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Bluebook 21st ed.

George J. Terwilliger II., Under-Breaded Shrimp and Other High Crimes: Addressing the
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ALWD 6th ed.

Terwilliger, G. ., Under-breaded shrimp and other high crimes: Addressing the
over-criminalization of commercial regulation, 44(4) Am. Crim. L. Rev. 1417 (2007).

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over-criminalization of commercial regulation. American Criminal Law Review, 44(4),
1417-1434.

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George J. Terwilliger II., "Under-Breaded Shrimp and Other High Crimes: Addressing
the Over-Criminalization of Commercial Regulation," American Criminal Law Review 44,
no. 4 (Fall 2007): 1417-1434

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Over-Criminalization of Commercial Regulation" (2007) 44:4 Am Crim L Rev 1417.

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Terwilliger, George J. III. "Under-Breaded Shrimp and Other High Crimes: Addressing
the Over-Criminalization of Commercial Regulation." American Criminal Law Review,
vol. 44, no. 4, Fall 2007, p. 1417-1434. HeinOnline.

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George J Terwilliger II, 'Under-Breaded Shrimp and Other High Crimes: Addressing the
Over-Criminalization of Commercial Regulation' (2007) 44 Am Crim L Rev 1417

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 UNDER-BREADED SHRIMP AND OTHER HIGH CRIMES:
ADDRESSING THE OVER-CRIMINALIZATION OF
COMMERCIAL REGULATION

George J. Terwilliger I*
I. INTRODUCTON
On July 10, 2002, a panel of witnesses, in which I was included, sat before a Senate
Judiciary Subcommittee in a hearing to "mark-up" a bill that was to be included in the
so-called Sarbanes-Oxley legislation.1 The testimony during this session, convened to
give due consideration to the bill, was interripted so that the members could go to the
Senate floor and vote on the very legislation under consideration. 2 So much for due
consideration. The headlong rush to pass Sarbanes is symptomatic of a trend by which
Congress has, often with bipartisan political fervor, moved the federal establishment to
apply criminal sanctions to a wide range of otherwise legitimate commercial activity that
crosses a regulatory line, and often a fuzzy line at that.
Fraud and dishonest practices in the commercial world subvert free markets and
engender a lack of respect for the rule of law. Such transgressions deserve criminal
sanction. But regulating legitimate activity through criminal prosecution, particularly
where prosecutors in the exercise of their broad discretion set--as a practical matter-
regulatory parameters, is an ill-advised policy choice. Now would be a good time to
arrest this trend and allay the damage to competitiveness that it has produced.
II. CRIMINALIZING REGULATORY VIOLATIONS

Maintaining an honest and free marketplace is essential to our economy. Criminal law,
including the investigation and prosecution of fraud in the marketplace, is a traditional
and powerful tool for protecting the means and instrumentalities necessary for sound
economic health. However, using criminal law as a primary means to regulate business
activity, now a standard aspect of the exercise of federal prosecutorial authority, is
materially different and far removed from the well-established roots of the use of
criminal sanctions in our law. With the accelerating trend of criminal punishment for the
transgression of often imprecise and uncertain regulatory standards, the fundamental use
of criminal sanctions in the business context has shifted from protecting commerce to

* George J. Terwilliger Ill is a partner in the Washington office of White & Case LLP and the head of the firm's global
white collar practice. He served as the Deputy Attorney General of the United States, the U.S. Attorney for the District of
Vermont, and an Assistant U.S. Attorney during fifteen years of public service. © 2007, George J. Terwilliger I
1. Penaltiesfor White Collar Crime: Are We Really Getting Tough on Crime?: Hearing Before the Subcomm.
on Crime and Drugs of the S. Comm. On the Judiciary,107th Cong. 1-41 (2002).
2. See 148 Cong. Rec. 12504 (2002). Amendment SA4185, which was proposed "[t]o provide for the criminal
prosecution of persons who ... defraud investors of publicly traded securities, and for other purposes," was
agreed to by a vote of 97-0. Id. at 12508.

1417
1418 AMERICAN CRIMINAL LAW REVIEW [Vol. -44:1417

regulating it. This shift may do more to threaten than protect the economy because it may
chill the entrepreneurial risk-taking that is essential to economic growth. Moreover,
attaching criminal sanctions to violations of highly technical or vague and unintelligible
regulatory standards is offensive to well established due process principles and may
engender lack of due respect for the rule of law. While many of the regulatory goals enjoy
widespread support and many of the regulatory areas are legitimate subject matter for
regulation, that is not a sufficient justification for resorting to criminal sanctions as a
means to achieve them.
The rapid expansion in the use of government regulations to pursue a wide range of
social goals has spurred the trend to use criminal sanctions to regulate business conduct.
The result has been an "explosive growth of federal crime legislation," amounting to
"over 4,000 offenses that carry criminal penalties in the ' ,4
United States Code."' 3 This
record number "reflects a one-third increase since 1980.
Examples of the trend toward regulation by criminalization abound. Environmental
laws for instance, incorporate steep criminal penalties for failing to meet regulatory
standards in conducting what is otherwise legitimate commercial activity. Polluting is
legal in the United States; the government issues permits to allow it. Polluting too much,
however, can be a felony. Some acts of pollution may indeed be criminal because they
involve volitional and intentional acts that can result in foreseeable and significant
harm-dumping highly toxic materials in an open field or waterway, for example. But
the more common subject matter of environmental "crimes" involves the line between
permitted and not permitted discharges, which can be razor thin, often expressed in parts
per million, and the stuff of great debate between experts and scientists. 5
Similarly, charging a government health insurance program for medical services that
were never delivered is clearly a crime. Conversely, billing government health pro-
grams for medical services is obviously legitimate commercial activity. That legitimate
commercial conduct can be a crime though, when the bill sent to the govemment does
not conform to the requirements of a sheaf of federal regulatory dictates, which are
dense and given to producing uncertainty and disagreement among experts in the field.
Payees can be held to answer for a criminal violation if they run afoul of such regu-
latory minutiae, and are often prosecuted not for healthcare fraud per se, but for making
a false statement to the government, that is, a bill not consistent with regulatory
requirements.
Extracting oil and gas from federal lands is, of course, legitimate commercial activity.
Yet failing to abide by complex government regulations when valuing crude oil or raw
gas for royalty purposes may not only lead to treble damages claims under the False

