www. NYLJ.com
thursday, September 2, 2010
©2010 ALM
corporate crime
Mushrooming Criminal Code
Generates Growing Concern
S
lowly yet steadily, the United States
has increased the percentage of its
population it incarcerates. Current
estimates indicate that one of every 100
people is behind bars, up from less than
one of every 400 people just 40 years ago, resulting
in a prison population in excess of 2.3 million.1 As
these numbers suggest, the war on crime has led to
an increasing number of Americans serving longer
sentences and facing jail time for a violating an
ever-growing number of criminal laws.2 In addition
to violations of Title 18—the federal criminal
code—securities, environmental, agricultural,
and copyright statutes, to name only a few, also
provide for criminal penalties.3 All told, one study
concludes there were approximately 4,450 federal
crimes at the end of 2007, up from an estimated
4,000 federal crimes at the beginning of the year
2000, and from only 3,000 in the 1980s.4
Most of these 4,450-plus federal crimes
undoubtedly provide important social protections,
but many are overly-broad or vague laws that trap
the unwary, or are inflexible or harsh laws that may
not require a criminal intent or penalize one for the
conduct of another. Still other laws impose criminal
sanctions where civil or regulatory penalties would
suffice. In this latter category, I often joked while
a young federal prosecutor that I wanted to be
the first assistant in the Southern District of New
York to bring charges for using the Smokey Bear or
Woodsy Owl characters, or the slogan “Give a Hoot,
Don’t Pollute,” without authorization.5 Though the
statute books contain similar seemingly humorous
crimes, the stories told by individuals who have
been prosecuted for honest mistakes in violation
of these statutes are anything but funny.6
Perhaps because of the horrifying stories, and
despite the steadily increasing number of crimes
and incarcerations, and the received wisdom that
Howard W. Goldstein is a partner at Fried, Frank, Harris,
Shriver & Jacobson. Jocelyn D’Ambrosio, an associate at
the firm, assisted in the preparation of this article.
there is nothing to be gained politically by being
soft on crime, we are beginning to see inroads on
a number of fronts that could start to turn back
the flood tide created by the reflex to make every
wrong a crime.
Judicial Inroads
One of the most recent inroads against federal
prosecution for violations of overly-broad laws is the
Supreme Court’s decision in Skilling v. United States.7
In Skilling, the Supreme Court limited application
of the so-called “honest services” statute, 18 U.S.C.
§1346, which criminalizes “a scheme or artifice to
deprive another of the intangible right of honest
services,” to those schemes involving bribery and
kickbacks.8 As the Court explained, “[c]onstruing
Obviously, it is still difficult for Congress
to overcome its almost reflexive response
to address pressing problems by
enacting new criminal statutes.
the honest-services statute to extend beyond that
core meaning . . . would encounter a vagueness
shoal.”9 The statute for decades had been a favorite
of federal prosecutors, who often called upon it to
target self-dealing and conflicts of interest in the
private sector. The reason it was favored—the
breadth of what could be seen as denying one’s
“honest services”—was also the very reason the
Supreme Court saw fit to reconsider its reach.10
Because the government did not allege that Skilling
accepted bribes or kickbacks, the Court held that
he did not commit honest services fraud and
remanded the case to determine whether the jury’s
verdict, which may have rested on a now invalid
theory of what constituted honest services fraud,
was harmless error, and whether reversal of the
conviction on conspiracy required reversal of the
other counts.11
By
Howard W.
Goldstein
In the wake of the Skilling decision, both the case
against Conrad Black, former chief executive of
Hollinger International, and Bruce Weyhrauch, former
legislator in Alaska, were remanded by the Court in
light of the new understanding of what constitutes
honest services fraud.12 Some have predicted it will
now be “more difficult for prosecutors to pursue
criminal cases against corporate executives for
misconduct that does not involve lining their own
pockets.”13 However, it remains to be seen both
how courts will interpret what constitutes a bribe
or kickback and whether Congress will reconsider
the honest services statute—itself a reaction to a
Supreme Court ruling14—and provide more specific
examples of conduct it intended to criminalize.15
Two other examples of decisions reining in
overly-broad laws are the recent decisions by
the United States Court of Appeals for the Ninth
Circuit and the United States District Court for
the District of Colorado striking down the Stolen
Valor Act, 18 U.S.C. §704, as an unconstitutional
regulation of protected speech.16 The Stolen Valor
Act was initially enacted to criminalize wearing,
manufacturing, or selling unauthorized military
decorations or awards.17 A year after its enactment,
additional provisions were added to ensure
adequate protection of the reputation and meaning
of military decorations.18 These new provisions
criminalize falsely representing that one had been
awarded a decoration or medal of honor authorized
by Congress for the Armed Forces, thus putting
those with Dick Whitman (aka Don Draper)-like
tendencies at risk of serving up to a year in prison
for claiming credit for the Purple Heart awarded
to another.19
Legislative Inroads
In addition to these judicial inroads, we are seeing
the beginnings of movement on the legislative front.
