Two ways to think about the punishment of corporations

American Criminal Law Review

Volumn 46, Issue 4, 2009, Pages 1359-1392

  Alschuler, Albert W ^a  

^a NORTHWESTERN UNIVERSITY   (United States)

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EID: 76749127641     PISSN: 01640364     EISSN: None     Source Type: Journal    
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References (296)

1. I first offered this comparison 18 years ago at the end of a comment on two conference papers. See Albert W. Alschuler, Ancient Law and the Punishment of Corporations: Of Frankpledge and Deodand, 71 B. U. L. REV. 307, 312-13 (1991). Sara Sun Beale, Cheryl Evans, and the editors of the American Criminal Law Review encouraged me to revisit the comparison and, as they say in Congress, extend my remarks.
2. The word refers specifically to the English practice of forfeiting the offending animal or object to the Crown and then using the proceeds for charitable purposes. The literal translation of deodand is "given to God." I use the word more generically to encompass the official condemnation of animals and objects not only in England but in other places.
3. Exodus 21:28 (King James).
4. E. P. EVANS, THE CRIMINAL PROSECUTION AND CAPITAL PUNISHMENT OF ANIMALS (Faber and Faber 1987) (1906).
5. Walter Woodburn Hyde, The Prosecution and Punishment of Animals and Lifeless Things in the Middle Ages and Modem Times, 64 U. PA. L. REV. 696, 708 (1916). Most prosecutions apparently involved pigs, for pigs ran through European streets for centuries and "were frequently involved in altercations, particularly with small children". Paul Schiff Berman, Rats, Pigs and Statues on Trial: The Creation of Cultural Narratives in the Prosecution of Animals and Inanimate Objects, 69 N. Y. U. L. REV. 288, 298 (1994).
6. See generally Louise Harmon, The Day the Dogs Died: A Mad Essay on the Perils of Alien Scholarship, or an Alien Essay on the Perils of Mad Scholarship, 23 LEGAL STUD. F. 1, 14 (1999) ;
7. Anna Pervukhin, All the Lizards Stand and Say "Yes, Yes, Yes": The Element of Play in Legal Actions against Animals and Inanimate Objects (Bepress Legal Series Working Paper No. 96, 2003), http://law.bepress.com/expresso/eps/96.
8. 2 FREDERICK POLLOCK & FREDERIC WILLIAM MAITLAND, THE HISTORY OF ENGLISH LAW BEFORE THE TIME OF EDWARD I 472-73 (Cambridge Univ. Press 2d ed. 1968) (1898) ("Horses, oxen, carts, boats, mill-wheels and cauldrons were the commonest of deodands. In English men called the deodand the bane, that is, the slayer.").
9. Case of the Lord of the Manor of Hampstead, (1704) 91 Eng. Rep. 195, 195 (K. B.).
10. Id.
11. Id. at 195-96 (adding that "if a tree shall fall upon the branch of another tree, and both fall to the ground, and the branch kills a man, the tree and branch are both forfeited") (emphasis omitted).
12. OLIVER WENDELL HOLMES, JR., THE COMMON LAW 1-38 (Dover 1991) (1881).
13. Id.at 19.
14. Id. at 28-29;
15. see POLLOCK & MAITLAND, supra note 6, at 474 ("[I]t is hard for us to acquit ancient law of that unreasoning instinct that impels the civilised man to kick, or consign to eternal perdition, the chair over which he has stumbled.").
16. See CATHERINE DRINKER BOWEN, YANKEE FROM OLYMPUS: JUSTICE HOLMES AND HIS FAMILY (1945).
17. HOLMES, supra note 10, at 1.
18. WILLIAM HOLDSWORTH, A HISTORY OF ENGLISH LAW 13 (3d ed. 1922) (1903) ;
19. see also POLLOCK & MAITLAND, supra note 6, at 568-71 (noting variations on the frankpledge system described in text). The definitive work is WILLIAM ALFRED MORRIS, THE FRANKPLEDGE SYSTEM (1910).
20. See Frankpledge, 11 THE ENCYCLOPEDIA BRITANNICA 34 (Hugh Chisholm ed., 11th ed. 1910).
21. See Edgar, 8 THE ENCYCLOPEDIA BRITANNICA 933 (Hugh Chisholm ed., 11th ed. 1910). Edgar was the father of Ethelred the Unready, whom John Cleese portrayed in Monte Python films.
22. See id.; John Cleese Filmography, MOVIE PLANETS, http://movieplanets.com/imdbphp/imdb-person. php?mid=0000092.
23. Frankpledge, supra note 16;
24. see MORRIS, supra note 15, at 19 (describing this law as "the last step in the establishment of general peace suretyship").
25. Frankpledge, supra note 16, at 34;
26. see MORRIS, supra note 15, at 31 (The "name seems to be nothing but a Norman version of the word used in the everyday speech of the English people.").
27. But see id. at 2 (suggesting that "franc pledge" was a translation of the Latin term "plegium liberale"). Morris offers evidence that the Normans organized the frankpledge system during the reign of William the Conqueror and that frankpledge differed significantly from its Anglo-Saxon predecessors.
28. See id. at 8-41. Notably, although earlier systems required every man to find a surety, they did not force anyone to become one. In the earlier systems, principals and sureties apparently struck their own bargains.
29. See F. W. Maitland, Introduction to 2 SELECT PLEAS IN MANORIAL AND OTHER SEIGNORIAL COURTS xi, xxxvi-xxxvii (F. W. Maitland ed., Professional Books, Ltd. 1974) (1889) ;
30. see also ALBERT BEEBE WHITE, THE MAKING OF THE ENGLISH CONSTITUTION 175, 181 (2d ed., rev. 1925).
31. See Frankpledge, supra note 16, at 35 (declaring that, although frankpledge was in "active operation" in 1376, it soon began to fall into disuse and vanished altogether during the Tudor period).
32. See Deodands Act, 1846, 9 & 10 Vict., c. 62 (Eng.). In the years just preceding 1846, coroners seeking to compensate the families of workers killed in industrial accidents had resurrected the use of deodands.
33. See Harry Smith, From Deodand to Dependency, 11 AM. J. LEG. HIST. 389 (1967). Deodand's close cousin, the in rem forfeiture of instrumentalities of crime, persists in America today.
34. See, e.g., Bennis v. Michigan, 516 U. S. 442 (1996) (upholding the forfeiture of a wife's interest in a jointly owned automobile after her husband had sex with a prostitute in the vehicle). Indeed, revenue-hungry American legislatures have expanded instrumentality forfeiture far beyond its common law boundaries by requiring the forfeiture of real estate as well as personal property.
35. See, e.g., 18 U. S. C. § 1963 (b) (1) (2006).
36. *300.
37. *27.
38. *476;
39. see also Anonymous Case (No. 935), (1706) 88 Eng. Rep. 1518, 1518 (K. B.) ("A corporation is not indictable but the particular members of it are.").
40. 212 U. S. 481 (1909).
41. Id. at 494-95.
42. Id. at 495.
43. Id.
44. Id. at 496.
45. State courts had begun to allow the prosecution of corporations in the mid-nineteenth century, and although "the early prosecutions were for crimes involving a corporation's failure to act,... the distinction between offenses involving nonfeasance and misfeasance was short-lived." Peter J. Henning, The Conundrum of Corporate Criminal Liability: Seeking a Consistent Approach to the Constitutional Rights of Corporations in Criminal Prosecutions, 63 TENN. L. REV. 793, 808-09 n. 61 (1996).
46. Several federal district courts had approved the criminal punishment of corporations in the years just preceding New York Central. Id. at 810-12.
