Corporate Criminal Liability

Article excerpt

 I. INTRODUCTION
II. THE LAW OF CORPORATE CRIMINAL LIABILITY
    A. Corporations are Only Liable for the Acts of Employees if
       the Employees are Acting Within the Scope and Nature of
       Their Employment
    B. A Corporation Will Not be Liable for the Acts of its
       Employees Unless Those Actions are Designed to Benefit the
       Corporation
    C. To Hold a Corporation Liable for the Acts of its Employees,
       a Court Must Impute the Intent of the Individuals to the
       Corporation
       1. Conspiracies
       2. Mergers, Dissolutions, and Liability
       3. Misprision of Felony
       4. The Willful Blindness Doctrine
       5. The Collective Knowledge Doctrine
III. ORGANIZATIONAL SENTENCING GUIDELINES
    A. Introduction: Purpose and Scope of the Organizational
       Guidelines
       1. Controls on Prosecutorial Discretion
       2. Promulgation of the Organizational Sentencing
          Guidelines
       3. General Principles
       4. Organizations Covered by Chapter 8 of the Guidelines
       5. Purpose and Effect of the Organizational Guidelines
    B. Guidelines Provisions: Offenses Covered and Sanctions
       Permitted
       1. Remedies
       2. Probation
       3. Imposition of Fines
          a. Base Offense Level
          b. Base Fine
          c. Culpability Score
              i. Calculation: Increasing Factors
             ii. Calculation: Decreasing Factors
                 (1) Effective Corporate Compliance Programs
                 (2) Cooperation
          d. Multipliers
          e. Disgorgement
          f. Implementation
          g. Departures

I. INTRODUCTION

Corporate criminal liability developed as courts struggled to overcome the problem of assigning criminal blame to fictional entities in a legal system based on the moral accountability of individuals. (1) Courts began with the civil law-based doctrine of respondeat superior (2) and gradually injected aspects of the criminal law, such as hearings and sentencing, into the abstract nature of the corporation. (3) Although criminal prosecution of corporations is guided by recognized principles, many prosecutors still proceed against corporations with great discretion, persuaded by the argument that punishing a corporation in effect punishes innocent stockholders. (4)

Yet the public outrage surrounding corporate scandals culminated in the passage of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley"). (5) Although Sarbanes-Oxley exposes corporations to increased criminal liability, most investigations and prosecutions have targeted the wrongdoing of individual officers instead of prosecuting corporations. (6) While recognizing that corporations will be subjected to criminal liability in a small percentage of cases, the Department of Justice insists that prosecutors should seek indictments for companies guilty of corporate wrongdoing. (7) The government will be especially likely to prosecute when an organization has obstructed a federal investigation. (8)

A broad range of principles guides the law of corporate criminal liability. These principles are outlined in the remainder of this Article. Part II of this Article describes the three elements required to incur corporate criminal liability. Part III of this Article addresses the United States Sentencing Guidelines' mechanism for sentencing organizations and the requirements of Sarbanes-Oxley on the Guidelines. (9)

II. THE LAW OF CORPORATE CRIMINAL LIABILITY

A corporation may be held criminally liable for the acts, omissions, or failures of an agent acting within the scope of his employment. (10) The nature of incorporeal legal entities requires courts look to employees of the corporation as a means of imputing intent, or mens rea, (11) as well as the guilty act, or actus reus, (12) to the corporation. Courts find a corporation vicariously liable for the acts of its employees if the individual: (i) acted within the scope and nature of his employment; (13) (ii) acted, at least in part, to benefit the corporation; (14) and (iii) act and intent can be imputed to the corporation. …