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Prosecuting Executives Who Lack Criminal Intent

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Can a person go to jail without proof that he personally did anything wrong or even knew about any wrongdoing? Prosecutors typically charge corporate officials with business-related felonies and allege that the corporate officer knowingly and intentionally committed the crime. It's tough enough to defend against that charge, even though that is the tried and true way cases are brought. And well over 90% of federal prosecutions result in convictions.

But consider this Kafkaesque twist. Rather than having to prove that the officer knowingly and intentionally violated the law, the prosecutor candidly acknowledges that the officer was not aware of any wrongdoing, but nonetheless argues for guilt. And the judge agrees with the prosecutor. Could that scenario actually happen?

Take this case:  you're the CEO of a thriving business, maybe even a public company, that affects the public health. You work fifteen hour days, every day, promoting and sustaining your business. In terms of corporate hierarchy, you are in charge of supervising nearly everything -- advertising, shareholder relations, product development, finances, hiring, firing, product safety, and dealing with the Food and Drug Administration. Simply put, you're the chief cook and bottle washer. You rarely take a day off. You seem to be everything a company, its shareholders, board of directors, employees, even the Chamber of Commerce and Consumer Reports, would want in a CEO. But a problem has developed with the safety of one of the company's health care products.

You actually didn't know of the problem until the FBI came barging in one day, warrant in hand. A federal investigation had been underway for some time, spurred by an anonymous whistleblower, and continued for two years more. Nearly complete, the prosecutors candidly concede to your lawyer that they have no proof whatsoever -- neither direct nor indirect -- nor even a suspicion that you were actually aware of the safety problem or the manufacturing shortcuts that apparently led to it. However, even though you had delegated product safety to a qualified vice president, you are responsible -- as the saying goes, "the buck stops here." Equally important, the prosecution acknowledges that you did not "consciously avoid" knowing about the problem, meaning that you did not bury your head in the sand lest you learn about the problem (for that, too, would supply an alternative legal theory for prosecution and conviction).

Despite all of this, the prosecutor advises your lawyer that if you don't plead guilty to criminal misdemeanors, which can potentially land you in jail for up to a year on each offense, they will ask a grand jury to indict you for felonies, by invoking what has come to be known as the "responsible corporate officer doctrine" of criminal liability. And under this doctrine, a defendant is exposed to very substantial jail time as well as other punitive consequences. The power of prosecutors to bring this type of charge for crimes that the law refers to as crimes of "strict liability" stems from the potential for health care products and food products to cause serious injury and even death. Under the 1938 Food, Drug and Cosmetic Act, as interpreted by the U.S. Supreme Court, prosecutors can bring criminal charges against corporate officers without any evidence that the officer actually knew that a crime was committed. The result is typically "guilty as charged."

Yes, you read it right. Prosecutors can charge officials in this draconian fashion even though they have the option of pursuing alternative strategies, such as charging the corporation only, or maybe only those corporate officers on the front lines who are actually responsible for the wrongdoing, rather that charging a seemingly innocent chief executive.

In allowing prosecutions of high corporate officers who are blameless of any wrongdoing, the Supreme Court said that "in such matters, the good sense of prosecutors, the wise guidance of trial judges, and the ultimate judgment of juries must be trusted." To be sure, the responsible corporate officer wildcard is only available for certain specified offenses -- those where health and safety are implicated. Nonetheless, the Wall Street Journal on September 13 reported that the Justice Department has actually stepped up such enforcement tactics, using the responsible corporate officer doctrine to prosecute the former CEO of KV Pharmaceutical Co., a former division president at medical device maker Synthes, Inc., and executives at pet food company ChemNutra, Inc. -- sending a frightening message to health care executives across the nation.

True, we do want regulators to carefully scrutinize the conduct of health care operatives -- these companies literally hold the public's lives in their hands. And it was a unanimous Supreme Court that upheld the principle of such "no-fault criminality," inasmuch as the corporate officer who was placed in the dock was the "responsible" person for maintaining the product's safety. The Court essentially held that negligence alone could trigger his conviction.

But don't we risk the bedrock principle of American justice that a person should be morally blameworthy before we punish him, particularly at a time when prosecutors increasingly have powerful weapons to criminalize business activities that previously were never the subject of criminal enforcement, and cause risk-averse executives to cut their losses and plead guilty to lesser offenses? Is that the way the justice system should operate -- bringing prosecutions that basically extract lesser misdemeanor guilty pleas, merely because, to use a somewhat parallel example, a corporate executive was sitting in the driver's seat when a defective wheel (which should have been checked out by a grease monkey in the motor pool operating loosely under the executive's line of authority) fell off the car while he was driving, causing another person's serious injury or death? To be sure, corporate CEOs always seem to the public to be sitting in the driver's seat -- as if Henry Ford was working on the manufacturing conveyor belt.

Because that's what aggressive prosecutions under the responsible corporate office doctrine conceivably can amount to. Yes, as the Supreme Court noted, federal judges appointed by the president and confirmed by the Senate, and trial jurors, are the ultimate check against prosecutorial abuse. But when the tabloids whip up public outcries and demands for blood when an unfortunate health hazard erupts that should have been discovered sooner, will those checks work? The public demands, quite properly, that corporate executives must be responsible -- but as an ethical and practical matter, there are limits to what they should be held criminally responsible for.

And one final concern. In an economy that has suffered grievously as a result of corporate abuses, there is the risk that Congress might suddenly get the bad idea of legislating criminal strict liability to corporate executives on many more subjects.