3. John S. Baker, Jr., Measuringthe Explosive Growth of Federal Crime Legislation, 5 ENGAGE 23, 23 (2004),
availableat http://www.fed-soc.orgldoclib/2007032l-oct04.pdf.
4. Id.
5. See, e.g., Gen. Elec. Co. v. EPA, 53 F.3d 1324, 1326 (D.C. Cir. 1995) (discussing the Toxic Substances
Control Act, which was concerned with the level of polychlorinated biphenyls inside decommissioned electric
transformers in parts per million).
2007] UNDER-BREADED SHRIMP AND OTH1ER HIGH CP.waEs 1419

Claims Act, but federal grand jury attention as well. The list can be extended almost
indefinitely.
Problems caused by such explosive growth in federal regulatory prosecutions,
especially in the criminalization of what in the past would have been viewed as
purely civil or administrative matters, have been exacerbated by the various legal
doctrines that have made it far easier to prosecute corporations. These include the
respondeat superior doctrine and vicarious corporate liability, the collective
knowledge doctrine, and the general lessening of the intent standard in many of
the crimes involved. Where "intent" simply means "knowing conduct," and where
a corporation is held to know everything any of its employees knows and is held
responsible for the actions of every employee, it is easy to understand why
corporate prosecutions proliferate.
One final point bears emphasis at the outset. To question the use of criminal
sanctions to enforce highly technical and complex regulatory norms is not to
suggest that criminal prosecution has no appropriate role in dealing with corpora-
tions or that fraud or dishonesty in the marketplace should be condoned. Quite the
contrary. A dishonest market is not a free market and the criminal law is an
essential tool for preserving the honesty and integrity of the market. The federal
government and federal law enforcement have a crucial role to play in policing the
marketplace for fraud and corruption and enforcing standards that promote
investor confidence in capital markets and provide transparency in credit and
other fiduciary transactions. One does not have to look far for examples of how
dishonesty, deceit, and corruption can cripple a nation's commercial system and
economy. Indeed, businesses themselves have a vital interest in a level-that is, an
honest-commercial playing field. A core function of the federal government is to
promote commerce by protecting its means and instrumentalities. Thus, the core
purpose of federal criminal law in the business context should be to protect and
preserve the instrumentalities of commerce, a traditional role and a critical
function. But much of the criminal law to which businesses today must adhere has
strayed far from the goal of promoting these core values.
III. THE EARLY EVOLUTION OF FEDERAL CRIMINAL LAW

A reminder of the evolution of the use of federal criminal law, particularly as

related to commercial activity, is essential to appreciate and place in context the
criminal regulatory regimes that face businesses today. The first Congress enacted
laws punishing treason, 6 misprision of treason,7 perjury in federal court, 8 bribery
of federal judges, 9 forgery of federal certificates and securities," ° and murder,

6. An Act for the Punishment of Certain Crimes Against the United States, ch. 9, 1 Stat. 112, 112 (1790).
7. Id. at ch. 9, § 2.
8. Id. atch. 9,§ 18.
9. Id. at ch. 9, § 21.
10. Id. at ch. 9, § 14.
1420 AMERICAN CRIMINAL LAW REVIEW [Vol. 44:1417

robbery, larceny and receipt of stolen property on federal property or on the high
seas. 1 These and other statutes tracked closely the powers conferred on the fed-
eral government by the Constitution. Article I, section 8 of the Constitution
gives Congress, inter alia, the power to "punish" treason, counterfeiting, piracies,
12
felonies committed on the high seas and offenses against the law of nations.
These clauses, and the statutes enacted pursuant to them, served a fundamental
purpose: to protect the country and the functions of government.
In the latter half of the nineteenth century, a pattern of lawmaking by which the
sanction of criminal laws safeguarded commerce and cleansed it of corruption
developed. The Civil War brought the False Claims Act, 1 3 which, though enacted
to prevent fraud by wartime profiteers, also operated to punish frauds in federal
procurement, which taxed the public welfare by providing sub-standard goods or
services and taxed the public fisc by denying the government the value of its
bargain in connection with government contracts and contractors. Similarly, the
predecessor to the mail fraud statute operated to protect the mails from use as an
instrumentality of fraudulent schemes of any nature. 14 The Interstate Commerce
17
Act 1 5 and the Sherman Antitrust Act,16 1assed in the post-Civil War period,
sought to provide protection to the free market by aiming to free interstate
commerce from unnatural, anticompetitive impediments.
Enacting federal criminal statues to protect the means and instrumentalities of
commerce continued through much of the twentieth century. Banks are easily
recognized as critical instrumentalities of commerce. Thus, first through the
federal bank robbery statutes and later via a broad panoply of criminal prohibi-
tions, banks became well fortified by the protection of federal criminal statutes. 18
New Deal securities acts and financial reporting laws were designed to preserve
the integrity of commerce and increase investor and consumer confidence in

11. An Act for the Punishment of Certain Crimes Against the United States, ch. 9, §§ 3, 8, 16, 17, 1 Stat. 112,
113-114, 116 (1790).
12. U.S. CONST. art. I, § 8.
13. An Act to Prevent and Punish Frauds upon the Government of the United States, ch.67, 12 Stat. 696 (1863)
(current version at 18 U.S.C. § 287 & 31 U.S.C. §§ 3729-3733).
14. The predecessor to the current mail fraud statute was the Postal Act of 1872. Act of June 8, 1872, ch. 335,
§ 301, 17 Stat. 283, 323 (1872). See Anne S. Dudley & Daniel F Schubert, Mail and Wire Fraud,38 AM. CrnM. L.
REv. 1025, 1025 n.3 (2001) (discussing the evolution of mail and wire fraud statutes into powerful tools of
prosecution).
15. Interstate Commerce Act, ch 104, 24 Stat. 379 (1887).
16. Sherman Antitrust Act, ch. 647, 26 Stat. 209 (1890).
17. Notably, it was in this period that Congress began to rely on the Commerce Clause of Article 1, Section 8 as
the source of authority for such enactments. See, e.g., Gonzales v. Raich, 545 U.S. 1, 16 (2005) ("[IWn response to
rapid industrial development and an increasingly interdependent national economy, Congress ushered in a new
era of federal regulation under the commerce power, beginning with the enactment of the Interstate Commerce
Act in 1887, and the Sherman Antitrust Act in 1890.") (internal citations and quotation marks omitted).
18. See, e.g., Law of June 25, 1948, ch. 645, § 2113, 62 Stat. 796 (current version at 18 U.S.C. § 2113) (bank
robbery and incidental crimes); see also Pub. L. No. 98-473, § 1344, 98 Stat. 2147 (1984) (codified as amended at
18 U.S.C. § 1344) (bank fraud).
2007] UNDER-BREADED SHRIMP AND OTHER HIGH CRIhES

