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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.
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.
