October 16, 2007

In this article, Partner Andrew Weissmann discusses the evolving standards of corporate criminal liability.  According to Mr. Weissmann's article, despite benefits from legal reforms and DOJ and SEC efforts in the wake of Enron’s demise, this increased scrutiny of corporate malfeasance has also brought to light a significant fissure in the current legal system, namely the scope of corporate criminal liability.  Mr. Weissmann notes that in spite of a company's best efforts to deter corporate criminality, a company can nevertheless be held criminally liable based on the conduct of a single employee, even if that employee acted in contravention of corporate policy.  Mr. Weissmann notes that this current legal standard is the product of federal appellate case law, as neither the Supreme Court nor Congress has addressed this issue. 

Mr. Weissmann argues for a reform of the standard for corporate criminal liability that ties corporate criminal liability to the lack of an effective compliance program. Such a reform would create greater incentives for boardrooms to devise, implement, and monitor compliance measures.  By placing the burden on the government to prove that a company’s program was inadequate as a prerequisite to criminal corporate liability, the article says, these reforms will also provide a systemic check on prosecutors who seek to institute such actions in the future, helping to ensure that they do so only where the company should be justifiably responsible for the criminal conduct of its employees.