Mark Rothko, No. 8 (1952)
Module V – Corporate Externalities
Chapter 12
Corporate Criminality
Bar
exam
Corporate
practice
Law
profession
Citizen of
world
Corporations:
A Contemporary Approach
• Potential criminal actors
– Corporate agents
– Corporate supervisors
– Corporate entity
• Corporation as criminal
– Finding corporate intent
– Fines borne by Shs
• Corporate supervisors as criminals
– Strict liability
– Legal compliance programs
– Sentencing guidelines
Chapter 12
Corporate Criminality
Slide 2
of 15
How can corporation be criminal?
DGCL § 122. Specific Powers
Every corporation created under this
chapter shall have power to:
(4) Purchase and own property
(8) Conduct its business
(12) Transact any lawful business
(13) Make contracts
(14) Lend money
Corporations:
A Contemporary Approach
Chapter 12
Corporate Criminality
Slide 4
of 15
Who is responsible in corporation?
Contract/tort
creditors
Investors
Mgmt
Corporate
entity
Gov’t
regulator
Criminal
prosecutor
Corporations:
A Contemporary Approach
Chapter 12
Corporate Criminality
Slide 5
of 15
Who is responsible in corporation?
Contract/tort
creditors
Investors
PCV
Mgmt PCV
Corporate
entity
Gov’t
regulator
Criminal
prosecutor
Corporations:
A Contemporary Approach
Chapter 12
Corporate Criminality
Slide 6
of 15
Who is responsible in corporation?
Contract/tort
creditors
Investors
PCV / direct?
Gov’t
regulator
Mgmt
Corporate
entity
Criminal
prosecutor
Corporations:
A Contemporary Approach
Chapter 12
Corporate Criminality
Slide 7
of 15
Who is responsible in corporation?
Contract/tort
creditors
Investors
Gov’t
regulator
Mgmt
Corporate
entity
Criminal
prosecutor
(employees)
Corporations:
A Contemporary Approach
Chapter 12
Corporate Criminality
Slide 8
of 15
Classic sociopathic personality:
manipulating, grandiose,
lacking in empathy, denies
responsibility for its actions,
and cannot feel remorse …
Corporations:
A Contemporary Approach
Chapter 12
Corporate Criminality
Slide 9
of 15
State v. Christy Pontiac-GMC
(Minn 1984)
Corporations:
A Contemporary Approach
Chapter 12
Corporate Criminality
Slide 10
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Jim Christy
Board
Criminal
prosecutor
Officers
Corporation
Phil Hesli
Gary Swandi
Corporations:
A Contemporary Approach
Chapter 12
Corporate Criminality
Slide 11
of 15
Jim Christy
Board
Bench
trial
Officers
Corporation
Phil Hesli
Corporations:
A Contemporary Approach
Chapter 12
Corporate Criminality
Slide 12
of 15
Can corporation be criminal?
“Unless legislature expressly
excluded corporations from
criminal liability … corporations
are to be considered persons
within the meaning of the
Criminal Code.”
Corporate criminal intent?
“Corporation can be liable in civil
tort for both actual and punitive
damages for libel, assault and
battery, or fraud, … also
criminally liable for conduct
requiring specific intent.”
State v. Christy Pontiac-GMC (Minn 1984)
Corporations:
A Contemporary Approach
Chapter 12
Corporate Criminality
Slide 13
of 15
How show criminal intent?
(1) agent acting within course/scope of
employment, having authority to act
for corporation wrt particular
corporate business
(2) agent acting in furtherance of
corporation’s business interests
(3) criminal acts authorized, tolerated, or
ratified by corporate management.
Notes
•
•
(1) (2) (3) beyond civil liability
Federal crimes:
(3) [not required]
•
Model Penal Code:
(3) conduct “authorized, requested,
commanded, performed or
recklessly tolerated by board or
manager.”
State v. Christy Pontiac-GMC (Minn 1984)
Corporations:
A Contemporary Approach
Chapter 12
Corporate Criminality
Slide 14
of 15
Unanswered questions:
• Criminal vs. private liability: why not let “victim” GM pursue
private remedies? What happened to Christy Pontiac?