47. New York Central, 212 U. S. at 494.
48. See, e.g., United States v. Union Supply Co., 215 U. S. 50, 54-55 (1909) ;
49. Joplin Mercantile Co. v. United States, 213 F. 926, 936 (8th Cir. 1914) ("The whole growth of the modern law tends to subject corporations, as nearly as may be, to the same pains and penalties imposed upon individuals.") ;
50. London v. Everett H. Dunbar Corp., 179 F. 506, 510 (1st Cir. 1910) ;
51. People v. Canadian Fur Trappers' Corp., 161 N. E. 455, 455-56 (N. Y. 1928) ;
52. People v. Star Co., 120 N. Y. S. 498, 500 (N. Y. App. Div. 1909) ;
53. State v. Ice & Fuel Co., 81 S. E. 737, 738 (N. C. 1914) ;
54. Vulcan Last Co. v. State, 217 N. W. 412, 414-15 (Wis. 1928).
55. The Elkins Act, Pub. L. No. 57-103, ch. 708, 32 Stat. 847 (1903) (current version codified in scattered sections of 49 U. S. C.).
56. See, e.g., Old Monastery Co. v. United States, 147 F.2d 905, 908 (4th Cir. 1945) ("The generally accepted rule is thus laid down: 'A corporation may be held criminally responsible for acts committed by its agents, provided such acts were committed within the scope of the agents' authority or course of their employment.'") (quoting current 19 C. J. S., Corporations § 1362 (2008), formerly § 861) ;
57. Zito v. United States, 64 F.2d 772, 775 (7th Cir. 1933) ("Corporations speak and act through their agents. There is abundant proof in the instant case that one McNamara was an agent of the appellant company and that he had authority to sell its products. Therefore, it naturally follows that his actions... are binding upon appellant company.").
58. MODEL PENAL CODE § 2.07 (1) (c) (Proposed Official Draft 1962). At least twelve states have approved the Model Penal Code formulation without significant modification, and a comparable number have approved standards based on the Code that expand, modify, or clarify its ill-defined reference to "[h]igh managerial" agents.
59. See MODEL PENAL CODE § 2.07 cmt. 5 (c) n. 37 (1985).
60. For example, the New York statute defines "high managerial agent" as any "officer of a corporation or any other agent in a position of comparable authority with respect to the formulation of corporate policy or the supervision in a managerial capacity of subordinate employees." N. Y. PENAL LAW § 20.20 (l) (b) (McKinney 2009).
61. See generally Elizabeth K. Ainslie, Indicting Corporations Revisited: Lessons of the Arthur Andersen Prosecution, 43 AM. CRIM. L. REV. 107 app. B (2006) (reviewing the law of each state).
62. See, e.g., United States v. Potter, 463 F.3d 9, 25-26 (1st Cir. 2006) ;
63. United States v. Hilton Hotels Corp., 467 F.2d 1000, 1007 (9th Cir. 1972).
64. See, e.g., United States v. Sun-Diamond Growers of California, 138 F.3d 961, 970 (D. C. Cir. 1997), aff'd, 526 U. S. 398 (1999) ;
65. United States v. Cincotta, 689 F.2d 238, 241-42 (1st Cir. 1982) ;
66. United States v. Automated Med. Labs., Inc., 770 F.2d 399, 407 (4th Cir. 1985).
67. Sara Sun Beale writes, "It is... true that liability can be imposed on corporations for the actions of corporate employees, even in the absence of specific proof of corporate fault. This is not unique." Sara Sun Beale, Is Corporate Criminal Liability Unique?, 44 AM. CRIM. L. REV. 1503, 1505 (2007). She notes two other instances of vicarious criminal liability in the American criminal justice system (but only two) : [I]n some jurisdictions felony murder imposes liability for one of the most serious offenses on the basis of vicarious strict liability. Similarly, in many jurisdictions an accomplice to one crime is also responsible for other crimes committed as a natural and probable consequence of the offense he aided and abetted, even if he does not assist or even know of the additional offenses.... Compared to liability for homicide, corporate criminal liability for white collar offenses does not seem like such a big deal.
68. Id. at 1514-15. Analogizing corporate criminal liability to felony-murder rule and to the natural-and-probableconsequences doctrine does not say anything nice about it. Unlike corporate criminal liability, however, the felony-murder rule and the natural-and-probable-consequences doctrine do not punish the blameless; they simply hold deliberate wrongdoers responsible for more than they intended. Corporate criminal liability does appear to be unique.
69. Dale Osterle comments, "Since an indicted firm is a dead firm, a decision to defend an indictment is suicide." Dale A. Osterle, Early Observations on the Prosecutions of the Business Scandals of 2002-03: On Sideshow Prosecutions, Spitzer's Clash with Donaldson Over Turf, the Choice of Civil or Criminal Actions, and the Tough Tactic of Coerced Cooperation, 1 OHIO ST. J. CRIM. L. 443, 476 (2004).
70. Arthur Andersen Convicted of Obstruction of Justice-Firm to Cease Auditing Public Companies, FACTS ON FILE WORLD NEWS DIGEST, June 15, 2002, at 456G1, available at LEXIS.
71. See, e.g., United States v. Bank of New England, N. A., 821 F.2d 844, 854-56 (1st Cir. 1987) ;
72. United States v. Sci. Apps. Int'l Corp., 555 F. Supp. 2d 40, 55-56 (D. D. C. 2008) ;
73. United States v. T. I. M. E.-D. C., Inc., 381 F. Supp. 730, 738-39 (W. D. Va. 1974) ;
74. State v. Zeta Chi Fraternity, 696 A.2d 530, 535-37 (N. H. 1997).
75. See Ken Brown & Ianthe Jeanne Dugan, Arthur Andersen's Fall from Grace is a Sad Tale of Greed and Miscues, WALL ST. J., June 7, 2002, at A1 (reporting that Arthur Andersen employed 85, 000 people worldwide).
76. See Samuel W Buell, The Blaming Function of Entity Criminal Liability, 81 IND. L. J. 473, 486 (2006) ;
77. Arthur Andersen Convicted, supra note 40.
78. Arthur Andersen Convicted, supra note 40.
79. Arthur Andersen LLP v. United States, 544 U. S. 696, 708 (2005).
80. See Brown & Dugan, supra note 42. Although the government did not charge Nancy Temple, it did charge and enter a plea agreement with another Andersen employee, David Duncan. After the Supreme Court reversed Andersen's conviction, Duncan was permitted to withdraw his plea. Greg Farrell, Former Auditor Isn 't Done with Enron, USA TODAY, NOV. 25, 2005, at 7B. The Ford Pinto prosecution, in which a jury acquitted Ford Motor Company of manslaughter, was another case in which prosecutors filed charges against a corporation while declining to charge the individuals alleged to have committed its crime.
81. See BRENT FISSE & JOHN BRAITHWAITE, THE IMPACT OF PUBLICITY ON CORPORATE OFFENDERS 45 (1983). Prosecutors did charge the individuals allegedly responsible for the crimes of the Bankers Trust Corporation, but after the corporation entered a plea agreement and paid a fine of $60 million, a jury acquitted these individuals of all of the twenty-seven charges brought against them.
82. See Matthew L. Schwartz, Using the Criminal Law to Combat Insider Banking Misconduct, 35 COLUM. J. L. & SOC. PROBS. 371, 371-73 (2002).
83. See Oklahoma Press Co. v. Walling, 327 U. S. 186, 205 (1946) ("[C]orporations are not entitled to all of the constitutional protections which private individuals have in these and related matters.").
84. See generally Henning, supra note 30.
85. The Court first held the privilege inapplicable to corporations in Hale v. Henkel. 201 U. S. 43 (1906). It declared that a corporation was a "creature of the State" with "certain special privileges and franchises" and that "[t]here is a reserved right in the legislature to investigate its contracts and find out whether it has exceeded its powers."
