I admire Mike's latest post. It is a lucid, forthright, and honest statement of the purpose of corporate criminal liability. I have rarely seen a better explanation of the role played by corporate criminal liability in the contemporary criminal justice system.
Mike says he is describing an "additional and crucial purpose served by corporate criminal liability." I would insist on the removal of the word "additional." I think Mike has described the only purpose of corporate criminal liability, and it is a crucial one: coercing corporations into cooperating in the investigation and prosecution of their employees.
Mike asserts that "without corporate cooperation, many serious white collar criminals would never be caught." I entirely agree. Mike then gives four supporting reasons why this is true. They are impeccable. This is one of the best statements of the value of corporate criminal liability for the white collar prosecutor that I have seen.
Under our traditional criminal law, there is no duty to aid the government in one's own prosecution. The presumption of innocence places the burden on the government to prove every element of its case, and the reasonable doubt standard makes that very difficult to do. The privilege against self-incrimination guarantees that an accused does not have to help the government overcome this hurdle. Other civil libertarian protections built into the system increase the difficulty. The requirement to prove mens rea is a major impediment for prosecutors, and the accused's right to the advice of counsel and the protection of the attorney-client privilege further raises the bar. Yet, despite all these obstacles, prosecutors successfully prosecute and convict criminals and enforce the law every day.
This is because the traditional criminal law addresses actions that cause visible harm in the world. Murder, assault, robbery, rape, arson all have visible effects about which evidence can be gathered, and the nature of the conduct typically suggests the ill will or mens rea with which it is undertaken. Even traditional state level fraud (the offense of false pretenses) requires an outright misrepresentation, actual reliance upon it, and an actual loss of property. Such elements are susceptible of proof within the protective civil libertarian constraints built into the criminal law.
As Mike lucidly points out, white collar crime is different. Over the course of the 20th and 21st centuries, Congress has seen fit to create a broad array of amorphous and inchoate new offenses. The federal fraud statutes criminalize any scheme or artifice to defraud. This requires neither misrepresentation, reliance, nor loss, and can consist of any potentially deceptive conduct. The elements insider trading continue to confound courts and legal scholars. In addition, the federal government has enacted a myriad of arcane, malum prohibitum regulatory offenses. Boiled down to its essence, what we call the "white collar" criminal law consists of the effort to police the behavior of those engaged in business for compliance with regulatory requirements and general honest dealing.
Congress dumped the task of enforcing this body of law into the laps of federal prosecutors. But, as Mike points out, this task is virtually impossible within the civil libertarian confines of the traditional criminal law. In the first place, policing all of the business concerns in the United States not only for honest dealing, but for compliance with the myriad regulations that carry criminal penalties is a monumental task. These offenses typically consist of deceptive behavior, and have no corpus delicti or smoking gun to introduce into evidence. White collar crime is intentionally designed to be indistinguishable from non-criminal activity. As a result, considerable investigation may be required merely to establish that a crime been committed. Even then, a great deal of legal and/or accounting sophistication may be required to unravel the deception. No matter how large the Department of Justice's budget for white collar crime may be, it would still be insufficient to address anything beyond the tip of the iceberg of potential offenses if DOJ had to prove every element of its case beyond a reasonable doubt with its own resources.
Secondly, the organizational setting makes it extremely difficult to establish the mens rea of these offenses. The corporate form diffuses decision-making responsibility. Decisions made by one member of a firm may not be fully informed by what other members of the firm are doing or have decided, and corporations frequently take actions that were never explicitly known to or authorized by any identifiable individual or individuals within the firm.
And finally, the right against self-incrimination and the attorney-client privilege make it difficult for prosecutors to obtain the evidence they need to meet their burden of proof. Because white collar crime consists primarily in crimes of deception, the evidence necessary for a conviction will consist predominantly in the business records of the firm for which the defendant works and the testimony of co-workers. But to the extent that these records are in the personal possession of the defendant, contain communications between the defendant or other members of the firm and corporate counsel, or are the work product of corporate counsel, the right against self-incrimination and the attorney-client privilege render them unavailable to the prosecution. And to the extent that it consists of the testimony of others members of the business who may fear prosecution, the right against self-incrimination again renders it unavailable.
As a society, we face a choice. We can continue to pass criminal statutes that cannot be enforced consistently with the preservation of our civil liberties or we can draw back and let market forces and civil liability enforce those aspects of honest dealing that cannot be controlled criminally without severely impairing those liberties. But prosecutors have no such choice. They are charged with enforcing the law. And given the nature of the white collar criminal law described above, the only way to do so is to coerce business people into acting as deputy prosecutorial agents.
The purpose of corporate criminal liability is not to punish corporations. It is to force them to cooperate in the prosecution of their employees. As Pam Bucy has documented, see Pamela H. Bucy, Why Punish? Trends in Corporate Criminal Prosecutions, 44 AM. CRIM. L. REV. 1287 (2007), there is an ever-increasing number of federal criminal investigations of business organizations and an ever-decreasing number of corporate indictments and convictions. That is because if a federal prosecutor actually has to bring a corporation to trial, the prosecutor has already failed in his or her mission to get it to cooperate. Arthur Andersen was indicted and destroyed primarily because it failed to agree to waive its attorney-client privilege. See Julie R. O'Sullivan, Some Thoughts on Proposed Revisions to the Organizational Guidelines, 1 OHIO ST. J. CRIM. L. REV. 487, 496, n. 30 (2004) . This also accounts for the sharp increase in DPA's that Mike mentioned in an earlier posting. The DPA's are granted in return for the corporation's cooperation with the federal investigation.
As Mike points out, the ability to threaten the corporation with criminal indictment shifts the balance of power between prosecutor and defendant. And that is the purpose of corporate criminal liability. The reason why it does not advance any of the traditional purposes of punishment is that it is not designed to punish. It is designed to circumvent the pro-defendant, liberal bias inherent in our system of criminal law.
Mike has already spoken for me by indicting that my objection to this will be that it is morally offensive in liberal society. Prosecutors' jobs would be much easier if they could threaten to indict all those who might have knowledge relevant to their criminal investigations unless they aided in the prosecution of their fellow citizens. Generally, we do not permit this, and for good reason. It reminds us too much of the practices of the Nazi and Soviet regimes in which failure to inform on others was itself an offense. We don't want a society in which police agencies pursue their missions by adopting practices that turn citizens against each other.
Corporate criminal liability is the exception to this, and it is an unfortunate one. For it turns employers into the adversaries of their own employees whenever those employees are suspected of committing a crime. This may not seem so harmful in cases in which the employees have truly acted purposely and malevolently. But given the amorphous nature of the federal criminal law and its myriad provisions that can be violated without one's moral sense indicting that one is doing anything wrong (try teaching white collar crime to business students and watch their eyes widen in fear), this becomes a very harmful and destructive practice indeed. As knowledge of the incentives placed on corporations by corporate criminal liability slowly become more widely known by those involved in business, its poisonous effect on trust and loyalty spreads. Years ago, my students used to believe that if one was loyal to his or her employer and did the right thing, he or she was entitled to expect loyalty and support in return. These days most of them have learned enough about how businesses respond to the incentives of corporate criminal liability to know when asked about any suspicious behavior in the corporation, rule #1 is: Calm up and get your own personal attorney.