Corporate Criminal Liability

• Author: Michael Augustyn
• Pages: 637-666

CORPORATE CRIMINAL LIABILITY

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 638

II. ELEMENTS OF THE OFFENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 639

A. Employee Acts Within Scope of Employment . . . . . . . . . . . . . 639

B. Benefit to the Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 641

C. Corporate Mens Rea. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 642

D. Specific Applications of Corporate Criminal Liability . . . . . . . 643

1. Conspiracy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 643

2. Mergers, Dissolutions, and Liability . . . . . . . . . . . . . . . . 644

3. Misprision of Felony . . . . . . . . . . . . . . . . . . . . . . . . . . . 645

III. DEPARTMENT OF JUSTICE ENFORCEMENT POLICIES. . . . . . . . . . . . . . . . . 645

A. Controls on Prosecutorial Discretion. . . . . . . . . . . . . . . . . . . 646

B. Deferred Prosecution Agreements and Non-Prosecution

Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 647

C. Corporate Enforcement Policy . . . . . . . . . . . . . . . . . . . . . . . 649

IV. ORGANIZATIONAL SENTENCING GUIDELINES . . . . . . . . . . . . . . . . . . . . . 650

A. Introduction: Purpose and Scope of the Organizational

Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 650

1. General Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651

2. Organizations Covered by Chapter Eight of the

Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 652

3. Purpose and Effect of the Organizational Guidelines . . . . 652

B. Offenses Covered and Sanctions Permitted under the Guidelines 653

1. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 654

2. Probation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 655

3. Imposition of Fines . . . . . . . . . . . . . . . . . . . . . . . . . . . . 656

a. Base Offense Level . . . . . . . . . . . . . . . . . . . . . . . . . 658

b. Base Fine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 658

c. Culpability Score . . . . . . . . . . . . . . . . . . . . . . . . . . 659

i. Calculation: Aggravating Factors . . . . . . . . . . . 659

ii. Calculation: Mitigating Factors . . . . . . . . . . . . . 660

(1) Effective Corporate Compliance Programs . . 660

(2) Cooperation. . . . . . . . . . . . . . . . . . . . . . . 664

d. Multipliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665

e. Disgorgement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665

f. Implementation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 665

g. Departures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666

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I. INTRODUCTION

Corporate criminal liability, also called entity 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

The Supreme

Court did not clearly hold a corporation liable for a crime of intent until 1909,

when it was motivated in part by the need for effective enforcement of laws

intended to curb corporate abuses.

2

In 2002, Congress passed the Sarbanes-Oxley Act (“Sarbanes-Oxley”), which

exposed corporations to increased criminal liability for the actions of its employees

in response to corporate scandals at the turn of the millennium.

3

Similarly, in the

wake of the 2008 global financial crisis, Congress passed the Dodd-Frank Wall

Street Reform and Consumer Protection Act (“Dodd-Frank”) in 2010 to “promote

the financial stability of the United States by improving accountability and trans-

parency in the financial system, ... end[ing] ‘too big to fail,’ . . . protect[ing] the

American taxpayer by ending bailouts, ...protect[ing] consumers from abusive fi-

nancial services practices, and for other purposes.”

4

Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376

(2010); see also Damian Paletta & Aaron Lucchetti, Law Remakes U.S. Financial Landscape, WALL ST. J. (July

16, 2010), http://online.wsj.com/article/SB10001424052748704682604575369030061839958.html.

Dodd-Frank introduced signif-

icant changes to financial regulation by altering more than two dozen criminal

offenses, extending criminal liability to additional types of financial instruments,

and criminalizing other conduct for the first time.

Although armed with significant resources and legislation to hold corporate enti-

ties accountable for their part in the financial crisis, federal prosecutors are directed

to seek indictments against companies

5

U.S. DEP’T OF JUST., JUSTICE MANUAL §§ 9-28.000–9-28.1300 (2018) [hereinafter JUSTICE MANUAL],

https://www.justice.gov/jm/justice-manual.

rather than individuals.

6

See Matt Apuzzo & Ben Protess, Justice Department Sets Sights on Wall Street Executives, N.Y. TIMES

(Sept. 9, 2015) (criticizing prosecutors for failing to hold individuals accountable), http://www.nytimes.com/

2015/09/10/us/politics/new-justice-dept-rules-aimed-at-prosecuting-corporate-executives.html; see, e.g., Press

Release, U.S. Dep’t of Just., Five Major Banks Agree to Parent-Level Guilty Pleas (May 20, 2015), https://www.

justice.gov/opa/pr/five-major-banks-agree-parent-level-guilty-pleas.

To address

criticisms, the United States Department of Justice (“DOJ”) announced several

policies to increase accountability for individual employees.

7

See Memorandum from Deputy Att’y Gen. Sally Q. Yates on Individual Accountability for Corporate

Wrongdoing (Sept. 9, 2015), https://www.justice.gov/archives/dag/file/769036/download (highlighting six key

steps to strengthen prosecutions of individual wrongdoers).

This article outlines the principles that guide the law of corporate criminal liabil-

ity. Section II describes the three elements required to incur corporate criminal

1. See generally Kathleen F. Brickey, Corporate Criminal Accountability: A Brief History and an

Observation, 60 WASH. U. L.Q. 393 (1982).

2. Id. at 1482–83; N.Y. Cent. & Hudson River R.R. Co. v. United States, 212 U.S. 481, 494–95 (1909).

3. See Sarbanes-Oxley Act, Pub. L. No. 107-204, §§ 802–807, 116 Stat. 745 (2002); Valerie Watnick,

Whistleblower Protections Under the Sarbanes-Oxley Act: A Primer and a Critique, 21 FORDHAM J. CORP. &

FIN. L. 831, 831 (2007).

4.

5.

6.

7.

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