject a corporation to criminal liability for the actions of its agents Based on public policy reasons:
too difficult to enforce otherwise corporations predominantly involved in interstate commerce

C. Acting on behalf of a corporation where act is contrary to policy or order Expansion of respondeat 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 corporate behavior 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 or where 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 its employees operating within the scope of their employment

E. Intention: Benefitting the corporation Supposed to be a limit on respondeat superior only liable if the act benefits the corporation 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 benefit the corporation here the corporation was defrauded by its employee

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Corporate officers are criminally liable for failure to control the misconduct of subordinates or failure to discover or correct misconduct Corporate officers criminally liable even if they were not personally involved and even if they were unaware of the conduct

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First arose in prosecutions under Food, Drug and 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 under environmental laws Clean Water Act, Clean Air 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 mishap juries 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 & Chemical Corp., 402 U.S. 558 (1971)
shipment of dangerous chemicals Court establishes standard of strict liability regarding dangerous or deleterious devices or products, or obnoxious waste material rationale is that the probability of regulation is so great that anyone who possesses these products, devices or materials should be aware of the regulations

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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 strict liability Court attempts to prevent statute from covering innocent 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 welfare cases regarding criminal liability and mens rea example of how courts struggle to make sense out of 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 own moral standards deciding what is criminal behavior and what isnt should be up to Congress, not the federal courts

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Objectives of tort law and criminal law are completely different Respondeat superior is inconsistent with basic 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 willfully dealing in firearms without a license example of different viewpoints on mens rea and federal criminal law

Bryan v. U.S., 524 U.S. 184 (1998)

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Mens rea is even more important today because most new crimes are malum

prohibitum

Many federal crimes are really regulations If traditional requirement of mens rea is weakened, then it undermines unique features of criminal law

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A. Origin and interpretation of the term white-collar crime

Professor Edwin H. Sutherland coined the term in a 1939 speech and his1949 book White Collar Crime Based on status of the offender, not on the crime committed Ordinary protections of the criminal law, such as presumption of innocence, should not apply Sociologists have changed definition of crime to focus on harm caused, socioeconomic status, occupation

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B. RICO Example of expansion of sociological redefinition of crime to include enterprise liability 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 prosecutions Driven by the media, public outrage over corporate scandals and public perception that most corporations and corporate officers are greedy and corrupt Many new federal laws are reactions by Congress 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 compliance agreements 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 regulate corporate governance Located in judicial branch, which raises serious 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 about regulating corporations so they will be good 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 behavior Compliance programs are now seen as a mandatory legal obligation to force corporations to be good citizens Standard of what constitutes an effective compliance program is uncertain and evolving Prosecutors, rather than courts, effectively decide what is an acceptable compliance program through deferred prosecution agreements
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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 that federal 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 corporate cooperation Prosecutors to consider, inter alia, the corporation's timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents, including, if necessary, the waiver of corporate attorney-client and work product protection

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C. Justice Departments charging policies McNulty Memo, 2006

response to opposition to Holder and Thompson Memos and Congressional action waivers of attorney-client privilege and work product protections are not prerequisite to a finding that corporation has cooperated gives some guidance to prosecutors when requesting waivers or production of corporate documents

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Time permitting

The End

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