PRESENTATIONS next weekTues• Defense Contracting: Martin Chu (Northrop Grumman); Dean

Hansen (Lockheed Martin)• Fast Food Industry: Jennifer Steiner (McDonalds); Jennifer

White (Chick-Fil-A)• Broadcast Media/Radio: Jennifer Linwood (Radio One); Lauren

Cohen (Clearchannel)Thurs• Telecommunications: Elizabeth Lewis (Verizon); Jennifer

Phelps (SBC)• Banking/Financial Services: Cherisse Robison (Citigroup);

Maria Ruiz (JP Morgan)• Airline: Tara Ambalathumkal (Continental); Jennifer Popp

(American Airlines)• Cable TV: Cynthia Windle (TimeWarner); Elliot Manegold

(Comcast)Corrections?

Agencies as Law Enforcers:

3. What do you think of the EU’s “voluntary agreement” with the PVC industry?

• What purposes do voluntary agreements serve?

• Why might regulators prefer them over regulations?

• Why might regulated industry prefer them?

• Are they a good idea, in your view?

4. If you were in charge of a regulatory agency whose mission is to prevent/minimize company activity that could harm the public (as, e.g., at the SEC, EPA, FTC, etc.), what mix of enforcement tools would you use to accomplish your agency’s mission?

Regulatory Violations and Enforcement

1. Jones, who works for XYZ Corp., is responsible for complying with regulations re:

• Workplace safety (protection of workers)

• Financial reporting and disclosure (protection of investors)

• XYZ’s product standards (protection of public)

• Storage of toxic substances on site (protection of workers and public)

Suppose Jones fails to do his job properly such that the rules are violated. Who is responsible? Liable? What kind of liability?

Individual Company

Civil Civil statutory or Civil statutory or regulatory liabilityregulatory liability

Civil statutory or Civil statutory or regulatory regulatory

liabilityliability Respondeat

Superior

Criminal Civil statutory or Civil statutory or regulatory liabilityregulatory liability Mens rea + Actus

reus

“responsible corporate officer”?

Civil statutory or Civil statutory or regulatory regulatory

liability liability

Direct and Vicarious

criminal liability?

When should business be civilly liable for acts of an employee or agent?

• Business firms as “legal persons” or “undertakings”

• Principal-agent theory

Noncontractual Civil Liability

Imputing employee responsibility to business: vicarious liability and respondeat superior

• Company liability for actions of an employee if undertaken within the “scope of his/her employment”

• Scope of employment vs. following orders

Should employee ever be liable, rather than the business, for regulatory violations undertaken

within the scope of employment?

Criminal Liability

• What is the difference between civil liability and criminal liability?

• When is criminal punishment appropriate? Why do governments impose criminal punishment for some violations and not for others?

• Traditionally, what distinguishes criminal wrongdoing from the wrongdoing we punish with only civil sanctions.

Criminal Liability

• Actus reus = guilty act

• Act or omission

• “act” attempt / conspiracy crimes

• Mens rea = guilty mind

Morrisette v. U.S.

“The contention that an injury can amount to a crime only when inflicted by intention … is … universal and persistent in mature systems of law …”

What is criminal intent?

• Knowing that what you are doing is illegal? Wrong? I know I am supposed to have a permit for this gun, but I don’t get one.

• Knowingly doing something that the law defines as illegal? I bought a gun without getting the required permit.

Businesses and Criminal Liability

U.S. v. International Minerals Corp: • What regulatory violation was committed here?• What must the prosecution prove to convict a

defendant of a criminal violation of this provision?

• What does it mean to “knowingly” violate a rule, regulation or statute?

Businesses and Criminal Liability

U.S. v. International Minerals Corp:

Dissent: “This case stirs large questions – questions that go to the moral foundations of criminal law. …[T]he statute means exactly what it says …”

• It shall be an offense to knowingly sell adulterated milk, vs.

• It shall be an offense to knowingly violate the regulation (which prohibits sale of adulterated milk)

What is the difference?

What is criminal intent?

• Knowing that what you are doing is illegal? Wrong? I know I am supposed to have a permit for this gun, but I don’t get one.

• Knowingly doing something that the law defines as illegal? I bought a gun without getting the required permit.

Defenses to criminal liability are based upon the defendant’s intent:

Insanity justification (self defense)

Can businesses be held criminally liable as legal persons? If so, for whose acts is the organization responsible?

Can businesses have a guilty state of mind? How?

Can businesses be punished criminally? How?

Businesses and Criminal Liability

1. If business organizations be criminally liable, for whose acts is the organization responsible?

Arthur Andersen case – partnership (not corporation):

• Should entire firm be prosecuted for the criminal behavior (i.e., criminal violation of SEC rules) of a small subset of partners?

• LLP vs. GP vs. Corporation

• Judge’s jury instructions

Is this typical? Were these partners acting on behalf of the firm? Would Andersen have been criminally

prosecuted in other countries?

Hilton Hotels case: Co. policy and manager directed purchasing agent not to participate in illegal boycott. Court: Better rule is strict vicarious liability because violations (and individual violator) are hard to determine, and violations benefit company.

Is this typical? Was this employee acting on behalf of the firm? Would Hilton have been criminally

prosecuted in other countries?

Businesses and Criminal Liability

Businesses and Criminal Liability

2.Can individual managers within a business be held criminally liable for acts committed by subordinates?

U.S. v. Park: After first violation, CEO directed “trusted subordinates” to fix problem, but violations persisted. Court: CEO had a duty and the power to prevent further violations, and it is fair to impose liability on these responsible corporate officers even if they did not commit or direct the act in question or have prior knowledge of it.

Misdemeanors only?

What can/should managers do to protect themselves and the company from criminal liability?