86. Id. at 74-75. A later Supreme Court decision spoke of "[t]he [state's] reserved power of visitation" and said that "the visitatorial power... of necessity reaches the corporate books." Wilson v. United States, 221 U. S. 361, 384-85 (1911). An enterprise no more waives the privilege against self-incrimination by accepting a corporate charter, however, than it waives any other constitutional right. Could the state force an entity that obtained a charter to waive the right to jury trial? Or to stand trial without counsel? Do the state's "visitatorial powers" entitle the police to break down doors and seize corporate records without search warrants and without probable cause? Hale itself reiterated an earlier ruling that a corporation retains some Fourth Amendment rights. 201 U. S. at 76-77 (discussing Boyd v. United States, 116 U. S. 616 (1886)). Moreover, the claim of a reserved "visitatorial power" as a reason for denying the Fifth Amendment privilege collapsed when the Supreme Court held that unincorporated "collective entities" could not claim the privilege either. United States v. White, 322 U. S. 694, 699 (1944). The Court offered a second rationale for withdrawing the privilege in White. It declared that "[t]he constitutional privilege against self-incrimination is essentially a personal one, applying only to natural individuals."
87. Id. at 698. It added that the privilege should not extend to any organization with "a character so impersonal in the scope of its membership and activities that it cannot be said to embody or represent the purely private or personal interests of its constituents."
88. Id. at 701. The Court argued that corporate records "embody no element of personal privacy."
89. Id. at 700. Following a grant of immunity from prosecution, however, the government may force an individual to disclose his most intimate secrets without violating the privilege.
90. See, e.g., Kastigar v. United States, 406 U. S. 441, 441 (1972). As the Supreme Court now has recognized, "the Fifth Amendment protects against 'compelled self-incrimination, not [the disclosure of] private information. '" Fisher v. United States, 425 U. S. 391, 401 (1976) (quoting United States v. Nobles, 422 U. S. 225, 233 n. 7 (1975)). Because the Fifth Amendment privilege advances purposes other than the protection of personal privacy, the fact that corporate records "embody no element of personal privacy" supplies no reason for withholding the privilege. White added a third rationale for withdrawing the privilege. It appears to be the only one still standing: The scope and nature of the economic activities of incorporated and unincorporated organizations... demand that the constitutional power of the federal and state governments to regulate those activities be correspondingly effective.... Were the cloak of the privilege to be thrown around these impersonal records and documents, effective enforcement of many federal and state laws would be impossible.... White, 322 U. S. at 700. More recently, Braswell v. United States, 487 U. S. 99 (1988), declared that "recognizing a Fifth Amendment privilege on behalf of the records custodians of collective entities would have a detrimental impact on the Government's efforts to prosecute 'white-collar crime,' one of the most serious problems confronting law enforcement authorities."
91. Id. at 115. The government, however, has no greater interest in enforcing the laws against white-collar crime than in enforcing the laws against murder, rape, and robbery. The framers of the Constitution sacrificed the most effective enforcement of these criminal prohibitions when they established the privilege, and there is no reason to imagine that they meant a different rule to apply to the government's investigations of crimes like price fixing and bribing foreign officials. By punishing corporations without affording them the protections of the Bill of Rights, the government has its cake and eats it too.
92. Braswell, 487 U. S. at 113-14 (1988).
93. The Court's distinction between corporations and individuals initially meant a great deal more than it does today. Unlike corporations, individuals once were permitted to withhold documents whose contents would tend to incriminate them. Today both corporations and individuals can usually be required to produce incriminating documents.
94. See United States v. Doe, 465 U. S. 605, 605 (1984) ;
95. Fisher v. United States, 425 U. S. 391, 401 (1976).
96. The Supreme Court has called the corporation "a mere creature of the law, invisible, intangible, and incorporeal." Bank of the United States v. Deveaux, 9 U. S. (5 Cranch) 61, 88 (1809) ;
97. see also Trustees of Dartmouth College v. Woodward, 17 U. S. (4 Wheat.) 518, 636 (1819) (calling the corporation "an artificial being, invisible, intangible, and existing only in contemplation of law").
98. John Coffee recycled Thurlow's remark as the title of a noted article.
99. See John C. Coffee, "No Soul to Damn, No Body to Kick": An Unscandalized Inquiry Into the Problem of Corporate Punishment, 79 MICH. L. REV. 386, 386 (1981). With one brief interruption, Thurlow was Lord Chancellor from 1778 until 1792. He presumably made his statement before leaving that position.
100. See Alexander Wood Renton, Edward Thurlow Thurlow, 26 THE ENCYCLOPEDIA BRITANNICA 903-04 (Hugh Chisholm, ed., 11th ed. 1910). Many scholars have quoted Thurlow, but no one has tracked his statement to a primary source. Coffee noted its quotation in MERVYN KING, PUBLIC POLICY AND THE CORPORATION 1 (1977).
101. The late-nineteenth and early-twentieth-century penology that gave rise to corporate criminal responsibility rejected the concept of blame altogether. Roscoe Pound voiced the views of most serious thinkers about crime in the Age of Darwin when he spoke of the legal system's "exaggerated respect for the individual", declared that behavioral science had "routed" the concept of free will, and wrote, "We recognize that in order to deal with crime in an intelligent and practical manner we must give up the retributive theory." Albert W. Alschuler, The Changing Purposes of Criminal Punishment: A Retrospective on the Last Century and Some Thoughts About the Next, 70 U. CHI. L. REV. 1, 4 (2003) (citations omitted). Pound and his contemporaries maintained that the criminal law and all law should be entirely forward-looking and instrumental. Although the Supreme Court's opinion in New York Central did not discuss penology, a noted 1927 article on the criminal punishment of corporations did.
102. See Henry W. Edgerton, Corporate Criminal Responsibility, 36 YALE L. J. 827 (1927). This article, which Henry Edgerton wrote ten years before his appointment to the D. C. Circuit, declared, "[T]he assumption that crime involves 'guilt' is quite erroneous."
103. Id. at 842. Edgerton saw no significant difference between crimes and torts.
104. id. at 836, and he apparently viewed the retributivist position as a form of sadism: The argument against corporate criminal responsibility, that the corporation cannot itself be "guilty" and therefore should not be punished, rests on the tacit assumption that the aim of criminal law is retributive... consists, in other words, in the pleasure which some persons derive from the infliction of pain upon those whom they conceive to deserve it.
105. Id. at 832. Edgerton announced, The chief civilized purpose of criminal law is deterrence-the prevention of acts which are conceived to injure one social interest or another. The question is not whose mind is "guilty", but whose responsibility will serve this deterrent purpose.... It seems evident that this purpose is further served if corporate criminal responsibility is added to the criminal responsibility of the corporation's representatives.
106. Id. at 833. He added, "Corporate criminal responsibility tends to prevent crime not only by influencing the corporation's representatives of all degrees to abstain from conducting its business in unlawful ways, but also by influencing those of higher or remote degree to restrain subordinates."
107. Id. at 835.
108. DEP'T OF JUSTICE, U. S. ATTORNEYS' MANUAL § 9-28.1000 (2008).
109. Id.;
110. see also id. at § 9-28.300 (listing as one of nine factors a prosecutor "should" consider "collateral consequences, including whether there is disproportionate harm to shareholders, pension holders, employees, and others not proven personally culpable").
111. Beale, supra note 38, at 1522.
112. Id. at 1522-23 (quoting Tracey L. Meares, Social Organization and Drug Law Enforcement, 35 AM. CRIM. L. REV. 191, 206-07 (1998)).
113. Courts, sentencing commissions, and legislatures should do much more than they currently do to minimize the secondary effects of criminal punishment.
114. See generally Darryl K. Brown, Third Party Interests in Criminal Law, 80 TEX. L. REV. 1383 (2002).
115. Defenders of corporate criminal liability note that it may be impossible to determine which corporate employees committed a crime, especially when all of them point fingers at one another.
116. See, e.g., Edgerton, supra note 54, at 834. Imagine, however, that Mom or Dad or both of them have killed their only child. Mom denies her guilt and accuses Dad; Dad denies his guilt and accuses Mom. No physical or other evidence reveals which parent is telling the truth, if either of them is. The prosecutor concludes that neither Mom nor Dad can be proven guilty beyond a reasonable doubt. Is the appropriate solution to convict the "marital entity"? Or the "family"?
