CORPORATE CRIME REPORTER
Schumer’s
General Counsel Preet Bharara Wants to Limit Corporate Criminal Liability
21 Corporate Crime Reporter 40, October 10, 2007
He’s credited with being the lawyer who opened the investigation that
brought down Attorney General Alberto Gonzales.
Meet Preet Bharara – former Assistant U.S. Attorney in the Southern District of New York.
Columbia Law School grad.
Good buddies with USA Patriot Act architect and Georgetown Law Professor Viet Dinh.
General counsel to Senator Charles Schumer (D-NY).
In January 2007, Bharara, working with Schumer on the Senate Judiciary Committee, opened the investigation of the U.S. Attorney firings – an investigation that ended in the resignation of Gonzales.
Also in January 2007, the American Criminal Law Review published a little noticed article by Bharara titled “Corporations Cry Uncle and Their Employees Cry Foul – Rethinking Prosecutorial Pressure on Corporate Defendants.”
In the article, Bharara argues that the source of prosecutorial leverage over corporate criminals “stems not from abuse of (prosecutorial) power, but from a century of expansion of corporate criminal liability.”
Corporations are exposed to almost certain conviction for the misconduct of even one rogue employee under the doctrine of criminal respondeat superior, Bharara says.
And it is precisely these court-created liability rules that embolden the prosecutor and cow the corporation.
And instead of focusing on the abuse of prosecutorial discretion – as the debate over the KPMG case and the McNulty memo does – Bharara wants to rein in prosecutorial power by tightening the standards of corporate criminal liability.
As Fried Frank partner Audrey Strauss pointed out recently, Bharara’s voice is one in a growing chorus calling for a clampdown on corporate criminal liability.
Bharara argues that prosecutors hold a gun to the head of corporations.
And the gun – though wielded by prosecutors – “was licensed and loaded by a century of Supreme Court jurisprudence that has encouraged prosecutors to take dead aim, not just at the individual miscreants responsible for corporate crime, but at the business organizations that employed and arguably enabled them.”
“The courts have obligingly stocked the federal prosecutor's arsenal with legal doctrines whose effect has been to expose business organizations to maximum criminal liability,” Bharara writes. “During the same period, courts have depleted the corporation's available defenses, so that today a business entity faces indictment and almost certain conviction if there is so much as one low-level criminal actor in the organization. This legal state of affairs has been decried by virtually every commentator who has thought to study it.”
And while many scholars have suggested that the corporate criminal liability rules should be narrowed – or eliminated altogether – “none of these proposals is grounded on the premise that a narrower rule would serve as a more reasonable check on the risks of prosecutorial overreaching against corporations and interference with individual defendants' rights and privileges,” Bharara writes.
“Indeed, there is little sustained and serious examination of the likelihood and desirability of reining in prosecutorial power through a tightening of the standards for corporate criminal liability rules,” he says.
Bharara’s article is extreme in many respects.
For example, he cites approvingly an article by Ohio State Law School Professor Dale Oesterle who writes about the overwhelming pressure felt by a company facing the prospect of prosecution, quipping that “since an indicted firm is a dead firm, a decision to defend an indictment is suicide.”
“The corporate corpses of Arthur Andersen, E.F. Hutton, Drexel Burnham Lambert, and others, lend force to these observations,” Bharara writes. “Recent statements from the heads of business organizations with criminal exposure further reinforce the conclusion that in order to survive, corporations must do everything possible to avoid indictment.”
What Bharara doesn’t mention are the scores of major corporations that have been not only indicted, but pled guilty to crimes – and have not been forced out of business. (See Corporate Crime Reporter’s The Top 100 Corporate Criminals of the 1990s.)
Bharara says that while the McNulty memo attempted to sooth concerns of the white collar defense bar over prosecutors’ demands for corporate waivers of attorney-client and work product privileges, the McNulty memo “has not necessarily altered the dynamic much.”
“Because the gravamen of the criticism is the inherent coerciveness of the corporation's predicament, rather than that of any particular demand, the solution suggested is not merely a reconsideration of today's waiver policy, but more fundamentally a reexamination of yesterday's outmoded corporate liability rules,” he writes.
Bharara rejects the idea of eliminating corporate criminal liability altogether.
“Such an extreme proposal fails to comport with the widespread view that corporations, as entities, can be blameworthy in at least certain circumstances, and a purely civil liability regime in which corporations will have less incentive to self-police is not ideal, as many writers have argued,” he writes. “Any proposal to eliminate all criminal liability for corporations, apart from other failings, gives corporations an unsatisfactorily free hand, merely transferring to business entities the leverage that prosecutors now enjoy. In any event, given overwhelming public, Congressional, and judicial support for the idea of corporate criminal liability, its elimination has little possibility of gaining acceptance in the foreseeable future.”
Bharara
would narrow corporate criminal liability through a compliance program approach
– allowing judges and juries to decide whether the corporation had a tough
enough compliance program in place when the alleged wrongdoing was committed.
This he says, would shift power from the prosecutors to the juries.
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