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Abstract:
Corporate criminal liability has become an important and much-talked about topic. This Article argues that entity-based liability - particularly the manner in which it is currently applied by the federal government - creates social costs in excess of its benefits. To help companies better deter employee crime, the Article suggests the abolition of entity-wide criminal liability, and in its place, the adoption of an insurance system, whereby carriers would examine corporate compliance programs, estimate the risk that a corporation's employees would commit crimes, and then charge companies for insuring those risks. The insurance would cover the entity's civil penalties associated with its employees' criminal conduct. Entities that successfully procured insurance would no longer be subject to entity-wide criminal liability. Part I begins with a discussion of corporate criminal liability and the costs that accrue from the manner in which it has been implemented by the Department of Justice. Part II examines several proposals to reform corporate criminal liability and explains why they are inadequate. Part III lays out the proposal for an insurance system in lieu of entity-based criminal liability and explains, in rough form, how corporate entities might contract for insurance, how claims might be filed and how damages might be measured. Part III also addresses a number of arguments that others might raise against the proposal.

corporate crime, compliance, deferred prosecution, insurance

Abstract:
In light of the financial meltdown of 2008, it is reasonable to question whether the prior decade’s emphasis on corporate compliance - the internal programs that corporations adopt in order to educate employees, improve ethical norms, and detect and prevent violations of law - has been fruitful. This Article contends that the key problem with compliance is that we regulate it through an adversarial system that pits federal prosecutors against corporate defense counsel, fueling distrust between corporate entities and the government, and between the corporate employees and the internal monitors tasked with ensuring compliance. Despite this adversarial atmosphere, a number of scholars have suggested that corporate compliance is an example of a more collaborative regulatory approach known as “New Governance.” This Article challenges that notion, arguing that the government’s adversarial stance all but eliminates the experimental and collaborative approach championed by the New Governance movement. The Article further concludes that a New Governance model of compliance regulation is unlikely to take hold. Nevertheless, policymakers should consider New Governance’s administrative stance in lieu of the more punitive, “war-driven” approach that adjudication usually encourages.

compliance, corporate governance, adversarial, prosecutor, corporate crime, New Governance, adjudication

Abstract:
When Hewlett Packard (HP) announced in September 2006 that its Board Chairman, Patricia Dunn, had authorized HP's security department to investigate a suspected Board-level press leak and that the investigation included tactics such as obtaining HP Board members' and reporters' telephone records through false pretenses (conduct known as "pretexting"), observers vehemently condemned the operation as illegal and outrageous. In congressional testimony, however, Dunn defended the investigation as "old fashioned detective work." Although Dunn would later claim that she was unaware of key aspects of the investigation, her description was not so far off. The police routinely rely on deception to investigate and apprehend wrongdoers. Although it is tempting to view HP's pretexting episode as a one-time scandal, the episode illuminates a more important, largely unexplored, conflict between corporate policing and corporate governance.

This Article analyzes the tension between the board's competing responsibilities of overseeing its internal corporate police and implementing the norms and structures that presumably create ethical (and therefore "good") corporate governance. As the HP scandal aptly demonstrates, law enforcement techniques that rely primarily on deception are likely to conflict with corporate governance norms such as trust and transparency. After outlining the problem, the Article considers its broader policy implications.

Abstract:
Corporate fraud is often presumed to be the type of crime that can be deterred. Those who embrace deterrence as a goal of law enforcement, however, often ignore the tradeoffs between the deterrence of potential offenders and the deterrence of those "mid-fraud perpetrators" who are already mid-way through illicit schemes when the government announces a change in policy. Unlike potential offenders, mid-fraud perpetrators have no incentive to cease criminal conduct in response to increases in sanctions or likelihood of detection. This is true because a "link" exists between the offenders' cessation of future misconduct and the probability that their prior conduct will be detected and punished. If a CFO has lied to a company's shareholders in Quarter 1 about the company's profits, his cessation of lying in Quarter 2 substantially increases the chances that someone will focus on and detect his previous lies in Quarter 1. The problem with this linkage between cessation of conduct and increased probability of punishment is that criminal sanctions aimed primarily at deterring new offenders may also encourage perverse reactions from perpetrators in the midst of frauds. Policymakers contemplating changes in law enforcement policy therefore should consider the linkage problem in calculating the benefits and drawbacks of different law enforcement strategies.

fraud,deterrence, corporate crime, white-collar, law enforcement, law and economics

Abstract:
This is a Response to Adam Kolber's essay, The Subjective Experience of Punishment, 109 Colum. L. Rev. 182 (2009). Kobler criticizes courts for failing to take into account subjective experience of punishment when imposing sentences for criminal conduct. Kolber contends that the failure to calibrate punishment to reflect subjective experience undermines both retributivist and consequentialist arguments for punishment.

This Response grapples with the consequentialist implications of Kolber's argument. Specifically, it argues that calibrated sentencing may be far less desirable than its logical alternative, calibrated policing. Indeed, many would say that we already distribute police resources based on our estimation of how people will respond subjectively to the criminal justice system. Moreover, by adjusting sentences at the back-end to reflect subjective experience of punishment, Kolber's regime may forfeit certain front-end benefits that come about (self-regulation, for example) when individuals are particularly fearful of or sensitive to punishment. In sum, it is impossible to evaluate the consequences of Kolber's proposed sentencing regime without also considering how that regime would affect broader law enforcement efforts.

Punishment, Sentencing, Policing, Self-Regulation