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Prosecutors in the Boardroom

Prosecutors in the Boardroom: Using Criminal Law to Regulate Corporate Conduct

Anthony S. Barkow
Rachel E. Barkow
Copyright Date: 2011
Published by: NYU Press
Pages: 287
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  • Book Info
    Prosecutors in the Boardroom
    Book Description:

    Who should police corporate misconduct and how should it be policed? In recent years, the Department of Justice has resolved investigations of dozens of Fortune 500 companies via deferred prosecution agreements and non-prosecution agreements, where, instead of facing criminal charges, these companies become regulated by outside agencies. Increasingly, the threat of prosecution and such prosecution agreements is being used to regulate corporate behavior. This practice has been sharply criticized on numerous fronts: agreements are too lenient, there is too little oversight of these agreements, and, perhaps most important, the criminal prosecutors doing the regulating aren't subject to the same checks and balances that civil regulatory agencies are. Prosecutors in the Boardroom explores the questions raised by this practice by compiling the insights of the leading lights in the field, including criminal law professors who specialize in the field of corporate criminal liability and criminal law, a top economist at the SEC who studies corporate wrongdoing, and a leading expert on the use of monitors in criminal law. The essays in this volume move beyond criticisms of the practice to closely examine exactly how regulation by prosecutors works. Broadly, the contributors consider who should police corporate misconduct and how it should be policed, and in conclusion offer a policy blueprint of best practices for federal and state prosecution.Contributors: Cindy R. Alexander, Jennifer Arlen, Anthony S. Barkow, Rachel E. Barkow, Sara Sun Beale, Samuel W. Buell, Mark A. Cohen, Mariano-Florentino Cuellar, Richard A. Epstein, Brandon L. Garrett, Lisa Kern Griffin, and Vikramaditya Khanna

    eISBN: 978-0-8147-0937-5
    Subjects: Law

Table of Contents

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  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Acknowledgments
    (pp. ix-x)
  4. Introduction
    (pp. 1-10)

    The simple account of America’s system of separated powers has legislators responsible for making laws, the executive branch (and prosecutors within it) charged with enforcing the laws, and judges with the power to adjudicate any disputes by declaring what the law commands. Two aspects of our modern government that have disrupted this paradigm—judicial and agency policymaking—have become scholarly obsessions. But there is another, equally strong challenge to the traditional separation-of-powers framework that has received far less attention: prosecutors who regulate.

    The constitutionally limited role of the prosecutor is to “take care that the laws be faithfully executed”—that...

  5. 1 The Causes of Corporate Crime: An Economic Perspective
    (pp. 11-37)

    This chapter examines the causes of corporate misconduct from an economic perspective, focusing on crime. Our purpose is to provide an understanding of why corporate misconduct occurs and to identify some considerations that are important to enforcement authorities and corporate monitors in determining how best to deter it. These considerations have grown in importance over the past decade, especially with the emergence of governance reform and the related use of DPAs as means for promoting monitoring and related deterrence of crime in business organizations.¹

    Thethreat of sanctionis central to the deterrence of corporate crime in this setting. This...

  6. 2 Deferred Prosecution Agreements on Trial: Lessons from the Law of Unconstitutional Conditions
    (pp. 38-61)

    Deferred prosecution agreements are arrangements between prosecutors and potential criminal defendants to impose a provisional cessation of ongoing litigation. Under a DPA, the case is not plea-bargained to a final settlement. Instead, as its name suggests, the DPA only defers the prosecution so long as the defendant complies with the terms of the agreement. Only upon full compliance with its terms will the DPA finally terminate the prosecution. If, however, the defendant does not comply with the terms of the agreement, the prosecutor may institute formal charges wholly without regard to the statute of limitations defense that was waived in...

  7. 3 Removing Prosecutors from the Boardroom: Limiting Prosecutorial Discretion to Impose Structural Reforms
    (pp. 62-86)

    Prosecutors in the United States are no longer content to sanction corporations for their employees’ crimes. They also now regularly intervene in corporations’ internal affairs by pressuring firms to adopt structural reforms ostensibly designed to reduce the likelihood of future wrongdoing. Moreover, prosecutors do not restrict their structural reform mandates to corporations convicted of federal crimes. They also use DPAs and NPAs to pressure firms that are merelypotentiallysubject to conviction to agree to structural reforms in order to avoid indictment or conviction. Through these DPAs and NPAs, prosecutors have required firms to adopt prosecutor-approved compliance programs, alter the...

