Elizabeth Warren on white-collar prosecution — and what to do instead

My new piece at Cato, citing Carissa Byrne Hessick and Benjamin Levin at Slate, discusses Sen. Elizabeth Warren’s proposal to lower the standard for criminal culpability in many white-collar prosecutions to simple negligence. It begins:

Presidential candidate and Sen. Elizabeth Warren (D-Massachusetts) wants to see more business people behind bars, and she’s not fussy about how to make that happen. In a Washington Post op-ed last week she unveiled a new Corporate Executive Accountability Act, which in her words would expand “criminal liability to any corporate executive who negligently oversees a giant company causing severe harm to U.S. families.” She says she wants top executives to know that they can be (again in her own words) “hauled out in handcuffs for failing to reasonably oversee the companies they run.”

And ends:

The civil courts already hear many thousands of cases seeking damages over claims that serious harm arose from industry conduct that falls short of being reckless or deliberately wrongful. Not infrequently – as with claims over supposed “sudden acceleration” in cars, cancer from Roundup, and autoimmune disease from silicone breast implants – large sums get paid even when science finds no basis for concluding the products caused the harms alleged, such is our legal system’s tendency to tilt against business defendants as unsympathetic. Under the Warren standard, complaints that driverless cars have gotten into avoidable accidents or vaccines have caused side effects – maybe even that cheeseburgers, supersize sodas, and margaritas have worsened the harms of obesity – will put business people at risk for long prison terms. To her backers, will this count as a bug? Or a feature?

Aside from the propriety of criminalizing simple negligence, the issue is not so much that individuals as such are the wrong target for white-collar prosecution — as Stephen Bainbridge has argued, holding them personally culpable will often make more sense than prosecuting the corporate entity — as that notions of collective guilt must not be used to impute criminal culpability to others within an organization not proved to have committed wrong acts or acted with wrong mind. While the Warren proposal would march off in the wrong direction, in the Cato Handbook for Policymakers two years ago,
I contributed a chapter on white-collar prosecution with the following recommendations:

Congress and state lawmakers (and where appropriate, the president and executive branch law enforcement officials) should

  • review existing law with an eye toward rolling back overcriminalization and replacing criminal penalties with civil sanctions where feasible;
  • enact reforms such as the model Criminal Intent Protection Act to bolster recognition of mens rea (punishment should ordinarily require a guilty state of mind, not inadvertent noncompliance) as well as the related mistake of law defense in criminal law;
  • codify the common law rule of lenity (ambiguity in law should be resolved against finding guilt), as Texas joined other states in doing in 2015;
  • devise safe harbor provisions that enable economic actors to avoid criminal liability by behaving reasonably and in intended compliance with the law;
  • limit agency discretion to create new crimes without an act of the legislature;
  • enact guidelines to strengthen judicial oversight of deferred prosecution agreements and nonprosecution agreements (explicit court approval, not the unilateral say-so of government prosecutors, should be required for appointment of corporate monitors or the extension of time under supervision);
  • enact asset forfeiture reforms such as Rep. Jim Sensenbrenner’s (R-WI) Due Process Act, including requiring that conviction be a prerequisite for forfeiture; review and, where appropriate, reduce or coordinate per offense fines and sanctions to avoid levying penalties disproportionate to the gravity of misconduct;
  • prohibit, as a proposed New Mexico law would do, the allocation of settlement moneys (cy pres) to charities, nonprofits, or advocacy groups not themselves injured;
  • assign penalties, forfeitures, and settlement proceeds to the public treasury or, where appropriate in certain cases, to private parties who can show specific individual injury from the offense (penalties should not fund particular government agencies in ways that incentivize zealous enforcement or insulate the agencies from appropriations oversight);
  • prohibit the payment of public lawyers and forensics experts on contingency, that is, in ways dependent on case outcome or the magnitude of penalties (this principle should apply alike to career prosecutors, other staff public lawyers, experts, and outside law firms); existing contingency arrangements should be terminated; and
  • impose transparent principles of selection and payment on outside contracting for legal services.

One Comment

  • Re the post on Elizabeth Warren’s proposal to hold corporate CEOs liable for the harm done by their companies: let’s debate the issue by adding politicians being held civilly or criminally responsible for the bad outcomes of the laws they endorse and pass.

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