publicly traded markets and the financial system generally.' 9 Years later, criminal
RICO provisions responded to the risk posed to legitimate commerce by the
infiltration of organized crime.2 °
Each of these statutes can be seen as aimed at conduct that was recognized as
traditionally criminal and that threatened markets and the means and instrumentali-
ties of commerce. In addition to the authority described above, Article 1, Section 8
gives the federal government authority to "regulate" commerce, both with foreign
nations and among the States. This section also provides the means for Congress to
promote commerce by, for example, providing the authority to make uniform
bankruptcy laws, to establish post offices and post roads and to promote science
and protect inventions.21 That commerce should flourish was of the utmost
concern to the Founders. As Hamilton wrote in The Federalist No. 12,
The prosperity of commerce is now perceived and acknowledged, by all
enlightened statesmen, to be the most useful as well as the most productive
source of national wealth; and has accordingly become a primary object of
their political cares. By multiplying the means of gratification... it serves to
vivify and invigorate the channels22
of industry, and to make them flow with
greater activity and copiousness.
The pattern of using federal criminal statutes to protect the means and instrumen-
talities of commerce was thus consistent with the Founders' concern that the
federal government be enabled to create infrastructures that would promote
commerce and encourage it to flourish in the fledgling nation.

IV. A NEW PARADIGM: USING FEDERAL CRIMINAL LAW TO REGULATE

CORPORATE BEHAVIOR

When the Supreme Court decided in a 1909 watershed decision that corpora-
tions could be prosecuted for crimes, it is doubtful that it foresaw the minefield of
regulatory offenses that would follow and that the modern corporation would need
to traverse on a daily basis. In New York Central & Hudson River Railroad Co. v.
United States, the Court addressed the payment of rebates by the railroad company
to the American Sugar Refining Company and other favored customers, which
meant that the cost of freight to these companies was less than the publicly-listed
price available to non-favored customers.23 The Elkins Act prohibited individuals
from engaging in this practice and expressly prohibited corporations from engag-

19. See, e.g., Securities Act of 1933, 48 Stat. 74 (codified as 15 U.S.C. § 77(a)); Securities Exchange Act of
1934, 48 Stat. 881 (codified as amended at 15 U.S.C. § 78(a)).
20. Racketeer Influenced and Corrupt Organizations Act (RICO), Pub. L. No. 91-452, 84 Stat. 941 (1970)
(codified as amended at 18 U.S.C. §§ 1961-1968).
21. U.S. Const. art. I, § 8.
22. THE FEDERAusT No. 12, at 55 (Alexander Hamilton) (Bantam Classic ed., 1982).
23. 212 U.S. 481,489-90 (1909).
1422 AMERICAN CRiMINAL LAW REVIEW [Vol. 44:1417

ing in practices that would be criminal violations of the Act if done by a natural
person.2 4 The corporate defendants in New York Central & Hudson challenged
Congress's authority to "impute to a corporation the commission of criminal
offenses, or to subject a corporation to a criminal prosecution," arguing that if the
Court held otherwise, innocent stockholders would be punished and deprived of
their property without due process of law.25
After acknowledging common law precedents favorable to the corporate defen-
dants' position, the Court found that the ability to hold corporations vicariously
liable for the civil wrongs committed by their employees was indistinguishable
from vicarious criminal liability.26 The Court noted that the doctrine of respondeat
superior was established in tort and that respondeat superior applied when the
employee acted wantonly or recklessly or against the principal's orders. 27 The
Court further noted that corporations were liable for actions that third parties
would reasonably believe to be within a corporate agent's authority, even if they
were, in fact, unauthorized. 28 The Court then-and without any in-depth analysis-
extended the liability of corporations to criminal liability:
Applying the principle governing civil liability, we go only a step farther in
holding that the act of the agent, while exercising the authority delegated to
him... may be controlled, in the interest of public policy, by imputing his act
to his employer and imposing
29
penalties upon the corporation for which he is
acting in the premises.
In reaching this result, the Court moved rather casually from the premise that
corporations could be held civilly liable for injuries to the conclusion that they also
could be held accountable for crimes.
The Court distinguished the common law crimes traditionally not imputed to
corporations from the Elkins Act offense which was part of "a large class of
offenses... wherein the crime consists in purposely doing the things prohibited by
statute.",30 For such crimes, the Court concluded that "we see no good reason why
corporations may not be held responsible for and charged with the knowledge and
purposes of their agents, acting within the authority conferred upon them ....If it
were not so, many offenses might go unpunished .... 3'The Court noted that the
statute was an appropriate means by which to impose vicarious criminal liability
on corporations because the statute's prohibitions "[did] not embrace things
impossible to be done by a corporation; its objects are to prevent favoritism, and to

24. Elkins Act, ch. 708, 32 Stat. 847 (1903) (codified as 49 U.S.C. § 11907).
25. New York Cent. & Hudson, 212 U.S. at 492.
26. Id. at 492-98.
27. Id. at 493.
28. New York Cent. & Hudson River R.R. Co. v. United States, 212 U.S. 481,493-94 (1909).
29. Id. at 494.
30. Id.
31. Id. at 494-95 (citations omitted).
20071 UNDER-BREADED SHRIMP AND OTHER HIGH CRIMES 1423

