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"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?"



Rafael Mangual
Project Manager,
Legal Policy

Katherine Lazarski
Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.