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. Conspiracy
        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. General Principles
        3. Organizations Covered by Chapter Eight of the
           Guidelines
        4. 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
4. Deferred Prosecution Agreements

I. INTRODUCTION

Corporate criminal liability developed as courts struggled to overcome the problem of assigning criminal Name 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 cases with corporate defendants. (3) This practice, however, raises theoretical questions because corporations can act only through individuals and not independently. (4) Although criminal prosecution of corporations is guided by recognized principles, many prosecutors still proceed against corporations with great caution, persuaded by the argument that punishing a corporation in effect punishes innocent stockholders. (5)

In response to increasing public outrage over corporate scandals at the turn of the century, Congress passed the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley"). (6) Although Sarbanes-Oxley exposes corporations to increased criminal liability, most investigations and prosecutions have targeted the wrongdoing of individual officers instead of the corporations they work for. (7) While recognizing that corporations will be subjected to criminal liability in a small percentage of cases, the Department of Justice ("DOJ") still insists that prosecutors seek indictments against companies guilty of corporate wrongdoing. (8) The government will be especially likely to prosecute when a corporation impedes or obstructs a federal investigation. (9)

Acting in response to the global financial crisis of 2008-2009, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") in July 2010. (10) Dodd-Frank introduced significant changes to financial regulation, including changes to over two dozen criminal offenses, extends criminal liability to additional types of financial instruments, such as swaps, and criminalizes other conduct for the first time. (11)

A broad range of principles guides the law of corporate criminal liability. These principles are outlined in the remainder of this Article. Section II of this Article describes the three elements required to incur corporate criminal liability. Section III addresses the United States Sentencing Guidelines' (the "Guidelines") mechanism for sentencing organizations, including the requirements of Dodd-Frank and Sarbanes-Oxley, (12) and the effect of the Supreme Court's decision in United States v. …