Mark Rothko, No. 8 (1952). Corporations: A Contemporary Approach Chapter 12 Corporate Criminality...
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Transcript of Mark Rothko, No. 8 (1952). Corporations: A Contemporary Approach Chapter 12 Corporate Criminality...
Corporations:A Contemporary Approach
Chapter 12Corporate Criminality
Slide 2of 15
Chapter 12Corporate Criminality
• 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
Module V – Corporate Externalities
Citizen of world
Citizen of world
Law profession
Law profession
Corporate practice
Corporate practice
Bar examBar exam
Corporations:A Contemporary Approach
Chapter 12Corporate Criminality
Slide 4of 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 12Corporate Criminality
Slide 5of 15
Who is responsible in corporation?
Corporateentity
InvestorsContract/tortcreditors
Gov’t regulator
Criminalprosecutor
Mgmt
Corporations:A Contemporary Approach
Chapter 12Corporate Criminality
Slide 6of 15
Corporateentity
InvestorsContract/tortcreditors
Gov’t regulator
Criminalprosecutor
MgmtPCV
Who is responsible in corporation?
PCV
Corporations:A Contemporary Approach
Chapter 12Corporate Criminality
Slide 7of 15
Corporateentity
InvestorsContract/tortcreditors
Gov’t regulator
Criminalprosecutor
MgmtPCV / direct?
Who is responsible in corporation?
Corporations:A Contemporary Approach
Chapter 12Corporate Criminality
Slide 8of 15
Corporateentity
(employees)
InvestorsContract/tortcreditors
Gov’t regulator
Mgmt
Criminalprosecutor
Who is responsible in corporation?
Corporations:A Contemporary Approach
Chapter 12Corporate Criminality
Slide 9of 15
Classic sociopathic personality: manipulating, grandiose, lacking in empathy, denies responsibility for its actions, and cannot feel remorse …
Corporations:A Contemporary Approach
Chapter 12Corporate Criminality
Slide 10of 15
State v. Christy Pontiac-GMC(Minn 1984)
Corporations:A Contemporary Approach
Chapter 12Corporate Criminality
Slide 11of 15
Corporation
Jim Christy
Criminalprosecutor
Board“same charge”
Officers
Phil HesliGary Swandi
4 felony counts
theft + aggravated forgery
Corporations:A Contemporary Approach
Chapter 12Corporate Criminality
Slide 12of 15
Corporation
Jim Christy
Bench trial
Board
Dismissed
(lack probable cause)
Officers
Phil Hesli
Acquitted on 3 counts
(guilty on 1 count - misdemeanor)
Guilty on 4 counts: theft
+ aggravated forgery
Corporations:A Contemporary Approach
Chapter 12Corporate Criminality
Slide 13of 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 12Corporate Criminality
Slide 14of 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 12Corporate Criminality
Slide 15of 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 12Corporate Criminality
Slide 16of 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.
ROBERT E. WAGNER, City University of New York (CUNY) Baruch College Zicklin School of Business
Corporations:A Contemporary Approach
Chapter 12Corporate Criminality
Slide 17of 15
Corporate “death penalty” …
Corporations:A Contemporary Approach
Chapter 12Corporate Criminality
Slide 18of 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 12Corporate Criminality
Slide 19of 15
Going after corporate execs …
Jeff Skilling(CEO Enron)
Corporations:A Contemporary Approach
Chapter 12Corporate Criminality
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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 12Corporate Criminality
Slide 22of 15
Going after corporate execs …
• "The Effect of Deferred and Non-Prosecution Agreements on Corporate Governance: Evidence from 1993-2013" WULF A. KAAL, University of St. Thomas, Minnesota - School of Law, European Corporate Governance Institute (ECGI)Email: [email protected] LACINE, University of St. Thomas (Minnesota)Email: [email protected] 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.