by Miriam Baer
For scholars, jurists and other observers, the body of doctrines collectively known as “corporate criminal law” continues to generate questions about its provenance and mission. Is it just another form of criminal punishment, whose weaknesses mirror the weaknesses we encounter throughout the criminal justice system generally? Or is it so different in design and execution that it functions as something wholly different from criminal law, prompting its own set of first principles and challenges? Should we think of corporate criminal law as a form of regulation, as just another manifestation of criminal law, or as something more transformative that can be used to spur systemic changes in how our society relates to the private sector and to government generally?
I examine these competing viewpoints in two recent pieces: Corporate Criminal Law Unbounded, a book chapter in the Oxford Handbook on Prosecutors and Prosecution, and Three Conceptions of Corporate Crime (and One Avenue for Reform), a piece written for a symposium on corporate enforcement hosted last year by Duke Law School and its journal Law and Contemporary Problems.
The Unbounded chapter describes the ways in which corporate criminal law all but ignores three foundational principles that are often said to define and internally restrain criminal law. For example, a quick glance of one of the leading criminal law casebooks[1] advises the first-year law student that criminal law embodies three foundational concepts: legality, culpability and limited punishment. Although these concepts are admittedly aspirational, they combine to project an image of criminal law as distinct from common law subjects and therefore exceptional in both form and mission.
What Distinguishes Criminal Law
Because criminal law grants the state the power to deprive its citizens of liberty, property and sometimes life, we at least theoretically place a series of additional constraints on its execution. Criminal law stands apart from torts or property because it is statutorily derived, it ordinarily requires proof of a culpable mental state, usually of at least recklessness, and because it seeks to impose, by way of graded statutes and formal and informal sentencing practices, a type of limited punishment on offenders that accords with the wrongfulness or dangerousness of their behavior. These are the internal limitations that first-year law students learn when they first study criminal law.
Now, I don’t mean to suggest that our criminal justice system universally adheres to these limitations. Much of the first-year course addresses those areas where criminal law diverges from the principle of legality (i.e., when judges, prosecutors or regulators effectively promulgate criminal law’s substance) and where it falls short of criminal law’s culpability and punishment limitations. Indeed, when the criminal justice system gives up on even trying to meet these goals, enforcement institutions lose legitimacy and the support of the governed.
How Corporate Criminal Law Diverges from the Rest of Criminal Law
In contrast to the rest of criminal law, the subcategory of doctrines known as corporate criminal law pathologically ignores these boundaries. A product primarily of the federal criminal justice system, corporate criminal liability is largely the product of common law court decisions. In fact, corporate criminal liability isn’t so much a theory of guilt as it is a rule of ascription – when a corporation’s employee acting in the scope of her authority violates the law, her violation can be attributed to the corporate person provided she acted with a partial purpose of benefitting the corporation. This common law rule of respondeat superior, handed down by the Supreme Court in its 1909 New York Central decision, has never been codified across the board by Congress.[2] The federal code denominates corporations and other business entities “persons” for purposes of criminal liability, but it leaves the details of corporate criminal liability to courts.[3] Accordingly, it is difficult to say corporate criminal liability adheres to the legality principle in its full form.
And what about culpability, one of criminal law’s other limiting principles? On its face, respondeat superior says nothing about corporate culpability. If an employee violates the law with a partial aim of benefitting her employer, the corporation can be found criminally liable regardless of whether it encouraged the wrongdoing, turned a blind eye to the wrongdoing, or aggressively and assiduously discouraged the wrongdoing. Under the official law of corporate criminal liability, it does not matter whether a corporation’s officers, board members, owners or supervisors have acted wrongfully. The organization is criminally liable. So much for culpability as a constraint.
Still, culpability matters, albeit not in the way we would prefer. Over the years, a shadow theory of corporate criminal liability has grown up alongside the actual rule described in court opinions. The law may not care whether a corporation has erected a sophisticated compliance program to prevent and detect violations of law, but prosecutors very much do. And through their unquestioned enforcement discretion, prosecutors have created a shadow law of corporate criminal liability that ostensibly injects concepts of culpability. Over the past decade, federal prosecutors have implemented policies (e.g., the Yates Memo, the FCPA Corporate Enforcement Policy) that add or subtract penalties depending on how promptly and completely a corporation detects and reports certain types of wrongdoing. The good corporate citizen might not be able to wield an affirmative legal defense in a court of law, but it seeks protection in enforcement policies that purport to distinguish crimes caused by rogue employees and those encouraged by noxious corporate cultures.
Although corporate criminal liability’s shadow law solves one problem – lack of a culpability constraint – it simultaneously aggravates corporate criminal law’s legality deficits. The prosecutor’s charging principles and policies are unenforceable in a court of law; they can be modified or withdrawn at will by the Department of Justice. Moreover, in a decentralized Department featuring over 90 jurisdictions and hundreds of line prosecutors, it is difficult to imagine anything close to uniform application of these policies.
Finally, what about the concept of limited punishment? When we speak of punishment and individuals, scholars draw on concepts like proportionality and parsimony to limit the government’s grasp. To the extent rehabilitation is mentioned, we demand hard data demonstrating an actual fit between the proposed intervention and the expected payoff. And we ask whether the intended remedy will create unintended distributed effects or interfere with a prisoner’s autonomy.
