What is a Business Crime?

23 Pages Posted: 16 Nov 2007

See all articles by Richard A. Booth

Richard A. Booth

Villanova University Charles Widger School of Law; ECGI


Criminal prosecution has been used with increasing frequency recently in connection with a variety of business failures and other financial offenses. Indeed, it appears that there are few such offenses that cannot be prosecuted criminally even though they also give rise to civil remedies. While some such offenses seem to be quite serious frauds, others seem to be as minor as getting the accounting rules wrong. Thus, the question addressed in this essay is how to define a business crime and what should be the proper role of criminal prosecution in connection with business offenses. I start with the proposition that we should criminalize conduct only when lesser remedies do not work to deter the offense. I then describe the array of private civil remedies available, ranging from simple compensatory damages to punitive damages to class actions and derivative actions and find that there are few business offenses that cannot be well addressed by these devices. I conclude that as a general matter private civil remedies are much more efficient at addressing business and financial crimes. The expansion of criminal prosecution may be due to some extent to problems with the way civil remedies work in practice, but for the most part it is difficult to explain except as a result of failure to understand the role of criminal law and to define financial crimes with any precision.

Keywords: criminal, civil, remedy, deter, simple compensatory damages, disgorgement, punitive damages, treble damages, class action, derivative action, securities fraud, insider trading, corporate governance, fiduciary duty, good faith, business judgment rule, diversification, scienter, willful, detection, IT

JEL Classification: G3, K14, K22, K42

Suggested Citation

Booth, Richard A., What is a Business Crime?. Villanova Law/Public Policy Research Paper No. 2008-17, Available at SSRN: https://ssrn.com/abstract=1029667 or http://dx.doi.org/10.2139/ssrn.1029667

Richard A. Booth (Contact Author)

Villanova University Charles Widger School of Law ( email )

299 North Spring Mill Road
Villanova, PA 19085
United States
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HOME PAGE: http://www1.villanova.edu/villanova/law/academics/faculty/Facultyprofiles/RichardBooth.html

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