For example, just before departing for the August
recess, Congress passed the Fair Sentencing Act of
2010, reducing the ratio of powder cocaine to crack
cocaine required to trigger the same sentence from
thursday, September 2, 2010
100-to-1 to 18-to-1.20 Introduced by Senator Durbin
(D-Ill) in October of 2009, the Fair Sentencing Act seeks
to accomplish two goals: restoring fairness to drug
sentencing and focusing limited federal resources
on the most effective means of ending violent drug
trafficking.21 The reform was sparked in part by the
realization that the sentencing disparity, which was
enacted as part of the Anti-Drug Abuse Act of 1986,
had been based on later-disproved assumptions, for
example that crack cocaine was more addictive than
powder cocaine and was more commonly associated
with violence.22 The sentencing disparity was also
widely thought to have disproportionately impacted
racial and ethnic minorities, contributed to the rising
prison population, and undermined confidence
in U.S. criminal justice system.23 As Assistant
Attorney General Lanny A. Breuer explained to
the Subcommittee on Crime and Drugs of the
Senate Judiciary Committee in April of 2009, the
“Administration believes that the current federal
cocaine sentencing structure fails to appropriately
reflect the differences and similarities between
crack and powder cocaine, the offenses involving
each form of the drug, and the goal of sentencing
serious and major traffickers to significant prison
sentences.”24
Although the act did not, as originally proposed,
completely eliminate the sentencing disparity, it
does eliminate the mandatory minimum for simple
possession of crack and provides for increased
penalties for major drug traffickers.25 It also gives
judges increased discretion at sentencing, directing
the Sentencing Commission to provide for increasing
the offense level if certain aggravating factors are
present (for example, if the defendant used violence
during a drug trafficking offense or the defendant led
the activity), and to provide for decreasing the base
offense level where the defendant is less culpable.26
While not a panacea, this legislation shows a much
needed congressional willingness to undo some of
the criminal code’s harshness and inflexibility.
In that regard, the House of Representatives is
beginning to lay a foundation for future legislation
to address the harshness and unfairness of
criminal laws. For example, last summer, the
House Subcommittee on Crime, Terrorism, and
Homeland Security held a hearing on the unintended
consequences of mandatory minimum sentences.27
At the hearing, the subcommittee considered three
bills, including the Common Sense in Sentencing
Act of 2009, which would allow judges to impose
a sentence below a mandatory minimum to
avoid unjust results, the Major Drug Trafficking
Prosecution Act of 2009, which would eliminate all
mandatory minimum sentences for drug related
offenses, and the Ramos and Compean Justice Act
of 2009, which would eliminate minimum sentences
for peace officers who use a firearm in relation to
performing their duties.28
The hearing brought together judges, attorneys,
and interested organizations, including Families
Against Mandatory Minimums and the National
Border Patrol Council, to provide insight on the
impact of mandatory minimums. Those in favor
of reform pointed out that mandatory minimums
are often an imperfect means of punishing serious
crimes, given the difficulty of creating a one size fits
all solution. They also explained that mandatory
minimums have contributed to overcrowding of
federal prisons and increased federal correction
costs, while eroding public confidence in the criminal
justice system.29 Those in favor of readdressing, but
not removing, mandatory minimums pointed out
that by providing a floor on sentences, mandatory
minimums ensure a degree of uniformity and
fairness in sentencing and demonstrate a federal
commitment to combating serious crimes.30
Last summer, the same subcommittee also held
a hearing on the over-criminalization of conduct
and over-federalization of criminal law, bringing
together a former attorney general, representatives
of think tanks, professors, and people who had
suffered at the hands of over-criminalization to
discuss the mounting concern over the growing
criminal code.31 Throughout the hearing, witnesses
warned that provisions in the criminal code are
often vague, overreaching, duplicative of state laws,
based on expansive theories of liability such as
strict liability or respondeat superior, or would
be better dealt with through regulations or civil
penalties.32
These hearings are only a beginning and
obviously have not ushered in sweeping reform.