117. Professor Beale writes: [T]he argument that it is improper to impose criminal fines that effectively "punish" the "innocent" shareholders, employees, creditors, and others, proves far too much. These arguments apply equally to punitive damages, and indeed to any money judgment against a corporation, since such a judgment also reduces the shareholders' equity (as well as its ability to pay its' employees and creditors). Sara Sun Beale, A Response to the Critics of Corporate Criminal Liability, 46 AM. CRIM. L. REV. 1481, 1485 (2009). Of course a widget-manufacturing company should pay for the steel it has purchased, and a court should force it to pay if it refuses to honor its contract. Equally, this company should pay for the injuries its employees inflict in the course of their employment. These injuries are as much a cost of widget-production as the cost of steel, and this cost should be reflected in the price of widgets. Forcing the corporation to pay even "punitive" damages may be appropriate when wrongdoing is difficult to detect or when injuries are small enough that victims have little incentive to sue. Although called punitive, these damages may do no more than require the corporation to "internalize" some costs it has inflicted on people not before the court.
118. See BMW of North America v. Gore, 517 U. S. 559, 582 (1996). Forcing the company's innocent shareholders to pay the cost of producing widgets before they pocket the profits is obviously appropriate. Punishing them when they have done nothing wrong is-equally obviously-inappropriate. Beale asks, "Do criminal penalties really differ in some fundamental way from other damages that are properly imposed upon corporations?" Beale, supra, at 1485. The answer is yes. The law distinguishes between civil and criminal proceedings for a reason. Sadly, Professor Beale and many others have missed it. Not only is the criminal punishment of corporations unjustified in principle; it is probably less effective in practice than civil regulation. Civil regulation removes the requirement of proof beyond a reasonable doubt and permits the imposition of sanctions by administrative agencies rather than courts.
119. See, e.g., V. S. Khanna, Corporate Criminal Liability: What Purpose Does It Serve?, 109 HARV. L. REV. 1477 (1996) (offering an extended argument that civil sanctions deter corporate wrongdoing more effectively than criminal sanctions) ;
120. Jennifer Arlen, Corporate Crime and Its Control, in THE NEW PALGRAVE DICTIONARY OF ECONOMICS AND THE LAW 492-97 (Peter Newman, ed., 1998) (maintaining that lower procedural hurdles and sanctioning costs make civil penalties more cost-effective deterrents of corporate wrongdoing than criminal punishment). The Supreme Court currently affords legislatures broad leeway to declare sanctions civil rather than criminal. Criminal safeguards are required only when the "clearest proof establishes that a sanction is "so punitive either in purpose or effect... as to 'transfor[m] what was clearly intended as a civil remedy into a criminal penalty.'" Hudson v. United States, 522 U. S. 93, 99-100 (1997) (quoting Rex Trailer Co. v. United States, 350 U. S. 148, 154 (1956)) (overruling the more restrictive standard of United States v. Halper, 490 U. S. 435 (1989)). Of course nothing in this article opposes the regulation and taxation of corporations or the use of civil sanctions to enforce the legal obligations of these entities. On the European continent, corporations usually are not subject to criminal prosecution, but recent years have seen substantial slippage in the American direction.
121. See generally Sara Sun Beale & Adam G. Safwat, What Developments in Western Europe Tell Us About American Critiques of Corporate Criminal Liability, 8 BUFF. CRIM. L. REV. 89 (2004).
122. I recall being offended by several such bargains when I worked in the Justice Department's Criminal Division in 1968-69, and the Department's policy was apparently no different in 1985. In the spring of that year, [defense attorney Tom] Cumin told [E. F.] Hutton's board that it faced two choices: plead guilty to a massive list of felonies or face a trial that would likely see three senior Hutton executives convicted and drive Hutton out of business. Curnin advised settling with the government.... On May 2, Hutton agreed to plead guilty to 2, 000 counts of mail and wire fraud, as well as pay a $2 million fine plus $750, 000 for the cost of the investigation. Hutton also agreed to pay $8 million in restitution.... In return, Curnin wrung two major concessions [one of which was that] no Hutton executives would be prosecuted.... Wikipedia, E. F. Hutton & Co., http://en. wikipedia.org/wiki/E-F-Hutton (last visited September 30, 2009) ;
123. see also JESSE KORNBLUTH, HIGHLY CONFIDENT: THE CRIME AND PUNISHMENT OF MICHAEL MILKEN 136 (1992) ;
124. Nathaniel C. Nash, E. F. Hutton Guilty in Bank Fraud: Penalties Could Top $10 Million, N. Y. TIMES, May 3, 1985, atA1.
125. Memorandum from Larry D. Thompson, Deputy Attorney Gen., U. S. Dep't of Justice, to Heads of Dep't Components & U. S. Attorneys, U. S. Dep't of Justice (Jan. 20, 2003), available at http://www.usdoj.gov/dag/cftf/corporate- guidelines.htm. [hereinafter Thompson Memo].
126. Memorandum from Paul J. McNulty, Deputy Attorney Gen., U. S. Dep't of Justice, to Heads of Dep't Components & U. S. Attorneys, U. S. Dep't of Justice (Dec. 12, 2006), available at http://www.usdoj.gov/dag/speeches/2006/ mcnulty-memo.pdf. [hereinafter McNulty Memo].
127. The Department's current Principles of Federal Prosecution of Business Organizations are contained in the U. S. Attorneys' Manual.
128. See DEP'T OF JUSTICE, supra note 54, at §§ 9-28.000 to 9-28. 1300.
129. See Lawrence D. Finder, Ryan D. McConnell, & Scott L. Mitchell, Betting the Corporation: Compliance or Defiance? Corporate Pre-Trial Agreement Update 2008 at 11, available at http://papers.ssrn. com/sol3/papers.cfm?abstract-id=1332033. Cases in which the government lets corporations off the hook altogether in return for their assistance may not result in DPAs and NPAs.
130. Thompson Memo, supra note 62, at 5.
131. McNulty Memo, supra note 63, at 8-11.
132. See Finder et al., supra note 65, at 11. Even agreements that do not require explicit waivers of the privilege may require cooperation that a corporation cannot give unless its lawyers reveal information obtained in confidence.
133. United States v. Stein (Stein I), 435 F. Supp. 2d 330
134. (S. D. N. Y. 2006), aff'd, 541 F.3d 130 (2d Cir. 2008).
135. The district court later excluded the statements of two corporate officers because, in response to government pressure, the corporation had threatened these officers with a loss of their jobs and of corporate payment of their legal fees unless they gave the statements. United States v. Stein (Stein II), 440 F. Supp. 2d 315, 337-38 (S. D. N. Y. 2006).
136. McNulty Memo, supra note 63, at 11;
137. U. S. DEP'T OF JUSTICE, supra note 55, at § 9-28.730.
138. United States v. Stein, 541 F.3d 130 (2d Cir. 2008).
139. McNulty Memo, supra note 63, on the first of two pages preceding page 1.
140. See Preet Bharara, Corporations Cry Uncle and Their Employees Cry Foul: Rethinking Prosecutorial Pressure on Corporate Defendants, 44 AM. CRIM. L. REV. 53, 83-84 (2007) (noting that the Chamber of Commerce, the American Civil Liberties Union, the National Association of Criminal Defense Lawyers, former Attorney General Edwin Meese, and former Acting Solicitor General Walter Dellinger III had all denounced the Thompson Memorandum).
141. See DEP'T OF JUSTICE, supra note 54, at § 9-28.800 (describing the requisites of corporate compliance programs).
142. See id. at § 9-28.900 ("Among the factors prosecutors should consider and weigh are whether the corporation appropriately disciplined wrongdoers....").
143. See id. at § 9-28.700 ("[T]he prosecutor may consider... the corporation's willingness to provide relevant information and evidence and identify relevant actors within and outside the organization, including senior executives.") ;
144. id. at § 9-28.720 ("Whichever process the corporation selects [for gathering information], the government's key measure of cooperation must remain the same as it does for an individual: has the party timely disclosed the relevant facts about the putative misconduct?").
