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Potential criminal liability is, or should be, a concern for all business associations and the attorneys representing them. Expanding propositions of obligations, adding fines under the Federal Condemning Guidelines, and original conditions to diminish liability have made amenability with the law far more complex than simply trying to do the right thing.


Expanding Liability

In the past two decades, the upsurge in felonious and nonsupervisory examinations and executions of pots has been stunning. In a current civil check of over 200 general counsel, forty-two per cent exposed that their pot had been the objective of a civil disquisition. The number of civil felonious persuasions has risen from many dozen per time to further than 300 per annum.[1]

Increasing Penalties

“The average fine assessed on condemned pots rose from roughly $50,000 in the mid-1980s to further than $800,000 by 1990. Under the Organizational Federal Condemning Guidelines”[2] , which took upshot November 1, 1991, the average commercial forfeiture will be much higher likely exceeding$ 1 million. The Guidelines exclude much of a judge’s traditional sentencing discretion and bear forfeitures that some consider draconian.


Under literal common law principles of felonious responsibility, a party couldn’t be condemned for a crime unless he or she held a felonious state of mind.[3]” Because an organization cannot form any state of mind, much less a felonious state of mind, early English common law cases held that organizations couldn’t be held criminally liable. Either, the English courts reasoned, pots couldn’t be locked.’ With the elaboration of vicarious and strict liability in the mid-1800s, courts began to attribute the felonious liability of a hand to a pot. Courts ultimately set up that organizations could be held responsible indeed for the specific intent crimes of their workers.


Executives frequently are surprised to learn that a pot can be said criminally accountable for the acts of indeed the lowest position at hand, indeed when the hand was acting contrary to express directions. “Generally, an organization can be held criminally liable for its agent’s felonious act if two rudiments are satisfied. First, the demeanour must do within the compass of the agent’s authority. Second, the agent must take over the conduct, in part, for the advantage of the organizations.”[4]     

In United States v. Automated Medical Laboratories,[5]  the base of a pot’s Food and Drug Administration regulation compliance office initiated his workers to falsify and fabricate records to conceal colourful nonsupervisory scarcities. On appeal, the corporations contended that the head of the compliance office instigated the unlawful practices to profit himself- not the pot- citing the director’s determined nature and want to lift the commercial graduation. “The United States Court of prayers for the Fourth Circuit rejected this argument, noting that the director” was easily acting in part to profit (the pot) since his advancement within the pot depends on ( the pot’s) well-being and its lack of difficulties with the FDA”.


Although there are numerous benefits of an effective compliance program, it generally won’t give an absolute legal defence to felonious liability. Generally, as indicated supra, indeed when a hand acts divergent to compliance program programs and generic directives, the corporations can be held criminally liable. [6]

The Leading Case on the “Collective Knowledge” Principle: United States v. Bank of New England

United States v. Bank of New England[7] is the leading case applying the collaborative knowledge doctrine. The Bank was condemned for violations of the Currency Transaction Reporting Act’ which needs banks to file Currency sale Reports (CTRs) within fifteen days of client currency deals exceeding$10,000. It’s inapplicable whether workers controlling one element of an operation know the precise conditioning of workers administering another aspect of the operation. “The court reflected that in light of the complications of the operations of ultramodern corporations, a collaborative knowledge instruction like that given by the quarter court is” not only proper but necessary.”


Prosecutors don’t charge every existent or corporation whose conduct might have violated the felonious law. Neither limited government coffers nor the true interests of justice permit a charge in every situation meeting the minimum standard of probable cause. Deciding whether to make a particular matter is the subject of a prosecutor’s broad discretion.        


