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October 26, 2004

"Collective scienter" and business guilt

According to Lyle Roberts at 10-b5 Daily, a theory of "collective scienter" is "beginning to gain a foothold in securities litigation caselaw, even if courts are not expressly acknowledging the nature of their holdings." The idea is to attribute conscious wrongdoing to a business if the requisite knowledge or awareness was present among executives or employees aggregated together -- the alternative, of course, being to require proof that one particular corporate officer had a guilty state of mind. Which raises the inevitable question: "if an officer makes the statement and a janitor knows the statement is false, has the corporation acted with fraudulent intent?"

Posted by Walter Olson at 05:37 PM | TrackBack (1)

Corporate Governance



Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.