145. See infra text accompanying notes 130-54.
146. A former Assistant Attorney General in charge of the Justice Department's Criminal Division and his co-author write that "in most cases-especially those resolved since the Thompson Memorandum was issued-cooperation is perhaps the most important factor in a prosecutor's assessment of whether to bring criminal charges against the company itself." Christopher A. Wray & Robert K. Hur, Corporate Criminal Prosecution in a Post-Enron World: The Thompson Memorandum in Theory and Practice, 43 AM. CRIM. L. REV. 1095, 1135 (2006).
147. See also Andrew Weissman, A New Approach to Corporate Criminal Liability, 44 AM. CRIM. L. REV. 1319, 1321 (2007) ("It is now a commonplace position among the white collar bar post-Enron-among both defense and prosecution-that corporate defense consists largely of being an arm of the prosecutor.").
148. Dan M. Kahan, Social Meaning and the Economic Analysis of Crime, 27 J. LEGAL STUD. 609, 618-19 (1998).
149. Peter J. Henning, Corporate Criminal Liability and the Potential for Rehabilitation, 46 AM. CRIM. L. REV. 1417, 1426 (2009).
150. Kahan's penology echoes that of Emile Durkheim, who maintained that a society's imposition of criminal punishment furthers its solidarity.
151. See EMILE DURKHEIM, THE DIVISION OF LABOR IN SOCIETY 62-66 (MacMillan 1933) (George
152. See, e.g., Buell, supra note 43, at 491 ("[T]he criminal process can impose a unique form of reputational sanction, the effects of which can flow through to institutional members in ways that promise to deter individual wrongdoing and promote group endeavors toward compliance.") ;
153. Ann Foerschler, Corporate Criminal Intent: Toward a Better Understanding of Corporate Misconduct, 78 CAL. L. REV. 1287, 1289-90 (1990) ;
154. Stephen A. Salzburg, The Control of Criminal Conduct in Organizations, 71 B. U. L. REV. 421, 431-32 (1991) ;
155. William S. Laufer & Alan Strudler, Corporate Intentionality, Desert, and Variants of Vicarious Liability, 37 AM. CRIM. L. REV. 1285, 1311-12 (2000).
156. Compare Michael K. Block, Optimal Penalties, Criminal Law and the Control of Corporate Behavior, 71 B. U. L. REV. 395, 414-15 (1991) (concluding that whether a firm's act is sanctioned as a civil or a criminal wrong does not significantly affect the damage its reputation suffers), with Buell, supra note 43, at 504 ("Managers and their counsel apparently do not see civil and criminal sanctions as substitutes.") and Assaf Hamdani & Alon Klement, Corporate Crime and Deterrence, 61 STAN. L. REV. 271, 280 (2008) ("The perception that the reputational consequences of a conviction could exceed even the substantial monetary penalties in any parallel civil litigation explain why firms under investigation for criminal violations are willing to do almost whatever it takes-including waiving attorney-client privilege, assisting the government's prosecution of their senior officers, and paying millions of dollars in civil fines-to avoid an indictment.").
157. See HERBERT L. PACKER, THE LIMITS OF THE CRIMINAL SANCTION 273 (1968) ("The more indiscriminate we are in treating conduct as criminal, the less stigma resides in the mere fact that a man has been convicted of something called a crime."). Samuel Buell argues that blaming and punishing collective entities is not simply expressive. He advances what might be called a mixed deodand-frankpledge position. Buell observes that organizations influence the behavior of their members, that people do in fact blame organizations, and that blaming organizations can influence people inside and outside these organizations to make the organizations better.
158. See Buell, supra note 43, at 497, 501. One wonders whether Buell would extend his defense of punishing collectivities to non-commercial groups-say, college fraternities and families. The members of some fraternities influence each other to behave very badly, and so do the members of some families. Fraternities and families can develop bad reputations, and a fraternity or family's reputation can prompt people to reform it. Buell argues for the punishment of a corporation whenever one of its agents has committed a crime to "further[] the purposes of her institution. "
159. Id. at 530. Would he equally favor the criminal conviction of a family whenever one of its members committed a crime to advance the family's purposes? Or of a college fraternity when one of its members stole a keg of beer for a party?
160. Lawrence Friedman, In Defense of Corporate Criminal Liability, 23 HARV. J. L. & PUB. POLICY 833 (2000). The author of this article teaches constitutional law at New England. He is not the Lawrence Friedman who teaches legal history at Stanford.
161. Id. at 838.
162. Id. at 844-45.
163. Id. at 843 (quoting Jean Hampton, The Retributive Idea, in JEFFRIE G. MURPHY AND JEAN HAMPTON, FORGIVENESS AND MERCY 111, 125 (1988)). Andrew Taslitz writes: [A]s a newer generation of scholars and policymakers have increasingly come to recognize, this vision of the corporation [as an aggregation of its individual members] is seriously flawed. There are "social facts" with as real consequences for political culture as any physical, material facts. In the social world, corporate persons are real. They have an identity and a unique character separate and apart from that of their individual shareholders, directors, officers, and employees.
164. Andrew E. Taslitz, Expressive Fourth Amendment: Rethinking the Good Faith Exception to the Exclusionary Rule, 76 MISS. L. J. 483, 532-33 (2006). Of course, in bygone social worlds and perhaps some current ones too, demon-infested animals and inanimate objects were real, and this "social fact" had consequences. For Professor Taslitz, the fact that most people believe something apparently makes it a "social" fact, and because "social" facts are to be treated as real facts, he would presumably endorse the punishment of animals and objects by the people who inhabited these worlds. Taslitz might endorse human sacrifice too. That the gods wanted human blood was once a social fact with as real consequences for political culture as any physical, material facts.
165. See Friedman, supra note 85, at 844-45 (adverting to my earlier use of the deodand analogy).
166. Id. at 847-48.
167. See Pamela H. Bucy, Corporate Ethos: A Standard for Imposing Corporate Criminal Liability, 75 MINN. L. REV. 1095, 1099 (1991).
168. Friedman, supra note 87, at 848-52.
169. First National Bank of Boston v. Bellotti, 435 U. S. 765 (1978).
170. Id. at 784-85.
171. Id. at 777 ("If the speakers here were not corporations, no one would suggest that the State could silence their proposed speech.").
172. In most states and in the federal courts, unions and unincorporated business associations can be convicted of crimes.
173. See WAYNE R. LAFAVE, SUBSTANTIVE CRIMINAL LAW § 13.5d (2d ed., Thomson West 2003).
174. See, e.g., Editorial, The Torture Debate: The Lawyers, N. Y. TIMES, May 7, 2009, at A32 (discussing whether the authors of the torture memos should be prosecuted or otherwise disciplined).
175. These sanctions are among those the Federal Sentencing Guidelines authorize for corporate offenders.
176. See U. S. SENTENCING GUIDELINES MANUAL §§ 8D1.1 (a) (3), 8D1.4 (c) (1) (2008) (declaring that a convicted corporation with 50 or more employees is to be placed on probation and may be ordered to institute an effective compliance program if it does not have one already).
177. See generally Christopher A. Wray, Note, Corporate Probation Under the New Organizational Sentencing Guidelines, 101 YALE L. J. 2017 (1992).
178. See Vikramaditya Khanna & Timothy L. Dickinson, The Corporate Monitor: The New Corporate Czar?, 105 MICH. L. REV. 1713, 1714-1716 (2007). Critics might object that because all of the Bush administration lawyers have left the Office of Legal Counsel, criminal sanctions are no longer necessary. The departure of all breathing wrongdoers from a corporation, however, does not save it from punishment. The U. S. Attorneys' Manual notes that "the culpable or knowledgeable personnel may have been... fired, or they may have quit or retired." U. S. DEP'T OF JUSTICE, supra note 54, at § 9-28.700 (B). This circumstance leads the Manual to declare, not that the Justice Department should refrain from prosecuting the corporation, but only that the "corporation's cooperation may be critical in identifying potentially relevant actors and locating relevant evidence... and in doing so expeditiously."
