Corporate Criminal Responsibility

A practical problem in prosecuting corporations for crimes is what to do with them after conviction. Options include cash fines and forfeiture of proceeds of the criminal activity or property used to commit the offense; compensation to victims; public acknowledgment of wrongdoing; community service; appointment of a trustee to supervise some or all of the convicted corporation's affairs; required implementation of a corporate compliance plan; revocation of business licenses; debarment from conducting future business with the government or other entities; revocation of the corporate charter (the corporate equivalent of a "death penalty"); and probation, through which some of the above options may be implemented.

In 1991, the U.S. Sentencing Commission implemented sentencing guidelines for organizations. The guidelines are based upon the following four principles: a convicted organization should remedy any harm caused by the offense; if the organization "operated primarily for a criminal purpose or primarily by criminal means, the fine should be set sufficiently high to divest the organization of all of its assets"; the fine for any other organization should be based upon its conduct and culpability; and, probation is appropriate "when needed to ensure that another sanction will be fully implemented, or to ensure that steps will be taken within the organization to reduce the likelihood of future criminal conduct" (U.S. Sentencing Guidelines Manual, chap. 8, Introductory Commentary).

One of the more innovative aspects of the Sentencing Guidelines is the effort to describe an organization's "culpability." For most organizations (those not operated primarily for a criminal purpose or primarily by criminal means), the fine assessed upon conviction will depend, in part, upon the organization's culpability. A court is to examine the following factors to assess such culpability: involvement in or tolerance of criminal activity; prior regulatory and criminal history; violation of a judicial order; obstruction of justice during the investigation; installation of an effective program to prevent and detect violations of the law; self-reporting, cooperation; and acceptance of responsibility. In essence, the Sentencing Commission has provided a model for judging corporate intent.

Experts identify at least two potential side-effects of the Sentencing Guidelines. First, the guidelines may be partially responsible for the increase in prosecutions of organizations. From 1995, when the impact of the Sentencing Guidelines was just being felt, to 1998, there was a 197 percent increase in U.S. federal courts in convictions of organizations. Although the guidelines are intended to apply after conviction, they provide a model for assessing organizational culpability. This clarifies the law of corporate criminal liability for prosecutors and courts. The guidelines also make meaningful sentences more likely, which, in turn, gives prosecutors an incentive to pursue corporate offenders. Second, the guidelines have made it imperative that corporations have meaningful corporate compliance plans. The existence of such a plan affects an organization's culpability score under the guidelines, thereby reducing any criminal fine by as much as 400 percent.