{"id":20186,"date":"2015-10-14T14:55:21","date_gmt":"2015-10-14T18:55:21","guid":{"rendered":"http:\/\/hlrecord.org\/?p=20186"},"modified":"2019-07-23T23:41:55","modified_gmt":"2019-07-24T03:41:55","slug":"what-every-harvard-law-students-needs-to-know-about-corporate-crime","status":"publish","type":"post","link":"https:\/\/hlrecord.org\/what-every-harvard-law-students-needs-to-know-about-corporate-crime\/","title":{"rendered":"What Every Harvard Law Student Needs to Know About Corporate Crime"},"content":{"rendered":"<p class=\"p1\"><span class=\"s1\">When can a corporation be prosecuted for a crime?<span class=\"Apple-converted-space\">\u00a0 <\/span>One of the most remarkable stories in all of American criminal law is the recent rise of the corporate prosecutions.<span class=\"Apple-converted-space\">\u00a0 <\/span>From last week\u2019s announcement of new Department of Justice policies on corporate prosecutions, to the billions of dollars of currency fixing settlements in prosecutions of major banks, to the campaign trail speeches of candidates calling for more prosecutions of bad corporate actors, to the concern that \u201ctoo big to fail\u201d institutions can avoid justice for the harm they caused to our economy, corporate crime has never been more central to the national debate.<span class=\"Apple-converted-space\">\u00a0 <\/span>It should be a greater part of the law school discussion too and there is wonderful work that law students can get involved in.<\/span><!--more--><\/p>\n<p class=\"p1\"><span class=\"s1\">In criminal law, you learn that to convict a person of a crime, prosecutors must prove that she committed the acts described in the elements of the statute, or the actus reas, with the requisite state of mind, or mens rea.<span class=\"Apple-converted-space\">\u00a0 <\/span>Corporations are artificial entities, however, and they have no mind, except maybe a hive mind, and they can only commit acts through their agents.<span class=\"Apple-converted-space\">\u00a0 <\/span>In the United States, federal prosecutors have a powerful weapon: respondeat superior liability of corporations for crimes.<span class=\"Apple-converted-space\">\u00a0 <\/span>The standard, as you may recall from Torts, is broad, and so long as an employee is acting in the scope of employment, the corporation is liable&#8212;criminally, under the federal statutes.<span class=\"Apple-converted-space\">\u00a0 <\/span>Many are familiar with arguments about the Supreme Court\u2019s ruling in <i>Citizens United v. Federal Election Commission <\/i>that the First Amendment protects corporations against regulation of election spending.<span class=\"Apple-converted-space\">\u00a0 <\/span>But the flip side of corporate rights are corporate responsibilities, and a far more obscure 1909 Supreme Court case, <i>New York Central &amp; Hudson River Railroad v. United States <\/i>approved the constitutionality of a broad respondeat superior rule for corporate criminal liability.<span class=\"Apple-converted-space\">\u00a0 <\/span>Federal prosecutors have more than that.<span class=\"Apple-converted-space\">\u00a0 <\/span>Federal crimes like wire fraud and mail fraud are incredibly broad.<span class=\"Apple-converted-space\">\u00a0 <\/span>And although these cases are not normally assigned in law school, every year, corporations are prosecuted for crimes like accounting fraud, banking fraud, environmental violations, foreign bribery, money laundering, price fixing, securities fraud, and wire fraud.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">A clash between prosecutors and a corporation is like a battle between David and Goliath&#8212;but with the federal prosecutor as the little guy in the fight.<span class=\"Apple-converted-space\">\u00a0 <\/span>To be sure, over the past dozen years, there has been a remarkable increase in the size and importance of federal prosecutions of corporations.<span class=\"Apple-converted-space\">\u00a0 <\/span>I describe in my new book, \u201cToo Big to Jail,\u201d how billion dollar fines have become normal events.<span class=\"Apple-converted-space\">\u00a0 <\/span>However, more companies are not being prosecuted each year; actually fewer and fewer have.<span class=\"Apple-converted-space\">\u00a0 <\/span>Still more important, prosecutors have also extended new forms of leniency to corporations, entering out of court deals called deferred prosecution agreements and non-prosecution agreements, so that corporations can avoid criminal convictions.