Corporate Criminal Liability: an Essential Reference for Inhouse Counsel and White Collar Criminal Lawyers
Some treatises are merely reference books you keep on the shelf and consult when an issue arises, hoping that you can locate what you need in the table of contents or the index. When you can’t, you put the book back on the shelf and call someone you think has the answer or give it to an associate to research.
On occasion, a reference book is more than just something you might refer to find a quick answer; it is a work that has the capacity to educate the reader in an area they have no familiarity with, or so much familiarity, that they come to the subject overconfident and with erroneous notions about the state of the law. Corporate Criminal Liability (Thompson Reuters 2024-2025 edition) is one of those rare books that addresses both circumstances.
In this review I will endeavor to demonstrate how CCL can help white-collar criminal defense counsel better prepare to assist their clients, whether individuals or companies, weather the storm of a criminal investigation or go to battle if that becomes necessary.
I will also attempt to show why this treatise is an essential resource that every inhouse legal department should have on its shelf should the company uncover criminal activity by its employees or come under scrutiny by a federal agency for alleged criminal conduct.
1. Corporate Criminal Liability, or Whose Ox is Will Get Gored
Inhouse counsel may become aware that their company is under criminal investigation either: (1) because a federal grand jury subpoena has been served at one of their offices demanding a custodian of record produce certain documents to a government agent by a certain date; (2) they receive a frantic phone call from a manager at one of the company’s locations that government agents have arrived, served them with a search warrant, and have begun to search the facility, seize documents and computers, and question employees; (3) employees have informed their supervisors, or a senior officer has burst into your office reporting that people with badges have showed up at their homes and asked to speak with them. The existence of a criminal investigation can surface in other ways, but these are the most common and the most upsetting.
At some point, in-house counsel will have a meeting with an attorney experienced in representing companies in jeopardy either as a result of the reputational damage the company faces as a result of an accusation or because employees at some level violated the law, and the company may be facing criminal charges. That meeting may be occasioned by the events noted above, or inhouse counsel is already aware of the situation, either because it was reported by persons involved or there was a whistleblower.
Regardless, there will be a first meeting and many others to follow. How productive those meetings will be depends on how much the lawyers understand the legal landscape they must navigate.
Certain questions will arise.
Are the circumstances such that the employees’ actions will be imputed to the company? Are the circumstances such that the failure of employees to correct a problem will subject corporate officers to criminal liability? These issues become critical when a company’s products have sickened or killed consumers or a facility has exploded, and employees perished. These issues arise all the time and can affect any industry. A company is mismanaged, and airplanes fall out of the sky. A company receives citations for unclean facilities and consumers succumb to bacteria. A passenger in a vehicle operated by a ride-share company is raped and murdered by a driver.
Inhouse counsel cannot have a truly intelligent conversation with their outside counsel if they do not have sufficient grounding in the principles of criminal law that apply to the liability of companies to the acts of their employees and agents. CCL, Chapter 3, is devoted to this issue. Imputation of Criminal Conduct to the Corporation, which addresses the company’s liability for acts of officer and directors, 3:2, managers and supervisors, 3:3, subordinate agents 3:3, and independent contractors 3:6. Also discussed is a company’s liability for criminal acts committed contrary to express instructions, 3:9. Similarly in Chapter 5, there is an extensive discussion of corporate and individual liability for strict liability offenses under the Federal Food Drug and Cosmetic Act 5:14- 19.
Any criminal lawyer who goes into a meeting with inhouse counsel knowing that these issues are going to arise, who does not refamiliarize themselves with the basic principles of criminal liability and update their knowledge of the latest decisions, wastes their client’s time or worse.
Moreover, when an issue has been identified that calls for a deep dive into the case law, a partner acts at their peril, assigning the research to a clerk or an associate who, though they may possess outstanding academic credentials and research skills, knows only what they learned in their first-year class on criminal law. The most relevant cases are often uncovered in indirect ways that only a lawyer with a broad knowledge of the suspect matter can locate. Lawyers who have a grounding in the subject matter are far more likely to locate cases that speak to the issue at hand.
