For some of us, the very notion of corporate criminal liability doesn’t seem to make a great deal of sense.  Corporations are fictitious entities, existing because law says they do.  They don’t think or breath.  They don’t “do” anything. That includes committing crimes.  It’s not that individuals within corporations don’t commit crimes for the benefit of their interest in the corporations.  That clearly happens.  But one doesn’t blame the chair for being too weak when it strains and breaks under too heavy a weight.  It’s just a chair.

In an effort to make some small amount of sense out of corporate criminal liability, a “novel” argument was raised before the 2nd Circuit in U.S. v. Ionia Management, according to the WSJ Law Blog.  And the Circuit responded in a per curiam opinion with a resounding “NO!”

On appeal to the Second Circuit, former Enron Task Force head Andrew Weissmann, now of Jenner & Block, filed an amicus brief on behalf of the U.S. Chamber of Commerce and others. In what some viewed as a possible harbinger of good things, the court allowed Weissmann a few minutes to explain his position at oral arguments.

Weissmann argued that the trial court wrongly instructed the jury that a corporate defendant could be criminally responsible for acts committed by a single employee, even if those acts were committed against the company’s policies. Weissman argued that for nearly a century, judges, prosecutors and defense lawyers had misconstrued a 1909 Supreme Court decision, called New York Central and Hudson River Railroad v. United States, which allowed a company to be held criminally liable any time an employee commits a crime intended to help the company.

A ruling in Weissmann’s favor would have done “a lot to influence the balance of power between a prosecutor and a defense lawyer representing a company,” said Jonathan Polkes, a defense lawyer at Weil, Gotshal & Manges, to the WSJ’s Amir Efrati last fall.

To rephrase the problem, a corporation’s criminal liability is captive to whatever brainstorm pops into the head of some low level employee.  Perhaps the problem is that a department’s budget comes up short, and the employee comes up with an idea to circumvent some regulation that takes out a bite.  It may very well be an important regulation.  The damage caused by the conduct may be very serious.  But should the corporation be liable?

The argument of amicus was that before respondeat superior should condemn the corporation, the government should be required to prove that the corporation “lacked effective policies and procedures to deter and detect criminal actions by its employees.”  In other words, that the corporation did not do everything within its managerial power to make sure that the loading dock foreman wasn’t selling computer chips to the Russians. 

The Circuit’s reaction was to call this position “meritless”, the basic response to all arguments for which there is no really good reason against it but the Court just isn’t buying. 

While the general sense of justice from the criminal defense bar often leaves issues of corporate criminal liability on the sidelines, particularly since these cases are handled by the Biglaw, ex-AUSA, “we’re cooperating fully,” crowd, this is still part of criminal law and still facially wrong.  We may not feel terribly sympathetic toward corporate defendants, but there are some human beings holding shares in their retirement account who might be worthy of our concern.

Imposing sentence on a corporation fails to serve the same purposes as it does with an individual, rendering the concept of corporate criminal liability dubious in the first place.  Acts are done by people, not legal entities.  The only punishment that matters to a corporation is money, and that can be more easily imposed through civil than criminal process.  To call a corporation criminal is just plain silly, unless the entire enterprise exists for the purpose of crime, in which case there are bigger problems than corporate criminal liability, and these problems are still better addressed through prosecution of the individuals who perform the criminal acts, and those who may have directed them to do so.

But if we take the basic corporate entity, designed to engage in a lawful business in a lawful manner, with real policies and procedures in place to do everything within its power to make sure its employees aren’t shooting the customers, what more, exactly, would the government have it do?  Would they have a lawyer watching every employee to make sure each and every person on the payroll toes the line?  People, being people, come up with some peculiar ideas of propriety from time to time.  Corporations with tens of thousand of employees have tens of thousand of chances for one of them to commit a crime, thinking it’s a good idea for the corporation.  How does one prevent that from happening?

This is not absolve the crimes committed in the “name” of the corporation.  Not in the slightest.  But it is to suggest that corporations be recognized for their efforts to stop internal crime, when those efforts are real, effective (even if not perfect) and truly intended to reflect a corporate policy of compliance with the law.

The only other truly fair solution is to limit corporate punishment to imprisonment.  Can’t you imagine a cell block filled with corporate kits, each with jailhouse tats and singing the blues?