Peter Blair | February 13, 2015 | Business Crimes
While it may seem counter-intuitive, U.S. corporations are “people” in the eyes of the law. Therefore, just like the average citizen, a U.S. company can face criminal or civil charges in court. Whether it’s for money laundering, insider trading, fraud, or something else entirely, corporations are responsible for their actions just as much as any other citizen.
How can a business face criminal charges?
Corporations can face criminal charges under the doctrine of “respondeat superior,” which is Latin for “let the master answer.” Under respondeat superior, an employer is responsible for the actions of its employees taken in the course of employment. Therefore, the corporation as a whole can be indicted for the unlawful actions of specific employees, directors, managers, etc.
The U.S. Department of Justice decides whether or not to charge a corporation with a crime in much the same way it would with a normal citizen, with a few adjustments. The following factors are taken into account when deciding whether or not to file criminal charges against a business:
- The nature and seriousness of the offense, including the risk of harm to the public
- The pervasiveness of wrongdoing within the corporation, including the complicity or wrongdoing of corporate management
- The corporation’s history of similar conduct, including prior criminal, civil, or regulatory actions
- The corporation’s timely and voluntary disclosure of wrongdoing and willingness to cooperate in the investigation of its agents
- The existence and adequacy of the corporation’s compliance program
- Collateral consequences, including disproportionate harm to shareholders and employees not personally culpable
- Adequacy of non-criminal remedies, such as civil or regulatory action
How are corporations punished?
Since it’s impossible to put an actual corporation in prison, white collar crimes by corporations are typically punished by hefty fines. In some cases, the court can also put the company on some sort of probation, during which time a judge will oversee the business operations to spot further criminal activity.
It is important to understand the distinction between charging a corporation with a crime and charging individual employees with a crime. A U.S. Department of Justice memo puts it this way: “Prosecution of a corporation is not a substitute for the prosecution of criminally culpable individuals within or without the corporation.
Further, imposition of individual criminal liability on such individuals provides a strong deterrent against future corporate wrongdoing.” Therefore, a corporation can be charged and found guilty of a crime, but that does not mean the individual wrongdoers will go to prison; rather, there must be a separate criminal or civil case against these people in order to punish individual criminal acts.