The Global Evolution of Corporate Prosecutions
Corporations are now prosecuted for criminal violations across the world. In the space of 15 years, this globalization of corporate criminal prosecutions has changed the law and the practice of criminal law and corporate governance. Multinational corporations may be subject to criminal enforcement in several countries at once. Billion dollar fines, setting new records for criminal matters of any type, are now imposed on corporations with some regularity. Financial institutions are now prosecuted as well. This did not occur in the recent past. Most countries have not adopted strict standards for corporate criminal liability, and if they had any standard at all, it permitted liability only if higher-level corporate officers were involved in or tolerated the criminal behavior. In the United States, however, prosecutors have long benefitted from a rule potentially holding a corporation liable for the crimes of its agents, so long as they were committed in the scope of employment and at least in part to benefit the company. This respondeat superior standard, borrowed from tort liability, was ratified by the US Supreme Court in its 1909 decision in New York Central & Hudson River Railroad v. United States. 1 Despite that broad standard, before the 1990s, corporate prosecutions were not particularly noteworthy in the United States. Corporate fines remained modest, until the adoption in 1991 of federal Sentencing Guidelines specifically designed for organizations.
The most significant changes began to take form only beginning in 2003, when the US Department of Justice (DOJ) adopted a brand new approach to corporate prosecutions, following the prosecution of Arthur Andersen, and the resulting dissolution of the firm. The new approach, emphasizing out-of-court settlements, and the explosion in the size of penalties, would transform corporate criminal prosecutions in the United States. It is now impacting and influencing the law and practice of corporate prosecutions around the world, alongside other developments such as the OECD treaty and the Lisbon Treaty, and growing post-financial crisis concern with corporate violations. In this Article, I will describe those changes, data that I have collected analyzing patterns in US corporate prosecutions, and I will describe how countries have reacted to these developments, and what lessons can be learned from the evolving approaches towards corporate criminal prosecutions.