They nonetheless demonstrate a new congressional
awareness of the unintended consequences of
legislation designed to be tough on crime. At a
hopeful minimum, this increased congressional
awareness could lead to more thoughtful action
when future criminal legislation is proposed.
Doctrinal Inroads
Finally, on the doctrinal front, we are seeing a
renewed interest in reforming the standard for
holding corporations criminally liable. Under the
current rule, which stems from the Supreme Court’s
1909 decision in New York Central & Hudson River
Railroad Co. v. United States, a corporation can
be criminally liable for actions of its employees
committed within the scope of their employment
and with the intent to benefit the corporation.33
Certainly corporations can be deserving of criminal
punishment, but liability should mirror culpability.34
Yet as many commentators point out, liability
and culpability are not necessarily bedfellows
in corporate indictments; corporations can be
liable for actions of low level employees that are
beyond their control, or that are in contravention
of corporate policy. 35
Recognizing that the current rule is over-inclusive
and can invite prosecutorial overreaching, the issue
of how or whether to properly hold corporations
criminally liable is returning to center stage. At
the hearing in the House of Representatives last
summer on over-criminalization of conduct,
former U.S. Attorney General Richard Thornburgh
encouraged Congress to “reconsider whether it is
time to address whether respondeat superior should
be the standard for holding companies criminally
responsible for acts of its employees,” suggesting
that Congress enact a law that provides uniformity
and would protect corporations from actions of
truly rogue employees.36
The legal community has likewise taken up
its pen to critique the current regime and offer
renewed suggestions for reform. In the past few
years, scholars have suggested limiting corporate
liability to actions of, or authorized by, high
level employees;37 requiring the government to
demonstrate that the corporation has not taken
reasonable measures to prevent employee crime;38
providing corporations with a good faith affirmative
defense under which demonstrated efforts to
achieve compliance with the law could have an
exculpatory effect;39 charging corporations with
aiding and abetting employees’ crimes where the
firms were complicit or encouraged the criminal
conduct;40 or limiting corporate liability to those
situations in which the collective corporation had
the intent to commit the crime.41
Certainly renewed interest is not in and of
itself sufficient to spur congressional action. But,
questioning the status quo is an important first
step on the road to change.
Conclusions
While hardly a tidal wave, the judicial, legislative,
and doctrinal developments discussed above
represent the beginnings of movement that
eventually could lead to overhauling the extensive
federal criminal code. Certainly the judicial branch
is exercising its responsibility to interpret the laws
and uphold the Constitution, while the legislature
has been looking inward and reevaluating some
of the unintended consequences of the current
system. Encouraging a focus on these unintended
consequences could help alleviate the problems
plaguing the existing criminal code.
Notwithstanding these initial movements, it is
not yet time to celebrate. Just over a month ago,
on July 21, the Dodd-Frank Wall Street Reform and
Consumer Protection Act became law.42 Proposed
thursday, September 2, 2010
and passed as a direct response to the recent
financial crisis, the act provides for additional
regulation of financial institutions, while creating
dozens of criminal offenses, many of which lack
adequate mens rea elements.43 Obviously, it is
still difficult for Congress to overcome its almost
reflexive response to address pressing problems
by enacting new criminal statutes.
••••••••••••••••
•••••••••••••
1. “Too Many Laws, Too Many Prisoners,” ECONOMIST, July
14. McNally v. United States, 483 U.S. 350 (1987).
Criminal Liability: When Does It Make Sense?,” 46 AM. CRIM.
15. See generally Fried, Frank, Harris, Shriver & Jacobson
L. REV. 1437, 1437-38 (2009), and U.S. Attorneys’ Manual, §
Client Memorandum, “The Supreme Court Constricts the
9-28.200A (“Corporations should not be treated leniently
Scope of the ‘Honest Services’ Statute,” July 1, 2010; see also
because of their artificial nature nor should they be subject to
Amanda Becker, “Lawyers Prepare to Reopen ‘Honest Services’
harsher treatment. Vigorous enforcement of the criminal laws
Cases in Wake of Supreme Court Ruling,” WASH. POST, Aug. 9,
against corporate wrongdoers, where appropriate, results in
2010.
great benefits for law enforcement and the public, particularly
16. United States v. Alvarez, No. 08-50345, slip op. 11845,
in the area of white collar crime. Indicting corporations for
11851 (9th Cir. Aug. 17, 2010); United States v. Strandlof, No.
wrongdoing enables the government to be a force for positive
09-cr-00497-REB, 2009 WL 5126540, at *4 (D. Colo. July 16,
change of corporate culture, and a force to prevent, discover,
2010).
and punish serious crimes.”).
