A context for evaluating Department of Justice policy on the prosecution of business organizations: is the Department of Justice playing in the right ballpark?

• Author: Hasnas, John
• Position: Reducing Corporate Criminality: Evaluating Department of Justice Policy on the Prosecution of Business Organizations and Options for Reform

1. INTRODUCTION

   Federal criminal law permits the prosecution of business organizations for crimes committed by their employees acting within the scope of their employment with the intent to benefit the organization. This means that United States Attorneys must decide when to bring charges against business organizations as collective entities. They do so on the basis of guidance provided by The Principles of Federal Prosecution of Business Organizations, which, in its current incarnation, is known as the Filip Memorandum.

   How good is this guidance? Does this document correctly identify the conditions that justify the prosecution of an organization in addition to or instead of its individual employees? What are the goals of prosecuting business organizations? Is current Department of Justice ("DOJ") policy well-designed to realize them? Can it be reformed to do so more effectively?

   The purpose of this symposium is to answer these questions. Doing so requires both an understanding of the normative purposes of the criminal law and a high level of empirical expertise in the science of human behavior. Although I can lay claim to the requisite normative understanding, I do not possess the equally necessary empirical expertise. Fortunately, that expertise is being supplied by my fellow symposiasts. This situation suggests that my most valuable contribution to the symposium would be to provide a normative context for the empirical information supplied by my fellow contributors. I attempt to do that in what follows.

   To evaluate the merits of any policy, one must know what purpose it serves--what goals the policy is designed to help its adherents achieve. Hence, in Part II, I begin my analysis by identifying the purpose of imposing criminal liability on business organizations. With this knowledge in hand, in Part III, I explore the situations in which threatening to impose criminal liability on business organizations can advance this purpose. In Part IV, I draw two substantive implications that follow from this analysis of the proper range of application of DOJ policy. Finally, in Part V, I conclude.

2. PURPOSE

   One evaluates a policy by asking whether it is well adapted to its purpose. Such a question implies, of course, that one knows what purpose the policy is designed to serve. Thus, to evaluate the DOJ's policy on the prosecution of corporations, (1) we must first know what purpose is served by prosecuting corporations.

   Unfortunately, the purpose served by imposing criminal punishment on corporations is rather obscure. To begin with, the traditional purposes of the criminal sanction that justify the punishment of individuals--retribution, rehabilitation, and deterrence--do not apply to corporate entities. To see why, it is important to keep in mind precisely what corporate criminal liability is. Corporate criminal liability does not supplant the personal criminal liability of the individual or individuals who commit crimes; it supplements it with an additional form of strict, vicarious liability. (2)

   Corporations have no bodies or minds of their own. They can act only through their human agents. For purposes of criminal liability, the actions of a corporation's agents are attributed to the corporation under a respondeat superior theory of liability. Corporate criminal liability is strict liability in the sense that there is no need to find any fault on the part of any supervisory official for the corporation to be guilty of its employees' crimes. If an employee commits a crime within the scope of his or her employment, the corporation is instantly and simultaneously guilty of that crime.

   It is clear that neither retribution nor rehabilitation can be the purpose of such a form of criminal liability. Retribution--the process of requiting evil with evil--may be warranted against an individual employee who commits a crime because he or she has engaged in personal wrongdoing. But it cannot be the objective of corporate criminal liability, in which there is liability without fault. Without fault, there is no separate corporate evil to requite. Similarly, rehabilitation consists of the effort to improve the character of one who has manifested his or her dangerous or anti-social nature through his or her criminal activity. While rehabilitation may be appropriate for the employee who commits a crime, it cannot be the purpose of imposing liability without fault. Without fault, there is nothing to rehabilitate.

