Should guilty corporations avoid collateral consequences?

June 8, 2015 CCRC Staff

In the June 2 issue of the New York Law Journal, Robert J. Anello and Richard F. Albert argue that “criminal law concepts designed to punish human beings—bad boys and girls—are ill-suited to corporate beings.” They point out that corporations convicted of crime are rarely required to live with the kind of collateral consequences that result in loss of livelihood and social stigma for individuals (“Convicted Corporations Aren’t Really Bad Boys“). They describe how the government recently made “significant efforts to blunt the effects” of conviction on four major international banks that pleaded guilty to manipulation of foreign exchange rates, so that none of them ended up subject to “rules that would have restricted [their] ability to continue doing business in the United States.” The banks are currently seeking a waiver of Labor Department rules that would otherwise bar them from dealing with pension and retirement plans, and the government has postponed sentencing pending the outcome of these efforts.

By formally relieving corporations of “bad boy” provisions that impose shunning by rule, these recent government actions by necessity undermine what makes a criminal conviction unique and powerful. The extraction of ill-fitting teeth from the criminal process in the most recent corporate convictions—wisely done to avoid catastrophic outcomes—illustrates a basic mismatch between the criminal process and corporations. Although the government can boast success in securing the guilty pleas of parent global financial institutions, the practical impact of its prosecutions is hard to differentiate from a regulatory action. Quite simply, the framework for corporate criminal liability that has developed in the United States is of dubious utility.

But the logic of this conclusion is far from clear. More likely, it is simply that the government believed that the “Forex” banks were “too big to fail,” and so considered it more expedient to impose large fines than to require these corporate criminals to live with the same collateral consequences that are routinely visited upon individuals. That this is by no means unusual is suggested by provisions in the United States Attorney’s Manual that exhort prosecutors to consider the impact of collateral consequences on corporations. The USAM contains no analogous solicitude when it comes to individual defendants.

Perhaps it would be more appropriate to find fault with the collateral penalties themselves rather than selectively exempting only the most powerful criminal actors. If, instead of facing automatic statutory restrictions, the guilty Forex banks had been exposed to court-imposed restrictions on their ability to issue securities and deal with pension plans, the government would have had no occasion to give the criminally culpable banks what amounts to a slap on the wrist, confirming the public’s cynical views about the Justice Department’s interest in corporate accountability.