secure equal rights to all in interstate transportation, and one legal rate, to be
published and posted and accessible to all alike."3 2
While a motivation to ensure that identifiable wrongs could be remedied and
deterred is not unjustified, the Court's single "step further" was not at all an
obvious choice as a means to that end. Civil remedies were available to right
corporate wrongs, while the keystone criminal remedy-loss of liberty-was not
applicable to corporations. 3 The Court, in essence, made a policy decision that
regulatory violations should be criminally punished. It did not address, and
therefore offered no persuasive rationale for, its abandonment of traditional
notions of the basis for criminal responsibility in reaching the conclusion that a
criminal proceeding should lie against a legal entity that is a fiction of law,
incapable of forming intent or otherwise acting except through real persons. One
could argue that the statute at issue in New York Central & Hudson was one that
protected an important instrumentality of interstate commerce,34 but one could
also hope that the Court might have tied its rationale to that conclusion rather than
to a notion that, for a corporation, there is no meaningful distinction needed
between a civil and criminal remedy. Given the Court's broad language, it perhaps
should not be surprising that from this modest beginning sprung an array of federal
regulatory dictates and proscriptions giving rise to corporate criminal liability.3 5
Likewise, the notion that corporations should be prosecuted criminally for their
"wrongs"-any "wrongs"-has proven to be a common refrain as the federal
government has migrated away from its core purpose of fostering commerce, by
protecting the means and instrumentalities necessary to it, and toward using
criminal sanctions to punish regulatory transgressions.
The expansion progressed quickly. United States v. Union Supply Co. 3 6 took a
further step by upholding an indictment of a corporation for violating a statute that
applied to "persons," without an express clause applying criminal penalties to
corporations such as was present in the Elkins Act.37 The Court was undeterred by
the facts that the applicable section only applied to "persons" and set a mandatory
minimum term of imprisonment in addition to a mandatory minimum fine.38 Nor
did the Court find persuasive the existence of another penalty provision in the same
statute that expressly applied to both corporations and individuals and provided for

32. Id. at 495 (citations omitted).

33. See id. at 495-96 (discussing the fact that a corporation can only be fined).
34. See New York Cent. & Hudson River R.R. Co., 212 U.S. 481,496 (1909) ("There can be no question of the
power of Congress to regulate interstate commerce, to prevent favoritism, and to secure equal rights to all engaged
in interstate trade.").
35. There has been a similar explosion of federal criminal law applicable to individuals, but that is beyond the
scope of this article.
36. 215 U.S. 50 (1909).
37. Id. at 54-55.
38. Id.
1424 AMERICAN CRIMINAL LAW REVIEW [Vol. 44:1417

either a fine or a term of confinement.3 9

Justice Holmes, writing for a unanimous Court, again gave short shrift to the
leap from civil to criminal liability.4° Regarding the defendant corporation's
argument that the statute's mandatory minimum jail term meant that the provision
in question could not be applied to a corporate defendant, the Court held-in
language that seems at odds with the general and long-established rule that "a
criminal statute.., must be strictly construed, and any ambiguity must be resolved
in favor of lenity"al-that "if we free our minds from the notion that criminal
statutes must be construed by some artificial and conventional rule, the natural
inference, when a statute prescribes two independent penalties, is that it means to
inflict them so far as it can, and that, if one of them is impossible, it does not mean
on that account to let the defendant escape.""42 Thus, the judicial unmooring of
the criminal sanction from its traditional purposes inevitably hastened the march
of the law down the road of criminalizing otherwise legitimate corporate con-
duct that falls short of regulatory dictates. Unsurprisingly, more of the same
followed.
In United States v. Adams Express Co., another unanimous opinion authored by
Justice Holmes, the Supreme Court continued the expansion of corporate criminal
liability.4 3 The Adams Express Company argued that because it was a joint stock
association it could not be prosecuted for violating a statute applicable to
corporations for charging rates in excess of those it reported to the ICC. 44 The
Court held that the company should be subject to the statute's penalties, 45 noting
that otherwise the statutory references to "common carrier" would have different
meanings in the duties and penalty provisions. 46 A mere four years after New York
Central & Hudson had been decided, the Court concluded that "[t]he power of
Congress hardly is denied. The constitutionality of the statute as against cor-
porations is established.., and no reason is suggested why Congress has not...
[the] power... to personify the company
47
so far as to collect a fine by a proceeding
against it by the company name.
Prosecutions of individuals also became occasions for expansion of the doc-
trines that would contribute to the widespread use of criminal law to regulate
corporate behavior. Two of these latter cases are particularly significant:

39. Id. at 54.

40. See id. at 54-55.
41. See, e.g., United States v. Enmons, 410 U.S. 396, 411 (1973) (collecting cases).
42. United States v. Union Supply Co., 215 U.S. 50, 55 (1909) (emphasis added).
43. 229 U.S. 381 (1913).
44. Id. at 387-88.
45. Id. at 389-90.
46. Id. at 389.
47. Id. at 390 (quoting New York Cent. & Hudson R.R. Co., 212 U.S. at 492). No other cases were cited for this
proposition.
2007] UNDER-BREADED SHRIMP AND OTHER HIGH CRIMES 1425

49
United States v. Balint4 8 and UnitedStates v. Dotterweich.
Balint upheld the convictions of multiple defendants under the Narcotics Act of
1914.50 The Narcotics Act made it a crime to sell certain drugs without permission
from the Commissioner of Revenue, regardless of whether one sold the drugs
knowing that the drugs were of the type controlled by the Act.51 The Court in
Balint acknowledged that "the general rule at common law was that the scienter
was a necessary element in the indictment and proof of every crime, and this was
followed in regard to statutory crimes even where the statutory definition did not in
terms include it."5 2z However, the Court explained, "there has been a modification
of this view in respect to prosecutions under statutes the purpose of which would
be obstructed by such a requirement., 53 The Court stated that "[m]any instances of
this are to be found in regulatory measures in the exercise of what is called the
police power where the emphasis of the statute is evidently upon achievement of
some social betterment rather than the punishment of the crimes as in cases of
mala in se."54 Consequently, the Court concluded that where one's own negligence
"may be dangerous [to others] ... the policy of the law may, in order to stimulate
the proper care, require the punishment of the negligent person though he be
ignorant of ... what he sells. 55 The Court rejected the argument that "punishment
of a person for an act in violation of law when [he is] ignorant of the facts making it
so" violated due process. 56
Dotterweich was a significant further expansion of corporate criminal law. The
facts of Dotterweich are straightforward. The Buffalo Pharmacal Company and its
president and general manager Dotterweich were charged with criminal violations
of the Food, Drug, and Cosmetic Act for misbranding and adulterating drugs
shipped in interstate commerce.57 A jury acquitted Buffalo Pharmacal and found
Dotterweich guilty as to all counts.58 The United States Court of Appeals for the
Second Circuit reversed Dotterweich's conviction based on an interpretation of
"persons" in the Act's criminal provisions as referring only to the corporation, not
to the corporation's agents. 59 The Second Circuit expressly rejected the merits of
the argument advanced by Dotterweich on appeal regarding corporate criminal

48. 258 U.S. 250 (1922).

