Corp execs: fall guys for corporations
TO: Ohio Committee on Corporations, Law and Democracy / others interested
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Thanks, Greg Coleridge More information:
Corporate rights advocates can't have it both ways. They want full constitutional protections for corpses when it's convenient and total absence of liability for any wrongdoing -- again when it's convenient.
This from below sums it up:
"[L]ast week's report argues that if corporations are not people
for purposes of criminal law, then they shouldn't be considered a
person for the purposes of constitutional law."
Corporate Crime: Execs Taking Fall while Corporations Go Free.
By Niko Kyriakou, OneWorld.net, 3 January 2006
San Francisco - With help from the U.S. Justice Department and
state prosecutors, corporations are getting away with serious crimes by
using their executives as cannon fodder, according to a new report,
which questions whether this new legal strategy is hindering or
enabling corporate malfeasance.
Corporate Crime Reporter released the report Wednesday
documenting 34 special deals in which major U.S. companies have escaped
lawsuits through so-called deferred prosecution and non-prosecution
agreements. Under these deals, prosecutors agree not to file suits
against corporations in exchange for the company's cooperation in
convicting their own executives.
Not since the loudly publicized Arthur Anderson meltdown in 2002
has a corporation been convicted of a crime.
Many corporate defense lawyers argue the shift represents a wider
recognition that individuals-not corporations-think-up crimes, and
thus, individuals should pay for them.
A few years ago, most advocates of corporate social
responsibility agreed that an end to the impunity of corporate
executives was a good thing, but now some observers are beginning to
question whether shifting the blame away from the company as a whole
leads to meaningful institutional reform.
"There has been a sea change in corporate criminal prosecution
over the last couple of years," says Russell Mokhiber, editor of the
Corporate Crime Reporter, a 19-year-old legal newsletter, and author of
Today corporate defense lawyers work with federal prosecutors to
send executives to jail, the report explained. "In return, federal
prosecutors are agreeing not to convict the corporation. This has
undermined corporate criminal liability and may be doing serious damage
to the federal campaign to deter corporate crime."
The report, "Crime Without Conviction: The Rise of Deferred and
Non Prosecution Agreements," includes many of the actual agreements
bartered between lawyers in high-profile cases like those involving
Adelphia, Computer Associates, KPMG, Merrill Lynch, Monsanto, Sears,
Shell, and WorldCom/MCI.
The study finds that prosecutors have entered into twice as many
non-prosecution and deferred prosecution agreements with major American
corporations in the last three years (23 agreements between 2003 and
2005) than they had in the previous eleven years (11 agreements between
1992 and 2002).
Part of the reason companies are going unpunished is that
prosecutors and the Justice Department have supported the use of
Prosecutors, for one, are usually happy to defer attacks onto
executives because it gives them leverage in cases.
"Corporations faced with serious wrongdoing by corporate
executives must promptly accept full responsibility, discipline
wrongdoers, institute serious institutional reform and fully cooperate
with the government. If they do, they may escape institutional
indictment. If they do not, they face the risk of indictment,
conviction, and corporate death," Leonard Orland, a professor at the
University of Connecticut's Law School said in the report.
A felony conviction for accounting crime is viewed as a death
penalty for some companies because it can lead to debarment of
government contracts, says Robert Weissman, co-director of Essential
Action, a non-profit founded by Ralph Nader that encourages citizen
But according to the report, prosecutors were effectively told by
the Justice Department to opt for deferred and non-prosecution
This possibility of death to the company may have been what
initially sparked Justice Department official Larry Thompson to issue a
memo in 2003 recommending prosecutors to rely more heavily on such
The memo lays out nine qualifiers prosecutors should consider
before deciding to criminally prosecute a corporation, including the
nature and seriousness of the offense, the pervasiveness of wrongdoing
within the corporation, the corporation's history of similar conduct,
collateral consequences, and the corporation's willingness to
"The Justice Department came to believe that cooperation from
corporations wasn't real cooperation. And so the Department, in the
Thompson memo, demanded 'authentic' cooperation from corporations. And
now it's getting it," says Ted Wells, a leading corporate and white
collar crime defense attorney and a partner at Paul Weiss in New York.
"Part of it is that there is a lot of fear after Arthur Anderson
being put out of business that sanctions may be too harsh. It's widely
understood that the industry accounting firms are so concentrated that
in a sense the remaining few are too big to be prosecuted," says
"The country can't afford to restrict the number of large
accounting firms, partially for competition, partially for distinct and
overlapping functions," Weissman, who edits the Multinational Monitor,
a monthly publication that reports on the activities of U.S.
multinational corporations, told OneWorld.
Corporate defense attorneys have also argued that corporations
should not be held responsible for actions taken by individuals.
In August 2002, Robert Bennett, a partner at Skadden Arps in
Washington, D.C. and a leading white-collar criminal defense lawyer,
put it this way: "When you indict a company, you are doing enormous
damage to its stock. You are doing enormous damage to innocent people.
When a company gets indicted it has a real impact on them. I really
question the value of that."
Joseph Savage, a criminal defense attorney at Goodwin Procter in
Boston, told Corporate Crime Reporter that "there can be no crime of a
corporation without an individual act."
But last week's report argues that if corporations are not people
for purposes of criminal law, then they shouldn't be considered a
person for the purposes of constitutional law.
Like people, corporations are currently granted First Amendment
guarantees of political speech and commercial speech, Fourth Amendment
safeguards against unreasonable searches, Fifth Amendment double
jeopardy and liberty rights, and Sixth and Seventh Amendment rights to
trial by jury.
Without the ability to prosecute corporations, the report argues
that it becomes difficult to change the corporate culture that may
perpetuate bad behavior.
"Without this tool, the public would have no adequate deterrent
to corporate criminal conduct because the culture that condoned, or at
least acquiesced in, that behavior would be beyond the criminal law's
power to correct. Only by prosecuting the corporation itself can we
ensure systemic reform," said then Deputy Attorney General Larry
Thompson in a 2002 speech to the American Bar Association.
The report argues that deferred prosecution and non-prosecution
agreements were originally intended for minor drug cases and juvenile
The U.S. Attorney's manual is explicit in this regard, stating
that a major objective of these agreements is to "save prosecutive and
judicial resources for concentration on major cases."
The solution to the dilemma should be to have lawsuits against
both corporations and their executives, depending on the case,
according to Weissman.
"The lesson from the report is that there has to be both
accountability for the execs and for the institution-that both are
culpable. You need to have accountability punishment and deterrents
applied to both."