Should we strictly limit corporate criminal liability?
Mayer Brown partner Michael Volkov says – yes.
And in recent weeks, he has taken to his blog – Corruption, Crime and
Compliance – and to his Twitter account – @mikevolkov20 – with articles such as:
Are Prosecutors Pushing the Envelope Too Far?
Questioning Corporate Criminal Liability, and
FCPA Investigations: How Far Can the Justice Department Reach?
“There has been a lot of controversy surrounding criminal liability for
corporations,” Volkov told Corporate Crime Reporter in an interview last week.
“Is it fair to impose criminal liability on corporations?”
“Contrary to Mitt Romney’s comment that corporations are people,
corporations are fictitious entities. They are comprised of individuals –
officers, a board of directors, employees.”
“When a corporation is held criminally liable, who is getting punished?”
“There has been a great debate relating to the Foreign Corrupt Practices Act
and the fact that companies are being held liable for the actions of two or
three or ten employees in a multinational corporation – even though they
may have a tremendous compliance program, even though they may take
every effort to make sure there is not a violation.”
“Lo and behold, a few actors engage in misbehavior. And the company gets
held liable criminally and has to pay a fine, notwithstanding the fact that
95 percent of their effort and resources goes to make sure that they are in compliance.”
“Is it fair to impose a criminal conviction when the company is not going to jail?”
Even though Volkov says he just wants to raise the question, and hasn’t
reached an answer yet, it’s clear that he would reserve corporate
criminal liability for only the most egregious circumstances.
“Criminal prosecution is getting so commonplace now that it is replacing
the civil system,” Volkov said. “Prosecutors know that a company cannot go to trial.
They know that a company cannot test the evidence. We learned from Arthur
Andersen that an indictment can be a death sentence for a company.
The company always has to avoid an indictment. So, they have no choice but
to cut a deal with prosecutors. As a result, prosecutors have an enormous amount
of power over companies.”
I raise Professor John Coffee’s objection to getting rid of corporate criminal liability.
Coffee says that since the criminal law is saved for society’s most egregious acts,
denying the ability to criminally prosecute corporations sends the signal that
corporate wrongdoing is not as serious as individual wrongdoing.
“I don’t know if the public really cares about it,” Volkov said. “For example,
there has been an investigation into price fixing in the municipal bond fund
market. For some reason, the Antitrust Division agreed to let some of the
bigger financial institutions not plead guilty, but to enter into a civil resolution
with the SEC.”
“There was no criminal prosecution. And the reason must have been because
of the implications for these financial institutions.”
“I don’t know that the public didn’t take that any less seriously because it was a
civil resolution and not a criminal resolution.”
When it comes to egregious behavior, like the Gulf of Mexico, people might actually care.
“I understand that individuals are going to be criminally prosecuted
in the Gulf cases,” Volkov says. “And let’s say the corporations involved
get civil resolutions while the individuals are indicted for some type of
reckless homicide? Coffee has a point there.”
“So, I don’t think there is any blanket policy. What is clear is the criminal
prosecution of corporations has become more and more a cottage industry.”
“There may be reasons to rethink how we are applying that model on a
regular basis to corporate misconduct.”
“There are going to be egregious cases. You can’t have a rule that says
that companies can never be held criminally liable.”
“But there may be ways to draw lines using the doctrine of respondeat superior.
If senior management is involved in a particular crime, that may be
enough to say – its appropriate.”
“If it’s mid level – let’s say there are five officers in a subsidiary overseas and
they engage in the behavior – should you hold a global company criminally
liable even though 99 percent of its activity was lawful?”
“But then there are examples of terrible things that companies have done.
And those companies should be punished.”
Volkov says he’s surprised that a federal judge hasn’t yet jumped all over the
deferred and non prosecution agreements the way Judge Jed Rakoff did on
the SEC’s neither admit nor deny settlements.
“I am surprised that no judge has done that yet,” Volkov said. “If I were a judge,
that is the first thing I would do. I would say – what the hell are we doing here?
I don’t like this, but I like this. This fine is ridiculous to me, I want to hear about it.
Particularly in the corporate monitor cases, the judges are asleep.”
“Under the Tunney Act, when the Department of Justice resolves a public merger
case, the judge has to put it out for public comment. With regard to the FCPA,
they should be doing the same as well.”
Volkov has been taking some flak from his older colleagues for taking to the web
to air out his theories.
“I have a lot of grey hair,” he says. “I’m not the most web savvy person.”
“Law firms send out paper client alerts that are usually two weeks too late.
And general counsel just crumble them up and they don’t even read them.
They are worthless.”
“I started to do mass e-mails. And you get notes back from people saying –
please don’t e-mail me, you are cluttering up my e-mail box.”
“So, I went to a blog. And from the blog, I went to Twitter. And now,
I’m going to JD Supra, which is going to manage my blog. And I find it’s fantastic.”
“In the business, there is a demand for real time and not 20 pages of legal
analysis. Corporate lawyers don’t have the time. They need to know what is
going on quickly. If they need to dig into something, they will do it later.”
“I’ve had a lot of resistance from people my age,” he says. “But who are going
to be your corporate general counsels and corporate lawyers? It’s going to be
the 30 and 40 year olds. And very soon, they are going to be taking the reins.
And they do everything on the Internet – everything. If you want to be a
dinosaur, go right ahead.”
[For the complete transcript of the Interview with Michael Volkov, see
26 Corporate Crime Reporter 4, January 23, 2012, print edition only.]