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No Body to Kick, No Soul to Damn — Salvatore Padula
During the 2012 Democratic National Convention, a video was played that claimed that “government was the only thing we all belong to.” As objectionable as the sentiment behind that statement was, it does highlight the important fact that a government, at least ideally, is an association of its citizens. Recently, Mike H argued persuasively that government should be held to the same standards of accountability for its conduct as are other entities consisting of associations of individuals: corporations. While I wholeheartedly endorse Mike’s point about the relative accountability of corporations and government, one paragraph of his post caused me to pause.
When a corporation does something that would be morally or ethically wrong in the case of an individual, the people and the corporation involved are rightly punished. They may have broken a law, or they simply may lose business because of unsavory practices. Either way, we know when a corporation has done something wrong because it has violated a tenet to which we hold each individual. The rules for corporations don’t change simply because of the label “corporation,” because it is still a “person.”
The preceding paragraph may seem unobjectionable; after all, who can seriously oppose holding malefactors responsible for their actions? I certainly don’t.
What then, you may ask, is the problem? The problem is the implicit acceptance of the premise that corporations are capable of committing crimes and should consequently be open to criminal liability. While it may seem a no-brainer that corporations should be subject to criminal liability I would argue that corporate criminal liability is both theoretically unsound and has seriously deleterious consequences in the real world. This is not to say that corporations should be exempt from accountability. Civil liability is an important check upon harmful conduct committed on behalf of corporate persons. But it is past time we did away with criminal liability for corporations.
The chief purpose of the corporate form of association is to limit the liability of its constituent members. The corporation, as a legal entity, has been in existence for several centuries and for the majority of that period was subject to liability only in the civil context.
To early commentators at common law, the inability of corporations to be liable for criminal sanction was self-evident. Lord Thurlow, Lord Chancellor of England in Lord North’s government, is famously quoted asking “Did you ever expect a corporation to have a conscience, when it has no soul to damn and no body to kick?” Lord Thurlow spoke with the clear implication that conscience, soul, and body were all prerequisites for criminal liability.
The incorporeal nature of corporate entities was seen as a decisive impediment to the imposition of criminal liability on corporate defendants. Corporations could not actually commit crimes as they were incapable of independent action.
As Chief Justice Marshall noted, a corporation was “an artificial being, invisible, intangible, and existing only in contemplation of law.” Because a corporation existed only in the contemplation of law, it could only act in ways the law (and the corporation’s charter) authorized. Therefore, any infraction of the law was ultra vires and could not be attributed to the corporation.
Relying somewhat less heavily on theory, Blackstone stated flatly that “a corporation cannot commit treason, a felony, or other crime,” and apparently felt the point to be “so obvious that it needed no elaboration.” Blackstone went even further, stating that the criminal punishment of a non-human defendant was nothing but a superstition originating in “the blind days of popery.” (Interestingly, in the 13th century, Pope Innocent IV, a former professor of canon law at the University of Bologna, forbade the practice of excommunicating corporations on the theological ground that they did not possess souls and, thus, could not be moral actors.)
Corporate criminal liability became an established feature of American law in 1909, in a case called New York Central. New York Central involved a violation of the Elkins Act, which set minimum prices for freight transportation by railroads. The defendant railroad’s liability was based on illegal rebates given to certain of the railroad’s customers by an agent of the railroad. In upholding the railroad’s conviction, the Supreme Court imputed both the acts and intent of the agent to the railroad by adopting the established tort doctrine of respondeat superior, which holds a principal strictly liable for tortious acts committed by an agent within the scope of the agency.
The decision to base corporate criminal liability on a doctrine formulated in the framework of tort law was a dramatic alteration in the scope of corporate liability. Not only did the Court open corporations to criminal liability for acts committed by corporate agents, by adopting respondeat superior it also ensured that the new liability would be strict.
In the opinion, the Court provided no explanation for its decision to radically alter the nature of corporate liability beyond stating that, in the absence of strict vicarious liability, “many offences might go unpunished and acts be committed in violation of law.” With this slim, but pragmatic, justification, the judiciary commenced an extended period of increasing criminal liability in a manner which professor Leonard Orland has characterized as “law in search of theory and scholarship.”
