Crossing the fault line in corporate criminal Law.

Author:Sepinwall, Amy J.
  1. INTRODUCTION II. FINANCIAL WRONGDOING AND UNDISTRIBUTED RESPONSIBILITY A. The Tension Between Personal Culpability and Collective Action B. Corporate and Financial Wrongdoing III. SHARED RESPONSIBILITY A. Benefits-Based Accounts of Shared Responsibility B. Organization-Based Accounts of Shared Responsibility C. Shared Intention Accounts of Shared Responsibility D. Summary IV. SHARED RESPONSIBILITY FOR CORPORATE CRIME A. Executives and Group Action B. The Analytic Structure of a Responsibility Assignment C. Executives' Responsibility for a Group Transgression 1. The Object of Responsibility 2. The Non-Participating Executive's Connection to the Corporate Crime 3. The Ground of the Executive's Responsibility 4. The Magnitude of the Executive's Responsibility V. TRANSLATING THE EXECUTIVE'S LIABILITY TO BLAME INTO LIABILITY TO PUNISHMENT A. The RCO Doctrine VI. CRIMINAL LIABILITY FOR FAULTLESS CORPORATE EXECUTIVES A. Prosecuting Responsible Corporate Officers B. Punishing Responsible Corporate Officers C. When Should We Impose Criminal Liability on Corporate Officers? VII. CONCLUSION I. INTRODUCTION

    Why have there been so few prosecutions in the wake of the financial crisis? Official inquiries have found that rampant mendacity and fraud contributed to the meltdown. (2) Yet, if anything, the government has adopted a "gentler" response to financial wrongdoing in the last five years. (3) Why is this?

    We are told that the banks themselves are, in what has now become a depressing cliche, (4) "too big to fail." (5) But even to the extent that fear of systemic failure (or a general hostility to holding corporations criminally liable) (6) explains the lack of entity-level prosecutions, there is still the question of why virtually no individual executives at the wrongdoing entities have met the force of the criminal law. (7)

    The answer lies, I believe, in our unduly constrained understanding of culpability for crimes in organizational settings like the corporation. Culpability traditionally presupposes fault and, as John Coffee puts it, most of the heads of the wrongdoing banks are not "culpable enough by themselves to compare with [Enron's] Ken Lay, Jeff Skilling or the WorldCom CEO." (8) Judge Jed Rakoff, a federal district court judge in the Southern District of New York who has earned a reputation for standing up to Wall Street, (9) offers a similar diagnosis, speculating that the Department of Justice (DOJ) may have declined to prosecute high-level bankers because it believes that the bankers were not, or could not be proven to have been, at fault. (10)

    But fault is not everywhere and always the sine qua non of criminal liability. For example, other nations have well-established legal doctrines that allow for the heads of banks to incur criminal liability for wrongdoing in which they did not participate. (11) More sweepingly, fault may matter much less, morally and legally, when it is an organization, rather than an individual, that commits a crime. One might even contend that where a corporation has committed a crime, its leader is necessarily a criminal. (12)

    Deterrence grounds exist for straying from the fault principle. (13) Seeing an executive's head roll might well get corporate America's C-suites to clean up their acts. (14) At the same time, deterrence alone cannot justify criminal liability: We do not punish innocents solely for the deterrence gains we might thereby reap. This Article seeks to advance and defend the proposition that corporate executives deserve prosecution and punishment independent of their participation in their companies' wrongdoing and simply by virtue of their roles.

    The implications of such an analysis go far beyond the financial crisis. The failure to prosecute Wall Street bankers is but one example of the shortcomings of our impoverished conception of criminal responsibility. The larger theoretical ambition of this Article is to advance a novel account of shared criminal responsibility, under which one can be blameworthy even without the traditional hallmarks of culpability or fault. Instead, a member of a longstanding, institutional group may owe it to her fellows to accept blame, and sometimes even punishment, for the group's misdeeds, just by virtue of the loyalty group membership entails. This is especially so in the case of members who are expected to harbor a particularly strong commitment to the group, like a corporation's executives. For this reason, I focus on executive responsibility for corporate crime. The theory that corporate officers should be held responsible for corporate crime can and should reform our thinking about members' responsibility--both moral and legal--for the transgressions of other institutional groups too, like the university, the military, or even the nation-state. (15)