179. Id.
180. See Bill Vlasic, Chief Says G. M. Is Adapting Its Culture, N. Y. TIMES, Oct. 8, 2009, at B3.
181. Rescued banks currently buy T-bills with money that the government has obtained by selling T-bills.
182. See LEWIS CARROLL, THROUGH THE LOOKING-GLASS (Charles L. Dodgson ed., 1934) (1872).
183. See, e.g., Edgerton, supra note 53, at 835. Jennifer Arlen and Reinier Kraakman offer an elaborate analysis of what combinations of strict respondeat superior liability and responsibility for negligent monitoring can best induce corporations to monitor their employees efficiently. Jennifer Arlen & Reinier Kraakman, Controlling Corporate Misconduct: An Analysis of Corporate Liability Regimes, 72 N. Y. U. L. REV. 687 (1997). From an economic perspective, a sound system of individual and corporate liability must advance three objectives-inducing corporate employees to act efficiently, inducing corporate monitors to monitor efficiently, and encouraging the optimal pricing of a company's product. Our current regime offers a curious mixture of strict and fault-based liability. For the most part, our civil justice system seeks to promote the efficient conduct of corporate employees by holding them liable only when they have acted negligently. At the same time, our criminal justice system generally imposes liability only when an agent has inflicted harm with criminal intent. From a "frankpledge" perspective, the principle of respondeat superior in civil cases then seeks to promote the efficient monitoring of employees by holding firms strictly (and jointly) liable for the employees' negligently produced harms, and the principle of respondeat superior in criminal cases seeks to promote the efficient monitoring of employees by holding firms strictly (and jointly) liable for the employees' intentionally produced harms. Economists have long debated the relative merits of negligence and strict liability, but as far as I can tell, the current regime does not reflect any coherent economic principle. I do not understand why anyone imagines that this mixed system comes close to producing optimal prices.
184. See generally Alan O. Sykes, The Boundaries of Vicarious Liability: An Economic Analysis of the Scope of Employment Rule and Related Legal Doctrines, 101 HARV. L. REV. 563 (1988).
185. U. S. DEP'T OF JUSTICE, supra note 54, at § 9-28.200 (A).
186. Under the Federal Sentencing Guidelines, the monetary penalty imposed on a convicted corporation will be reduced by as much as 60 percent if it had an "effective" compliance program in place prior to the crime. U. S. SENTENCING GUIDELINES MANUAL § 8C2.5 (f) (1) (2008).
187. See supra text accompanying notes 15-20.
188. See State v. Akers, 400 A.2d 38, 40 (N. H. 1979) (holding unconstitutional a statute that punished parents when their children drove off-highway vehicles on the highways).
189. See Jennifer Arlen, The Potentially Perverse Effects of Corporate Criminal Liability, 23 J. LEGAL. STUD. 833, 836-37 (1994).
190. See Arlen & Kraakmann, supra note 102, at 708-09. The prospect of civil liability has a double effect too; a firm may decide not to monitor when monitoring could produce damaging evidence that opposing civil litigants might discover. If corporate managers dread criminal conviction more than civil liability, however, the threat of criminal prosecution is likely to magnify their fear of generating damaging evidence. Especially because even one criminal act can potentially cause a firm's demise and no one knows how prosecutors will respond to the firm's monitoring efforts, the effect of our regime of criminal liability on the behavior of corporate managers is uncertain. A regime of strict liability on paper administered by prosecutors who may consider innocence a full defense, a partial defense, or no defense at all is not one in which managers can easily calculate the optimal investment in discouraging improper conduct.
191. See supra text accompanying notes 33-40.
192. See supra text accompanying note 35 (describing the liability standard of the Model Penal Code).
193. HOLMES, supra note 10, at 44.
194. Bucy, supra note 90, at 1157. Bucy explains that the word ethos "refers to the characteristic spirit or prevalent tone of sentiment of a community, institution, or system."
195. Id. at 1123. For example, Texaco is reputedly selfish, greedy, mean and secretive; Exxon tranquil and elegant; and Shell lordly and sedate.
196. Id. at 1124 (citing ANTHONY SAMPSON, THE SEVEN SISTERS (1975)). Of course organizations do differ in their ethoi. Some in fact are wholly devoted to criminal activity. The most thoroughly criminal organizations, however-for example, the Bloods, the Crips, and the Mafia-are not usually incorporated. Although these organizations sometimes have been named as defendants in civil injunctive actions, see generally Scott E. Atkinson, Note, The Outer Limits of Gang Injunctions, 59 VAND. L. REV. 1693 (2006), I have never seen one of them prosecuted. Neither legislatures nor prosecutors nor anyone else has seen a need to prosecute these organizations in addition to the criminals who inhabit them.
197. Bucy, supra note 90, at 1101.
198. Id. at 1129.
199. Id. at 1133.
200. Id. at 1136.
201. Id. at 1137.
202. Bucy's proposed standard is less anthropomorphic than the standard proposed by two other champions of the deodand perspective. William Laufer and Alan Strudler would have a jury determine "whether the corporation purposely, knowingly, recklessly, or negligently engaged in the illegal act"-something the jury could infer by examining "whether the average corporation of like size, complexity, functionality, and structure, given the circumstances presented, would have the required state of mind." Laufer & Strudler, supra note 82, at 1310.
203. See Coffee, supra note 52, at 448 ("The study of corporate criminal responsibility too long has been led astray by commentators seeking to fashion retributive justifications and anthropomorphic analogies.").
204. It is difficult for a judge, jury, or prosecutor to know when a firm's investments in monitoring are optimal. Recognizing appropriate monitoring as an affirmative defense, however, casts the burden of uncertainty on the defendant. When a firm recognizes that it may bear this burden, it is likely to over-invest rather than under-invest in compliance programs.
205. See Dan M. Kahan, Ignorance of the Law is an Excuse-but Only for the Virtuous, 96 MICH. L. REV. 127, 133-35 (1997) (arguing that when the law treats reasonable mistakes of law as a defense, it encourages knowledge of the law more effectively than when it imposes strict liability for mistakes).
206. Faragher v. City of Boca Raton, 524 U. S. 775, 806 (1998).
207. See supra text accompanying notes 106-07.
208. A possible objection to the proposed defense is that it would not force firms to "internalize" some of the costs of their activities and would lead to inefficient pricing. Promoting optimal pricing, however, is much more a goal of civil liability than of criminal punishment, and the proposed defense would not relieve corporations of their civil obligations. These firms would remain obligated to compensate the victims of crimes committed by their agents on their behalf. Forcing firms to internalize the costs of their activities is one thing; punishing them when they have done everything they can fairly be expected to do is something else.
209. U. S. DEP'T OF JUSTICE, supra note 54, at § 9-28.300 (A) (2008).
210. Id.
211. Id. at § 9-28.300 (B).
212. Id. at § 9-28.800 (A).
213. Id.
214. I suggest some qualifications to this proposition in infra text accompanying notes 175-77.
215. John Ashcroft, Bailout Justice, N. Y. TIMES, May 5, 2009, at A27.
216. See Hamdani & Klement, supra note 83, at 278-79 (discussing the potential collateral consequences of a criminal conviction to a firm in a regulated industry).
217. Ashcroft noted this irony-but only as an argument for entering deferred prosecution agreements, not as a reason for revising the standards of corporate criminal responsibility and restricting the power of prosecutors.
218. Id. In considering whether the agreements Ashcroft described were "clearly better for everyone", note that the tens of millions of dollars in monitoring costs and the $311 million paid directly to the government probably will be reflected in the price of prosthetic knees and hips. Because people enjoy walking and hate pain, one imagines that the demand for these products is not very elastic, and if the financial burdens are spread evenly throughout the industry (95 percent of the market), manufacturers can treat them in the same way they would treat an increase in the cost of steel. These costs probably can be passed on to consumers without much difficulty. Because manufacturers forced patients to pay too much by giving kickbacks to surgeons, a criminal remedy was required, and the remedy was to force the patients to pay more.
