A new corporate world mandates a "good faith" affirmative defense.

• Author: Podgor, Ellen S.
• Position: Symposium: Corporate Criminality: Legal, Ethical, and Managerial Implications

INTRODUCTION

Initially, corporate criminal liability did not exist in the United States criminal justice system. (1) Because a corporation had no physical attributes, it could not perform an act; and because it had no mind, it could not have the mens rea necessary for finding criminal culpability. (2) Over the years, the barriers to corporate criminal liability disintegrated, with the Supreme Court eventually holding that corporations could be held liable under a vicarious liability theory. (3) Although corporate criminal liability is now accepted in the United States' criminal justice system, (4) only recently has there been a concerted effort to proceed criminally against corporations on a wide range of conduct. In the aftermath of corporate scandals like those related to Enron and Worldcom, and the establishment of the President's Corporate Fraud Task Force in July 2002, (5) the Department of Justice has moved with a new emphasis to curb corporate criminality. Congress has also met the challenge with legislation that imposes stricter compliance and more stringent oversight to curtail corporate criminality. (6)

Corporations have, for the most part, met these new demands and instituted effective compliance programs to "prevent and detect criminal conduct." (7) But despite the utmost "due diligence" in establishing and maintaining these programs, there is ultimately no truly effective program if there is any transgression from the law. Thus, corporations with the best of motives, with the best of efforts, and with the utmost in "due diligence" can still find themselves the subject of a criminal prosecution.

This essay advocates for the institution of an affirmative defense that corporations would be allowed to use when faced with possible criminal charges. To properly reward law-abiding corporations, an affirmative defense should be offered to those who present "good faith" efforts to achieve compliance with the law as demonstrated in their corporate compliance program.

Many scholars have proposed the use of "good faith" in the corporate world. For example, in 1993 Professor Laurie Levenson proposed a "good faith" defense for strict liability crimes. (8) She noted the recognition of this concept internationally and the need for the United States to learn from other countries. (9) Attorney H. Lowell Brown applied the "good faith" affirmative defense to the corporate context arguing that we needed to go beyond leaving the decision to prosecute within the hands of prosecutorial discretion. (10) Kevin Hoff, in a Note, recognized the importance of "good faith" in permitting evidence during a trial. (11) He believed juries needed to consider the fact that a rogue employee might be the cause of the corporate misconduct. (12) Professor William Laufer also spoke to "good faith" in discussing the shifting risks of liability. (13)

But despite the advocacy of these scholars, a "good faith" affirmative defense for corporations has not been incorporated into our legal system. This essay places these arguments in a new context. By demonstrating an increased exposure to criminal liability, the need for relief becomes apparent.

The first part of this paper begins by noting six relatively new developments that place an increased burden on corporate attempts to achieve compliance with legal mandates. Each of these burdens and responsibilities placed upon the corporation emphasizes the need to provide more support to corporations that make a "good faith" step in their compliance efforts. The second part of this paper considers the "good faith" affirmative defense offered to corporations on the civil side of the law. It notes that despite more severe ramifications for criminal conduct, an affirmative defense in the civil context is not replicated for the corporate entity facing criminal charges. The final part of this paper looks at the consequences of not having a "good faith" affirmative defense for corporate compliance. It notes that it is important in a post-Arthur Andersen world to protect law-abiding employees, shareholders, and the corporate entity from the ramifications of being held criminally liable when good faith efforts have been made to constrain rogue employees.

1. New Corporate Burdens and Responsibilities

   New legal developments make it increasingly difficult for corporations to comply with the law. The increased number of criminal statutes, (14) the addition of Sarbanes-Oxley legislation, (15) the specific addition of new federal criminal statutes for conduct that was previously handled on the administrative and regulatory level, and new scrutiny on the state level (16) make corporate compliance more difficult. Many new criminal statutes fail to include...