49. 320 U.S. 277 (1943).
50. Balint, 258 U.S. at 253-54.
51. Id. at 251.
52. Id. at 251-52 (emphasis in original).
53. Id. at 252.
54. United States v. Balint, 258 U.S. 250, 252 (1922).
55. See id. at 252-53.
56. Id. at 252 (citing Shevlin-Carpenter Co. v. Minnesota, 218 U.S. 57 (1910), a case which involved a state
trespass law).
57. United States v. Dotterweich, 320 U.S. 277, 278 (1943).
58. Id.
59. United States v. Buffalo Pharmacal Co., 131 F.2d 500, 503 (2d Cir. 1942).
1426 AMERICAN CRIMINAL LAW REVIEW [Vol. 44:1417

liability.6° Dotterweich had argued that because the statute had to be interpreted as
applying to corporations (or else clerks delivering the drugs would be exposed to
liability while the company would likely qualify for a safe harbor provision)
subsequent amendment to the Act that had stricken a clause expressly holding
corporations responsible for the acts of their agents rendered the statute unenforce-
able. 6 ' The Second Circuit dismissed this argument on the grounds that "the
omission of this provision adds nothing to the argument already developed; it was
doubtless62omitted as unnecessary because it states an obvious general principle of
agency.",
The Supreme Court reversed. The Court held that the clause relied on by the
Second Circuit to reverse Dotterweich's conviction could not "be read in isola-
tion." 6 3 In language that seems surprisingly broad for a decision in the context of
interpretation of criminal statutes, the Court stated that because the purpose of the
Act was to "touch phases of the lives and health of people which, in the
circumstances of modem industrialism, are largely beyond self-protection, "[re-
gardfor these purposes should infuse construction of the legislation ifit is to be
treated as a working instrument of government and not merely as a collection of
English words."64
Building on Balint, the Court found that Dotterweich's prosecution "[was]
based on a now familiar type of legislation whereby penalties serve as effective
means of regulation.6 5 In a remarkable acknowledgement of willingness to
overlook basic and fundamental notions of criminal responsibility, the court wrote
that this "familiar type" of legislation "dispenses with the conventional require-
ment for criminal conduct-awareness of some wrongdoing. In the interests of the
larger good it puts the burden of acting at hazard upon a person otherwise innocent
but standing in responsible relation to a public danger."' 66 In such instances, it is
"natural enough" to impose strict criminal liability as to the contents of drugs on
67
the shippers thereof.
In contrast to many modem regulatory statutes, in 1943 the Food, Drugs and
Cosmetic Act only provided for misdemeanor offenses. The Court relied on this
characteristic of the act in Dotterweich to justify the application of criminal
penalties to both the corporation and all employees, high and low, because "the
historic conception of a 'misdemeanor' makes all those responsible for it equally

60. Id.
61. Id.
62. Id.
63. Dotterweich, 320 U.S. at 280.
64. Id. (emphasis added).
65. Id. at 280-81 (emphasis added).
66. Id (citation omitted).
67. Id. at 281 (quoting United States v. Johnson, 221 U.S. 488, 497-98 (1911) (holding that Narcotics Act,
while covering factual statements as to the contents of drugs, did not apply to opinion or "mistaken praise")).
2007] UNDER-BREADED SHRIMP AND OTHER HIGH CRIMES 1427

guilty. ' 68 Turning to Dotterweich's convictions, the Court noted that the Food,
Drugs, and Cosmetics Act itself defined the term "person" to include corporations,
and that the only way a corporation can act is through the individuals who are its
agents. 69 The Court concluded that for Dotterweich to be immune from prosecu-
tion, it would have to mean that individuals are immune whenever the "person"
acting is the corporation; however, the Court stated that "[n]othing is clearer" than
that the legislative intent was to broaden the application of penal provisions
through amendments to the Act in 1938.70 The Court held that "[i]t is not credible
that Congress should by implication have exonerated what is probably a preponder-
ant number of persons involved in acts of disobedience" and that, following Justice
Holmes' earlier statement regarding conventional rules of criminal statutory
interpretation, "the history of the present Act, its purposes, its terms, and extended
practical construction lead away from such a result once 'we free our minds from
the notion that criminal statutes must be construed by some artificial and conven-
tional rule.'", 7' The Court accordingly chose to heed "the admonition that 'the
meaning of a sentence is to be felt ratherthan to be proved"' by not reading "an
exception to an important provision safeguarding the public welfare with a
liberality which more appropriately belongs to enforcement of the central purpose
of the Act.",72 The Court also rejected any attempt to delineate which employees
stand in "responsible relation" to the corporation as "mischievous futility" and
noted that, in making such determinations, "the good sense of prosecutors,73 the wise
guidance of trial judges, and the ultimate judgment of juries must be trusted.,
The Court, freed of the chains of legal principle and empowered to "feel" the
meaning of a statute rather than shoulder the undignified burden of reading text,
deemed criminal intent-the awareness of wrongdoing-unnecessary in the corpo-
rate context. Thus, what is a bedrock notion of criminal responsibility is rendered
mere sand to be scattered by the winds of an enlightened change necessary for the
achievement of social goals divined from the depths of federal regulations.
Congress finished the job five years after the Supreme Court decided Dotterweich,
enacting a revised criminal code that expressly included74corporations and other
organizations in its definition of "person" and "whoever.
The courts' development of the "collective knowledge" doctrine, under which a
corporation is held to know everything that any employee knows, may have done