17. Strandlof, 2009 WL 5126540, at *4; see also 18 U.S.C.
24, 2010, at 26.
2. See, e.g., “Rough Justice,” ECONOMIST, July 24, 2010, at
§704(a).
18. Strandlof, 2009 WL 5126540, at *4 (citing Pub. L. No. 109-
13.
3. See Sara Sun Beale, “Is Corporate Criminal Liability
Unique?,” 44 AM. CRIM. L. REV. 1503, 1507 (2007) (noting that
federal crimes are not only found in Title 18, but appear in
“virtually every title of the code”).
4. John S. Baker, Jr., “Revisiting the Explosive Growth of
Federal Crimes,” Legal Memorandum No. 26 at 1 (The Heritage
437 § 2-3, 102 Stat. 3266, 3266 (2006)).
19. See 18 U.S.C. §§704(b), (d); see also “Mad Men”: Season
1, Episodes 1 & 12.
5. 18 U.S.C. §§711-711a (2006). You can also face time in a
Ellen S. Podgor, “A New Corporate World Mandates a ‘Good
Faith’ Affirmative Defense,” 44 AM. CRIM. L. REV. 1537, 1539
(2007); Audrey Strauss, “New Voices Question Corporate
Criminal Liability,” N.Y.L.J., July 5, 2007; Andrew Weissman
20. Pub. L. No. 111-220 (2010).
et al., “Reforming Corporate Criminal Liability to Promote
21. See 155 Cong. Rec. S10490 (daily ed. Oct. 15, 2009)
Responsible Corporate Behavior 2” (U.S. Chamber for Legal
(statement of Sen. Durbin).
22. Id. at S1090-93 (statements of Sens. Durbin and
Foundation 2008).
35. See Howard W. Goldstein, “Corporate Liability Revisited,”
N.Y.L.J., May 2, 2002; see also Bucy, supra note 34, at 1440-42;
Specter).
Reform 2008).
36. Hearing on Over-Criminalization, supra note 6, at 7-8
(testimony of Richard Thornburgh).
federal prison for knowingly transporting alligator grass, water
23. See id.
chestnut plants, or water hyacinth plants (18 U.S.C. §46(a)),
24. Restoring Fairness to Federal Sentencing: Addressing
or transporting unlicensed artificial dentures (18 U.S.C.
the Crack-Powder Disparity: Hearing Before the Subcomm.
38. Weissman, supra note 35, at 17-18; Andrew Weissman &
§1821).
on Crime and Drugs of the S. Comm. on the Judiciary, 111th
David Newman, “Rethinking Criminal Corporate Liability,” 82
Cong. (2009), available at http://judiciary.senate.gov/hearings/
IND. L.J. 411, 414 (2007).
6.
See,
e.g.,
Over-Criminalization
of
Conduct/Over-
Federalization of Criminal Law: Hearing Before the Subcomm.
hearing.cfm?id=3798 (testimony of Lanny A. Breuer).
37. Weissman, supra note 35, at 18-19; Model Penal Code,
§2.07(1)(c) (1985).
39. Bucy, supra note 34, at 1442; Podgor, supra note 35;
on Crime, Terrorism, and Homeland Security of the H. Comm. on
25. At the time this article was written, the Public Law was
Model Penal Code, §2.07(5); see also Ved P. Nanda, Corporate
the Judiciary, 111th Cong. 33-43 (2009) [hereinafter Hearing on
not available from the Government Printing Office. See S. 1789
Criminal Liability in the United States: Is a New Approach
Over-Criminalization] (testimony of Kathy Norris) (discussing
§§2-4 (as passed by the House and Senate).