2. Time is Money for the Client and Counsel. The Effort Taken to Locate Source Documents Is the Enemy of Both.
A very helpful feature of CCL, particularly for criminal counsel, are the appendices found at the end of Chapter 1. White-collar counsel cannot determine the likelihood of prosecution without consulting the Justice Department’s policies on prosecuting business organizations. Counsel can, of course, look for those policies on the Internet or open CCL to Appendix 1a and immediately find the Justice Manual, Principles of Federal Prosecution of Business Organizations. If counsel needed to determine how DOJ treated other companies in circumstances similar to the one their client is facing, counsel could spend considerable time searching DOJ’s website or turn to Appendix 1I, DOJ’s Reported Corporate Enforcement Actions 2023-2024. If in-house counsel wants to determine the fairness of a proposed corporate integrity agreement, they can look at Appendix 1M and see Selected Corporate Integrity Agreements.
3. The Fundamental Principles Applying to Most White-Collar Offenses.
Common to all publicly traded companies are securities regulations. Common to most crimes committed by companies, public or not, is mail/wire fraud. Common to most white-collar regulatory offenses is the necessity for the government to prove some level of intent.
Unlike drug trafficking, racketeering, alien smuggling, or many other crimes prosecuted by the federal government and its alphabet-soup agencies, proving intent beyond a reasonable doubt is the most common impediment to a conviction. In many instances the same conduct can be criminal or legitimate depending upon the accused’s intent.
Consider anti-trust violations. There is nothing wrong with every manufacturer of all-weather tires raising their prices the same amount at the same time if there is no agreement among them to do so. Being competitive versus being non-competitive turns on whether they increased their prices because they thought their customers would be willing to pay more versus an agreement that left their customers no alternative to paying higher prices and ensured that all the manufacturers would make a greater profit.
Whether the government will pursue criminal remedies or drop an investigation entirely can be a function of defense counsel’s superior knowledge of the facts and the law. Understanding the evolution of statutes and their interpretation and application by the court allows counsel to argue from first principles which some prosecutors may be unaware of. CCL deals with statutes that are particularly relevant in corporate criminal litigation and shows how they developed over time.
Some inside baseball. Prosecutors always charge conspiracy along with a substantive offense. Sometimes, they only charge conspiracy. Conspiracy usually carries the same penalty as the substantive offense and is easier to prove if a case goes to trial. Prosecutors often charge mail or wire fraud. The reason is that almost any crime can be charged as a mail or wire fraud because, unless you are distributing drugs or smuggling an alien across the border, the USPO, or FedEx, or UPS, or email was used at some point to commit the crime.
At one time, the principles of mail and wire fraud were well settled. And certainly in the run of cases where fraudsters use telephones to contact victims and induce them to part with their money by promises of one kind or another, the law is clear. But in a host of more sophisticated schemes, the traditional foundation of criminal responsibility has crumbled.
The gravamen of fraud is interfering with the possession or use of someone else’s property. Leasing a car and not returning it to the rental agency is pretty clear cut. But if you write an investment column for a newspaper and purchase stocks in advance of your column’s publication, knowing that what you say will affect the market, have you taken property from your employer? What if you make false statements to get a license to operate a business, have you taken something from the state? If you make a deal with someone for a service and they deliver the service without any loss to you, but they misled you in circumstances where you would not have dealt with them had you known the truth, is this a fraud?
The importance of this level of understanding was made clear in the case of United States v. Skilling. In the past, had permitted persons to be prosecuted for mail fraud arising out of acts denying their employer or, in the case of elected officials, the citizens of a state, of their honest services as well as other schemes that did not deprive the victim of their property. When this principle came before the Supreme Court, the Court held that a scheme or artifice to defraud was limited to deprivations of property rights. Congress sought to overrule this decision by specifically including the right to honest services in the mail and wire fraud statutes, intending to return the case law status quo ante. However, the Supreme Court rejected this attempt and held that a deprivation of honest services was limited to cases where there was a bribe or kickback. While this decision may be flawed, understanding it is key to extending it to the conduct under investigation. Chapter 8, sections 8:33-8-36, explains this.
Any white-collar attorney advising a client as to their potential liability where the property involved is intangible needs to know where they are now and how they got there. 8:34-47.
