Corporate Criminal Liability: End It, Don't Mend It.

• Author: Smith, Stephen F.

INTRODUCTION 1089 I.THE NORMATIVE BANKRUPTCY OF "ENTITY LIABILITY" IN CRIMINAL LAW 1091 II.CORPORATE CRIMINAL LIABILITY AS OVERCRIMINALIZATION 1096 III.CORPORATE CRIMINAL LIABILITY OFFENDS BEDROCK DOCTRINES OF CRIMINAL LAW 1101 CONCLUSION 1107 INTRODUCTION

In the federal system, corporate criminal liability owes its existence to a remarkably unreasoned decision of the Supreme Court. In New York Central & Hudson River Railroad Co. v. United States, the Court held that, just as in tort law, corporations are vicariously liable for crimes committed by corporate officers and employees within the scope of their employment. (1) Essentially, if vicarious corporate liability based on respondeat superior was good enough for tort law, it was good enough for criminal law. The Court made no attempt to square that sharp break from prior law (2) with established doctrines positing that criminal liability requires what would later be described as an "evil-doing hand and evil-meaning mind." (3)

Over the years, scholarly proponents of corporate criminal liability have strived mightily to supply a justification for the New York Central rule that corporations are vicariously liable for all job-related crimes committed by their employees. These arguments basically take one of two forms. One line of argument is consequentialist in nature, positing that modern corporations are simply too powerful, in terms of their wealth and impact on modern society, to be left solely to regulation by administrative agencies and tort law. (4) The second line of argument contends that, despite their fictional status, corporations can and often do merit moral blame (and thus punishment) separate and apart from their officers and employees. (5)

These arguments, of course, have not gone unchallenged. Criminal law and jurisprudence scholars have argued that, because corporations cannot act except through their officers and employees, it is both incoherent and unjust to blame corporations (and, ultimately, their innocent shareholders) for crimes committed by their agents. (6) The guilt for corporate crime rests solely with the offending officers and employees although the corporations remain answerable under civil law. For their part, law-and-economics scholars add that criminal punishment of corporations is unnecessary at best, if not inefficient, because civil regulation can fully and more readily achieve all of the law-compliance goals of criminal prosecutions. (7)

My purpose in this brief Article is to offer an additional response to the arguments in favor of corporate criminal liability. Part I shows that, apart from corporate criminal liability, (8) entity liability does not exist in criminal law (and for good reason). Part II seeks to reframe the debate over corporate criminal liability as a reprise of the longstanding phenomenon of overcriminalization, in which criminal law is used symbolically or to address problems adequately dealt with through other means. Part III contends that corporate criminal liability, as it exists in the federal system, (9) is fundamentally incompatible with established principles governing criminal liability. Corporate criminal liability should be abolished and replaced with more robust civil regulation of businesses and increased prosecution of lawbreaking employees.

1. THE NORMATIVE BANKRUPTCY OF "ENTITY LIABILITY" IN CRIMINAL LAW

   Perhaps because corporate criminal liability remains so controversial in academic circles, some commentators have sought to repackage the doctrine as a more generalizable principle. In this view, corporate punishment is nothing special but merely an example of what is referred to as "entity liability" in criminal law. (10) How can it be controversial to hold corporations criminally liable when other entities are also subject to punishment? This argument is appealing except for one inconvenient fact: "entity liability" simply does not exist in criminal law; it is a rule only for corporations and other means of doing business.

   Although my primary claim here is a descriptive one--that, today, corporations and other forms of doing business are the only entities that face federal criminal liability--a word is in order at the outset about the historical development of corporate criminal liability in U.S. law. Throughout the early development of corporate criminal liability, the law had in mind municipalities (also known as "municipal corporations") and certain public transportation facilities, as opposed to the private commercial enterprises we now think of as "corporations." (11) Corporate criminal liability thus originally arose as a means of regulating "public and quasi-public corporations." (12)

   Today, however, corporate criminal liability deals specifically with lawbreaking within private enterprises. For other entities, criminal punishment would now be unthinkable, which gives rise to the following conundrum: "We would never dream of criminally punishing a city... for its criminogenic qualities, much less its 'character' flaws. Why, then, are we so bent on doing the same to corporations?" (13) Why indeed!

