Black’s Law Dictionary defines “corporate crime” as “any criminal offense committed by and hence chargeable to a corporation because of activities of its officers or employees.” If you examine the wording of this definition it becomes clear that a corporation can only be fined for a criminal act as the corporation itself cannot be placed in jail.
In most cases the only remedy is a fine for the corporation by some regulatory board. In some cases the punishment may be in the form of a lawsuit by a citizen or stockholder hoping for a settlement or judgment against the corporation for the questionable behavior of one of its officers or employees or the corporate policy that caused the alleged harm.
For an individual to be held accountable for crimes where the punishment could be jail time he or she must have acted outside the legal boundaries set by the corporation and the act must intend to illegally benefit a certain party causing foreseeable injury to another. These would include cases of embezzlement and fraud as well as product liability cases where corporations knowingly or negligently produce products or the manufacturing of those products cause harm to others.
However, after the headlines of late, the majority of American citizens today would define a “corporate criminal” as “any executive who was paid millions to send their company into financial ruin so the company would qualify for a federal bailout.”
Each day brings news of huge bonuses paid to executives who now want the average tax-paying citizen to pay for their bad business decisions. As our nation falls further into financial ruin they have walked away with tens and sometimes hundreds of millions of dollars, but are they “criminals” under US law?
To answer that question one must re-examine how a corporation works; what responsibility the corporation has to the shareholders; and whether any federal and state regulations were violated at the time of the alleged corporate criminal act, and the benefit received by the individual(s) involved in the criminal act.
A corporation is created to limit an individual’s liability in a business adventure to the assets of the business, thereby protecting other business or personal assets of potential investors. Usually a corporation is created by filing Articles of Incorporation with the Secretary of State of the state in which the corporation seeks to incorporate and do business in. This application to do business in that state usually includes the corporate name, the names of corporate officers, the name of the corporation’s registered agent, and the type of business to be conducted. A filing fee is paid and you have a new corporation, complete with enough legal variations and tax law loopholes to employ numerous attorneys, consultants, and tax accountants, if your corporation becomes successful enough.
A corporation becomes successful by increasing its assets by growing the business and the number of people willing to invest in the business or “shareholders.” The duty of the corporation is to increase the value of the stock (profit margin) of that corporation. To keep the tax benefit provided to corporations they must comply with certain requirements like having annual meetings with minutes taken, yearly or quarterly reports to shareholders, (depending on how the corporate bylaws define it), quarterly tax reports, and if the corporation has publicly traded stock then there are rules and regulations about insider trading, disclosure of detrimental information, employment contracts (to get those genius financial minds), and other issues that may apply in the analysis of whether a crime was committed. Remember, corporations are formed to limit liability in the pursuit of profit for those who invest in it.
To fully examine the decline in regulations that led us to this point would require more information than this format can provide. However, I believe time will show that many of these executives were indeed financial wizards, pushing every envelope of money their own way at every opportunity provided. When deregulation allowed assets to be leveraged sometimes 75 to 1, mortgages to be sold and resold dozens of times, loans to be given to people who were at obvious high risk of foreclosure, it became a free-for-all for those at the top. They knew the result this reckless greedy behavior would bring to all those small investors (average American’s with a 401(k)’s not having the majority voting stock to prevent obscene bonuses to executives and low income families who just wanted a home of their own) so they (CEO’s) milked every dime they could in fees and bonuses at every turn. Now to add insult to injury they reach out their hands for more help from the federal government for the failed business policies practiced.
To provide one more layer of protection against any liability many of these assets were sold to overseas investors. Now a bank in Switzerland or China may own your mortgage and is under no obligation to comply with new laws in the United States designed to help those being foreclosed against.
The corporate business model was created by lawyers many years ago to limit the liability to individuals in hopes of promoting new business. Most agree that new business is a good thing but the concept of limited liability sends the message that risks can be taken without that risk affecting the one taking the risk. The entire process promotes greed and the ability to ever press the gray areas for ways to increase payment to the largest investors at the cost of the smaller ones or society as a whole. Are these people criminals by the laws as they are currently written? Unfortunately, probably not! Except for those few extreme cases where the theft was in the billions instead of millions, most will escape any punishment for these perceived crimes.
Of course, I based this article on the written laws produced by lawyers who become legislators so they can write laws that benefit the lawyers, corporations, and individuals who donated the most time and money to get them elected. I guess in the final analysis I do believe these acts of greed were a crime and these corporate criminals that destroyed the dreams of so many others will be held accountable someday. For many who lost everything or nearly everything from this greed at the top, all they have left is their faith and the hope there is something to the saying that it is easier for a camel to walk through the eye of a needle than for a rich man to get into heaven.
It really is kind of funny when you visualize one of these greedy corporate criminals trying force their camel through the eye of that needle. When that doesn’t work they decide it may be possible if they have the needle made of solid gold and outsource the job to kick the camel to cheap labor so desperate to just survive that they will kick hard enough to make that camel jump through the eye of that needle all on it’s own. It will be so sad for these rich crooks when their camel and the kicker both die leaving them with nothing but a golden needle and nothing to sew.