#17091 - Corporate Liability Federal And Mpc Approaches - Criminal Law

• 3 elements

  • (1) corporate agent commits crime

    • Regardless of where the agent is in the hierarchy

  • (2) within the scope of his employment

    • Even if conduct is against explicit policy and instructions (Hilton Hotels)

    • Policy:

      1. Even with formal polices, informal corporate culture, practices or incentive structures implicitly encourage criminal practice (too easy of a defense)

      2. Corporation still benefits from the crime

      3. Corporation is the best position to control/stop crime; when they fail they should be liable

  • (3) with intent to benefit the corporation

    • Even if the corporation is not actually benefited (Sun Diamond)

    • Policy

      1. Corporation is in best position to control/stop crime

• If (2) or (3) not met but corporation ratifies agent's action (ex. Approval by superior) > liable

• Very broad liability, the rest is left up to prosecutorial discretion

• Reasons to charge

  • Expressive - send signal that this behavior is bad and will not be tolerated

  • Change - change corporate culture and practices

  • Reputational hit - cause a hit to the company's reputation

  • Vs. civil action - if just fines, companies will consider that a cost of doing business

  • Use this to pressure corporation to cooperate with prosecutors (if cooperate, give discounts to punishment)

  • Want to incentivize companies to investigate internally and turn in individuals doing criminal activity

  • Want company to go out of business (Arther Anderson - bad auditing, no reason to keep)

  • Pervasive wrongdoing in corporation

• Reasons not to charge

  • Collateral consequences - impact on the shareholders, employees, consumers, economy (too big to fail/jail banks - if shut down cause ripple negative effects)

    • Consider if company is publicly or closely held

  • Company is victim

    • Charging would lead to the company's collapse (esp due to hit to reputation)

    • Lead to deprivation of federal licenses critical to the business operation

  • Difficult to secure conviction

  • Want to incentivize companies to investigate internally and turn in individuals doing criminal activity

  • DPA/NPAs adequate

• 3 ways to hold corporation liable

• 2.07(1)(a): only applies to violations

  • Offense is violation OR non-MPC statute where legislative purpose to imposed liability on corp plainly appears) AND conduct is (1) performed by agent of corporation (2) acting in behalf of the corporation within the scope of his office or employment

  • V = ticket offenses, fines, no imprisonment

  • (5) Due diligence defense: if can prove HMA used due diligent to prevent crime's commission (unless SL offense)

• 2.07(1)(b) offense is an omission to perform duties specifically imposed on the corporation by law

• 2.07(1)(c) commission of crime was authorized, requested, commanded, performed or recklessly tolerated by the board of directors or high managerial agents acting in behalf the corporation within the scope of his office or employment

  • t-HMA def in (4c) - agents with such responsibility that his conduct might fairly be assumed represent the policies of the company

  • OR look to the state's definition

  • Beneficial - employee, even if low-level, had high responsibility with respect to particular business function > corp responsible

• Rationale for limiting liability

  • Company is more culpable if it directly contributed to the crime

  • Less/not culpable if only a lower level employee committed the crime; unfair to hold corporation liable

• Dominant/fed approach does not like this because

  • Difficult for prosecutors to prove who is high enough to be a HMA

  • Want to use broad liability to secure cooperation

  • Incentivize company to monitor and ferret out wrongdoing and create law abiding culture

1. Corp agent commits crime

> No matter where in hierarchy

> can argue collective knowledge

2. Within scope of employment

> even if against explicit policy/instruction (Hilton)

3. w/ intent to benefit corp

> even if corp not actually benefitted, but harmed (Sun Diamond)

If 2/3 not met but corp ratifies action > liable

Rest: prosecutorial discretion

• alternatives: fines, compliance programs, NPAs, DPAs

• consider collateral damages

1(a): violation + corp agent commits crime + within scope of employment

• due diligence defense: HMA used due diligence to prevent commission of crime (unless SL offense)

1(b): omission to perform duty imposed by law

1(c): crim conduct authorized, requested, commanded, performed, recklessly tolerated by board of directors or high managerial agent

• HMA: person with such responsibility that his conduct can fairly be assumed to represent policy of corp (Beneficial- HMA = high responsibility wrt particular business function, even if low level)