219. The U. S. Attorneys' Manual declares, "[I]t may not be appropriate to impose liability upon a corporation, particularly one with a robust compliance program in place, under a strict respondeat superior theory for the single isolated act of a rogue employee." DEP'T OF JUSTICE, supra note 54, at § 9-28.500 (A). Note that the language of this provision, like the language of most of the rest of the Manual, does not commit the Department of Justice to anything. Even when a corporation has "a robust compliance program in place", the Department "may" decide "to impose liability under a strict respondeat superior theory for the single isolated act of a rogue employee."
220. Conference, Achieving the Right Balance: The Role of Corporate Criminal Law in Ensuring Corporate Compliance, Georgetown University Law Center (Apr. 21, 2009) (video available at http://www.instituteforlegal reform.com/component/ilr-events/30/item/62.html) ;
221. Conference, Regulation by Prosecutors, New York University Law School (May 8, 2009) (video available at http://www.law.nyu.edu/centers/ adminofcriminallaw/events/regulationbyprosecutors/ECM-PRO-062107).
222. A former federal prosecutor comments: [T]he process of negotiating a deferred prosecution agreement... is not really a negotiation. Any push back by the company on a provision that the government requests is not only going to be shot down, but the government may see it as a reflection that the company's claimed contrition is not genuine.. Interview of David Pitofsky, Partner, Goodwin Procter LLP, New York, New York, CORP. CRIME REP., NOV. 28, 2005, at 8, available at http://corporatecrimereporter.com/pitofskyinterview010806.htm.
223. Ashcroft, supra note 130.
224. See Claire Heininger, Oversight of Corporate Monitors is Urged: Congressmen Say Ashcroft Contract Shows Need for More Regulation, N. J. STAR-LEDGER, Apr. 3, 2009, at 26.
225. See Cynthia Burton, Christie Speaks to Congressional Subcommittee, PHILA. INQUIRER, June 26, 2009, at B1 ("The estimate for Ashcroft's fees is between $20 million and $52 million for monitoring the rehabilitation of Zimmer holdings.... A copy of a bill from Ashcroft, distributed by committee Democratic staff, showed little specific backup for the charges.").
226. See Peter Spivack & Sujit Raman, Regulating the 'New Regulators': Current Trends in Deferred Prosecution Agreements, 45 AM. CRIM. L. REV. 159, 174 (2008) ;
227. Sue Reisinger, New DOJ Policy: Just Call it the Christopher Christie Amendment, LAW.cOM, May 21, 2008, http://www.law.com/jsp/ article.jsp?id=1202421573691 (last visited Sept. 30, 2009).
228. See Josh Margolin & Claire Heininger, Foes See Tarnish on Christie's Sparkling Image, Campaign Contributions Smack of Pay-to-Play, They Charge, N. J. STAR-LEDGER, Apr. 5, 2009, at 17. At the end of his first six months as monitor of a medical and dental school, Stern submitted bills totaling $5.8 million-$199, 600 for his own services at a rate of $500 per hour, $992, 787 for the services of other lawyers in his office, and the remainder for two accounting firms. Stern became the school's monitor after it acknowledged overbilling Medicaid by just under $5 million.
229. See David Kocieniewski, Cost of Inquiry at University in New Jersey Draws Criticism, N. Y. TIMES, Aug. 9, 2006, at B1. At this writing, Christopher Christie has won the June 2009 Republican primary, and the most recent poll indicates that he will be elected Governor of New Jersey.
230. See Cynthia Burton, Christie Reaches for the Urban Vote, PHILA. INQUIRER, July 15, 2009, at B1.
231. Eric Lichtblau & Kitty Bennett, 30 Ex-Govemment Officials Got Lucrative Posts as Corporate Monitors, N. Y. TIMES, May 23, 2008, at A23.
232. See Memorandum from Craig S. Morford, Acting Deputy Attorney Gen., U. S. Dep't of Justice, to Heads of Dep't Components & U. S. Attorneys, U. S. Dep't of Justice 3 (Mar. 7, 2008), available at http://www.usdoj.gov/ dag/morford-useofmonitorsmemo-03072008.pdf (providing that "United States Attorneys and Assistant Attorneys' General may not make, accept, or veto the selection of monitor candidates unilaterally" and that "the Office of the Deputy Attorney General must approve the monitor").
233. See Memorandum from Mark Filip, Deputy Attorney Gen., U. S. Dep't of Justice, to Heads of Dep't Components & U. S. Attorneys, U. S. Dep't of Justice (May 14, 2008) (on file with author) (declaring that DPAs and NPAs may not require payments to private parties other than crime victims).
234. DEP'T OF JUSTICE, supra note 54, at § 9-28.800 (B).
235. Id.
236. Video: Panel 3: How Should Corporate Compliance Programs Be Factored into Government Decisions, Conference on Achieving the Right Balance: The Role of Corporate Criminal Law in Ensuring Corporate Compliance, held by Georgetown University Law Center (Apr. 21, 2009) (available at http://www. chambercast. com/ramgen/video/ilr/090526d.rm).
237. Cristie Ford & David Hess, Can Corporate Monitorships Improve Corporate Compliance?, 34 J. CORP. L. 679, 681 (2009).
238. Id. at 682. Essentially, this study shows only that ethics and compliance officers do not think highly of the former prosecutors and others who are appointed as corporate monitors. The professionals complain that these monitors lack experience, gain little understanding during their one-shot appointments, and focus more on compliance mechanics than on developing an appropriate corporate culture. One senses that the compliance officers might prefer the selection of members of their own fraternity. Their professional association, the Society of Corporate Governance and Ethics, now offers training and an examination leading to certification as a compliance and ethics professional.
239. Id. at 692.
240. Kimberly Krawiec, Corporate Decisionmaking: Organizational Misconduct: Beyond the Principal-Agent Model, 32 FLA. ST. U. L. REV. 571, 591-97 (2005).
241. Id. at 593 (citing M. Cash Matthews, Codes of Ethics: Organizational Behavior and Misbehavior, in 9 RESEARCH IN CORPORATE SOCIAL PERFORMANCE AND POLICY 107, 108-09, 125 (William C. Frederick & Lee E. Preston eds., 1987) ;
242. Marie McKendall et al., Ethical Compliance Programs and Corporate Illegality: Testing the Assumptions of the Corporate Sentencing Guidelines, 37 J. BUS. ETHICS 367 (2002) ;
243. Marie A. McKendall & John A. Wagner III, Motive, Opportunity, Choice and Corporate Illegality, 8 ORG. SCI. 624 (1997)). A positive correlation between compliance programs and violations might suggest only that the managers of firms whose employees commit violations are likely to implement compliance programs. The positive correlation between the number of fire trucks at a fire and the size of the fire does not indicate that fire trucks are ineffective at fighting fires. I doubt that any quantitative methodology can reveal whether monitors and compliance programs reduce crime, but researchers can determine whether the telephone numbers set up to receive whistleblowers' calls receive well-founded complaints and whether corporate employees believe that the firm's compliance programs have changed either their own behavior or the behavior of others. I am more sympathetic to employee surveys of this sort than Krawiec appears to be, but the evidence produced by these surveys is as inconclusive as that produced by the data crunchers.
244. Id. at 592.
245. See supra note 35.
246. The last half-century has seen many Congressional contributions to the prosecutors' "tool kit"-among them, the federal sentencing guidelines, see 18 U. S. C. §§ 3551-3625 (2006) ;
247. 28 U. S. C. §§ 991-98 (2006) ;
248. mandatory minimum drug and firearms sentences, see, e.g., 18 U. S. C. §§ 860, 929, & 3561 (b) (1) (2006) ;
249. RICO, 18 U. S. C. §§ 1961-68 (Supp. 2009) ;
250. the Prosecutorial Remedies and Other Tools to End the Exploitation of Children Today or PROTECT Act, Pub. L. 108-21, 117 Stat. 650 (2003) ;
251. and the declaration that a scheme or. artifice to defraud includes a "scheme or artifice to deprive another of the intangible right to honest services." See 18 U. S. C. § 1346 (Supp. 2009).