The Principles are particularly applicable to indictment decisions relating to individuals, although by their terms they do not distinguish between individuals and organizations. Further insight into the policies underlying federal prosecutions can be gained by examining the Organizational Sentencing Guidelines[8]. Defence counsel seeking to avoid a corporate client’s indictment would be well served to review the Guidelines to develop policy arguments.[9]


Pretrial diversion, commonly referred to as PTD, is another substitute for indictment and trial. PTD seeks to “divert certain offenders from traditional criminal justice processing into a program of supervision and services.” ‘A subject participating in a PTD program signs a written agreement with the government acknowledging responsibility for the conduct at issue, but is not asked to admit guilt.’ The subject also must agree to submit to the supervision of the United States Probation Office or the Pretrial Services Office and abide by any special conditions imposed by the government (e.g., restitution or participation in specific community programs).’ PTD agreements may run for as long as eighteen months. Successful participants in a PTD program avoid prosecution; the unsuccessful are prosecuted.


White-collar indictments typically affect lengthy government examinations generally lasting months and occasionally times- that infrequently are kept secret. Therefore, a corporation or a business superintendent is nearly no way will be surprised by a charge; the charge will be a long-stressed prospect. At the first sign of a government disquisition, the corporation should advise outside counsel with experience in felonious matters, therefore allowing sufficient time for sweats to stave off a charge.


When imposing probation, and depending on the circumstances, the court may order the corporation to (i)” publicize,” its expenditure, the nature of the offence, its conviction, the judgment assessed, and the way it’ll take to help further transgressions[10];( ii) develop and apply for a useful compliance program[11];( iii) alert its workers and stockholders of its conviction, discipline, and novel compliance program;( iv) periodically report to the court any new felonious execution, executive proceeding, governmental disquisition involving the pot [12];( v) submit to” ordinary or impromptu examinations of its records and statutes; and ( vi) allow the interrogation of its officers.’ If the court finds it necessary to ensure the payment of a remitted portion of a fine or reparation, it also may order the pot to report its monetary state and the ends of business processes regularly to the court or a court-appointed expert, whose bills would be paid by the corporations[13].


White-collar culprits frequently don’t have a previous felonious history, and their conduct, while not condonable, frequently is resolvable in light of circumstances. Therefore, before the Guidelines were legislated, numerous judges were willing to consider exploration for first-time white-collar malefactors. For a commercial superintendent with a respectable career, a family to support, and a preliminarily untarnished background, this can be ruinous-indeed if the term of imprisonment is veritably short. While numerous corporations have written compliance programs or commercial canons of conduct, smaller have the type of effective program contemplated by the Guidelines. To be an effective program, the corporation must make substantial, good faith trouble to descry and help felonious conduct. The program must be designed to repel the focused scrutiny of prosecutors who’ll be eager to show that the program isn’t effective and the pot, thus, isn’t entitled to the fine reduction.


The issues surrounding corporate criminal liability are complex and rapidly evolving. The risks are high and the chance for a mistake is great even when an organization acts with the best motives. Prudence requires that a corporation seeking to avoid the devastating consequences of criminal prosecution of the company or its employees obtain competent advice from experienced counsel before a problem arises.

Author(s) Name: Aadrika Malhotra (Guru Gobind Singh Indraprastha University)


[1] Mark A. Cohen, Corporate Crime and Punishment: An Update on Sentencing Practice in the Federal Court 71 B.U. L. Rev. 247, 254, 274 (1991).   

[2] David A. Forkner, The United States Sentencing Guidelines, 73 Denv. L. Rev. 963 964 1996

[3] Case of Sutton’s Hospital (1612) 77 Eng Rep 960

[4] Kathleen F. Brickey, Corporate Criminal Liability: A Primer for Corporate Counsel, 40 BUS.LAW. 129, 131 (1984).

[5]  U.S. v. Automated Medical Laboratories, Inc., 770 F.2d 399 (4th Cir. 1985)

[6] United States v. Beusch, 596 F.2d 871 (9th Cir. 1979)

[7] U.S. v. Bank of New England, N.A., 821 F.2d 844 (1st Cir. 1987)

[8] David A. Forkner, supra note 2, at 968

[9] Id.

[10] David A. Forkner, supra note 2, at 974

[11] Id at 975

[12] Id at 976

[13] Id