    The theory of shared responsibility advanced here departs notably from the foundational conception of culpability in Anglo-American common law, where culpability presupposes fault, and where fault is understood to arise only where one has made a causal difference to the occurrence of a wrongful act with a guilty mind. (16) This understanding of culpability is enshrined in our dominant criminal law doctrines. Thus, for example, Blackstone proclaimed that "to constitute a crime against human laws, there must be, first, a vicious will; and secondly, an unlawful act consequent upon such vicious will." (17) The focus on the individual's act and the individual's state of mind reflects an equally foundational commitment, viz. that "guilt is personal." (18) The understanding of culpability that emerges on the traditional view, then, is thoroughgoingly individualist: One is guilty, and hence punishable, only for what one has done and only if one has done it with a guilty mind. (19) As such, the notion that an individual may be punished for another's crime is one that criminal law doctrine accepts rarely and with resignation (20) and that most criminal law commentators meet with vituperation. (21)

    The traditional view represents the paradigmatic case of blameworthiness--but it is not the exclusive case. (22) It remains to be determined whether, and if so when, blame may be assigned under other circumstances. Elsewhere, I have argued for an expansion of corporate criminal liability for actions committed by a firm. (23) Here, I contend it is sometimes appropriate to hold a corporate executive individually responsible for the crime of her corporation, even when she made no causal difference to the crime's commission and even when she did not harbor a guilty mind.

    That a corporate executive is an appropriate target of blame does not itself establish that her blameworthiness ought to eventuate in criminal liability. But given the moral condemnation that attends the criminal law, I argue that it is appropriate to prosecute and punish at least some corporate executives, whether or not they bear fault for their corporation's crime. The argument is bound to perplex criminal law scholars and practitioners, but it is well-grounded in both legal and ethical theory, as seen in our practices of praising and rewarding (e.g., through contractual bonuses) group members independent of their causal contributions to the group's success and our allocation of credit and blame in group contexts more generally.

    Once I have argued that it is morally permissible to prosecute senior bankers for crimes to which they did not culpably contribute, I next seek to identify a doctrinal hook for their prosecution. The law provides the government with multiple ways to impose criminal liability upon the executive who did commit some individual wrong. (24) Importantly, however, none of these laws apply to an executive who neither intended nor knew about his corporation's crime in advance of its commission. And yet, we might ask, doesn't the existence of a corporate crime necessarily implicate the corporation's leaders? (25)

    Following the Article's epigraph, if no existing crime captures the blameworthiness of those who helmed the ships of the wrongdoing entities, then it is high time to redefine our criminal law doctrines. This Article's secondary aim is thus to identify a doctrinal hook for executive liability and to sketch the details of its application to cases of corporate and financial wrongdoing. To that end, this Article reviews the Responsible Corporate Officer (RCO) doctrine, which allows for the criminal liability of executives for corporate crimes they neither participated in nor culpably failed to prevent. (26) While the RCO doctrine has traditionally been restricted to the health and welfare context, I argue that it compellingly tracks the understanding of blameworthiness that I advance, and I urge expansion of the doctrine to corporate crime at large.

    The idea that someone might be held criminally liable without fault is not without precedent in the criminal law, but the formulation I advance is novel. Strict and vicarious criminal liability are longstanding (though widely reviled and purportedly embarrassing) (27) fixtures in our jurisprudence. The species of criminal liability I have in mind, however, is from both of these. Strict liability contemplates a defendant who commits the actus reus of a crime without a culpable mental state. (28) By contrast, the prosecuted executive here need have performed no criminal act. Vicarious liability contemplates a principal who comes to bear criminal responsibility for the crime of his agent. (29) Here, on the other hand, it is the principal--i.e., the corporation--that has committed the crime, and the agent--i.e., the executive--who would be prosecuted and punished. (30) Notwithstanding these differences, the three doctrines--strict, vicarious, and RCO liability--are spiritual cousins insofar as each challenges the unduly cramped understanding of responsibility in most of criminal law. The theoretical advances this Article provides might well be used to defend...

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