Corporate Crime

It has been argued that only people can commit crimes because only people can be punished for committing crimes. After all: how can you put a corporation behind bars?

When the United States Supreme Court paved the way for corporations to be legally defined as a person under the Fourteenth Amendment, it opened up corporations to both the benefits and protections of the law, as well as prosecution when it runs afoul of it. A corporation is comprised of a Board of Directors; a partnership may have general and limited partners; a small company likely has officers and managers.  When people are elevated to positions like directors, partners, or officers who make the decisions for the company, they become, in essence, the human embodiment of the corporate persona.  As one many imagine, this becomes incredibly complicated when one person commits a fraudulent act that is then attributed to the entire corporation.

  • Was the individual acting on behalf of the corporation?
  • Was the individual acting with corporate ratification or approval?
  • Was this an isolated act by an individual that should not be attributed to the rest of the Board or the corporation?

When the corporation is involved in an illegal act, a person cannot hide behind the corporate entity. Similarly, when a person commits an act of fraud or embezzlement that hurts the company, they also cannot hide behind the corporate entity.  One of the crucial areas of inquiry is: What did the corporation do after learning about the questionably illegal act?

Often the most complicated part of corporate criminal defense is the beginning of representation. As lawyers get involved in the investigation and defense of wrong-doing, there is an immediate need to sort out the conflict duties of loyalties to individual people and the duty of loyalty to the corporation. Some of the initial questions to consider are:

  • What is considered attorney-client privilege when statements are made to in-house counsel at the beginning of the investigation?
  • Is the act attributable to the corporation?
  • How thorough must the Board investigate in the wake of criminal allegations?
  • Does the corporation have to cooperate with law enforcement?
  • How does the corporation cooperate with law enforcement when there are conflicting loyalties?
  • How do you sort out individual criminal liability versus corporate liability?
  • Can the corporation require individuals to cooperate with law enforcement?
  • If the corporate retains defense counsel, does it have an obligation to advice individual Board members to retain independent criminal defense counsel before obtaining statements?

Because corporate criminal prosecutions are so complicated, every individual must retain their own criminal defense lawyer who has an absolute duty of loyalty to him or her. The corporation will also retain criminal defense counsel to help coordinate the defense (if applicable), but invariably conflicts arise when individual interests conflict with corporate expectations...and vice-versa.

© 2014 Sumpter & González , L.L.P.
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