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Rethinking Corporate Criminal Liability
NACDL’s Third Annual White Collar Seminar, a joint educational endeavor
with the Georgetown University Law Center, was successful in ways both
expected, and unexpected. The two-day program, held on September 27-28,
set a new attendance record and featured a faculty of extraordinary
talent and experience. Under the leadership of our White Collar Crime
Project Director, Stephanie Martz, and Co-Chairs Abbe Lowell and Past
President Gerald Goldstein, the conference planners again assembled
leading white collar practitioners, distinguished prosecutors and highly
regarded jurists. So much for the expected.
What was unexpected was the content of remarks delivered by luncheon
speaker Hon. Lewis A. Kaplan, United States District Judge for the
Southern District of New York. When he introduced Judge Kaplan, Abbe
Lowell noted that on rare occasions a decision comes down that
fundamentally alters the way we think about the law. These occasional
judicial earthquakes shake established notions to their core and spawn
wholly new insights. They often come when lamentable practices have
become so routine that change seems unattainable. Of course, Mr. Lowell
was referring to Judge Kaplan’s landmark decision in the KPMG case.
Judge Kaplan held that the government’s insistence on corporate waiver
of attorney-client privilege and refusal to pay counsel fees of
corporate officers, as a condition of cooperation, violated the right to
counsel. This certainly was a judicial earthquake. The decision has
fueled reform efforts, including the NACDL-supported Attorney-Client
Privilege Protection legislation currently pending in both houses of
Congress.
Indeed, those who expected Judge Kaplan to reference the decision,
based upon the public record of the proceedings, were not disappointed.
But then the judge moved beyond discussion of reported decisions and
engaged in a thought-provoking analysis in the best tradition of the
jurist as thinker. Judge Kaplan raised the intriguing question of
whether it is time for society to rethink the concept of corporate
criminal liability. Given the profound consequences of the enormous
accretion of power in the prosecutorial function of the executive
branch, he wondered whether we ought to rethink the source of that
power.
Prosecutorial power in the corporate criminal context is premised on the
notions that the corporation is a person and that the corporation is
guilty if any person commits a crime to benefit the corporation while
generally acting within the scope of his or her corporate duties. Judge
Kaplan questioned whether these propositions make sense when applying
the criminal law in the modern context.
The stigma and moral sanction that befall individuals who commit crimes
provide meaningful punishment and work to assuage victims and channel
vengeance. But in the case of large publicly traded corporations, the
stigma and moral judgment that befall the corporate entity are
transferred to thousands of innocent employees and shareholders. Judge
Kaplan cited Arthur Andersen as a quintessential example. One might
readily think of Enron and others.
Further, Judge Kaplan observed that the notion that the owners are
responsible for the acts of the employees leads to irrational
consequences in the case of the modern large corporation. Corporations
are run by professional managers, and the owners (shareholders) have no
actual role in running the company or any say in how the corporation is
managed or mismanaged. Therefore, punishment of the owners is illogical.
In the final analysis, the inevitable loss of jobs and fortune brings
heartache and tragedy to individual lives and families.
While a tough approach to corporate crime may be a laudable goal, Judge
Kaplan concluded his analysis by noting that the pursuit of that goal by
any means is not necessarily in the national interest. Of course, as
one participant noted in the ensuing question-answer segment, the
accretion of prosecutorial power through the manipulation of mandatory
minimum sentences and unbridled control over plea-bargaining raises the
even broader question of whether the entire criminal justice system,
even as it relates to individual defendants, serves the national
interest. Certainly for NACDL, justice for individuals will always be
the paramount concern.
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In urging us to at least reconsider established notions of corporate
criminal liability, Judge Lewis Kaplan provided a somewhat unexpected
intellectual jolt to what was already a high-powered CLE program. No
doubt as the NACDL family, including the many committees that are
pursuing White Collar reform and our multitude of amicus brief writers,
digests the judge’s remarks, we will see new ideas emerge. And as these
ideas emerge there is no telling how it may foment reform across the
broad spectrum of our criminal justice system. This is the essence of a
living legal system, and vividly illustrates how a vibrant bar
association, through its commitment to continuing legal education and
its partnerships with the legal academy and the broader legal community,
can nurture reform.
One thing is certain. For those who attended the NACDL-Georgetown
seminar, it is unlikely that their thinking about the established
notions of criminal law will remain unaffected.
