Question

The Criminalization of American Business

What do Bank of America, Citigroup, JPMorgan Chase, and Goldman Sachs have in common? All paid hefty fines for purportedly misleading investors about mortgage-backed securities. In fact, these companies paid the government a total of $50 billion in fines. The payments were made in lieu of criminal prosecutions.

Today, several hundred thousand federal rules that apply to businesses carry some form of criminal penalty. That is in addition to more than four thousand federal laws, many of which carry criminal sanctions for their violation. From 2000 to 2019, about 3,200 corporations either were convicted or pleaded guilty to violating federal statutes or rules.

Criminal Convictions

The first successful criminal conviction in a federal court against a company—the New York Central and Hudson River Railroad—was upheld by the Supreme Court in 1909 (the violation: cutting prices). Many other successful convictions followed.

One landmark case developed the aggregation test, now called the Doctrine of Collective Knowledge. This test aggregates the omissions and acts of two or more persons in a corporation, thereby constructing an actus reus and a men's rea out of the conduct and knowledge of several individuals.

Not all government attempts at applying criminal law to corporations survive. Courts have sometimes found insufficient evidence to show that a company acted with specific intent to commit a crime. Often, however, companies choose to reach settlement agreements with the government rather than fight criminal indictments.

Many Pay Substantial Fines in Lieu of Prosecution

More than four hundred corporations reached so-called non-prosecution agreements with the government from 2000 to the beginning of 2019. These agreements typically involve multimillion- or multibillion-dollar fines. This number does not include fines paid to the Environmental Protection Agency or to the Fish and Wildlife Service.

According to law professors Margaret Lemos and Max Minzner, “Public enforcers often seek large monetary awards for self-interested reasons divorced from the public interest and deterrents. The incentives are strongest when enforcement agencies are permitted to retain all or some of the proceeds of enforcement.”

Questions Presented

1 A. Why might a corporation’s managers agree to pay a large fine rather than to be indicted and proceed to trial?

B. How does a manager determine the optimal amount of legal research to undertake to prevent her or his company from violating the many thousands of federal regulations?

(At least 100 word response for each please)

Answer 1

Solution to Q.1 A: To answer the essay question, the structure can be as below

Introduction - A one sentence introduction about the question or reiteration of the point brought up in the question.

Points 1 and 2 - Two points which answer the question in a brief one or two sentence each.

Discussion - A further elaboration of the points mentioned in Points 1 and 2.

Conclusion - A brief conclusion on the discussion and reiteration of answer to the question.

Key Points for the Q. 1 A: The corporation's agree to pay huge fine rather than proceed to the trial because there is a huge reputation at stake for the organisation and if the organisation is convicted it might lead to huge losses to it's employees, shareowners and suppliers.

Also, if a large organisation or corporation is convicted and faces legal trial it could trigger a collapse of that countries economy or even the world economy, since a number of this organisations have presence across the world.

Solution to Q.1 B:

To answer the essay question, the structure can be as below

Introduction - A one sentence introduction about the question or reiteration of the point brought up in the question.

Points 1 and 2 - Two points which answer the question in a brief one or two sentence each.

Discussion - A further elaboration of the points mentioned in Points 1 and 2.

Conclusion - A brief conclusion on the discussion and reiteration of answer to the question.

Key Points for the Q. 1 B. The number of federal regulations include areas related to Labour Laws, Environmental Safety, Corporate Governance and Accounting Standards. The manager should perform enough legal research in this areas to avoid violation.

Also, the manager can make use of resources that can help his organisation stay compliant, like hiring a compliance team or officer, Investing in accounting and reporting team or softwares and ensuring proper labour and environmental laws are adhered to avoid violation of federal regulations.