<span class=\"Apple-converted-space\">\u00a0 <\/span>This is where the concern with \u201ctoo big to jail\u201d enters into the picture.<span class=\"Apple-converted-space\">\u00a0 <\/span>More and more of the most important corporate offenders, particularly the public companies, have received such out of court deals.<span class=\"Apple-converted-space\">\u00a0 <\/span>No one was tracking these corporate prosecutions, and so with the help of many hard-working law students, and the UVA Law Library, I amassed a collection of hundreds of these agreements<\/span><span class=\"s1\">, and thousands of outright convictions of corporations, to better track what happens when companies are prosecuted.<span class=\"Apple-converted-space\">\u00a0 <\/span>You can read those agreements online and use them as a research resource.<span class=\"Apple-converted-space\">\u00a0 <\/span>You will recognize the names of many of those companies, many of them Fortune 500 or Global 500 firms.<span class=\"Apple-converted-space\">\u00a0 <\/span>They agree to pay fines, improve compliance (but often with quite generic agreements to adopt some \u201cbest practices\u201d), assist in investigations, and if they follow those terms, the case is dismissed after two or three years. If it commits crimes in the future, it is no recidivist. After all, the company avoided a conviction and has no criminal record.<span class=\"Apple-converted-space\">\u00a0 <\/span>That alone raises \u201ctoo big to jail\u201d concerns, since federal prosecutors do not extend that kind of leniency routinely to individual defendants.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">Speaking of individual defendants, almost two-thirds of those corporate prosecutions were not accompanied by any charges filed against employees.<span class=\"Apple-converted-space\">\u00a0 <\/span>Now that is a puzzle.<span class=\"Apple-converted-space\">\u00a0 <\/span>After all, the entire basis for corporate criminal liability is that an employee, acting in the scope of employment, committed a crime.<span class=\"Apple-converted-space\">\u00a0 <\/span>Even when charges are filed, over half the time, no jail-time results.<span class=\"Apple-converted-space\">\u00a0 <\/span>Few of those charged were higher ups like CEOs or CFOs or Presidents. To be sure, assessing and investigating who did what in a complex corporate environment raises great challenges for prosecutors.<span class=\"Apple-converted-space\">\u00a0 <\/span>There may be millions of pages of documents involved, and the corporations can and do hire entire law firms in their defense.<span class=\"Apple-converted-space\">\u00a0 <\/span>There are wonderful job opportunities for lawyers working on these investigations, with rewarding opportunities to help companies repair serious problems.<span class=\"Apple-converted-space\">\u00a0 <\/span>There is another part of the puzzle.<span class=\"Apple-converted-space\">\u00a0 <\/span>Practically speaking, these companies unfailingly commit in writing to fully cooperate in any investigations of individuals, and to provide documents, emails, and records that might assist prosecutors.<span class=\"Apple-converted-space\">\u00a0 <\/span>A company is a powerful cooperator, given information collected about day-to-day activities of employees and officers.<span class=\"Apple-converted-space\">\u00a0 <\/span>Yet so often, no employees are charged.<span class=\"Apple-converted-space\">\u00a0 <\/span>When politicians and the public use the expression \u201ctoo big to jail\u201d they have also been talking about this separate concern: that while the company may be prosecuted and pay a fine, the people who literally can be sent to jail are somehow being insulated from harm.<span class=\"Apple-converted-space\">\u00a0 <\/span>In a forthcoming Virginia Law Review article that analyzes the outcomes in individual cases accompanying deferred and non prosecution agreements with organizations, I call this the concern that the corporation may be a scapegoat.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">In response to criticism, the Department of Justice in early September announced in a new memo that there will be far more focus on individual prosecutions.