The cases extending corporate criminal liability include: Standard Oil Co. of Texas v. United States, holding that misconduct by even a low-level employee may give rise to liability; United States v. Bank of New England, creating the collective knowledge doctrine, whereby a corporation may be held liable even though none of its individual employees held the requisite knowledge or intent; United States v. Hilton Hotels, holding a corporate defendant liable for its agent’s actions that were contrary to both corporate policy and management’s express instructions and where the agent in question was individually acquitted of the crime; and United States v. Automated Medical Laboratories, which held the corporation liable for criminal acts that the corporate agent committed primarily for personal benefit.
While the courts were dramatically expanding the scope of corporate criminal liability, Congress was dramatically expanding the scope of the criminal law generally. Over the course of the last century, Congress created a multiplicity of new crimes ranging from a variety of federal conspiracy offenses to the imposition of criminal penalties for the insufficient breading of frozen shrimp, with many offenses, such as violations of the Elkins Act, falling somewhere in between the two moral extremes. Increased criminalization was the result of the shift toward a more comprehensive federal administrative state that regulated virtually every facet of commercial enterprise, combined with the omnipresent desire of politicians to appear tough on crime.
In addition to the proliferation of new criminal offenses exposing corporations to criminal sanction for a much wider variety of conduct, the expansion of the regulatory state caused a significant change in the consequences corporate defendants faced if criminally convicted.
For example, once convicted, corporations are barred from auditing companies listed on a public exchange or bidding on most government contracts, and criminal convictions often results in loss of licensing or disbarment from certain industries. Such delicensing or disbarment can, in effect, constitute a “corporate death penalty,” as in shown by the case of Arthur Andersen. Arthur Andersen was one of the world’s largest accounting companies, employing over 85,000 people. It was convicted of one count of obstruction of justice, which carried a penalty of only $500,000. However, because the conviction prevented Arthur Andersen from engaging in its primary business of auditing public companies, the single conviction caused the collapse of the entire company and the resulting unemployment of tens of thousands of people.
The current state of corporate criminal liability in America may be described as follows: Corporations face huge potential criminal liability. They may be held liable for any criminal act committed by any one of their employees, as long as the act was committed within the scope of the employment (scope of employment being broadly defined) and provided at least some benefit to the corporation. Once those facts are proved, the corporation has no way of escaping liability and may be convicted even if the employee acted contrary to express direction and corporate policy, and primarily for the purpose of personal gain.
Further, because mandatory disbarment or delicensing follows in many industries, corporations face potentially lethal consequences upon conviction of even relatively trivial offenses. The combination of the ease with which corporate convictions may be obtained and the extreme consequences of conviction, provides prosecutors with vast amounts of leverage when dealing with corporate defendants. As virtually every corporation is potentially indictable and indictments are all but certain to lead to conviction, prosecutorial discretion provides the only hope for a corporation seeking to avoid ruin. Perhaps unsurprisingly, criminal prosecutions of corporations are rare, as the overwhelming majority of corporations faced with the possibility of criminal liability seek to avoid indictment through deferred prosecution (DPAs) or non-prosecution agreements.
Often DPAs contain provisions with little relevance to the alleged wrongdoing or involving massive prosecutorial interference with the governance of a corporate defendant. Common characteristics of these agreements include: the payment of substantial fines, the implementation of substantial and costly compliance regimes, and complete cooperation with the authorities in the prosecution of the corporation’s employees. The demand for complete cooperation against corporate employees is so ubiquitous that one commentator has stated that “it is commonly accepted among practitioners that corporate criminal defense largely consists of being an arm of the prosecution.” As an aside, Chris Christie, while serving as U.S. Attorney for the District of New Jersey, was notorious for the heavy-handed use of DPAs, including one with Bristol-Myers Squibb that included a provision requiring the company to endow a chair of legal ethics at Christie’s alma mater.
I agree with Mike that government should be held to the same level of accountability as corporations, but I strongly dispute the notion that criminal liability is appropriate for non-human persons. Holding both corporations and government civilly liable for their actions would have the effect of decreasing corporate liability while increasing governmental accountability. In both cases, more equitable justice would result.
Published in General
When people call a law “fair”, they may mean, roughly, that the law is efficient. In all likelihood, that’s what I mean.
We consider the most grievous crimes those which are most avoidable, like premeditated murder. It is much easier to avoid killing in cold blood than it is to avoid an auto accident. The less an activity can be deliberately avoided, the less sense there is in punishing it as a crime.