By contrast, we seem blissfully unaware as to whether the government’s proposed corporate interventions are effective or not. We assume that compliance programs will do more good than harm, that monitors can reduce the likelihood of recidivism, and that corporate criminal law’s remedies in general can achieve a kind of faux regulatory effect that would be otherwise impossible to achieve absent the threat of criminal punishment. That is, we accept in the corporate context a kind of regulation-by-prosecution that many scholars would reflexively question were we to make similar claims in regard to natural persons who happened to commit crimes.
And to the extent scholars and commentators critique corporate criminal law, they often criticize its outcomes and not its failure to abide by criminal law’s vaunted ground rules. Corporate criminal law enforcement attracts vigorous criticism, but most of its critics deride prosecutors for cutting weak deals, for maintaining a relatively opaque settlement process and for failing to verify the benefits they claim to have secured. In other words, they excoriate the government for failing to do more but they rarely complain that corporate crime fails to look like the rest of criminal law.
Much of the frustration that revolves around corporate enforcement concerns the Deferred Prosecution Agreement, the extrajudicial settlement that enables the government to extract from corporate defenders some combination of fines, admissions of wrongdoing, and commitments to implement various agreed-upon reforms. Despite the vast criticism of DPAs, its critics have never managed to convince prosecutors to abandon the device. One reason for the DPA’s survival is that there exists no consensus regarding corporate criminal law’s role: Is it to punish wrongdoers (as is often the case with criminal law), to regulate corporations prospectively, or to play a role in effecting an overhaul in our political and socio-economic systems?
Reforming Corporate Criminal Law
These conflicting viewpoints suggest different avenues for reforming the process currently in place. Those who believe corporate criminal law should be treated as a category of criminal punishment are inclined to focus on corporate crime’s legality and culpability gaps. To remedy corporate criminal law’s unboundedness, we might seek a series of legislative statutes that explicitly define and subdivide variations of corporate wrongdoing. We might additionally seek language delineating types of behavior that best reflects our view of what constitutes culpable behavior within a for-profit company.
Those who see corporate criminal liability as a means towards imposing ongoing regulatory standards are apt to reach alternative conclusions. For the “regulation through prosecution” group, adhering to a (largely fictional) set of internal constraints is not the end goal. The fact that corporate criminal law diverges from the rest of criminal law isn’t the problem. Rather, for the group that imagines corporate prosecution as a form of regulation, the issue is how well prosecutors meet those regulatory goals. Reformers in this camp accordingly critique the prevalence of prosecutorial practices and policies that, in their view, have failed to generate meaningful oversight. Accordingly, the “regulation” camp focuses far more on prosecutorial accountability and remedial verification than it does on legislative code revisions. Reformers in this camp seek assurance that the corporate reforms prosecutors frequently cite are meaningful and that the deals the government strikes with corporate offenders are deals that redound to society’s benefit.
Finally, for those who subscribe to a more ambitious agenda, corporate crime’s current enforcement regime amounts to a grotesque failure, one that maintains the status quo while propping up a system that punishes the poor while rewarding the rich. Progressive corporate critics, particularly those who seek top-to-bottom realignment of power among corporate and government elites, draw little satisfaction from corporate criminal law’s incremental remedial measures that rely on a sophisticated deployment of prosecutorial carrots and sticks. To this final group of critics, the emergence of a shadow criminal law, paired with extra-judicial settlements, highlights just how rigged the criminal justice system is and appears to be.
It is because of these three conflicting viewpoints that corporate criminal law looks the way it does today. Few scholars are apt to vigorously defend the DPA or its underlying process, but it offers perhaps the only viable workaround in a world where respondeat superior offers so little guidance and where corporate criminal law’s critics cannot seem to agree on its proper role. Accordingly, both the chapter and essay conclude by urging Congress to reassert its proper role in this space. Only by formally codifying the shadow law of corporate criminal liability can Congress address the various rule of law and accountability concerns that arise in this context. Until Congress speaks, corporate criminal law’s primary enforcers – federal prosecutors – will continue to straddle the gossamer line between criminal punishment and regulation-by-prosecution; tweaking leniency policies, claiming reformatory victories in individual cases, and earning the skepticism of those who distrust unrestrained corporate power and those who just as vehemently distrust unbounded government power.
Footnotes
[1] Sanford H. Kadish, Stephen J. Schulhofer, & Rachel E. Barkow, Criminal Law and Its Processes: Cases and Materials, Chapter 3 (10th ed. 2017).
[2] See N.Y. Cent. & Hudson River R.R. Co. v. United States, 212 U.S. 481, 494 (1909).
[3] See 1 U.S.C. § 1 (2018) (except as otherwise indicated by context, terms such as “persons” and “whoever” include “corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals”); see also 18 U.S.C. § 18 (2018) (defining “organization” to mean “person” other than an individual).
Miriam Baer is a Professor at Brooklyn Law School and an Associate Director of its Center for the Study of Business Law and Regulation. She is an Adviser on the American Law Institute’s Principles of the Law of Compliance, Enforcement and Risk Management, and is a Senior Fellow at the Carol and Lawrence Zicklin Center for Business Ethics Research at the Wharton School.
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