Corporate Criminal Liability

Article excerpt

I. INTRODUCTION

While the common law concept of corporate criminal liability is not new,(1) it is anything but straightforward.(2) In the early sixteenth and seventeenth centuries, courts grappled with the difficulty of charging crimes to a fictional being. Additionally, the common law had to expand its concept of moral blame to include mind-less entities as potential violators, and criminal procedure had to reconcile new requirements (e.g., appearing for a hearing or serving out a sentence) with the non-corporeal nature of the corporation.(3) While corporations have long faced liability in civil actions for the acts of their employees under the doctrine of respondeat superior,(4) it was not until 1909 that the United States Supreme Court extended the corporate liability concept into the criminal arena.(5)

Since 1909, the development of corporate criminal liability doctrines and federal sentencing procedures has created two new difficulties. First, federal judges initially enjoyed broad discretion in the sentencing process. This discretion resulted in significant inconsistencies in the penalties imposed for similar offenses.(6) In the corporate criminal context, the inconsistencies added a great deal of undesirable uncertainty to the corporate decision making process. Corporations had to evaluate the costs and benefits of implementing compliance programs to discover acts of wrongdoing. Second, the common law of corporate criminal liability developed such that, even if a corporation had programs in place to discourage potentially criminal activities, it could still be held criminally liable for its employees' or agents' illegal actions.(7) Accordingly, there was little incentive for corporations to expend significant resources on compliance programs.(8) Indeed, to the extent that the common law failed to account for a corporation's efforts to mitigate its blameworthiness in the event of a criminal prosecution, it encouraged a corporation to ignore, and even hide, potential wrongdoing.(9)

In an effort to respond to the first of these difficulties, the United States Sentencing Commission ("Commission") promulgated the United States Sentencing Guidelines ("Guidelines") in 1987.(10) The Guidelines, however, were inadequate as applied to corporations since they reduced judicial discretion only in cases involving individuals. Accordingly, in 1991, the Commission amended the Guidelines to include Chapter Eight, Sentencing of Organizations ("Organizational Guidelines").(11) The Organizational Guidelines were intended to encourage corporations to undertake compliance programs designed to reduce criminal violations by their employees, and to encourage voluntary reporting of any such activity discovered by such corporations prior to formal federal action.(12)

Part I of this Article outlines the elements of corporate criminal liability as well as recent trends in the area. For a corporation to be liable for the acts of an individual: (1) the individual must be acting within the scope of her employment; (2) the individual must be acting to benefit the corporation; and (3) the act and intent must be imputed to the corporation. Section A describes when courts consider an individual to be acting within the scope of employment. Section B addresses the traditional requirement that an agent's activity benefit the company. Section C explores the means courts have used to impute actions and mental states to corporations.

Part II of this Article addresses organizational sentencing. Section A discusses the background, scope, and purpose of the organizational guidelines in detail. Section B outlines the provisions in Chapter Eight, which include: (1) mechanisms to remedy harm caused by an organization, including restitution, remedial measures, and community service; (2) probation, ranging from the requirement that no further crimes be committed during the prohibition term to the issuance of surprise audits and periodic reports; and (3) the imposition of monetary fines, largely determined by calculating the base level, base fine, and culpability factor. …