Government allegation and prosecution of white collar crime is a major risk for corporations and management. Complying with all laws and regulations has never been more important. For this discussion post, you will read and think about the trend toward strict liability for corporate wrongdoing.
Read these two paragraphs:
(1) Criminal Liability page 696 explaining the two parts of a crime: the act or omission (actus reus) and the subjective state of mind (mens rea);
Act Requirement: The act requirement, also called by its Latin name, actus reus, requires the government to prove that a defendant’s actions objectively satisfied the elements of a particular offense. The act requirement is based on the fundamental criminal law tenet that evil thoughts alone do not constitute a criminal act. Rather, there must be some overt conduct (either an act or an omission), and it must be voluntary. Courts generally follow the rule that an act is voluntary unless it is demonstrated that the defendant acted based on physical compulsion, reflex, or certain physiological or neurological diseases. An act by omission occurs when a crime is defined in terms of failure to act. For example, if the chief financial officer fails to disclose data required by federal securities law, she has committed an omission that satisfies the act requirement.
Mental Requirement: The mental element, also called by its Latin name, mens rea, which translates literally into “guilty mind,” requires that the defendant have a requisite degree of culpability with regard to each element of a given crime. The fundamental underpinning is that an act does not make a person guilty unless his mind is guilty.5 The words contained in a criminal statute to express the guilty mind requirement include intentionally, knowingly, maliciously, willfully, and wantonly. However, some criminal statutes set the intent requirement at mere recklessness or negligence, rather than actual intent, in determining the level of culpability. Thus, an act or omission in which the defendant’s conduct deviated from the standard of conduct so grossly that a reasonable person would judge it as criminal may also satisfy the mental element requirement. Courts and legislatures have also established certain rules for applying the mental element requirement in cases of mistake. Certain statutes also impose strict liability, whereby the mental element is assumed by certain conduct so that the defendant’s culpable state of mind need not be proved.
(2) Individual Liability for Business Crimes page 699 explaining strict liability and the Park Doctrine.
Individual Liability for Business Crimes: Congress and state legislatures have also expanded criminal culpability for individual officers and directors (and sometimes majority owners) for corporate crimes committed within the scope of their employment. These principals are often included in criminal statutes that require officers and directors to act as responsible corporate officers in complying with statutes and being diligent about adhering to standards set out in statutes and regulations. Because of the inherent difficulties in terms of proof, most statutes do not require the specific mental intent (guilty mind) that is required for other crimes. Since the mid-1970s, legislative bodies have begun to impose what amounts to strict liability statutes for corporate officers even when the officer in question did not have any actual knowledge that a crime had taken place.
The Park Doctrine: The Park doctrine was developed by the U.S. Supreme Court in a famous 1975 case in which the court held that an individual corporate officer could be guilty of a misdemeanor crime under the Food, Drug and Cosmetic Act (FDCA) for allowing food to become adulterated while stored in a corporate warehouse. The case centered on John Park, the President of Acme Markets, Inc., a large national retail food chain with approximately 36,000 employees, 874 retail outlets, and 16 warehouses. In 1970, the Food and Drug Administration (FDA) observed and advised Park of unsanitary conditions, including rodent infestation, at Acme’s Philadelphia warehouse. In 1971, the FDA found similar conditions at Acme’s Baltimore facility. After the violations were not corrected, the government charged Acme and Park with misdemeanors under the FDCA. Although Acme pled guilty, Park argued that he could not have possibly had the requisite knowledge necessary to commit a crime. A jury convicted Park and eventually the U.S. Supreme Court affirmed the conviction. The Court pointed out the narrowness of the decision (i.e., limited to FDCA violations), but nonetheless affirmed that corporate agents have a high level of responsibility when it comes to the well-being of the public. The Court rejected Park’s argument: The requirements of foresight and vigilance imposed on responsible corporate agents are beyond question demanding, and perhaps onerous, but they are no more stringent than the public has a right to expect of those who voluntarily assume positions of authority in business enterprises whose services and products affect the health and well-being of the public that supports them.
What are your thoughts about strict liability for corporate crimes? What does this mean for you as a corporate manager, officer, or director?