• Corporation as criminal: what does court say about effect
of fines? And why does corporation appeal $1000 fine?
• Corporate intent: if conviction based on “corporate policy,”
can “compliance program” negate?
• Evidence of intent: If Christy tolerated graft (corporate
policy), why not enough evidence to send him to trial?
• Double jeopardy: how is fine of Christy Pontiac-GMC
different from fine of Jim Christy?
Corporations:
A Contemporary Approach
Chapter 12
Corporate Criminality
Slide 15
of 15
"Criminal Corporate Character"
In the last few years, corporations have been accused
of crimes ranging from environmental pollution
on an unprecedented scale, to manslaughter, to
election tampering, to large-scale antitrust
violations.
Many of these accused companies had previously
committed similar acts or even the exact same
offense.
Unfortunately, the rules of evidence in the federal
system and in virtually every state system prohibit
the use of this information in a prosecution for such
crimes.
Lawyers, judges, and Federal Rules of Evidence and
their state counterparts -- make it unambiguously
clear that corporations are not covered by the
same principles regarding character as individuals.
Corporations:
A Contemporary Approach
Chapter 12
Corporate Criminality
ROBERT E. WAGNER,
City University of New York (CUNY)
Baruch College Zicklin School of Business
Slide 16
of 15
Corporate “death penalty” …
Corporations:
A Contemporary Approach
Chapter 12
Corporate Criminality
Slide 17
of 15
More questions:
• Does corporate “death penalty” go beyond goals -retribution, incapacitation and deterrence?
• Is “deferred prosecution agreement” violation of due
process? (Treat corporate execs like drug dealers?)
• Which shareholders get “fined” in public
corporations? Is this fair?
Corporations:
A Contemporary Approach
Chapter 12
Corporate Criminality
Slide 18
of 15
Going after corporate execs …
Jeff Skilling
(CEO Enron)
Corporations:
A Contemporary Approach
Chapter 12
Corporate Criminality
Slide 19
of 15
Going after corporate execs …
• Standard of liability
– Strict liability: “responsible corporate agent” (subject to
compliance-program defense)
– Wrongful failure to supervise: knowledge of harm and
acquiescence
• Compliance program
– Effect of Sentencing Guidelines – why would directors ever
not have one?
– Aren’t Sentencing Guidelines counter-productive – by asking
for more harshness, they induce judicial leniency?
Corporations:
A Contemporary Approach
Chapter 12
Corporate Criminality
Slide 20
of 15
The end
Corporations:
A Contemporary Approach
Chapter 12
Corporate Criminality
Slide 21
of 15
Going after corporate execs …
•
"The Effect of Deferred and Non-Prosecution Agreements on Corporate Governance: Evidence from 19932013" WULF A. KAAL, University of St. Thomas, Minnesota - School of Law, European Corporate
Governance Institute (ECGI)Email: kaal8634@stthomas.eduTIMOTHY LACINE, University of St. Thomas
(Minnesota)Email: timlacine@hotmail.comNon- and Deferred Prosecution Agreements (N/DPAs) are
controversial because prosecutors, not judges or the legislature, are changing the governance of leading
public corporations and entire industries. To analyze N/DPAs’ corporate governance implications and
provide policy makers with guidance, the authors code all publicly available N/DPAs (N=271) from 1993 to
2013, identifying 215 governance categories and subcategories. The authors find evidence that the
execution of N/DPAs is associated with significant corporate governance changes. The study categorizes
mandated corporate governance changes for entities that executed an N/DPA as follows: (1) Business
Changes, (2) Board Changes, (3) Senior Management, (4) Monitoring, (5) Cooperation, (6) Compliance
Program, and (7) Waiver of Rights. The authors supplement the analysis of governance changes in these
categories with a more in depth evaluation of the respective subcategories of governance changes. The
authors also code and analyze preemptive remedial measures, designed by corporations to preempt the
execution of an N/DPA or corporate criminal indictment. The paper evaluates the implications of the
empirical evidence for boards, management, and legal practitioners.
Corporations:
A Contemporary Approach
Chapter 12
Corporate Criminality
Slide 22
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