Corporate liability and the “crimes were committed” approach to law enforcement

Pursuant to Attorney General Loretta Lynch’s welcome change in DoJ policy, it occurred to me that an old draft post of mine might actually merit being posted, so here goes:

After listening to a presentation on the impressive growth in enforcement actions resulting in corporate criminal liability a few months ago, it occurred to me that people without legal training might not actually understand the reasoning behind the critique that individual prosecutions should almost always accompany corporate criminal liability. (The presenter at one point framed such critiques as claiming that prosecutors were colluding with management against the shareholders.)

The problem with corporate criminal liability is this: every crime has a mens rea or element of intent that must be proved as part of the prosecutor’s case. Negligence is one of the lower levels of mens rea, but many instances of negligence are not crimes. Often a “knowing” or “should have known” standard is applied in criminal law.

When a prosecutor chooses to seek corporate criminal liability, without bringing any cases of individual criminal liability, the problem is whether it makes logical sense to argue that the corporation had the mens rea for the crime, but no individual in the corporation had the mens rea (or the one with the mens rea managed not to take relevant action in promotion of the crime). Now one can dream up special circumstances where this position would actually be logical, but it seems to a lot of people that this situation should be rare.

Critics of corporate liability (I’m thinking of Judge Rakoff and Bill Black here, for example) would probably argue that pursuing corporate criminal liability, without pursuing individual liability is tantamount to stating that a crime was committed, but we don’t know by whom. (Note that the reverse where there is individual criminal liability without corporate criminal liability is likely to be much more common. Rogue employees and a genuine effort on the part of the corporation to avoid the criminal activity would both be good reasons – though not necessarily successful reasons – for not extending criminal liability from an individual to the corporation.)

Overall an important criticism of the growth of deferred prosecution agreements and non prosecution agreements is that finding this growth acceptable in the absence of individual prosecutions is essentially lowering the standards for what a prosecutor is supposed to do. “A crime was committed, but I don’t know by whom” should not be the normal stopping point for a prosecutor’s case.

The argument is, of course, not that there should never be corporate criminal liability without an accompanying case for individual liability, but simply that this outcome should be relatively rare. In general, we want our prosecutors to think of their jobs as going all the way to finding out “who done it,” and not stopping with “a crime was committed” and a fine was paid.

In short, the argument against treating a finding of corporate criminal liability as an end point is not about “collusion,” but instead goes to the heart of what it means to enforce the law.