252. See generally William J. Stuntz, The Pathological Politics of Criminal Law, 100 MICH. L. REV. 505, 510 (2001) ("[T]he story of American criminal law is a story of tacit cooperation between prosecutors and legislators, each of whom benefits from more and broader crimes.").
253. Preet Bharara argues that "efforts to reduce the risk of prosecutorial excess are... better directed at the source of prosecutors' leverage rather than at their conduct." BHARARA, supra note 73, at 54. He observes, "[T]he potential for excess will continue to loom large so long as prosecutors may persuasively (and legally) threaten to indict, and thus potentially destroy, any company, no matter how blameless, for the misdeeds of a single, low-level rogue employee."
254. Id. at 56. Bharara is now the United States Attorney for the Southern District of New York.
255. See Benjamin Weiser, Schumer Aide Is Confirmed As United States Attorney, New York TIMES, Aug. 8, 2009, at A16.
256. The quoted language appears in Note, Developments in the Law-Corporate Crime: Regulating Corporate Behavior Through Criminal Sanctions, 92 HARV. L. REV. 1243, 1257 (1979). For earlier suggestions of the same sort of defense
257. see MODEL PENAL CODE § 2.07 (5) (Proposed Official Draft 1962) (providing that in some circumstances "it shall be a defense if the defendant proves by a preponderance of the evidence that the high managerial agent having supervisory responsibility over the subject matter of the offense employed due diligence to prevent its commission") ;
258. Note, Corporate Criminal Liability for Acts in Violation of Company Policy, 50 GEO. L. J. 547, 563 n. 73 (1962) (proposing that a corporation be allowed to "rebut a presumption of responsibility for [some] crimes... by showing that the corporation in good faith did everything within its power to prevent the commission of the offense"). For more recent support of an "appropriate monitoring" defense
259. see John S. Baker, Jr., Reforming Corporations Through Threats of Federal Prosecution, 89 CORNELL L. REV. 310, 321 (2004) ;
260. Richard S. Gruner & Louis M. Brown, Organizational Justice: Recognizing and Rewarding the Good Citizen Corporation, 21 J. CORP. L. 731, 764-65 (1996) ;
261. H. Lowell Brown, Vicarious Criminal Liability of Corporations for the Acts of their Employees and Agents, 41 LOY. L. REV. 279, 308-28 (1995) ;
262. Andrew Weissmann & David Newman, Rethinking Criminal Corporate Liability, 82 IND. L. J. 411, 414 (2007) ;
263. Ellen S. Podgor, A New Corporate World Mandates a "Good Faith" Affirmative Defense, 44 AM. CRIM. L. REV. 1537 (2007) ;
264. Charles J. Walsh & Alissa Pyrich, Corporate Compliance Programs as a Defense to Criminal Liability: Can a Corporation Save Its Soul?, 47 RUTGERS L. REV. 605 (1995).
265. See supra text accompanying notes 62-78.
266. Larry D. Thompson, Remarks to the Conference on Achieving the Right Balance: The Role of Corporate Criminal Law in Ensuring Corporate Compliance, Georgetown University Law School, April 21, 2009 (video available at http://www.instituteforlegalreform.com/component/ilr-events/30/item/62.html) ;
267. see also Larry Thompson, The Blameless Corporation, 46 AM. CRIM. L. REV. 1323 (2009).
268. 28 U. S. C. § 2072 (2006).
269. Brief for the Association of Corporate Counsel et al as Amici Curiae Supporting Appellant, United States v. Ionia Mgmt. S. A., 555 F.3d 303 (2d Cir. 2009) (07-5801-CR).
270. 524 U. S. 775 (1998) ;
271. see also Burlington Indus, Inc. v. Ellerth, 524 U. S. 742 (1998) (a companion case that the Court analyzed much as it did Faragher).
272. Faragher, 524 U. S. at 805.
273. 527 U. S. 526 (1999).
274. Id. at 545 (quoting Kolstad v. American Dental Ass'n, 139 F.3d 958, 974 (D. C. Cir. 1998) (Tatel, J., dissenting)).
275. Id.
276. Id. at 545-46 (quoting Kolstad, 139 F.3d at 974 (Tatel, J., dissenting)).
277. United States v. Ionia Mgmt S. A., 555 F.3d 303, 310 (2d Cir. 2009).
278. Oddly, scholars continue to express hope for rulemaking by prosecutors.
279. See, e.g., Stephanos Bibas, Prosecutorial Regulation Versus Prosecutorial Accountability, 157 U. PA. L. REV. 959, 1003-07 (2009) ;
280. Rachel E. Barkow, Institutional Design and the Policing of Prosecutors: Lessons from Administrative Law, 61 STAN. L. REV. 869 (2009) ;
281. Erik Luna, Principled Enforcement of Penal Codes, 4 BUFF. CRIM. L. REV. 515, 593-604 (2000).
282. See KRAWIEC, supra note 150, at 584-91.
283. Kimberly Krawiec observes that "powerful interest groups have a stake in and benefit from compliancebased liability regimes, particularly legal compliance professionals such as lawyers, compliance and ethics consultants, in-house compliance and human resources personnel, and diversity trainers."
284. Id. at 574-75. She adds that "legal compliance professionals have been at the forefront of the push to adopt internal compliance structures, sometimes overstating to a significant degree both the risks of a failure to adopt such structures and the benefits of having such structures in place." Id. at 611. Although "the tendency of legal compliance professionals to overstate both a new legal risk and their ability to contain that risk though internal compliance structures has been well documented... business organizations [have adopted] the legal compliance professionals' recommendations."
285. Id. at 611-612 (citations omitted).
286. See supra text accompanying notes 145-51.
287. The analysis that follows is drawn primarily from Daniel R. Fischel & Alan O. Sykes, Corporate Crime, 25 J. LEGAL STUD. 319, 321-22 (1996). For a different economic perspective
288. see ARLEN & KRAAKMAN, supra note 102.
289. The suitability of this formula is unaffected by whether courts recognize appropriate monitoring as a defense. The formula's sanctions should induce firms to implement appropriate compliance programs whether or not the defense is recognized.
290. See, e.g., Michael K. Block, Optimal Penalties, Criminal Law and the Control of Corporate Behavior, 71 B. U. L. REV. 395 (1991) ;
291. Jennifer H. Arlen, Why the Commission's Proposal is Not Good Economics, 3 FED. SENT'G REP. 138 (1990) ;
292. Jeffrey S. Parker, The Current Corporate Sentencing Proposals: History and Critique, 3 FED. SENT'G REP. 133, 135 (1990). Compare FISCHEL & SYKES, supra note 171, at 345 (arguing that sanctions based on the offender's gain rather than the victim's loss over-deter), with A. Mitchell Polinsky & Steven Shavell, Punitive Damages: An Economic Analysis, 111 HARV. L. REV. 869, 918 (1998) ("[S]etting damages equal to harm generally results in proper deterrence even when the harm is less than the defendant's gain; a policy of removing the defendant's gain may result in over deterrence. An exception arises, however, when the defendant's gain is socially illicit, in which case extracting the defendant's gain is desirable.").
293. Although I have argued that the existence of an appropriate compliance program should provide a defense to criminal liability, the existence of such a program should not relieve a corporation of its obligation to compensate the victims of crimes committed by its agents on its behalf. Similarly, a compliance program should not relieve a corporation of a duty (preferably a civil duty) to disgorge any profit it has gained from the criminal activities of its agents.
294. The loss of innocent workers' jobs remains a horrid feature of liability regimes in which penalties go beyond the proposed fines-as they usually do when a loss of business licenses and other collateral consequences render conviction a de facto death sentence for a corporation.
295. Foreign Corrupt Practices Act of 1977, 15 U. S. C. §§ 78dd-1-3 (2006).
296. FISCHEL & SYKES, supra note 171, at 343-44.