In a blog entry published on the Heritage Foundation's The Foundry, Daniel Dew cleverly uses the example of the recent scandals plaguing the Obama administration to point out the vast scope and inherent unfairness of the Responsible Corporate Officer Doctrine.

The Responsible Corporate Officer Doctrine allows federal prosecutors to criminally prosecute business owners and officers for the criminal activity of their businesses, regardless of whether they had knowledge of the illegal activity. The only requirement for criminal liability is "some relationship between the executive's supervisory responsibilities and the underlying misconduct." Put another way, in order to obtain a conviction, the government need only prove (1) illegal conduct occurred, and (2) the corporate officer had authority to exercise control over the activity.

The DOJ has used the Responsible Corporate Officer Doctrine to make criminals out of many well-meaning business people. In United States v. Park, the Food and Drug Administration (FDA) prosecuted the president of a corporation under the theory that his subordinates committed violations of the Food, Drug, and Cosmetic Act that the president had the ability to prevent or correct. Park, the company president, had delegated responsibility to correct the violations to one of his employees, who, regrettably for Park, did not follow through on his responsibilities. Park was convicted for FDA violations that he did not commit, order committed, or conspire to commit.

Just to be clear, there is no evidence in the recent Obama Administration scandals that criminal behavior took place, but the executive branch should stick to one definition of "responsible." The DOJ definition of "responsible" is especially troubling in the context of a criminal prosecution where a person's individual liberty is at stake--not just news stories that make the President look bad.

Heritage senior fellow, Paul Larkin, invokes a similar analogy in his latest paper and expands further.

The question is a serious one, why the double standard?

The Heritage Foundation's The Foundry blog reported today that the House Committee on the Judiciary created the bipartisan Over-Criminalization Task Force of 2013. The goal of the task force is to "conduct hearings and investigations relating to over-criminalization issues within the Committee." The task force, will be chaired by Representative James Sensenbrenner (R-WI) and will consist of five Democrats and five Republicans.

The formation of this task force publicizes both the acknowledgment by Congress that the problem of overcriminalization is real and that the House Judiciary is willing to take active steps to address the alarming criminal law trends which depart from traditional common law norms and threaten individual and economic liberty.

Laura Finn, web editor for BoardMember.com, and James Copland discuss the results of ProxyMonitor.org's first finding in the 2013 proxy season.

The most numerous class of proposals to have been introduced again this year are those involving corporate lobbying and political spending. - Copland

The Manhattan Institute's Proxy Monitor project, featuring the first publicly available database cataloging shareholder proposals and Dodd-Frank-mandated executive-compensation advisory votes at America's largest companies, released its first Finding of the 2013 proxy season.

In 2013 to date, as in 2012, the most regularly introduced class of shareholder proposals seeks limits on or greater disclosures of corporate political spending and lobbying. The second-most frequently introduced type of proposal, again consistent with 2012, seeks to require companies to have an "independent chairman" separate from the company's chief executive officer.

This finding summarizes early 2013 trends in shareholder-proposal submission and voting, as well as executive-compensation advisory voting, paying special attention to proposals seeking to split the chairman and CEO roles. The finding also highlights the shareholder proposals of interest on the horizon between now and mid-May, focusing on four classes of proposals of particular interest: splitting the chairman and CEO, political spending and lobbying, board declassification, and proxy access.

Continue Reading...

Richard Epstein discusses the Supreme Court's decision in Comcast v. Behrend on Point of Law Columns.

And Point of Law's own, Ted Frank, discusses the significance of the ruling and its potential impact on class action litigation in a new podcast.

Point of Law's very own Ted Frank testified before the House Subcommittee on the Constitution and Civil Justice as they examine litigation abuses. Ted's testimony starts around the 31 minute mark. For further reading, see Ted's recent report for the Manhattan Institute's Center for Legal Policy titled Class Actions, Arbitration, And Consumer Rights: Why Concepcion Is a Pro-Consumer Decision.

Colin Hedrick
Legal Intern, Manhattan Institute's Center for Legal Policy

Tuesday, March 4, 2013: the day freedom died in New York City! That was going to be the original title of this post. While it may seem hyperbolic, it would have been true, at least symbolically, for those who like to make their own choices in life without government interference.Those choices were to be limited by Mayor Bloomberg's ban on sugary drinks over 16oz. that was set to go into effect on March 4.