   Federal racketeering laws provide an example of an important area of law in which "entity liability" does not exist. Organized crime syndicates obviously differ from corporations because they lack legally-recognized existence and exist for unlawful purposes. Otherwise, however, they bear much in common, structurally speaking, with corporations. Like corporations, they are ongoing entities that can only act through their individual members. More to the point, organized-crime syndicates, no less than corporations, are powerful institutions that have a major impact on the national and global economies. (14) Indeed, they are often hierarchically organized and diversified in the manner of major corporations. (15) It is for these reasons that Congress took aim at organized crime in 1970 with the landmark RICO law, which sought nothing less than the eradication of organized crime. (16)

   As much as Congress wanted to wipe out organized crime, RICO did not impose criminal liability on organized crime syndicates themselves. Instead, RICO took aim only at those who commit racketeering crimes under the auspices of organized crime. (17) The organization itself is relevant under RICO only in so far as it elevates other federal and state crimes into RICO violations.

   Subsection 1962(c), the most commonly used basis for substantive RICO charges, is instructive. It imposes civil and criminal liability on the persons "employed by or associated with" organized-crime syndicates or other RICO "enterprises" who "conduct, or participate in the conduct of, the [enterprise's] affairs" through a "pattern of racketeering activity." (18) Although, as used in federal law, the term "persons" can be construed to encompass corporations and certain other legal entities depending on context, (19) RICO defines "person" narrowly so as to exclude organized crime syndicates. (20) Congress thus recognized that the vital objective of eradicating organized crime could be fully accomplished by taking aim at those who commit the racketeering activities that render organized crime so dangerous.

   To be sure, the analogy to organized crime cannot be pressed too far. After all, there would be considerable practical difficulties with authorizing direct prosecution of organized-crime syndicates. For example, even if Congress could satisfactorily define "organized crime" (an effort that confounded lawmakers in the years preceding RICO's passage), (21) organized crime syndicates differ from corporations in that they have no assets in their names that might be used to pay criminal fines. These obstacles are not insuperable, however, at least when it comes to Mafia organizations and other highly structured syndicates. In such organizations, the members of the ruling body (such as the Commission of La Cosa Nostra) could be required to pay the fines imposed on their organizations. Moreover, RICO's asset-forfeiture provisions demonstrate faith that investigation can allow enforcers to reach concealed interests that were illegally acquired, held, or used by organized-crime syndicates. (22)

   In any event, police departments constitute an even closer (and timely) analogy to corporations for present purposes. The practical problems that would attend punishing organized-crime syndicates are completely absent in the case of police departments. Police departments, like corporations, have a legally recognized existence, a chain of command, and assets that might be used to pay criminal fines. The buzzwords supporters of corporate criminal liability often use--institutional "cultures," "reputations," "character," and the like--also apply to police departments. (23)

   Although all police departments presumably employ officers who occasionally use their authority in ways that violate federal law, many police departments have systemic problems that regularly produce unconstitutional policing. These troubled departments might have rogue leadership (such as former Los Angeles Police Chief Daryl Gates and former Maricopa County, Arizona Sheriff Joseph Arpaio) or training modules or policies that facilitate constitutional violations, or they might have deficient disciplinary processes that allow bad officers to remain on the force. (24) These departments are said to have a "pattern or practice" of constitutional violations and, as such, are subject to federal structural reform to ensure that they will operate lawfully. (25)

   Importantly, Congress recognized that the proper role of federal criminal law in combating unconstitutional policing is to punish the individual officers who violate federal law but not the departments under whose authority they act. Officers who deprive people of federally guaranteed rights and privileges are subject to prosecution and conviction in federal court. (26) Even if the departments that employed and trained the officers...