Protecting Employee Rights and Prosecuting Corporate Crimes: A Proposal for Criminal Cumis Counsel

68 Pages Posted: 29 Aug 2014 Last revised: 5 Nov 2014

J.S. Nelson

Villanova Law School; Villanova School of Business; The Wharton School, University of Pennsylvania

Richard O. Parry II

California State University, Fullerton

Date Written: August 1, 2013

Abstract

To address multi-dimensional conflict of interest problems in directors and officers (D&O) indemnification cases, we propose a solution that was originally developed for civil insurance cases in California, but that has an even more powerful and appropriate application in the context of criminal employee defendants.

Corporate crime costs the United States a staggering $600 billion a year. By contrast, the total cost of all non-corporate crime in 2001 from robbery, burglary, larceny-theft, and motor vehicle theft combined was $17.2 billion; less than one-third of what fraudulent activities at the single company of Enron cost investors, pensioners, and employees in the same year. Given these statistics, it is understandable why the U.S. Department of Justice (the DOJ) put pressure on corporations not to pay employees’ legal fees and judgments in its efforts to fight corporate crime and to hold individual employees responsible for their criminal acts.

But the DOJ’s approach missed at least two essential pieces of the problem. The DOJ overlooked individual employee defendants as potential allies in the fight against corporate crime. Most importantly, however, the DOJ failed to recognize that its objections to corporate indemnification ultimately rest on the conflict of interest for employee’s counsel when counsel is being controlled by the corporation — a violation in the criminal context of the individual employee defendant’s Sixth Amendment rights.

Adopting criminal Cumis counsel would address this violation of individual employee defendant’s rights. In addition, adopting criminal Cumis counsel would ultimately operate to the benefit of the DOJ, corporations, and individual employee defendants, as well as serve larger social objectives in reducing corporate crime and encouraging the more effective management of companies.

Suggested Citation

Nelson, J.S. and Parry, Richard O., Protecting Employee Rights and Prosecuting Corporate Crimes: A Proposal for Criminal Cumis Counsel (August 1, 2013). Berkeley Business Law Journal, Vol. 10, No. 1, 2013. Available at SSRN: https://ssrn.com/abstract=2488907

Josephine Sandler Nelson (Contact Author)

Villanova Law School ( email )

299 N. Spring Mill Road
Villanova, PA 19085
United States

Villanova School of Business ( email )

800 Lancaster Avenue
Villanova, PA 19085-1678
United States

The Wharton School, University of Pennsylvania ( email )

3730 Walnut Street
Room 668 Jon M. Huntsman Hall
Philadelphia, PA 19104-6340
United States

Richard O. Parry II

California State University, Fullerton ( email )

800 N State College St
Fullerton, CA 92831
United States
(657) 278-3410 (Phone)

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