<span class=\"Apple-converted-space\">\u00a0 <\/span>I applaud the DOJ for responding to these concerns and making a strong statement that individual accountability matters in corporate investigations.<span class=\"Apple-converted-space\">\u00a0 <\/span>One can be forgiven for being surprised that this was not the policy all along. \u00a0The memo largely says what should have been obvious, that cooperation means saying who was responsible for the crimes. \u00a0In any other type of criminal case, it would not be enough to say, \u201csomeone committed a crime, but I can\u2019t say who.\u201d<span class=\"Apple-converted-space\">\u00a0 <\/span>And of course, many prosecutors did focus on individuals.<span class=\"Apple-converted-space\">\u00a0 <\/span>In recent years, though, there have been troubling and high-profile cases where corporations paid large fines and settled their cases out of court, and despite having described and admitted to crimes by employees, none were charged.<span class=\"Apple-converted-space\">\u00a0 <\/span>Will this change?<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">The new DOJ memo states corporate cooperation will only be credited if a company fully cooperates in identifying the relevant individuals.<span class=\"Apple-converted-space\">\u00a0 <\/span>But what if a company is not fully cooperative? \u00a0What if low-level employees are thrown under the bus, but the role of higher-ups is kept vague? \u00a0Will prosecutors have any way of knowing? \u00a0What if they do know a company was downright uncooperative?<span class=\"Apple-converted-space\">\u00a0 <\/span>Even if so, cooperation is only one of many factors that prosecutors consider. \u00a0The guidelines are multi-factored and vague. \u00a0Could prosecutors still give leniency to an uncooperative company? \u00a0They have done so in the past. \u00a0Could judges nevertheless approve such a corporate settlement?<span class=\"Apple-converted-space\">\u00a0 <\/span>It remains uncertain what the standard of review is for a deferred prosecution, and non prosecution agreements are not filed in court and no judge has anything to review. Hopefully this memo sends a message that serious cooperation comes first. \u00a0We still may not see any sharp change or\u00a0uptick in individual charges in the near term. \u00a0<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">If these developments interest you or concern you, you are not alone.<span class=\"Apple-converted-space\">\u00a0 <\/span>Corporate prosecutions are challenging, fascinating, and allow lawyers to wrestle with questions at the core of the future of our economy.<span class=\"Apple-converted-space\">\u00a0 <\/span>If you want to follow that path, sign up for courses on the subject, seek out corporate investigation or prosecution work during the summer, read books and articles on these cases, or pursue research projects.<span class=\"Apple-converted-space\">\u00a0 <\/span>Corporate prosecutions are themselves too important to fail.<span class=\"Apple-converted-space\">\u00a0 <\/span>Future prosecutors, defense lawyers, judges, and legislators will be the ones to decide how to respond to the ever-present \u201ctoo big to jail\u201d problem.<\/span><\/p>\n<p class=\"p3\"><span class=\"s1\"><i>Brandon Garrett is the Justice Thurgood Marshall Distinguished Professor of Law, at the University of Virginia School of Law.<span class=\"Apple-converted-space\">\u00a0 <\/span>His first book, \u201cConvicting the Innocent: Where Criminal Prosecutions Go Wrong,\u201d was published by Harvard University Press in 2009, and his most recent book, \u201cToo Big to Jail: How Prosecutors Compromise with Corporations,\u201d was published in 2014.<\/i><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>When can a corporation be prosecuted for a crime?\u00a0 One of the most remarkable stories in all of American criminal law is the recent rise of the corporate prosecutions.\u00a0 From last week\u2019s announcement of new Department of Justice policies on corporate prosecutions, to the billions of dollars of currency fixing settlements in prosecutions of major [&hellip;]<\/p>\n","protected":false},"author":213,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[349],"tags":[350],"class_list":{"0":"post-20186","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-features","7":"tag-what-every-harvard-law-student-should-know"},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v14.8 - 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