Prosecuting Corporate Crime When Firms Are Too Big to Jail: Investigation, Deterrence, and Judicial Review
58 Pages Posted: 7 Aug 2018 Last revised: 20 Nov 2018
Date Written: November 18, 2018
Some corporations have become so large or so systemically important that when they violate the law, the government cannot credibly threaten them with “efficient” criminal sanctions. By extending a standard microeconomic model of corporate liability, this Note shows how this “Too Big To Jail problem” reduces prosecutors’ ability to deter corporate crime just by fining a defendant corporation without any accompanying prosecution of culpable individuals. Further, the Note shows how the risk of corporate criminal liability alone cannot incentivize a Too Big To Jail firm to invest in internal controls or cooperate with government investigations. In the presence of Too Big To Jail firms, prosecutors must adopt a strategy that credibly threatens culpable managers with monetary and non-monetary penalties and that eschews excessive reliance on corporate defendants’ cooperation.
The Note also advances a structural explanation for the relative dearth of individual prosecutions relative to negotiated criminal settlements with Too Big To Jail companies: Prosecutors rely on an institutional apparatus for investigation that can produce the information necessary for corporate settlements but will not reliably produce the kind of information necessary to bring charges against culpable individuals. In response, the Note proposes to enlist the courts as a bulwark against the tacit collusion in which prosecutors can agree to a large corporate settlement without insisting on an investigation that can produce a coherent theory of the underlying individual responsibility. Thus, I present a legislative reform that would authorize judicial review of federal Deferred Prosecution Agreements to ensure that prosecutors have collected sufficient evidence prior to entering corporate settlements.
Keywords: corporate crime, law and economics, criminal procedure, deferred prosecution agreements, law and political economy
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