There are precautions innocent people can take against becoming the dupes of criminals, but even with these precautions, innocent people have much less control over the duping than the criminals do.
You can deliberately avoid being a criminal. It’s much harder to deliberately avoid being a victim or an innocent bystander, so why punish victimhood or bystanderhood?
By which I mean, under any reasonable (i.e, “just”) system of law, it should be possible to deliberately avoid being a criminal. Evidently, under our current system, it’s no longer always possible to deliberately avoid being a criminal, and to the extent that happens, that is a sure sign our law is unjust.
No I didn’t, sorry, but now I have and all I have come up with is what a convoluted mess thought up by lawyers and the government and businesses bought into it because they thought they would be protected from lawyers and the government.
Also there is quite the push these days for the ability to declare ‘legal personhood’ and many more ramifications if this is done. Corporations are made up of individual humans who can be sued, charged, whatever, or soon we will be discussing if the dog that bit postal worker should pay damages. Do you think this farfetched? There are those who would like to declare babies NOT legal persons until age 2 or so (Dr. Death Emmanuel).
Salvatore – I opened by challenging your comment (#15) “I don’t think governments commit crimes”. I understand the adherence to a legal position of prosecuting corporations in civil cases. And the need to prosecute individuals who have committed fraud, theft, embezzlement, or more heinous acts. The method of the prosecution isn’t what I’m contesting. My contention is that a corporation or a government can be so riddled with corruption or intentionally designed to commit crime. Clearly the National Socialist Party who came to power and governed in Germany was an organization intent on committing international crime by invading other countries and committing crimes against humanity with the extermination of Jews, Catholics, and the mentally disabled. Does this absolve the individuals who rounded up those to be exterminated, or who released the gas. Absolutely not. Hopefully many of them received the punishments they so richly deserved. But it becomes laughable to suggest that the fascist government of Nazi Germany wasn’t committing crime as a matter of organized intent and routine. Again governments and corporations are human enterprises. How they are dealt with legally is a completely separate matter. Whether these organizations can commit crimes should be bloody evident.
Brian- the reason I don’t think governments, corporations, or any non-human entity can commit crimes is that only humans are capable of agency. Non-human persons are distinct entities from the people who act on their behalf. I do not think it accurate to ascribe intent to a government based on the intent of its office holders or functionaries.
What does a criminal enterprise do?
What do you mean by criminal enterprise? The common usage of the term denotes conspiracies entered into by individuals for criminal purposes. It does not encompass legally-created incorporeal persons whether or not crimes are committed by their agents.
“Non-human persons”. Really? I think about 52 million non-human persons were legally put to death since Roe v. Wade.
What do you think I mean? It’s more than conspiracies. It is an organization designed in all of its policies, structures, guidelines, operations, instructions – not simply the occasional or random verbal command or instruction from a superior – for the sole purpose to engage in criminal activity. The evil of the enterprise has been codified. And by the way, the legal profession – with all its definitiions – is not sacrosanct, free from error or pure. It is a necessary evil itself at times.
Brian- Whether you like it or not, corporations are legal persons. They are not human beings. Abortion has nothing to do with this subject.
A corporation cannot “codify” a criminal purpose or structure. corporations are creations of the law. They can only exist for purposes which are authorized by law. Further, corporations are required to conform with corporate by laws, a universal feature of which is conformance with law. When corporate agents act in an illegal manner their actions are ultra vires and cannot be accurately imputed to the corporation. The same thing goes for governments.
You are simply wrong about governments not codifying, not having designed in its policies, structures, guidelines, operations, instructions — a criminal purpose or structure. That is precisely what the Nazi government did in Germany after they seized power. The Nazi government was a legal entity…so, so much for legal entities. That legal entity became an enterprise of evil.
I’m done, you have a nice day.
Brian- governments do not act. People do.
Salvatore, I have no idea why this is at all difficult for people.
There is a difference between morality and the law. A government, i.e. those individuals given the public trust, may pass laws that are immoral. Slavery was immoral, and yet legal in this country for years. The government even owned slaves. That was all legal. It was also immoral by my lights. Can an organized group of criminals get control of governments? Yes. Can criminals overthrow a government and put their own in place? Yes. But once that government, even if filled with immoral characters, is truly in place and considered legitimate, anything they do by following the procedures is legal. Eventually, they get to a point where they stop following the procedures for changing the law, though, or put “emergency” legislation in place. Then, even a dictator is legal.