68. Id. (citing United States v. Mills, 32 U.S. 138, 140 (1833) (holding that with an "offence [sic] charged [as] a
misdemeanour [sic], all are principals; and the law which requires that before [an] accessory can be convicted[]
the principal must be proved to have been guilty, and the offence [sic] to have been committed, does not apply" )).
69. United States v. Dotterweich, 320 U.S. 277, 281 (1943).
70. Id. at 282 (citing House and Senate reports' statements that the Act was intended to increase the protections
available to the consumer).
71. Id. at 283 (quoting United States v. Union Supply Co., 215 U.S. 50, 55 (1909)).
72. Id. at 284 (citation omitted) (emphasis added).
73. Id. at 285.
74. Act of June 25, 1948, ch. 645, § 6, 62 Stat. 683, 859 (1948) (codified as amended at 1 U.S.C. § 1).
1428 AMERICAN CRimINAL LAW REVIEW [Vol. 44:1417

that Congress one better. In United States v. Bank of New England, the district
court had instructed the jury "to look at the bank as an institution. As such, its
knowledge is the sum of the knowledge of all its employees. 75 The First Circuit
affirmed the instruction as "entirely appropriate in the context of corporate
criminal liability .... '[T]he corporation is considered to have acquired the
collective knowledge of its employees and is held responsible for their failure to
act accordingly.' ,76
Thus, a corporation may "know" of a crime even if no individual employee
knows that a crime occurred. For example, if one employee knew that a certain
drain led to the river but did not know what substance had been discharged via the
drain, and a second employee knew that a pollutant was being poured in the drain
but incorrectly thought it part of a proper treatment system, the corporation could
be held to know that a pollutant was being improperly discharged into the river.
Simply put, the "collective knowledge" and respondeat superior doctrines com-
bine to impose criminal liability on corporations in ways that further undermine
the bedrock concept of mens rea by creating a collective mens rea that itself could
not exist if the pertinent co-workers shared their individual knowledge with each
other.
V. ExPANsION OF CRIMINAL OFFENSES DEFINED By REGULATORY STANDARDS

Congress is responsible for much of the expansion of the use federal criminal
law as a regulatory tool because it took the cue of the courts to sew criminal
provisions into an ever expanding array of federal regulatory programs. In so
doing, however, the legislature has largely abandoned its role in defining by statute
what is a crime, instead enacting general criminal enforcement provisions in
regulatory schemes and allowing regulatory agencies to define the crimes by virtue
of their exercise of rule making authority in a given program. Delegating the
substantive definitions of crimes to unelected regulators presents several concerns.
Individuals and corporations must wade through a morass of regulations to
determine what constitutes a crime. In addition, these regulations usually require
regulated entities to provide information to the government, both formally and
informally. Such reporting often involves data that is something other than merely
objective compilations of quantifiable information. As a result, reports and
certification of compliance with regulatory requirements become fodder for
prosecutors considering whether to prosecute a corporation for making false
statements or concealing material information from the government. Finally,
because the substantive regulatory standards that define regulatory crimes are
drafted by agency bureaucrats largely away from public attention and adopted

75. United States v. Bank of New Eng., 821 F.2d 844, 855 (1st Cir. 1987).
76. Id. at 856 (quoting United States v. T.I.M.E.-D.C., Inc., 381 F Supp. 730, 738 (W.D. Va. 1974) (citations
omitted)).
2007] UNDER-BREADED SHRIMP AND OTHER HIGH CRIMES 1429

through notice and comment agency rulemaking, the full and open public debate
that would be attendant to legislative definition of crimes in Congress is lost.
The trend towards increased corporate criminal liability has not abated despite
the substantial increase in the complexity of the regulatory environment and the
penalties for non-compliance. Examples abound from federal circuit courts of
appeal that highlight the problems created by the Supreme Court's wholehearted
embrace of the criminal law to regulate corporate behavior. A few outlier examples
that might otherwise be humorous evince the troubling trend.
In 1982, in United States v. Hartley, the Eleventh Circuit upheld the conviction
of a corporation and two of its employees for selling the military breaded shrimp
that failed to meet certain specifications, including the amount of breading on each
piece of shrimp. 7 7 To be sure, the defendants in that case also had committed
serious criminal acts. They deceived the government by altering inspection
standards and changing the weights used to determine how much shrimp the
government bought. 78 These transgressions may well deserve criminal sanction
because they involve the type of deception and dishonesty that traditionally
characterizes criminal intent. But one must question whether the under-breading of
shrimp, the fundamental aspect of the case, justified thirty-three counts of
conspiracy,,
79
mail fraud, violations of the National Stolen Property Act, and
RICO.
Continuing in the shellfish genre, in United States v. McNab, the National
Marine Fisheries Service seized a shipment of Honduran lobster tails as they were
coming into the United States.8 0 Honduran law requires that exported lobster tails
be 5.5 inches long, that they be processed prior to shipment, and that the lobster
tails be shipped in boxes.81 Inspection of the shipment at issue showed that 2.5% of
70,000 pounds of lobster tails were less than 5.5 inches long, that the lobster tails
were not processed prior to shipment, and that the lobster tails were shipped in
clear plastic bags.82 Based on these facts, in September 2000, a grand jury returned
a forty-seven-count indictment alleging conspiracy, smuggling, money laundering,
and violations of the Lacey Act (which prohibits the importation of "fish or
wildlife taken, possessed, transported, or sold in violation of ... any foreign
law").8 3 Following prosecution, the principal defendants
84
were found guilty and
sentenced to prison terms of ninety-seven months.

77. United States v. Hartley, 678 F.2d 961,965-66 (1lth Cir. 1982).
78. Id. at 966.
79. Id. Hartley was subsequently abrogated regarding the applicability of the RICO statute, in that Hartley
involved the only circuit court of appeals to hold that the person and the enterprise identified by the RICO statute
could each be the same corporation. United States v. Goldin Indus., Inc., 219 F.3d 1268, 1270-71 (1lth Cir. 2000).
80. 331 F.3d 1228, 1232 (11th Cir. 2003).
81. Id at 1233 n.4
82. Id. at 1233.
83. Id. at 1236 (quoting from 16 U.S.C. § 3372(a)(2)(A)).
84. Id at 1235.
1430 AMERIcAN CRIMINAL LAW REVIEW" [Vol. 44:1417

In sum, commercial crimes traditionally were characterized by dishonest

conduct in which mens rea was obviously present. Federal criminal law, as
currently applied to commerce, has largely lost that limitation. Only knowledge of
the acts committed (and sometimes not even that) is required. In light of the
collective knowledge doctrine, that is not much of a limitation where the defendant
is a corporation. Coupled with the complexity of regulatory standards that now
provide the substantive content of criminal prohibitions, the result is a difficult
environment for even standard corporate operations, let alone entrepreneurial
risk-taking. Business decisions governed more by fear of potential federal criminal
liability for conduct controlled by the minutia of federal regulations, rather than by
traditional economic calculus, will in the end stunt economic growth.
VI. A POTENTIAL JUDICIAL REACTION

