Academic journal article American Criminal Law Review

Corporate Criminal Liability and the Potential for Rehabilitation

Academic journal article American Criminal Law Review

Corporate Criminal Liability and the Potential for Rehabilitation

Article excerpt


In December 2008, Siemens AG, the multinational German corporation with over 400,000 employees and annual revenues in excess of 70 billion [euro], entered a guilty plea to violating the Foreign Corrupt Practices Act (FCPA). The company agreed to pay a $450 million criminal fine and disgorged profits of $350 million in a related SEC civil enforcement action. This was by far the largest FCPA fine ever paid, and marked a significant turning point in international business corruption enforcement. (1) Just two months later, in February 2009, UBS AG, Switzerland's largest bank, entered in to a deferred prosecution agreement with the Department of Justice that included a payment of $780 million in fines, penalties, and interest for aiding United States citizens to avoid paying taxes on undeclared accounts at the bank. More importantly, the Swiss bank agreed to turn over information about its American clients to the IRS, apparently the first time in history the wall of secrecy surrounding Swiss banking operations had been breached on a significant scale. (2)

Each company undertook an extensive internal investigation to ascertain wrongdoing by corporate employees and agreed to restructure its operations to ensure future compliance with United States law. If the potential for criminal charges being filed against the companies had not been available, would either corporation have done anything to rectify the misconduct that occurred within the organization? While one can bemoan corporate criminal liability as a "weed" growing in the legal system, (3) it cannot be denied that the potential for criminal prosecution of an organization apart from its individual agents can serve important law enforcement purposes.

Yet the notion of corporate criminal liability continues to be questioned as an unwarranted extension of the criminal law that gives prosecutors too much authority over companies that feel compelled to cooperate. Recently, Andrew Weissmann proposed narrowing the scope of corporate criminal liability by requiring that the "government should bear the burden of establishing as an additional criminal element that the corporation failed to have reasonable policies and procedures to prevent the employee's conduct." (4) Professor Ellen Podgor went a step further in proposing a "good faith" affirmative defense if the company made efforts to achieve compliance with the law. (5)

Some have even asserted that the criminal sanction should be reserved solely to individuals rather than incorporeal organizations that cannot form criminal intent or act on its own, leaving the regulation of businesses to civil enforcement programs. For example, Professor Parker asserts that "there is no legitimate function of corporate criminal liability that cannot be served equally as well, if not better, by civil enforcement." (6) Mr. Lynch of the Cato Institute stated, "[p]olicymakers should excise the doctrine of corporate criminal liability from American law." (7) Professor Baker argues, "[m]odern corporations are abstract, impersonal, utilitarian entities lacking emotions and a personal story, and as such they do not deserve sympathy simply because they are not human. For that reason alone, they should not be the subjects of criminal prosecutions." (8)

So much has been made about prosecutorial unfairness in treating corporations, that some multibillion dollar enterprises have been bullied by the Department of Justice to cooperate with the government by acknowledging guilt and then turning over records and employee statements regardless of guilt or innocence. And for what crimes? According to former Attorney General Dick Thornburgh, Congress has adopted "artificial crimes" that criminalize acts which cause no cognizable harm to people or property." (9)

The demise of Arthur Andersen after its conviction in 2002 for obstruction of justice is often used to "prove" the purported overwhelming power of prosecutors and the trembling fear of corporations who dare not risk going to trial under any circumstances lest they face near-certain destruction. …

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