4. Specific Regulatory Offenses.
Where inhouse counsel is concerned that some aspect of a company’s operations violates the Sherman Act, counsel can review 6:23 to see if they have a reason for concern. Where counsel’s fears are justified, counsel may be able to save the company from prosecution under the Antitrust Division’s “Corporate Leniency Policy.” But counsel can only do so if counsel is aware of it and knows what the policy says. 6:28 will arm in-house counsel with the knowledge they need to explain the situation to outside counsel so they can have a meaningful discussion about approaching the government.
CCL contains an extensive discussion of racketeering under the federal RICO acts and similar state statutes. Criminal RICO prosecutions have become rare as Congress has ratcheted upon penalties for simpler offenses and made many offenses subject to forfeiture through the expedient of charging money laundering. However, civil RICO suits have become a popular cause of action in civil lawsuits. This is an incredibly arcane area of the law that most inhouse lawyers may not have any experience with until their company is sued. If that happens, inhouse counsel faces a steep learning curve, and Chapter 7 will get you into the area. Without some understanding of this dark universe, inhouse counsel will have many fruitless conversations with outside counsel.
Inhouse counsel of a publicly traded company already possesses a great deal of knowledge of securities regulations. And hopefully, the company has followed the law as counsel has instructed them. Most white-collar criminal defense attorneys don’t have as much knowledge or experience with securities regulations. But someone may walk into counsel’s office accused of insider trading. While counsel may want to consult with or associate a lawyer who specializes in securities law, this is not so esoteric an offense that counsel must refer the case to someone else. Chapter 8 will give you a good start on developing the expertise to take on the government.
However, if the potential client is accused of illegally marketing securities or making false statements in their filings with the SEC, the assistance of an expert in securities law is essential. But this does not mean that you must refer the case to another lawyer. Our cousins defending murderers and rapists have had to master the ins and outs of DNA evidence. Securities regulations are complicated but not that complicated.
A client may want you to represent them because you have more experience negotiating with prosecutors than most securities lawyers. A client facing trial is going to want a lawyer who has experience trying cases. Securities lawyers are not going to be able to match your experience. If you have sufficient time to prepare, the client wants you to represent them, and the client understands that you are not an expert on securities law—at least not yet, associate or consult with counsel who have the expertise you lack. In my own experience, I have comfortably and successfully handled securities and commodities matters where I had no prior background but became an expert in what I needed to know handle the matter, either before the SEC or at trial. Again, bring in co-counsel to assist with the more arcane issues of law. In any event, Chapter 8 will help you to properly advise your client.
If you are inhouse counsel, and your company has operations overseas that involve business with a foreign government, you better be or become an expert in the Foreign Corrupt Practices Act. Chapter 9 will provide you with a head start on that process.
It will also explain how any false accounting or record-keeping by a publicly traded corporation can and often does result in prosecutions, whether or not false entries or omissions had anything to do with foreign commercial activity. Once again, the Appendices at the end of this chapter are invaluable because they set out declinations involving 14 companies that were suspected of being involved in criminal conduct. A declination is the goal of all companies under investigation. These are role models to be emulated.
5. CCL is a Valuable Resource for Federal Criminal Lawyers Who Do Not Represent Corporations or Corporate Employees
Large firms dominate representation of Fortune 1000 corporations. C-Suite officers gravitate to such firms as well. And the government prosecutes only a small number of executives in any given year. Consequently, even seasoned federal criminal lawyers may not have had any experience handling cases involving corporate criminal liability. But as we have seen, CCL addresses mail and wire fraud in detail, which are the bread and butter of many federal practices. Section 9:26— 9:45 deals with bribery and gratuities, 10:2—10-49 with election law violations, Chapter 11 with tax crimes and currency reporting violations, Chapter 12 with obstruction of justice, Chapter 13 with perjury and false statements, and finally, Chapter 14 with environmental crimes.
6. Final Observations
Legal treatises are expensive, and this one is no exception. Consequently, lawyers who do not do a substantial amount of criminal practice may simply toss the flyer for CCL into the waste can where other similar offers end up. That’s understandable, BUT what you might want to do instead is make a copy of the table of contents and put it in your top drawer or scan it into your computer. If you get contacted about a potential case and being a subject matter expert enhances your chances of being hired, you can then decide whether the potential return on investment is worth spending the money on this book. And if you already represent the client, you can see whether CCL would significantly reduce the time you would otherwise spend getting the answers you need.