There are some signs that the judiciary may be beginning to provide the basis to
roll back some of the expanded use of criminal law to regulate business conduct
that is not of the malum prohibitum variety but instead has run afoul of highly
complex and unclear regulations.
For example, in General Electric Co. v. EPA,85 the EPA penalized General
Electric $25,000 for processing polychlorinated biphenyl in a manner not autho-
rized under the EPA's interpretation of its own regulations. 86 General Electric
petitioned for review of the EPA's order. The U.S. Court of Appeals for the District
of Columbia noted that the regulation in question was part of a "comprehensive
and technically complex" regulatory scheme, and that agencies' interpretations of
their regulations are given deference. Accordingly, the court concluded, EPA's
interpretation was reasonable. 87 Yet because General Electric had suffered a
penalty, the court noted, it was required also to assess whether General Electric had
received fair notice of the proscribed activity. If, "by reviewing the regulations and
other public statements issued by the agency ... [the company,] acting in good
faith would be able to identify with 'ascertainable certainty,' the standards with
which the agency expects the parties to conform, then the agency has fairly notified
[the company] of the agency's interpretation., 88 The EPA's highly technical and
opaque regulations failed to meet that standard, however, and the court therefore
89
vacated the EPA's finding-of liability.
Similarly, in United States v. Whiteside," the Eleventh Circuit rejected the
overbroad application of a general criminal statute to ordinary commercial
conduct. The government accused the defendants of making false statements in

85. 53 F.3d 1324 (D.C. Cir. 1995).

86. Id. at 1325.
87. Id. at 1328.
88. Id. at 1329.
89. Id. at 1325.
90. 285 3d 1345 (11th Cir. 2002).
2007] UNDER-BREADED SHRIMP AND OTHER HIGH CRIMES 1431

Medicare/Medicaid and CHAMPUS reimbursement reports, and of conspiracy to

defraud the United States. 91 The case turned on whether the defendants knowingly
and willfully made a false statement when they filed a single report classifying
debt interest in terms of "how the debt was being used at the time of the filing of
the cost report rather than how the funds were used at the time of a loan
origination., 92 The court found no legal authority clearly supporting the govern-
ment's interpretation of the regulations at issue, noted that the experts disagreed
as to the proper interpretation thereof, and accordingly found that the govern-
ment failed to establish that the defendants' interpretation of the regulations
was not reasonable. 93 This result is consistent with the well-established principle
of due process and statutory interpretation that "a penal statute must define a
criminal offense with sufficient definiteness that ordinary people can understand
what conduct is prohibited and in a manner that does not encourage arbitrary and
discriminatory enforcement., 94 The court concluded that "competing inter-
pretations of the applicable law are far too reasonable to justify these convic-
tions. 9 5
And, in United States v. Levin,96 the Sixth Circuit upheld a district court's
dismissal of a 560-count indictment charging the defendants with Medicare fraud
and related charges. The defendants were charged with violating Medicare
regulations when they received free surgical supplies with each purchase of a
specific medical device, the cost of which was reimbursed by Medicare.9 7 The
provision of free surgical supplies as a promotional measure had been approved,
however, by the Health Care Financing Administration, a part of the Department of
Health and Human Services, and this approval had been circulated throughout the
targeted professional medical community.98 The district court dismissed, holding
that on the undisputed evidence in the case, the government could not demonstrate
the requisite criminal intent. On appeal, the Sixth Circuit affirmed, holding that
due process does not permit the government to mislead individuals through
assurances that certain conduct is legal, then later initiate prosecution for engaging
in that conduct. Quoting the Supreme Court, the court of appeals noted that "[a]
state may not issue commands to its citizens, under criminal sanctions, in language
so vague and undefined as to afford no fair warning of what conduct might
transgress them." 99

91. Id. at 1350.

92. Id. at 1351.
93. Id. at 1352-53.
94. Kolender v. Lawson, 461 U.S. 352, 357 (1983). The value of this principle becomes apparent if one wades
through the Medicare regulations.
95. Whiteside, 285 F3d at 1353.
96. United States v. Levin, 973 F.2d 463 (6th Cir. 1992).
97. Id. at 464.
98. Id. at 465.
99. Id. at 466 (quoting Raley v. Ohio, 360 U.S. 423,438-39 (1959)).
1432 AMERICAN CRIMINAL LAW REVIEW [Vol. 44:1417

Vii. SIGNS OF A CONTINUING TREND

Despite the possible judicial movement discussed above, however, other factors
suggest that increased use of the federal criminal law to regulate business activity
will continue. On December 12, 2006, the Departmeni of Justice issued a
Memorandum from Deputy Attorney General Paul J. McNulty concerning the
"Principles of Federal Prosecution of Business Organizations" ("McNulty Memo-
randum"), which is the latest of several policy memoranda promulgated by the
Department of Justice in the last decade. 10 The McNulty Memorandum is, in part,
designed to ensure that "corporate governance mechanisms" are "truly effective"
rather than "mere[ ] ...paper program[s]."1 ' Where an entity has effective
corporate governance programs, the McNulty Memorandum advises that prosecu-
tion is less likely to be warranted than in a situation where no such program is in
place. 102
By linking the evaluation of corporate governance mechanisms to "Federal
Prosecution of Business Organizations," the McNulty Memorandum outlines an
approach that plainly involves using the criminal law to regulate corporate
conduct, indeed even to dictate corporate management. The McNulty Memoran-
dum also directly links the exercise of prosecutorial discretion to an evaluation of
whether the organization is properly monitoring its activities-an
10 3
activity more
typically considered to be within the regulatory province.
Similarly, while the Supreme Court has reduced the influence of the Federal
Sentencing Guidelines by holding that they are advisory rather than binding, 10 4 a
recent amendment to the Sentencing Guidelines for organizational defendants also
suggests' that the trend towards increased regulation of organizations through

