Miller & Chevalier Partner Barry Pollack: Time to Stop Living Vicariously

Barry Pollack is not a big fan of corporate criminal liability.

But he wouldn’t necessarily get rid of it.

He would, on the other hand, get rid of vicarious liability.

A couple of years ago, he wrote an article for the American Criminal Law Review titled “Time to Stop Living Vicariously: A Better Approach to Corporate Criminal Liability.”

He has another article coming out in the same publication titled – “Lone Wolf or the Start of a New Pack: Should the FCPA Guidance Represent a New Paradigm in Evaluating Corporate Criminal Liability Risks?”

Pollack is a partner at Miller & Chevalier in Washington, D.C.

“The system of corporate criminal liability has significant problems and that is the focus of the first article and to some extent the second article,” Pollack told Corporate Crime Reporter in an interview last week.

“The vicarious liability standard is so low that it effectively shifts all of the power to the prosecution. The prosecutor can almost always say there is a violation. Then it becomes a matter of prosecutorial discretion as to whether they are going to go after that kind of conduct.”

“So, you get into a very lopsided negotiation. All of the factors the Department of Justice says they look to in the exercise that prosecutorial discretion should be factors in determining whether or not a corporation committed a crime as opposed to whether or not the government is going to exercise its discretion not to pursue it.”

“Those factors include — does the company have a good compliance program, were the individuals involved in the conduct high ranking individuals or lower level employees, how widespread was the conduct?”

“What I argue in ‘Time to Stop Living Vicariously’ is that we establish a standard of liability that takes those factors into account.”

“You do have on occasion a corporation that is infected by a culture of malfeasance, that has high ranking officials committing crimes, that doesn’t have adequate compliance.”

“And in that kind of a situation, I can see the argument for corporate criminal liability. But where you don’t have that, I don’t think the corporation itself should be viewed as having committed a crime. And I don’t think the Department of Justice should have the power to claim that there is a crime and extract some kind of a settlement under the guise that it is going to exercise its discretion not to pursue that crime.”

“Just as a matter of common sense, one should never be vicariously liable and be viewed as a criminal for somebody else’s conduct. Either you have committed an offense or you haven’t.”

“That’s why I would like to see a system that judges whether the corporation itself has engaged in criminal conduct as opposed to whether any one of its individual employees has. I don’t think any corporation, no matter how well run, no matter how conscious of compliance, can be a guarantor that none of its employees will ever commit an offense.”

Pollack would get rid of vicarious liability for corporate criminal liability. What are the chances that will happen? And if it happens, how will that change the landscape?

“Unfortunately, I don’t think the chances are very good,” he says. “There has been a movement for reform of corporate criminal liability — but it seems to be more modest reform than what I am proposing.”

“There has been an effort to make having an adequate compliance program a defense to a charge of criminal conduct by a corporation. While that is an intriguing idea and might be a useful reform, I don’t think it goes far enough. It still puts a corporation at the mercy of the Department of Justice. And then if it is charged, it has the burden of showing an affirmative defense and hoping that it prevails on the defense. Most large corporations cannot stomach being charged, much less take the risk that they may not prevail on that defense.So, I’m not sure it really changes the dynamic all that dramatically.”

“If my proposal were enacted, it would result in far fewer numbers of deferred prosecution agreements and other settlements that come through this negotiated resolution process.”

“You would have settlements where there truly has been corporate malfeasance at high levels of the corporation. You will have incentives for corporations to conduct themselves exactly the way that we would want corporations to conduct themselves — with compliance programs, with leadership at the top setting the right example. But we would be more realistic about the fact that sometimes that is not going to prevent individual misconduct.”

“When that does occur, the individual ought to be held responsible for the individual’s misconduct. We ought to see some corporations actually go to trial. It has become anachronistic to think of a corporation trying a criminal case. It’s only on rare occasion. The standard that I’m arguing for is such a fact bound standard that I could see the possibility of more cases getting tried. And that’s not a bad thing. Too much of the fact finding has been through negotiated resolution rather than by testing the facts in an adversarial system of the courtroom.”

There was an editorial in the Wall Street Journal this week titled “The Troubling SAC Case: Can a criminal enterprise be run by someone who isn’t a criminal?”

The editorial leads with this:

“A friend who used to work on Wall Street once interrupted a conversation by noting that the government now has the power to destroy any company it chooses in American finance. Which is what the government seems intent on doing with its criminal indictment Thursday of SAC Capital as an insider-trading conspiracy.”

The editorial continues:

“The simple fact is that people commit crimes. Buildings don’t.”

Does this express your sentiment? Or is the Journal saying something else?

“The Journal is probably going a little further than I would go,” Pollack says. “That sounds to me like an argument for abolishing corporate criminal liability. “Buildings don’t” sounds to me like an argument that a corporation could never have criminal intent and therefore could never be criminally prosecuted.”

“I’m not sure that I buy that. I’m also not sure that you couldn’t have a corporation prosecuted where the CEO was not prosecuted.”

“Under the test that I argue for, you could have a corporation, for example, that has a poor compliance program, that has a history of violations, that has a CFO or COO or another very high ranking official engaging in criminal conduct, and you could meet the standard that I’ve articulated in the right case with a CEO who is as pure as the driven snow.”

“I’m not sure I would go as far as the Journal is going. There is a credible argument to be made for abolishing corporate criminal liability altogether. And it sounds to me like the Journal is making that argument. But I wouldn’t go quite so far. There are corporations that are bad actors. That doesn’t necessarily mean that every individual or even the CEO is a bad actor. But it ought to be more than simply — if any employee is a bad actor, the corporation is a bad actor. Which is what the vicarious liability standard is.”

Do you care to weigh in on the justification for the prosecution of SAC Capital?

“Obviously, we don’t know what the facts are yet,” he says “We know what the government’s allegations are. If the government’s allegations are proven, then this might be the type of case that I have posited where it would be appropriate for corporate criminal liability — if the conduct is widespread, if it involves large sums of money, if it involves high ranking officials at the company, if it occurs over a lengthy period of time, if there is not an adequate compliance program to stop it. Those are factors that I believe the government has alleged in this case. They are the kinds of factors that even under my regime would support pursuing a corporation.”

“But that’s why we have trials and an adversary process. Simply because the government alleges all those things doesn’t necessarily make them true. Even the fact they have obtained guilty pleas doesn’t necessarily make them true. You have a tremendous disparity in negotiating power. And you have facts that are agreed to without them being tested, without cross examination, without witnesses being called. I would love to see the SAC case get litigated. I would love to see more of these cases get litigated. Let’s see what the facts are when we test them through the adversary process, instead of making a conclusion based on a lopsided negotiated resolution.”

While Pollack defends both corporations and individuals in white collar criminal matters, his practice is heavily tilted to individual defense.

And he has two high profile national security cases.

He’s the criminal defense attorney for Wikileaks founder Julian Assange. And he’s representing former CIA official Jeffrey Sterling.

Isn’t it a bit unusual for a big firm white collar criminal defense attorney to be representing such high profile national security defendants?

“It is unusual for large or highly sophisticated law firms to have individual-centric practices,” Pollack says. “Most large corporate law firms almost exclusively represent corporations. You are not going to get into the same breadth of issues that you get into if you are a white collar criminal defense specialist who represents individuals in all the myriad cases that are brought against individuals.”

“My practice has always been individual focused, trial focused. That focus helps me tremendously when I do represent corporations. It gives me a different perspective.”

“But I would agree with you — it is not the typical big law firm practice.”

[For the complete transcript of the Interview with Barry Pollack, see 27 Corporate Crime Reporter 31(11), August 5, 2013, print edition only.]

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