James R. Copland, writing for the Manhattan Institute, suggests in his report that the criminal prosecution of corporations has gotten out of hand. The body of law has been expanded to a point that allows federal prosecutors unprecedented coercive control over major corporations.
The impact of criminal prosecution on a corporation is great. In addition to the cost of defending itself in criminal proceedings, corporations which are merely indicted may face raised interest rates from creditors or terminated lines of credit. Indicted medical companies may be disqualified from being reimbursed by Medicare or Medicaid, indicted contractors may be barred from bidding for government contracts, and indicted brokers may be barred from participating on the stock exchange. Thus, it is possible that a corporation may be barred from pursuing any course of profitable business prior to its day in court and even if ultimately exonerated.
Because the repercussions of a mere indictment are so grave, the government uses delayed-prosecution agreements (DPAs) and non-prosecution agreements (NPAs) to coerce corporations to submit to the demands of prosecutors. Prosecutors have exacted major changes in corporate governing policy, personnel shakeups, and acquiescence to the oversight of prosecutor-approved monitors. Copland calls these ad hoc remedies for what may or may not be crimes. The cost of negotiation and compliance may sometimes outweigh any potential benefit of these measures.
To combat excessive “regulation via prosecution,” Copland recommends various policy changes. Courts should only find a criminal statute applicable to a corporation if the statute contains a clear showing of congressional intent, prosecutions should be limited only to serious crimes, and only the actions of officers and high-level managers should open the corporation to liability. In addition, if a corporation is indicted, it should be permitted to assert an affirmative defense of having made a good-faith effort to internally promote compliance with the law. Finally, legislatures should make sure that the most severe collateral penalties that can doom an innocent company attach after a conviction, as opposed to merely after an indictment.
– A.J. SmullenIntern, Center for Effective Justice