100. Memorandum from Paul J. McNulty, Deputy Att'y Gen., to Heads of Department Components and U.S.
Attorneys on Principles of Federal Prosecution of Business Organizations, (2006), [hereinafter McNulty
Memorandum] available at http://lawprofessors.typepad.com/whitecollarcrimeblog/files/mcnultymemo.pdf.
See also Memorandum from Robert D. McCallum, Jr., Acting Deputy Att'y Gen., to Heads of Department
Components, United States Attorneys, Principles of Federal Prosecution of Business Organizations (Oct. 21,
2005), availableat http://www.abanet.org/poladv/priorities/privilegewaiver/2005oct2lprivwaiv-dojmccallum.pdf;
Memorandum from Larry D. Thompson, Deputy Att'y Gen., to Heads of Department Components and United
States Attorneys, Principles of Federal Prosecution of Business Organizations (Jan. 20, 2003), available at
http://www.usdoj.gov/dag/cftf/businesssorganizations.pdf; Memorandum from Eric H. Holder, Jr., Deputy Att'y
Gen., to All Component Heads and United States Attorneys, Bringing Criminal Charges Against Corporations at
II. (June 16, 1999), availableat http://www.usdoj.gov/criminal/fraud/docs/reports/1999/chargingcorps.html.
101. McNulty Memorandum, supra note 100, at VII.B. The memorandum also emphasizes the importance of
cooperating with the government's investigation and the voluntary disclosure of wrongdoing to the government,
and encourages prosecutors who are considering charging a corporation to evaluate cooperation by looking to the
corporation's willingness "to disclose the results of its internal investigation" and to waive attorney-client and
work product protection that would otherwise obtain with respect to relevant communications, reports, or other
information. Id. at llI.A.4, VI.B.2, XIII.B. This aspect of the Memorandum, and the debate over privilege
waivers, is beyond the scope of this article.
102. See id. at i1.
103. Id. at ll.A.5.
104. See United States v. Booker, 543 U.S. 220 (2005).
2007] UNDER-BREADED SHRIMP AND OTHER HIGH CRIMES 1433

federal criminal law will continue. This amendment seeks to deter organizational
misconduct by reinforcing the importance of maintaining an effective compli-
ance and ethics program by adding a new section that establishes a specific and
workable framework for an "effective compliance and ethics program." 10 5 Inthis
way, the Sentencing Guidelines essentially tell organizations how they should
structure their compliance and ethics programs. The Sentencing Guidelines also
reduce an organization's culpability score used to determine the sentencing
guidelines range if such an "effective compliance and ethics program" was in place
at the time of the offense. Consequently, an organization would
10 6
be remiss not to
institute the kind of program prescribed by the government.
VIII. FIXING THE PROBLEM
For those concerned about the growing trend to regulate commercial activity
through the criminal law, and for businesses generally, an effective response to this
trend consists of three elements. First, these constituents must address this issue at
the policy level in both the legislative and executive branches, beating the drum
regularly to remind policymakers of the core purpose of federal criminal law as
applied to commerce. Second, businesses and individuals who are under inves-
tigation for criminal regulatory violations must press both the policy and legal
issues at the pre-indictment stage in all cases where prosecutors, and particularly
responsible supervisory officials, might be persuaded that considerations of fed-
eralism, among others, militate against criminal prosecutions based on purported
transgressions of regulatory standards. Third, where the. opportunity presents
itself, corporate and individual defendants should be prepared to litigate the un-
derlying policy issue by challenging prosecutions -premised on unclear and
ambiguous regulatory standards, particularly those subject to legitimate dispute by
experts such as accountants, engineers, and other specialized professionals.
The policy argument is obvious: the government should focus on using federal
criminal provisions to secure the core federal interest of promoting and protecting
the means of commerce. Continuing to rethink the applicable aspects of the
Department of Justice policies set forth in the McNulty Memorandum is a good
way to move to a more well-reasoned and sound policy on corporate prosecutions,
because it will decrease the regulation that occurs through prosecution or the threat
of prosecution. Another obvious policy option is to seek other means to achieve
regulatory goals. Choices include the use of other financial incentives for meeting
regulatory objectives, real rewards for self-policing, and, as necessary, civil
damages and consent agreements to deter and change corporate behavior.
The second and third points can be achieved if those subjected to prosecutorial

105. U.S. SENTENCING GutDELEs MANUAL § 8B2.1 (2004).

106. See id. § 8C2.5(f) (reducing a corporation's culpability score for having an effective compliance and
ethics program at the time of the offense).
1434 AMERIcAN CRIMINAL LAW REVIEW [Vol. 44:1417

scrutiny are bold enough to argue and, if necessary, litigate some of the issues
raised by egregious use of federal criminal law to regulate commercial activity. As
noted above, there have been some favorable and encouraging decisions in recent
years. These points and arguments have currency in litigation, and can be used
aggressively and effectively during the pre-indictment stages of a case to persuade
prosecutors that alternative means to accomplish governmental objectives may be
a far better policy choice than criminal prosecution. This is particularly so when
the matter is presented to prosecutorial officials who have the responsibility to set
policy in the exercise of prosecutorial discretion. It may also be possible to raise a
legal challenge to a tenuous prosecution using these principles before trial, as in
the Levin case discussed above.
IX. CONCLUSION

The Department of Justice and the FBI have continued-and should con-
tinue-to identify white collar crime as a priority. However, in this post 9-11
world, the demands on federal law enforcement are greater than ever before, and it
is apparent that enforcement authorities cannot be omnipotent and omnipresent.
Moreover, there are the beginnings of some signs that the courts are pushing back
some against the excessive expansion of the use of the criminal law for technical
violations of highly complex regulations. Consequently, this seems a good time to
address the issue of regulating corporate behavior through the application of
federal criminal law and to refocus federal law enforcement on core federal
functions.
This does not mean giving corporations a free pass to violate the law. Quite
the contrary. It means vigorous criminal enforcement, but with the emphasis back
on protecting the means and instrumentalities of commerce rather than using
criminal law to regulate, and punish, ordinary commercial activity governed by
regulation. In mounting a defense to this trend, certain concepts are worth
repeating. Corporations are not inherently evil-they are the primary employers of
people and creators of wealth. A strong economy is essential to the health of our
country, our people, and our democratic government. And commerce carries
blessings to people far beyond the buyer and seller in a particular transaction.
Business leaders can contribute much by reminding our political leaders of these
fundamental principles. The adventurous, risk-taking endeavors that lie at the heart
of American commerce will thrive only so long as they are nourished in a
hospitable environment. The trend toward regulation through criminalization
poses a threat to that environment. It would be a mistake for us not to consider
these issues and take such corrective actions as consensus might allow.