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Corporate crime: opening the eyes of the sentry

Published online by Cambridge University Press:  02 January 2018

Celia Wells
Affiliation:
University of Bristol

Abstract

The relationship between criminal law and regulatory techniques in responses to corporate crime is complex and changing. The Serious Fraud Office's increased proactivity in relation to economic crime is precariously balanced on the fulcrum of criminal and regulatory rhetoric. In this paper I note significant developments and suggest that the similarities and differences between regulatory and criminal law approaches to corporate accountability are ripe for re-examination.

Type
Research Article
Copyright
Copyright © Society of Legal Scholars 2010

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References

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33. See text accompanying n 49 below.

34. For example, in 2009, UBS were fined £8 million, and Seymour Pierce £154,000, for failing to prevent employee fraud; see the website available at http://www.fsa.gov.uk/Pages/Library/Communication/PR/2009/index.shtml. However, the Financial Services Authority believes that action against individuals has more deterrent value than against companies: Enforcement Annual Performance Account 2008/9 p 8.

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38. The BB order was followed in October 2009 by a Civil Recovery Order of almost £5 million against AMEC plc, an international engineering and project management firm. And see ‘Ashley/JJB investigation’The Guardian 11 September 2009, available at http://www.guardian.co.uk/football/2009/sep/10/mike-ashley-faces-fraud-investigation. For a theoretical exploration see Parker ‘Legal pluralism, privatization of law and multiculturalism’ (2008) 9 Theoretical Inquiries L 349.

39. D McBarnet ‘After Enron will “whiter than white collar crime” still wash?’ (2006) 46 Brit J Criminol 1091 arguing that the fraud cases brought against Enron et al may have indirectly endorsed the creative compliance strategies. The use of deferred prosecution agreements may have been equally or more effective in bringing about changes in corporate practice. This would only work of course where there was a functioning corporation available to persuade.

40. Announced in March 2009: see the website available at http://www.attorneygeneral.gov.uk; see also N Vamos ‘Please don't call it “plea bargaining”’[2009] Crim LR 617.

41. Hodgson, T From famine to feast: the prosecution of multi-jurisdictional crime in the electronic age’ (2008) 15 Jnl Fin Crime 320.CrossRefGoogle Scholar

42. R v Wallace Duncan Smith (No 4)[2004] EWCA Crim 631, [2004] QB 1418 and Criminal Justice Act 1993.

43. Serious Crime Act 2007, s 2(5).

44. R Alderman, Director of the SFO ‘How the SFO and corporates can work together’ speech 11 March 2009, available at http://www.sfo.gov.uk/about-us/our-views/speeches/speeches-2009/how-the-sfo-and-corporates-can-work-together.aspx.

45. A fine of £6.6 million was imposed. R Alderman ‘Bribery Bill and anti-corruption’ speech 10 November 2009, available at http://www.sfo.gov.uk/about-us/our-views/speeches/speeches-2009/bribery-bill--anti-corruption,-richard-alderman.aspx.

47. It was alleged he conspired between 2002 and 2008 with others to give or agree to give corrupt payments (contrary to s 1 of the Prevention of Corruption Act 1906) to officials and agents of certain Eastern and Central European governments, including the Czech Republic, Hungary and Austria, as inducements to secure contracts for the supply of fighter jets by BAE Systems plc; see the website available at http://www.sfo.gov.uk/our-work/latest/former-bae-agent-charged-with-corruption.aspx.

50. The merged organisation will also provide advice and prosecution services to the Serious Organised Crime Agency and the UK Border Agency. See the website available at http://www.cps.gov.uk/news/articles/the_public_prosecution_service_-_setting_the_standard/.

51. Garoupa and Gomez-Pomar, above n 15, argue that in some circumstances both may be optimal.

52. Hart, HlaDefinition and theory in jurisprudence’ (1954) 70 LQR 37 Google Scholar. See also Hoffmann, LordForeword’ in Pinto, A and Evans, M Corporate Criminal Liability (London: Sweet & Maxwell, 2003) p xiv.Google Scholar

53. Hart, ibid, at 56.

54. Ibid, at 57.

55. Iwai, K Persons, things and corporations: the corporate personality controversy and comparative corporate governance’ (1999) 47 Am J Comp L 583.CrossRefGoogle Scholar

56. Ibid, at 593.

57. Harding, C Criminal Enterprise: Individuals, Organisations and Criminal Responsibility (Cullompton: Willan, 2007) ch 2.Google ScholarHarding distinguishes organisations of governance and representation from organisations of enterprise, although the categories may overlap. Here I am talking more of organisations of enterprise.

