Fundamentals of Business Law

It is true that when one thinks of a crime, most individuals think that only individuals are capable of committing crimes. This view is, however, inaccurate. A crime or more technically known as an offense is an act or omission punishable by law. Following this definition, it is immaterial whether it is a natural person or an artificial person that committed the crime. What is controlling is that an act or omission which is punishable by law was committed.

Under our criminal law, the sole authority that will define a crime and classify it whether it is a felony or a misdemeanor is the federal government. A distinction must be made between a felony and a misdemeanor. A felony is deemed the most serious class of offense and is punishable by imprisonment for one year or more. In some cases, a felony is punishable by death. On the other hand, a misdemeanor is less serious than an offense. It is a minor violation or infraction which is generally punished by a fine. Corporate crimes are considered felonies primarily because of their impact and the extent of their damage.

Under the law, corporations are also capable of committing crimes and may also be held criminally liable. The difference, however, is that a natural person is imprisoned. In the case of a corporation, the corporation is not placed behind bars, rather, it is the directors as a whole, regardless whether they were actively involved in the commission of the illegal act is punished and the assets of the corporation are held accountable. Thus, if a director had knowledge of the commission of an illegal act even if he did not actually perform the official act, but he voted in the consummation of the act, he will incur criminal liability.

One basis of criminal liability imposed on corporations for the commission of a crime of its employee is the concept of vicarious liability. (“Corporate Crimes and Criminal Responsibility”) Under this theory, the corporation as the employer is held liable for the criminal acts of his servants, his employees, in the course of the business of the corporation. In this case, it does not matter whether the corporation is proved to be negligent. So long as the criminal act was committed by an employee of a corporation, such as a director, and the act was committed within the scope of his function, liability will be imputed to the corporation.

Consider the case of WorldCom. Bernard Ebbers, the former CEO of WorldCom, and Sullivan, the ex-CFO of WorldCom have both been found guilty for their role in the accounting scandal at WorldCom early in the year 2000. (Krysten Crawford) The WorldCom scandal has resulted to what is now considered as the largest case of bankruptcy in US History. Among those who are impleaded as defendants are the other directors and Arthur Anderson who is an accountant and the company’s former director.

I argue against the imposition of criminal liability on corporations. I do not think that it is proper for a corporation to be punished for the act of its directors. Firstly, I consider it foolhardy to impose criminal sanctions on a corporation which cannot be imprisoned or deprived of liberty. Secondly imposing the sanction against a corporation will only do more harm than good. This is because in punishing a corporation by holdings its assets, properties and funds, accountable for a crime committed by its directors, the people who will be affected most are the stockholders. These stockholders do not have any participation in the criminal act but they stand to be prejudiced by the imposition of the sanction against the corporation. I think criminal liability is personal. It should be imposed only against those who committed the crime. To consider a corporation liable for the crime of another is utterly incomprehensible.