Warranted?, 58 AM. J. COMP. L. 605, 630 (2010) (recommending
her husband’s prosecution and imprisonment for 17 months
26. Id. §§5-7.
for importing orchids without the proper paperwork required
27. Mandatory Minimums and Unintended Consequences:
40. Geraldine Szott Moohr, “Of Bad Apples and Bad
by the Convention on International Trade and Endangered
Hearing Before the Subcomm. on Crime, Terrorism, and
Trees: Considering Fault-Based Liability for the Complicit
Species); id. at 43-51 (testimony of Krister Evertson)
Homeland Security of the H. Comm. on the Judiciary, 111th
Corporation,” 44 AM. CRIM. L. REV. 1343, 1364 (2007).
(recounting his prosecution and acquittal for shipping sodium
Cong. (2009) [hereinafter Hearing on Mandatory Minimums].
borohydride by UPS “ground” transportation in Alaska, which
was delivered by air in contravention of the law, and his
28. See H.R. 2934, 111th Cong. (2009), H.R. 1466, 111th Cong.
(2009), and H.R. 834, 111th Cong. (2009) respectively.
the MPC approach).
41. Barry J. Pollack, “Time to Stop Living Vicariously: A
Better Approach to Corporate Criminal Liability,” 46 AM. CRIM.
L. REV. 1393, 1411-13 (2009).
subsequent prosecution, conviction, and imprisonment for
29. See, e.g., Hearing on Mandatory Minimums, supra note
18 months for improperly storing chemicals, or in EPA terms
27, at 1-3 (statement of Rep. Scott); id. at 22-31 (statement of
43. See National Association of Criminal Defense Lawyers,
improperly disposing of hazardous waste, under the Resource
Rep. Waters); id. at 31-33 (statement of Rep. Poe); id. at 34-66
“Dodd-Frank Wall Street Reform & Consumer Protection Act
Conservation and Recovery Act).
42. Pub. L. 111-203 (2010).
(testimony of Julie E. Carnes); id. at 66-70 (testimony of Grover
[HR 4173],” available at http://www.nacdl.org/public.nsf/
7. No. 08-1394, 561 U.S. __ (2010).
G. Norquist); id. at 79-86 (testimony of T.J. Bonner); id. at 87-96
whitecollar/HR4173; National Association of Criminal Defense
8. Id. at 1-2; see also id. at 3 n.1 (quoting the honest-services
(testimony of Julie Stewart).
Lawyers, Criminal Provisions in the Dodd-Frank Wall Street
30. See, e.g., id. at 19-20 (statement of Rep. Gohmert); id.
Reform & Consumer Protection Act, available at http://www.
9. Id. at 1-2.
at 20-22 (statement of Rep. Smith); id. at 71-78 (testimony of
nacdl.org/public.nsf/86871e9e0d470e3185257006006e5f55/
10. See, e.g. id. at 39 & n.37 (discussing the disagreement in
Michael J. Sullivan).
b5224f126c7e41cb8525773f0074136f/$FILE/Criminal%20
statute).
the courts of appeals over how to interpret the honest-services
31. Hearing on Over-Criminalization, supra note 6, at 1-2.
statute); see also Peter J. Henning, “How the Skilling Ruling
32. Id. at 3-4 (statement of Rep. Gohmert); id. at 5-19
Reins in White-Collar Cases,” DealBook, June 25, 2010, http://
(testimony of Richard Thornburgh); id. at 20-32 (testimony of
dealbook.blogs.nytimes.com/2010/06/25/how-the-skilling-
Timothy Lynch); id. at 33-43 (testimony of Kathy Norris); id. at
ruling-reins-in-white-collar-cases/ (noting the aggressive use of
43-51 (testimony of Krister Evertson); id. at 52-64 (testimony
the statute over the past 20 years).
of Stephen A. Saltzburg); id. at 65-71 (testimony of James A.
11. Skilling, 561 U.S. __, slip op. at 49-51.
12. See Black v. United States, No. 08-876, 561 U.S. __ (2010);
Weyhrauch v. United States, No. 08-1196, 561 U.S. __ (2010) (per
curiam).
13. Henning, supra note 10.
Provisions%20in%20HR4173.pdf.
Strazzella).
33. See New York Cent. & Hudson River R.R. Co. v. United
States, 212 U.S. 481 (1909).
34. For arguments in favor of corporate criminal liability, see
Beale, supra note 3, at 1505-06, 1533, Pamela H. Bucy, “Corporate
Reprinted with permission from the September 2, 2010 edition of the
New York Law Journal. © 2010 ALM Media Properties,
LLC. All rights reserved. Further duplication without permission is
prohibited. For information, contact 877-257-3382 or reprints@alm.
com. # 070-09-10-10