When Officers Can Be Charged With Criminal Responsibility

Wednesday, May 26, 2004

Amiad Kushner, http://

Abstracted from: Applying The Responsible Corporate Officer Doctrine Outside The Public Welfare Context
By: Amiad Kushner
Journal of Criminal Law & Criminology - Vol. 93, Nos. 2-3, Pgs. 681-711

Overview:
Describes criminal law’s doctrine of the responsible corporate officer, which holds an officer responsible for employees’ criminal acts under certain circumstances. Recommends broadening its applicability outside the public welfare context to crimes committed in the corporate setting.

Traditional criminal law in a corporate context.
In general, a corporate officer is not liable for criminal acts committed by the employees of the corporation unless the officer personally participated in the act. The executive may be found guilty only if the employee who performed the illegal act on behalf of the corporation did so under the officer’s direction or with his or her permission. In the case of a small, closely held corporation, officers often supervise corporate operations so closely that it is reasonable to infer that they gave their permission for illegal acts. However, for a large, bureaucratic, public corporation, inferring that an officer had power over an act and was therefore responsible for authorizing it seems much harder. Amiad Kushner suggests that the doctrine has a place in combating securities fraud in the large corporate setting and should be applied despite the bureaucratic cloud that protects an executive wrongdoer by fogging the path of authority.

Origins of the doctrine.
The Supreme Court introduced the responsible corporate officer doctrine in 1943, the author explains, in United States v. Dotterweich. The president of a drug repackaging company had been charged with violating the Federal Food, Drug, and Cosmetic Act, even though he did not know that certain drugs sold by his company were mislabeled. The Court chose to extend liability to the president because mislabeling could endanger the public health and welfare. In United States v. Park (1975), the Court set out the elements of a responsible corporate officer’s liability. Officers would be liable for a criminal violation if their position in the company gives them the responsibility and authority to prevent or correct a violation and if they failed to do so. Because both these decisions were strict liability cases, the mens rea requirement did not apply. Generally the court must find that the defendant performed a wrongful act or failed to take action to prevent a wrongful act; under the doctrine, the acts of junior employees are imputed to the officers.

Moving beyond public welfare justifications.
It is no longer appropriate, the author asserts, to limit the doctrine to public welfare cases, because those grounds are not broad enough to cover all the corporate situations for which the doctrine may be a reasonable approach. In the large corporate setting, it is difficult to prove that an officer specifically authorized an illegal act. Courts instead should presume that corporate officers who have a responsible relationship with their employees are knowledgeable about the activities of those employees, then impose the doctrine. Courts have begun to apply the doctrine in cases requiring a finding of mens rea, for example, in environmental cases where the evidence shows the officer knew of the violation but not that he or she authorized the violation. To meet the mens rea requirement, courts have imputed an employee’s actions to an officer if the hands-off executive knew of the illegal activities. The doctrine requires that the corporate officer knows of the activity, is responsible for the person conducting the activity, and does not prevent the criminal act. It could be effective in finding a nonparticipating-yet-aware officer liable in an antitrust conspiracy.

Abstracted from Journal of Criminal Law & Criminology, published for Northwestern University School of Law by University of Illinois Press, 1325 S. Oak Street, Champaign, IL 61820.

Return to Library of Business Information