Corporate Criminal Liability

Article excerpt

    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
    C. To Hold a Corporation Liable for the Acts of its Employees,
       a Court Must Impute the Intent of the Individuals to the
       1. Conspiracies
       2. Mergers, Dissolutions, and Liability
       3. Misprision of Felony
       4. The Willful Blindness Doctrine
      5. The Collective Knowledge Doctrine
     A. Introduction: Purpose and Scope of the Organizational
        1. Controls on Prosecutorial Discretion
        2. Promulgation of the Organizational Sentencing
        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
        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


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 and occurs more frequently today, many prosecutors still proceed against corporations with great discretion, persuaded by the argument that punishing a corporation in effect punishes innocent stockholders and deprives them of their property. (4)

Yet the public outrage surrounding recent 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 recent investigations and prosecutions have targeted the wrongdoing of individual officers instead of prosecuting corporations. (6) It is likely that the new criminal penalties provided in Sarbanes-Oxley (7) will not increase prosecution of corporations except in cases where the organization has obstructed a federal investigation. (8) 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.... [W]here corporate corruption extends to a corporate cover-up, we will not hesitate to seek a corporate conviction." (9) Indeed, in accord with these statements, the Department of Justice ("DOJ") did not prosecute Global Crossing, a corporation mired in an accounting scandal, after the company complied with DOJ investigators. (10)

The broad range of principles guide the law of corporate criminal liability. These principles are outlined in the remainder of this Article. …


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