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
        6. Case Law Concerning 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

The current law of corporate criminal liability developed as courts struggled to overcome the problem of assigning criminal blame to fictional entities in a legal system based on individual moral accountability. (1) Courts resolved this issue slowly, beginning with the civil law-based doctrine of respondeat superior (2) and gradually injecting 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 and occurs more frequently today, many prosecutors still proceed against corporations with great discretion, persuaded by the argument that punishing a corporation in reality punishes innocent stockholders and deprives them of their property. (4) However, recent corporate scandals have increased public focus on corporate governance and accounting practices. Calls for tougher penalties by investors who have been harmed by unethical and illegal accounting practices may increase the number of prosecutions of corporations. (5) For example, Arthur Anderson was convicted of obstructing the Securities and Exchange Commission's investigation of Enron's audit documents. (6)

Public outrage surrounding this scandal and other similar incidents built the momentum necessary for the passage of the Sarbanes-Oxley Act of 2002. (7) Although the Sarbanes-Oxley Act exposes corporations, officers, and employees to increased criminal liability, most recent investigations and prosecutions have targeted wrongdoing by individual officers instead of prosecuting corporations. (8) It is likely that the new criminal penalties provided in Sarbanes-Oxley (9) will not increase prosecution of corporations except in cases where the organization has obstructed federal investigation. (10) In a speech before the Corporate Fraud/ Responsibility Conference, Attorney General John Ashcroft suggested that prosecutors should seek indictments for companies that obstruct federal investigations "corporations that choose to prolong the damage to the public by refusing to cooperate with investigators should be forewarned: if you obstruct, if you impede--you leave your company vulnerable to public indictment, prosecution, and conviction. …