  8. 4 Potentially Perverse Effects of Corporate Civil Liability
    (pp. 87-109)

    Careful analysis of incentives dominates the mature academic field of enterprise liability. Vicarious liability rests on the idea that firms can control the conduct of their agents. Assigning liability to firms promises to reduce legal violations by encouraging firms (really managers) to influence agent behavior.¹ Remaining arguments in the field center on how optimally to calibrate incentives when attaching liability to firms. For example, in an important work from which I have lifted my chapter title, Jennifer Arlen demonstrated that imposing strict liability on firms for agent misconduct, without crediting firms with a liability reduction for self-policing efforts, would encourage...

  9. 5 Inside-Out Enforcement
    (pp. 110-131)

    A distinct regulatory characteristic of corporate fraud cases is the interaction between government agents and private enforcement and the outsourcing of some investigative functions. The increasing use of DPAs between the federal government and corporate defendants provides a key mechanism for regulation by prosecutors. DPAs are hybrids of plea agreements, consent decrees, and private contracts. They offer corporations an intermediate sanction that averts some of the collateral consequences of indictment and conviction, but they require in exchange full cooperation with the investigation and remedial measures after settlement. When corporations commit to assisting government agents, perform critical investigative tasks like employee...

  10. 6 The Institutional Logic of Preventive Crime
    (pp. 132-153)

    Most organized societies promise to punish unjustified violence.¹ An assassin wrapping up her latest job seems as deserving of criminal punishment as the underworld boss who hired her or the intoxicated driver who smashes into them. But crime control drives a hard bargain. As police walk their beats, investigators sift through evidence, and prosecutors charge, the machinery of criminal justice routinely reveals a darker side. Mass incarceration imposes severe fiscal burdens and social costs.² Police action often seems to reflect glaring inequities, sometimes degenerating into brutal episodes as violent as those used to justify criminal enforcement in the first place.³...

  11. 7 Collaborative Organizational Prosecution
    (pp. 154-176)

    This chapter begins a discussion about the merits of “regulation by prosecution” by framing the increasingly close but complex relationship between prosecutors and regulators in corporate cases. The Supreme Court has held that parallel administrative and criminal penalties against the same firm do not raise double jeopardy issues.¹ As a result, corporations may face parallel proceedings by civil regulatory authorities and criminal prosecutors in the same matter, including in multiple jurisdictions. Commentators have long debated the significance of such blurring of the civil and criminal distinction. Less examined has been the institutional relationship between civil and criminal enforcers as they...

  12. 8 The Prosecutor as Regulatory Agency
    (pp. 177-201)

    We live in an age when prosecutors are a significant source of corporate regulation. The terms of NPAs, DPAs, and state settlement agreements abound with regulations that go far beyond simple commands to companies to stop disobeying the law or to pay for prior violations. These agreements insist on new business models and practices, and they have contained regulations that have covered everything from personnel decisions to the rates companies charge customers. In many instances, prosecutors have not stopped with the regulation of single companies; they have commanded entire industries to comply with new terms. These prosecutorial commands have been...

  13. 9 What Are the Rules If Everybody Wants to Play? Multiple Federal and State Prosecutors (Acting) as Regulators
    (pp. 202-225)

    This chapter describes the multiple layers of overlapping jurisdiction involving prosecutors at the federal, state, and local level and explores the issues this multiplicity of actors raises. The federal structure has long created the possibility that the various federal, state, and local actors might all seek to open investigations or bring charges against the same defendants. The potential for multijurisdictional prosecutorial activity is particularly high when prosecutors are acting in a regulatory capacity because those cases typically involve multistate activity. For purposes of this chapter, activity is “prosecutorial” not only when formal criminal charges are filed but also when a...

  14. 10 Reforming the Corporate Monitor?
    (pp. 226-248)

    Over the last decade enforcement authorities have increasingly relied on the appointment of corporate monitors as part of DPAs and NPAs. However, this growth has not been without criticism or controversy. In the last few years a great deal of attention has been focused on the conditions for obtaining a DPA or NPA, how monitors are selected, how they are paid, and what kinds of powers and obligations they have.¹ This increased attention has been accompanied by a series of legislative and enforcement developments leading to discussions on how to reform and regulate corporate monitors. This chapter explores what steps...

  15. Conclusion
    (pp. 249-258)

    The preceding chapters have shown that the increasingly broad policymaking role of prosecutors in corporate affairs raises a host of complex issues. Indeed, the question of regulation by prosecutors is as complicated as the question of regulation itself. Whether a regulatory regime makes sense requires a careful assessment of its costs and benefits; the same holds true for the regulatory system created through DPAs, NPAs, and settlement agreements. Thus, just as regulatory reform in general must rest on reliable empirical information, so, too, must regulatory reform in the context of prosecutors’ offices. Accordingly, before suggesting a comprehensive set of reforms...

  16. About the Contributors
    (pp. 259-262)
  17. Index
    (pp. 263-277)