58. Balmer v HM Advocate[2008] SLT 799. See, in general, Scottish Law Commission Report on Unincorporated Associations No 217, 2009.

60. R v L(R) and F(J)[2008] EWCA Crim 1970, [2009] 1 All ER 786 per Hughes LJ.

61. Salomon v A Salomon Co Ltd[1897] AC 22 held that Salomon the incorporated company was entirely separate from Salomon the main shareholder, a decision famously described by O Kahn Freund as ‘calamitous’ in ‘Some reflections on company law reform’ (1944) 7 Mod Law R 54.

62. The matter is not straightforward, however, and it is a matter of statutory interpretation whether an offence applies to an unincorporated association; the discussion excluded offences which require proof of mens rea.

63. Harding, above n 57, ch 5, quoting HLA Hart Punishment and Responsibility: Essays in the Philosophy of Law (Oxford: Oxford University Press, 1968) p 265.

64. Harding, ibid, p 103.

65. From Hart, ch IX. The discussion here is taken from Harding, ibid, ch 5.

66. For example, Harlequins rugby club chairman resigned over fake blood injury scandal, ‘Ultimately this happened under my watch and the failure to control must fall at my door’. But he denied personal blame for the blood capsule scandal, ‘We, Harlequins, failed to control Dean [Richards, the club's director of rugby]’: The Guardian 28 August 2009.

67. Interestingly, as Nick Gaskell has pointed out to me, much of the jurisprudence on the ‘directing mind’ of the company derives from civil maritime liability cases, see cases cited in Meridian Global Funds Management Asia Ltd v The Securities Commission[1995] 3 WLR 413.

68. Leigh, L The Criminal Liability of Corporations (London: Weidenfeld and Nicolson, 1969)Google Scholar, Fisse, B and Braithwaite, J Corporations, Crime and Accountability (Cambridge: Cambridge University Press, 1993)Google Scholar, Gobert, J and Punch, M Rethinking Corporate Crime (Cambridge: Cambridge University Press, 2003)Google Scholar, Wells, C Corporations and Criminal Responsibility (Oxford: Oxford University Press, 2001).CrossRefGoogle Scholar

69. Broadly the Hart, Hla and Honore, T view Causation in the Law (Oxford: Oxford University Press, 1968)Google Scholar; see Harding, above n 57, p 111.

70. Broadly the Norrie, Alan view, ‘A critique of criminal causation’ (1991) 54 Mod LR 685.CrossRefGoogle Scholar

71. Harding, above n 57, p 111.

72. See ibid, pp 226–227; Wells, above n 68, ch 4.

73. Wells, ibid, p 151.

74. Wells, C and Elias, J Catching the conscience of the king: corporate players on the international stage’ in Alston, P (ed) Non State Actors in International Law Collected Courses of the Academy of European Law vol XIII (Oxford: Oxford University Press, 2005) p 141 at p 155.Google Scholar

75. Harding, above n 57, ch 9.

76. Report prepared for the UN Special Representative of the Secretary General on Human Rights and Business by Allens Arthur Robinson‘Corporate culture’ as a basis for the criminal liability of corporations (February 2008) p 62, available at http://198.170.85.29/Allens-Arthur-Robinson-Corporate-Culture-paper-for-Ruggie-Feb-2008.pdf.

77. A further matter, the relationship between the prosecution of corporation and the/any individual, is not considered in detail in this paper.

78. It could be argued that this is so in Australia too since the Australian Criminal Code Act's application has been exempted from a number of key federal statutes which have their own models of liability. However, the Australian Code does provide a broad unifying starting point for non-exempt federal offences.

79. The report is ambiguous here between the physical (ie human) actor and the conduct element of the offence. Here my emphasis is on the latter.

80. Part 2.5, s 12.2. ‘Physical element’ is further defined in s 4.1(2) as including ‘an act, an omission to perform an act or a state of affairs’.

81. Section 22.1(a) and s 22.2. For commentary on s 22, see T Archibald, K Jull and K Roach ‘The changed face of corporate criminal liability (2004) 48 Crim Law Quarterly 367.

