WCC (1/20/21)

Assignment
• For today, you should have read pp. 21-39 (Ch.
2 – Corporate and Individual Liability)
• For Mon., please read pp. 47-60 (Ch. 2 –
Corporate and Individual Liability)
• Next assignment after that will be: pp. 61-89
(Ch. 3 – Conspiracy)
 Issues
• Ch. 2 – Corporate and Individual Liability (pp. 21-60)
– Respondeat superior doctrine
– U.S. v. Automated Medical Laboratories (pp. 23-27)
– U.S. v. Hilton Hotels (pp. 28-30)
– MPC § 2.07 = an alternative to respondeat superior
– Commonwealth v. Beneficial Finance Co. (pp. 33-38)
– Collective Knowledge
– Willful ignorance
– Individual Liability: U.S. v. Park (pp. 50-57)
Two Main Doctrines of Corporate Criminal
Liability
 Respondeat Superior Doctrine
• Corporation vicariously liable for acts
committed by corporate agents acting:
– on behalf of the corporation,
– to benefit the corporation, and
– within the scope of the agent's authority.
• Recognized in torts.
• Should it be recognized in criminal law?
 Note
• On behalf of corporation (representation of
corporation) is often equated with one of the
other two elements:
– Intended to benefit corporation
– Within scope of employment
• Many courts even reduce the three elements
to just one: within scope of employment.
 Hypo
• I beat a few of you for not participating.
• Clearly, criminal batteries.
• Victims will sue me and LSU for lots of money.
• LSU will very likely be vicariously liable for my
batteries in tort.
– LSU might also be directly liable for negligent hiring
and/or negligent supervision.
• But should LSU be held vicariously liable for my
crimes?
 Variation #1
• What if, after finding that 30 profs were
beating their students, prosecutors demanded
that LSU close for good?
 Variation #2
• What if the Board of Supervisors and
administration signed off on the corporal
punishment?
 General Question
• At what point should LSU face the ultimate
criminal punishment (for corporations):
dissolution?
Three Arguments against Respondeat
Superior Doctrine in Criminal Law
 Argument #1: Collateral Damage = Innocent
Victims
• Employees
• Customers
• Shareholders/investors
• Local businesses that provide services to
employees and customers
 Argument #2: Unfair to Corporation Itself
(pp. 27, 31)
• Respondeat superior = a form of strict liability:
corporation being punished even though no
mens rea and therefore not (technically)
culpable.
• Liable even if employee acted contrary to
instructions or company policy.
• So corporation may be punished for acts that
it did not necessarily approve, know about, or
was able to prevent.
• Strict liability is extremely rare in criminal law
precisely because it is thought to be unfair.
 Argument #3: Will Actually Disincentivize
Compliance (p. 32)
• If corporations' compliance policies will not
shield them from respondeat superior liability,
then corporations will have less incentive to
implement them in the first place.
In Other Words, Corporate Leaders Will Sulk

• If our policies will not protect corporation

from punishment, then we have no incentive
to implement these policies in the first place.
• If the corporation is going to be punished
either way, whether or not we try to comply
with the law, then we might as well not even
try.
 The Problem with Argument #3
• It assumes that criminal punishment of the
corporation is inevitable, that it will happen
regardless of corporation’s behavior or policies.
• But criminal punishment of the corporation is
not inevitable.
• Corporate policies may very well be effective in
preventing criminal acts (not to mention
mitigating charges or sentences).
• If an officer, executive, or manager of the
corporation wants to minimize the risk that
the corporation will be punished, the threat of
respondeat-superior-based criminal
punishment incentivizes her to
– (a) establish policies that discourage criminal
activity and
– (b) make sure that these policies are strictly
enforced.
U.S. v. Automated Medical Laboratories, Inc.,
770 F.2d 399 (4th Cir. 1985) (pp. 23-27)
 Central Legal Question
• Is corporation culpable for crimes requiring
knowledge and willfulness if it did not in fact
know about employees’ commission of these
crimes within the scope of their employment?
 Facts
• Richmond Plasma Corporation (“RPC”) was a
wholly-owned subsidiary of Automated
Medical Laboratories (“AML”).
• AML, a Florida corporation ... owns and
operates several medically-related businesses,
such as kidney dialysis centers, facilities for
the manufacture and sale of the cancer drug
Interferon, and plasmapheresis facilities.
• AML's primary line of business, however, is the
collection and sale of plasma through its eight
commercial plasmapheresis centers.
 Plasmapheresis
• http://www.healthline.com/health/plasmapheresis#Ove
rview1