Originally, this post was going to examine both the legal and policy reasons against the ban, but a last minute reprieve from this task and the ban itself came in the form of a decision overruling the ban handed down by Supreme Court Justice Milton Tingling. Justice Tingling's ruling is sweeping in its denunciation of the Mayor's proposal and is based on the very same arguments that would have been articulated in the previously planned posting.

The Justice was specifically concerned that enforcement of the ban would be "fraught with arbitrary and capricious consequences" due to the wide range of businesses exempted from the ban and the ill-justified exceptions for some drinks but not others. In reality, the uneven enforcement and loopholes in the rule would "effectively defeat the stated purpose of the rule."

Colin Hedrick
Legal Intern, Manhattan Institute's Center for Legal Policy

Should doctors and pharmaceutical companies be liable to patients who become addicted to habit-forming drugs they prescribe/manufacture? If State Sen. Tick Segerblom (D-Las Vegas) has his way, they will be. Segerblom recently introduced SB 75, which would make doctors and drug makers liable for the treatment costs of those who become addicted to legally prescribed pain medications. The bill would also open up doctors and drug makers to potential punitive damages as well.

Thankfully, this rather ridiculous idea is starting to draw national attention and if the overwhelmingly negative response at a recent senate hearing on the bill is any indication, it has little chance of passing. Doctors, drug makers and experts of all varieties lined up to speak out against this proposed law. Most are concerned that it will do little to curb addiction and will negatively impact many who have a real need for these pain medications.

As the 2013 proxy season kicks off--most U.S. public companies will hold their annual shareholder meetings between April and June--the Manhattan Institute is releasing its third annual proxy season preview in a series of reports and findings tracking shareholder proposal trends. Using vote results from the Manhattan Institute's unique, publicly available database that tracks shareholder proposals in real time, James Copland, director of the Manhattan Institute's Center for Legal Policy, identifies what hot button issues to watch for in the 2013 proxy season, including ISS recommendations, and proposals on political spending, "Say-on-Pay", and board declassification.

The report employs new data on shareholder activism from the Proxy Monitor database, now expanded to include the largest 250 U.S. public companies, as ranked by Fortune Magazine, in addition to new survey data tracking proxy proposal information at these companies, conducted by the Society of Corporate Secretaries and Governance Professionals at the Manhattan Institute's request.

Colin Hedrick
Legal Intern, Manhattan Institute's Center for Legal Policy

Given the recent slew of negative press (e.g. Daily Beast, Frontline) about the government's failure to prosecute executives for their alleged role in the 2008 financial crisis, it is unsurprising that the Justice Department is making high profile moves against big banks. However, the strategy the Justice Department is pursuing, as recently reported by Ben Protess of the New York Times' Deal Book, raises serious concerns. Many of those concerns are all too familiar, especially to those following the ongoing saga of the Foreign Corrupt Practices Act and its enforcement.

The Justice Department's new strategy more or less consists of the old strategy of fines and reforms but with the added twist of encouraging guilty pleas from the companies accused of wrongdoing. In recent years, the Justice Department was hesitant to push for guilty pleas or actual court proceedings for fear of irreparably injuring companies, and as a result, the economy at large. However, under this new strategy, the Department is attempting to avoid this pitfall by eliciting the guilty pleas out of subsidiaries as opposed to the parent banks. The idea is that focusing on the subsidiary will not destroy the entire company, yet still allows the Justice Department to take meaningful action.

It is easy to criticize this strategy on multiple fronts; however, the most common criticism leveled against this approach is that it amounts to little more than a PR campaign by the Justice Department to make it seem like they are doing something. It is much easier for the Department to point to a guilty plea than a deferred prosecution agreement or a non-prosecution agreement. A guilty plea is something that can be easily sold to the press and an angry public. This sentiment is perfectly expressed by former federal prosecutor Evan T. Barr in Protess' article, "Extracting a guilty plea from a wholly owned subsidiary finally enables the Justice Department to look tough on financial institutions while sparing them from the corporate death penalty." The idea that "looking tough" is the actual goal of this strategy is worrisome for both those looking for actual punishment and those seeking meaningful reform.