82. HL Bolton (Engineering) Co Ltd v TJ Graham and Sons Ltd[1957] 1 QB 159 at 172 per Lord Denning, MR.

83. Criminal Procedure Act 51, 1977, s 332(1).

84. In 2003 the US Department of Justice issued revised guidelines to prosecutors (the Thompson Memorandum). Relevant factors include the criminal history of the corporation, the likely collateral consequences of prosecution, the level and role of criminal conduct of the corporate employees, and the existence of an effective corporate compliance programme and placed particular emphasis on analysis of the concrete steps taken by the corporation to cooperate. Thompson Principles of Federal Prosecution of Business Organizations VII.B (20 January 2003), available at http://www.usdoj.gov/dag/cftf/business_organizations.pdf.

85. With some exceptions; one way of putting it is that identification liability applies where vicarious does not.

86. These fall broadly under the self-identity model described by Lederman, EModels for imposing corporate criminal liability: from adaptation and imitation toward aggregation and the search for self-identity’ (2000) 4 Buff Crim L Rev 641 at 677 et seq.CrossRefGoogle ScholarSee also Pettit, PGroups with minds of their own’ in Schmitt, F (ed) Socializing Metaphysics (Oxford: Rowman and Littlefield, 2003) pp 167193 Google Scholar and Rock, PThe corporate form as a solution to the discursive dilemma’ (2006)162 Journal of Institutional and Theoretical Economics 57.CrossRefGoogle Scholar

87. Part 2.5. This applies generally unless specifically exempted. For a list of statutes that have been amended in order to exempt offences, see Hill, J Corporate criminal liability in Australia: an evolving corporate governance technique?’ (2003) JBL 1 at fn 13.Google Scholar

88. Corporate Manslaughter and Corporate Homicide Act 2007, ss 1 and 8.

89. See the cases cited in n 37.

90. Above n 80.

91. Above n 81.

92. Penal Code, Ch 9, s 4.

93. Penal Code, Art 102(2).

94. LC Report 313 Reforming Bribery 2008, Part 6.

95. See C Wells ‘Bribery: corporate liability under the draft Bill 2009’[2009] Crim LR 479.

96. Joint Committee on the Draft Bribery Bill First Report Draft Bribery Bill 16 July 2009, available at http://www.publications.parliament.uk/pa/jt200809/jtselect/jtbribe/115/11502.htm.

97. Bribery Act 2010, s 7. The commercial organisation is liable for the actions of those associated with it, which includes those who perform services for it, employees, agents and subsidiaries (s 8).

98. A consultation paper is now promised for the summer of 2010.

99. Section 33; s 40 provides that the onus is on the employer to show that all reasonably practicable steps have been taken. See M Weismann ‘Why punish? A new approach to corporate criminal liability’ (2007) 44 Am Crim L Rev 1319, arguing that liability should follow where corporation lacks adequate compliance.

100. R v Chargot Ltd[2008] UKHL 73 at [21].

101. Ibid, at [29].

102. Section 12.3(2)(c).

103. Section 12.3(2)(d).

104. The tiger in Judith Kerr's brilliant children's book of this title (first published in 1968 and still in print) ate all the food in the house and then left. It never returned despite the family's precaution of buying a tin of tiger food in case it should.

105. Khanna, above n 1, at 98.

106. See the strong argument for desert by Laufer, W and Strudler, A Corporate intentionality, desert, and variants of vicarious liability’ (2000) 7 Am Crim L Rev 1285 Google Scholar; see also Yeung, above n 16, pp 85–90 and Morgan and Yeung, above n 15, fig 1.1, p 6.

107. Bussman, K-D and Werle, M Addressing crime in companies: first findings from a global survey of economic crime’ (2006) 46 Brit J Criminol 1128.CrossRefGoogle Scholar

108. As demonstrated in the cases cited in n 37.

109. See discussion of the new regulatory paradigm in Tomasic, R From white-collar to corporate crime and beyond: the limits of law and theory’ in Chappell, D and Wilson, P (eds) Issues in Australian Crime and Criminal Justice (Melbourne: LexisNexis, 2005) pp 252267.Google Scholar

110. Yeung, above n 16, p 151 (original emphasis).

111. Ibid, p 151.

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