• Plasmapheresis is a process in which the liquid in the

blood, or plasma, is separated from the cells.
• In sick people, plasma can contain antibodies that attack
the immune system.
• A machine removes the affected plasma and replaces it
with good plasma, or a plasma substitute.
• This is also known as plasma exchange.
• The process is similar to kidney dialysis.
• Plasmapheresis can be used to treat a variety
of autoimmune disorders, including
myasthenia gravis, Guillain-Barre syndrome,
and Lambert-Eaton.
• It can also be used to treat multiple sclerosis.
• Sometimes, it is used in people who have
received an organ transplant, to counter the
effects of the body's natural rejection process.
• In recent years, the therapy has increasingly
been used to treat critically ill patients with
infections and other problems.
• [A]pparently in 1978, Partucci [regional
manager] and Nugent, an Executive Vice
President at AML, established a special office
for the specific purpose of assuring
compliance with federal regulations at AML
plasma centers.
• [By late 1978, the compliance office included
[others].
• [T]he members of the compliance team clearly
drew their authority from AML.
• So they functioned as agents of AML.
• The compliance team often conducted
inspections in advance of Food & Drug
Administration (FDA) inspections.
• On Partucci’s instructions, the compliance
team members, Queris, and Curry began to
instruct RPC (plasma center) employees to
falsify and fabricate records to conceal
deficiencies.
• Falsified quality control logs, autoclave logs,
and various other records including donor
records and plasma storage freezer
temperature charts.
• Even after Partucci left AML, the practice of
falsifying records continued.
Similar to the Movie Silkwood
 Case History
• Dec. 12, 1983. A grand jury indicted
– AML
– RPC
– Partucci, Queris, and Ramos.
• The indictment alleged
– Falsification of logbooks and records was engaged
in to conceal from the FDA various violations of
federal regulations governing the plasmapheresis
process and facilities.
– Violations of false statements statute, 18 U.S.C. §
1001, with regard to particular logbooks or
records at the RPC facility.
 18 U.S.C. § 1001. Statements or entries
generally. (older version of statute)
• Whoever, in any matter within the jurisdiction of any department
or agency of the United States knowingly and willfully
– falsifies, conceals or covers up by any trick, scheme, or device
a material fact, or
– makes any false, fictitious or fraudulent statements or
representations, or
– makes or uses any false writing or document knowing the
same to contain any false, fictitious or fraudulent statement or
entry
• shall be fined not more than $10,000 or imprisoned not more
than five years, or both.
• AML was named as a defendant in six of the seven
substantive counts plus the conspiracy count.
• March 1984. Jury (E.D. Va.) convicted AML of
– one count of conspiracy, in violation of 18 U.S.C. § 371
(conspiracy to commit offense or to defraud United
States), and
– three counts of making and using false documents in a
matter within the jurisdiction of a federal agency, in
violation of 18 U.S.C. § 1001.
• AML appealed on grounds that there is no
evidence that any officer or director at AML
knowingly and willfully participated in or
authorized the unlawful practices at RPC
– Therefore no proof that AML had the requisite intent
to violate 18 U.S.C. § 1001.
– AML further maintain[ed] that the Government
failed to prove the “element” that its agents' criminal
acts were undertaken primarily to benefit AML.
 Court's Decision
• Affirmed AML's conviction on all counts.
Court's Reasoning
 Argument #1: Legal Standard: Scope of Employment +
Intent to Benefit Corporation = Sufficient for Corporate
Criminal Liability
• In United States v. Basic Construction Co., 711
F.2d 570 (4th Cir., 1983), this Court ...
summarized the rule on corporate criminal
liability as follows:
– [A] corporation may be held criminally responsible
for antitrust violations committed by its employees if
they were acting within the scope of their authority,
or apparent authority, and for the benefit of the
corporation even if … such acts were against
corporate policy or express instructions.
• FN5. We believe that Basic Construction states
a generally applicable rule on corporate
criminal liability despite the fact that it
addresses violations of the antitrust laws. …
Argument #2: Intent-to-Benefit Element

• “[W]hether the agent's actions ultimately

redounded to the benefit of the corporation is
less significant than whether the agent acted
with the intent to benefit the corporation.”
• “The basic purpose of requiring that an agent
have acted with the intent to benefit the
corporation, however, is to insulate the
corporation from criminal liability for actions of
its agents which
– [may] be inimical to the interests of the corporation
or
– ... may have been undertaken solely to advance the
interests of that agent or of a party other than the
corporation.”
 Translation
• Not fair to punish corporation when employee
intended to harm it rather than help it.
– Example: embezzlement.
 Argument #3: Intent to Benefit AML

• AML had specifically assigned to [Partucci,

Lawton, Hayes, and Curry] the responsibility
for assuring compliance by its plasmapheresis
centers with FDA regulations.
• “[I]t would seem clear that Partucci and the
other members of the compliance team acted
at least in part to benefit AML.”
• Partucci was clearly acting in part to benefit
AML since his advancement within the
corporation depended on AML's well-being
and its lack of difficulties with the FDA.
 Different Interpretations of “Scope of
Employment”
• Narrower: Performing acts of the kind which an
employee is authorized to perform.
– Problem: Employees are very rarely authorized to
perform crimes. So if scope of employment =
authorized to perform crimes, then respondeat
superior would almost never apply.
• Broader:
– In performance of the employee’s general line of work.
– Conduct that is reasonably related to the performance
of the employee’s duties.
 Office Space – Scope of Employment

• http://www.youtube.com/watch?v=mGS2tKQ
hdhY