Corporate Criminal Liability
Corporations were not initially held criminally responsible for corporate activities. A corporation was considered to be a legally fictitious entity, incapable of forming the mens rea necessary to commit a criminal act. The Supreme Court ultimately rejected this notion in 1909 in New York Central & Hudson River Railroad v. U.S. A railroad company employee paid rebates to shippers in violation of federal law. The court upheld the corporation's criminal conviction, finding no reason that corporations could not be held "responsible for and charged with the knowledge and purposes of their agents, acting within the authority conferred upon them." The Supreme Court concluded that criminal liability could be imputed to the corporation based on the benefit it received as a result of the criminal acts of its agents. The case and its progeny have essentially imported the doctrine of respondeat superior from tort law into the corporate criminal realm. A corporation may be convicted for its agent's unlawful acts when the agent acted within the scope of his or her actual or apparent authority. Another theory of corporate criminal liability is the "collective knowledge doctrine." As knowledge of criminal activity is often the scienter element of a particular crime, the requisite knowledge can be imputed to the corporation based on the collective knowledge of the directors and officers.
It is now well settled that corporate directors, officers, and employees can be held criminally liable for any criminal acts that they personally commit regardless of whether they were acting in furtherance of the corporation's interests. A corporate director, officer, or agent must answer for any personal wrongdoing and cannot be shielded by the corporate entity. An officer and a director can also be held criminally responsible for criminal acts committed by their agents under the respondeat superior tort theory mentioned above. Directors, officers, and employees may also be criminally responsible for any crime that they aid and abet.
Directors and officers may also be subject to criminal liability for any crime under the theory that they failed to prevent the crime "by neglecting to control the misconduct of those subject to their control." Under this theory of liability, a person is criminally liable based on her "responsible relation" to the criminal violation regardless of whether she has any knowledge of the criminal activity.
There are a plethora of federal statutes applicable to corporations under which criminal liability may be imposed. Some of these federal statutes are discussed more fully in separate articles. Although federal statutes may apply, this does not mean that the federal statutes preempt state laws that overlap. For example, if an employer's violation of the Occupational Safety & Health Act results in the death of an employee, the employer can still be prosecuted under the state's homicide statute.
Of particular interest to officer and directors of public companies that are required to register securities or report under federal securities laws is the recently enacted Sarbanes-Oxley Act of 2002 (Act). Criminal penalties under the Act are more fully discussed in a separate article.
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