A company is a legal entity and can be made liable for offences that are committed by its agents. Employees or directors as such can be either individually made liable or jointly. “The decision whether to prosecute a corporation rest with the Justice Department. Internal guidelines identify the factors that are to be weighed: the strength of the case against the corporation; the extent and history of misconduct; the existence of a compliance program; the corporation’s cooperation with the investigation; the collateral consequences; whether the corporation has made restitution or taken other remedial measures; and the alternatives to federal prosecution. As in the case of individual defendants, corporation prosecutions rarely result in a criminal trial. More often, the corporation pleads guilty or enters into a deferred or delayed prosecution agreement.”[1]
The same can be depicted in the case of the United States v. Agosto-Vega,[2] it was held that “Under federal law, companies or any other legal entities may be criminally liable for the crimes of their employees and agents.”
In this article, we will discuss more on the ruling punitive laws and the authority that adjudicates matters relating to offences regulating under company law.
- Authorities that prosecute corporate crimes:
“The United States has a federal system of government. However, federal as well as state governments prosecute violations according to their own law. As discussed earlier, the Department of Justice (DOJ) is principally responsible for investigating business crimes. The DOJ further specializes in prosecuting crimes like:
- Fraud Section,
- Money Laundering,
- Asset Recovery Section,
- A separate Anti-trust Division prosecutes anti-competition crimes,
- Bribery of foreign officials,
- Embezzlement or fraud,
In addition to this, prosecution of violations of criminal law by the DOJ, various other federal agencies are authorized to investigate to bring civil enforcement proceedings. in civil proceedings, agencies can seek civil monetary penalties, disgorgement (forfeiture), and injunctive (non-monetary) relief. Generally, criminal statutes apply to knowing and willfully committing criminal acts, while the standard intent for civil wrongdoing is lower.[3]
Laws:[4]
- The Environmental Protection Agency (for environmental cases),
- The Federal Trade Commission (for Anti-trust cases),
- The Internal Revenue Service (for tax cases),
- The Office of Foreign Assets Control (OFAC), for economic and trade sanctions,
- THE Securities and Exchange Commission (SEC), for securities fraud, insider trading, accounting and foreign bribery cases, to name a few.
- Foreign Corrupt Practices Act.
- The SEC Staff Accounting Bulletin No.99,
- Sherman Act,
- Tax crimes under the IRS laws,
- Commodity Exchange Act,
- Federal Election Campaign Act.
Cyber Security and data protection are governed by a number of statutes:
- Gramm-Leach-Bliley Act,
- Health Insurance Portability and Accountability Act,
- The Bank Secrecy Act,
- The USA Patriot Act,
- The Sarbanes-Oxley Act,
- International Emergency Economic Powers Act (IEEPA),
- International Traffic in Arms Regulations (ITAR),
- Countering America’s Adversaries Through Sanctions Act (CAATSA),
- Arms Export Control Act – guiding on export-related matters.
In the case of the United States v. Automated Medical Laboratories,[5] the court affirmed the corporation’s conviction for the actions of a subsidiary’s employee despite its claim that the employee was acting for his own benefit, namely his “ambitious nature and his desire to ascend the corporate ladder.” “Corporations are “legal persons,” capable of suing and being sued, and capable of committing crimes. Under the doctrine of respondeat superior, a corporation may be held criminally liable for the illegal acts of its directors, officers, employees, and agents. To be held liable for these actions, the government must establish that the corporate agent’s actions (i) were within the scope of his duties and (ii) were intended, at least in part, to benefit the corporation. In all cases involving wrongdoing by corporate agents, prosecutors should consider the corporation, as well as the responsible individuals, as potential criminal targets.”[6]
In another similar case of, the United States v. Cincotta,[7] the court held, that the “criminal liability may be imposed on the corporation only where the agent is acting within the scope of his employment. That, in turn, requires that the agent be performing acts of the kind which he is authorized to perform, and those acts must be motivated — at least in part — by an intent to benefit the corporation.” Applying this test, the court upheld the corporation’s conviction, notwithstanding the substantial personal benefit reaped by its miscreant agents, because the fraudulent scheme required money to pass through the corporation’s treasury and the fraudulently obtained goods were resold to the corporation’s customers in the corporation’s name.[8]
Factors to be considered in charging corporations under criminal laws:[9]
- The nature and seriousness of the offence, including the risk of harm to the public, and applicable policies and priorities, if any, governing the prosecution of corporations for particular categories of crime,
- The pervasiveness of wrongdoing within the corporation, including the complicity in, or condonation of, the wrongdoing by corporate management,
- The corporation’s history of similar conduct, including prior criminal, civil, and regulatory enforcement actions against it,
- The corporation’s timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents, including, if necessary, the waiver of the corporate attorney-client and work product privileges,
- The existence and adequacy of the corporation’s compliance program,
- The corporation’s remedial actions, including any efforts to implement an effective corporate compliance program or to improve an existing one, to replace responsible management, to discipline or terminate wrongdoers, to pay restitution, and to cooperate with the relevant government agencies,
- Collateral consequences, including disproportionate harm to shareholders and employees not proven personally culpable,
- The adequacy of non-criminal remedies, such as civil or regulatory enforcement actions.
In the USA, business establishments have always faced scrutiny in the way of how they conduct their business, the ethical practices they follow and especially their conduct with the environment. A good example on the same can be – the mass tort cases in which a deep analysis and merits of the individual cases is considered in which these companies can be legally held liable for their criminal conduct. Offences tend to be mostly in regard to health and corruption laws, and about compliance with international accords requiring operative laws against bribery and terrorist financing.
In a legal sense, the question is whether, and to what degree, particular laws, may constitute crimes committed by the corporation. To know more, contact our attorney at Layman Litigation now!
[1] https://sgp.fas.org/crs/misc/R43293.pdf [2] 617 F.3d 541, 552-53 (1st Cir. 2010). [3] https://iclg.com/practice-areas/business-crime-laws-and-regulations/usa [4] Refer above link. [5] 770 F.2d 399 (4th Cir. 1985). [6] https://www.justice.gov/sites/default/files/criminal-fraud/legacy/2010/04/11/charging-corps.PDF [7] 689 F.2d 238, 241-42 (1st Cir. 1982). [8] https://www.casemine.com/judgement/us/5914c3e9add7b049347ca02c [9] https://www.justice.gov/sites/default/files/criminal-fraud/legacy/2010/04/11/charging-corps.PDF
