Comparative Corporate Criminal Liability: Exploring the Uniquely American Doctrine through Comparative Criminal Procedure

Article excerpt

NOTE CONTENTS

INTRODUCTION

I.  COMPARATIVE CORPORATE CRIMINAL LIABILITY
     A. The United States
     B. Germany
     C. Comparison
        1. The Criminal Theorist's Account
        2. The Functionalist Account
        3. Enron "couldn't happen here"
        4. The "European Efficiency" Account
     D. Summary

II. THE COMPARATIVE CRIMINAL PROCEDURE ACCOUNT
     A. The Evidentiary Differences
     B. Prosecutorial Powers
     C. Finishing the Explanation: How the American System Works in
        Practice
        1. The Thompson Memorandum and the Use of "Deferred
           Prosecution Agreements"
        2. The American Outcome and Its Surprising Similarity to the
           German Outcome

CONCLUSION

INTRODUCTION

In post-Enron America, corporations are under attack. Increasing regulation and oversight, the threat of derivative shareholder suits, and the prospect of personal liability for corporate directors have created an atmosphere of constant risk for corporations, one decried by an increasingly vocal band of corporate leaders, legal scholars, (1) and practitioners. (2) At the core of that criticism, however, is the area of arguably greatest risk to corporations in modern America: criminal prosecution. In the United States, corporations--as entities--can be criminally tried and convicted for crimes committed by individual directors, managers, and even low-level employees. The risk of indictment alone is devastating: a criminal indictment promises a swift market response, the ouster of leadership, millions of dollars in legal fees, and, of course, the possibility of conviction. Such a conviction would lead not only to any criminal penalties imposed (usually a heavy fine), but also to what others have termed "collateral consequences"--devastating financial and reputational repercussions that can, and do, force companies out of business. (3) As a result, it is common wisdom within the business community that a conviction amounts to a potentially lethal blow for a corporation, (4) one from which the corporation may not recover even if it is actually innocent--just ask the former employees of Arthur Andersen. (5)

Corporate criminal liability has become the subject of piqued criticism not only here but also in the international business community. From a comparative perspective, such liability marks the United States as relatively unique. Few other Western countries impose entity liability, and those that do impose it comparatively infrequently and under the threat of far less serious punitive consequences. In countries like France and Germany, for example, the principle of societas delinquere non potest--"a legal entity cannot be blameworthy"--long prevented imposition of entity criminal liability at all. (6) More recently, France and several other European nations have cautiously experimented with corporate criminal liability. (7) Germany has held fast in refusing to punish criminally corporations for the acts of their individual directors or employees. (8)

The question of why the United States--and the United States virtually alone--imposes such significant corporate criminal liability has been the subject of limited scholarly attention. Those who have studied the field espouse varying rationales for America's unique position. Some have argued that the American system grew out of the common law tradition, one that historically embraced the legal fiction--prevalent in corporate law--of the business entity as a separate being. (9) Others have focused on the Continental system's use of administrative regulations and civil law remedies to hold corporate malfeasance in check, arguing that those approaches are the functional equivalent of criminal liability in America. (10) Finally, and more broadly, some have suggested that American punishment of white-collar crime is but another manifestation of this country's more general penchant for overcriminalization and harsh punishment of crime--harsh, that is, in comparison to other countries like Germany. …