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The New Conventional Wisdom

Only a couple of years ago, you couldn’t find a respectable academic or defense lawyer or study group to come out and say what Wall Street wanted to hear–don’t criminally prosecute corporations for their crimes.

After all, with the growing divide between the hyper-rich and the rich–never mind the rich and the rest of us–it was just considered a touch gauche to let major American corporations off the hook for corporate crimes that inflict more damage on society than street crimes.

Now, it is the conventional wisdom–don’t criminally prosecute corporations.

The Committee on Capital Markets Regulation (our name–Defending Corporate Criminals in Our Midst (DEFCOM))–earlier this month put out a report recommending that “the Justice Department revise its prosecutorial guidelines so that firms are only prosecuted in exceptional circumstances of pervasive culpability throughout all offices and ranks.”

University of Chicago Law Professor Richard Epstein goes a step further and says that corporations should never be criminally prosecuted.

Even if the corporation is criminally corrupt from top to bottom–you can get the job done by criminally prosecuting the individuals within the corporation–no need to prosecute the corporation itself, Epstein says.

On paper, the Justice Department defends corporate criminal liability.

But it in practice, it has all but eliminated effective criminal prosecution of corporations.

Outside of the antitrust arena, we can’t remember a major American company that has been convicted of a crime over the past two years or so.

If you know of one, let us know.

Every major corporation that has committed a crime during this period gets a deferred or a non-prosecution agreement.

These agreements were originally intended for minor individual cases, often first offenders–never for major corporate criminals.

It all started with the criminal prosecution of Arthur Andersen for obstruction of justice in the Enron case.

Andersen thumbed its nose at the Justice Department when the Department offered to settle the matter with a deferred prosecution agreement and instead went to trial, where it was convicted.

The conviction was later overturned by the Supreme Court.

But the damage was done when the indictment was filed. And the accounting firm was driven out of business.

Every since, the Department doesn’t dare convict a major American company.

And the Andersen case is used as the cornerstone for the argument to eliminate corporate criminal liability.

Or as DEFCOM put in its report–“Except in truly exceptional cases, there is no independent benefit to be gained from indicting what is in fact an artificial entity. As the demise of Arthur Andersen attests, criminal indictments of entire companies–especially those in the financial services industry where reputation is so crucial–effectively results in the liquidation of the entire firm–with this comes the attendant disruption of the lives of many employees and stakeholders who are totally innocent of wrongdoing.”

One problem with this argument–in the vast majority of corporate crime cases, an indictment does not result in the death of the firm.

In 2000, we put out a study on the Top 100 Corporate Criminals of the 1990s. All major corporations. All convicted of major crimes. None of them put out of business as a result. Indeed, our guess is that in the vast majority of these cases, the stock price ticked up on the news of the plea agreement–Wall Street cheers when legal clouds are disappeared.

Second problem–corporations are persons under the Constitution. For the most part, they get the privileges and rights and immunities of regular human beings. They have the right to speak. They have the right to petition their government for a redress of grievances.

But when they commit a crime, they shouldn’t be charged?

Why the double standard?

We’re not ones to defend collective punishment.

But there is a logic to collective punishment when the corporate crime is committed on behalf of the corporation, at the behest of the corporation, and for the benefit of the corporation.

But we can envision a global settlement agreement with DEFCOM.

How about no criminal prosecution of corporations in exchange for no Constitutional protection for corporations?

Corporate Crime Reporter is located in Washington, DC. They can be reached through their website.

 

 

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