   Deterrence also cannot be the purpose of corporate criminal liability, at least as deterrence is traditionally understood within the context of a liberal legal system. In a liberal society, the deterrence that can justify criminal punishment refers to the imposition of punishment on a wrongdoer to discourage both the wrongdoer and others from committing similar offenses in the future. It does not refer to the imposition of punishment on those without fault whenever doing so may reduce the overall level of criminal activity. Correctly understood, deterrence can be the purpose of punishing the individual employee who violated the law because he or she has engaged in wrongdoing. But, in a liberal society, it cannot be the purpose of punishing a party who has not engaged in criminal activity for the actions of another who has.

   In short, the traditional purposes of imposing criminal punishment on those who engage in personal wrongdoing cannot be the purpose of imposing an additional layer of criminal liability upon the wrongdoer's employer when the employer is without fault. (3)

   It is sometimes asserted that the purpose of imposing punishment on corporations is to ensure that serious crimes do not go unpunished. For instance, in New York Central & Hudson River Railroad Co. v. United States, (4)--the case that created corporate criminal liability--the court stated:

   [W]e see no good reason why corporations may not be held responsible for and charged with the knowledge and purposes of their agents, acting within the authority conferred upon them.... If it were not so, many offenses might go unpunished and acts be committed in violation of law, where, as in the present case, the statute requires all persons, corporate or private, to refrain from certain practices forbidden in the interest of public policy. (5) Indeed, in United States v. Hilton Hotels Corp.,6 the court suggested that corporate criminal liability is necessary because of the difficulty of obtaining convictions of the individuals who commit crimes within corporations.

   Complex business structures, characterized by decentralization and delegation of authority, commonly adopted by corporations for business purposes, make it difficult to identify the particular corporate agents responsible for Sherman Act violations. .... In sum, identification of the particular agents responsible for a Sherman Act violation is especially difficult, and their conviction and punishment is peculiarly ineffective as a deterrent. At the same time, conviction and punishment of the business entity itself is likely to be both appropriate and effective. (7) A moment's reflection, however, should convince one that ensuring that crime does not go unpunished cannot be the purpose of imposing criminal liability on corporations. This is because precisely the same evidence that is required to convict the individual is required to convict the corporation. The offense of the corporation is entirely coincident with the offense of the employee. To be able to convict the corporation, a prosecutor must already have sufficient evidence to convict the individual. Contrary to what is suggested by Hilton Hotels, unless a prosecutor can identify an individual employee who committed an offense within the scope of his or her employment with the intent to benefit the corporation, the prosecutor cannot convict the corporation. (8) Purely as a logical matter, the existence of corporate criminal liability cannot result in punishment for any offense for which an individual conviction cannot already be obtained. (9)

   What, then, are the purposes served by allowing the punishment of corporations for the offenses committed by their employees? I submit that there is only one: reducing criminal wrongdoing by corporate employees by coercing corporations into undertaking a policing function. (10) The purpose of imposing strict criminal liability on one party for the criminal actions of another can only be to motivate the first party to suppress the criminal activity of the second. The only reason for threatening an entire business organization with punishment for the crimes of any of its employees is to cause the organization to actively discourage criminal wrongdoing by its employees. (11)

   The problem with this is that using the criminal sanction for such a purpose is utterly inconsistent with the moral values inherent in a liberal legal system. Liberal societies eschew vicarious criminal liability. We could undoubtedly greatly reduce crime if we threatened to punish the family, friends, or fellow community members of those who commit crimes. We do not because it would violate the respect for individual autonomy that lies at the heart of a liberal society, and because it reminds us too much of the policies of collective punishment associated with fascist regimes. Yet, threatening to punish the members of a corporation who are without fault for the crimes of their colleagues is, in principle, indistinguishable from such schemes. (12)

   Further, use of corporate criminal liability to compel corporations to undertake a policing function is tantamount to a violation of the principle of legality (nulla poena sine lege)--the fundamental liberal principle that forbids punishment without violation of law. (13) The state or federal legislatures could pass criminal statutes requiring corporations to undertake efforts to suppress criminal activity by their employees. They have not. Hence, threatening corporations with...