Criminalization of negligent acts by employees of U.S. and foreign corporations: more and more, prosecutors in the United States and elsewhere are mounting criminal proceedings in traditional tort situations. There's cause to be wary.

• Author: Dunn, Richard M.

WHILE the investigation of aircraft, maritime, train and pipeline incidents are normally regarded as the province of governmental administrative agencies, such as the U.S. National Transportation Safety Board (NTSB), increasingly they are becoming the subject of U.S. grand jury deliberations. Agencies such as the NTSB are charged with the duty of making factual determinations regarding the cause or causes of these accidents. Their findings sometimes lead to important operational changes that enhance safety. Now, however, many NTSB investigations are being superceded by federal and state prosecutor's offices, which, in cooperation with the Federal Bureau of Investigation and other prosecutorial agencies, are pursuing criminal allegations against companies that might otherwise be guilty of nothing more than negligence.

In view of this trend, it now behooves the civil defense practitioner to replace the familiar duality of parallel administrative and civil proceedings with a potential tripartite overlay of administrative investigations, civil suits and discovery, and criminal prosecutions.

Anticipating this triple threat is key. Often the criminal investigation remains undisclosed until after critical statements have been obtained by administrative agencies or important witnesses have been deposed by civil litigants. It is crucial for defense counsel to make an early assessment regarding potential criminal liability, because once disclosed, the statements and associated documents can and will be used by prosecutors against the client to support a criminal prosecution.

Indeed, defense and corporate counsel risk greater liability for their clients by making decisions regarding the degree of cooperation to be provided in civil matters without giving due consideration to the criminal ramifications. An unannounced criminal investigation will bring a level of subsequent scrutiny to bear on erroneous responses to written civil discovery requests or questions at deposition that can create consequences far different from those normally attending the civil proceeding.

The potential cooperation between the participants lined up against the client also creates some unique problems. Plaintiffs' attorneys will meet with prosecutors and supply information, documents and analysis obtained during the course of civil discovery. In turn, prosecutors will review court filings, depositions and other discovery to buttress their case. Prosecutors also can rely on the expertise of administrative agencies to guide their criminal inquiry. With prosecutors contacting former employees, grand jury subpoenas suddenly being issued for witnesses and documents and the need looming in the distance to coordinate three parallel proceedings, the job of leading a successful defense is simply growing more difficult.

SOME NEGLIGENCE PROSECUTIONS

In 1909, the U.S. Supreme Court set precedent against one of America's railroad giants by allowing the criminal prosecution of New York Central & Hudson River Railroad Co. and its agents for criminal liability to proceed. (1) For a broad host of reasons, including the interruption of two industry-favorable world wars, the next 75 years saw little in the way of similar corporate prosecutions. This trend began to reverse in 1978-80 when there was an attempt to prosecute Ford Motor Co. and its executives for the allegedly defective gas tank design of the Ford Pinto.

The trend now appears to be gaining steam. (2) According to the U.S. Sentencing Commission, somewhere between 200 to 300 corporations, partnerships and other business entities have been found guilty of criminal wrongdoing every year for the past 10 years. In some measure, the foundation for this trend was laid in the 1970s through enactment of criminal provisions to the Water Pollution Control Act, 33 U.S.C. [subsection] 1251-1387, the Clean Air Act, 42 U.S.C. [subsection] 7401-7462, and the Resource Conservation and Recovery Act, 42 U.S.C. [section] 6928(d). An Office of Criminal Enforcement was created within the U.S. Environmental Protection Agency in 1981.

The more recent acceleration of the trend, however, may arise from prosecutors' desires to achieve a higher level of impact amid both popular and corporate culture. The impact derives from directly threatening corporate executives with heavy fines and possible jail time. The public, tired of seeing "faceless" corporations absorb damage awards like so many body blows, probably enjoys the spectacle of the wizard not only exposed, but also tarred and feathered. The media attention generated by the penetration of the corporate facade can be counted on to carry the message of increased personal accountability directly to corporate management.

Whatever the sociological impetus, it is clear that the range of organizational misconduct being subjected to prosecutorial scrutiny is expanding rapidly in both scope and frequency. At the edge of this expansion is corporate conduct that might previously have been the object of civil liability based on theories of negligence alone.

TARGET: AVIATION INDUSTRY

The most recent hotspot in the ongoing criminalization of corporate behavior appears to be the aviation industry. This trend appears to have been kicked off by the 1991 federal indictment of several supervisory and management level employees at Eastern Airlines for falsifying maintenance records. The indictments in the U.S. District Court for the Southern District of Florida ultimately were dismissed because of violations of the federal Speedy Trial Act. 1991 also is the year changes in the federal sentencing guidelines governing organizational defendants went into effect in the United States. Given the gravity of multiple passenger and crew fatalities that can occur in major aviation accidents, the industry is perhaps a predictable target.

1. ValuJet Crash

   The U.S. Attorney's Office for the Southern District of Florida appears to be at the forefront of the trend and has announced publicly that criminal prosecution of aviation-related misconduct is one of its top priorities. The May 11, 1996, ValueJet Flight 592 crash, for example, has become a definitive case study for how nightmarish criminal complications can grow from parallel regulatory and civil proceedings. In rather short order, the cause of the crash was pinpointed to oxygen generators removed from service, improperly secured and then loaded into the cargo hold of the ValueJet MD 80. Both regulatory and law enforcement agencies had representatives at the scene of the crash almost from the beginning.

   Owing to the early knowledge of causation, the National Transportation and Safety Board and the Federal Aviation Administration vied along side criminal investigators for relevant evidence. The Federal Bureau of Investigation executed a search warrant at the maintenance company, SabreTech's, Miami facility and served wide-ranging grand jury subpoenas duces tecum on both SabreTech and Value Jet. The U.S. Attorney's Office, the FBI and the local Metro-Dade Police were present at the NTSB hearings investigating the crash. FBI agents and local law enforcement made night-time visits to employees at their homes in an attempt to obtain interviews. At one point, police officers were posted outside SabreTech's Miami facility in an effort to solicit information from employees coming and going to work.

   The scope of the criminal inquiry blossomed over the course of the investigation. SabreTech and three of its mechanics were charged by federal authorities in a 24-count indictment for conspiring to falsify aircraft records, falsifying aircraft records, violating hazardous materials regulations, and placing a destructive device on board an aircraft. It is important to note that a number of the counts involving the maintenance paperwork were unrelated to the crash in any way. (3)

   The lesson to learn is that companies must be prepared for the likelihood that any and all negligent conduct may become fair game once a criminal investigation is under way. Although SabreTech ultimately was acquitted of the federal charges based on its willful mishandling of the oxygen generators, it was convicted on the charge of reckless mishandling of the generators. SabreTech was slated to stand trial in October 2001 in Florida state court for 110 counts of third-degree murder and 110 counts of manslaughter--one count per each fatality in the crash. According to the assistant state attorney handling the case, the parties were scheduled in court in December 2001, when it was expected that the defendants would enter...