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Corporate Criminal Liability

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What Is Corporate Criminal Liability?

A corporation is an entity, something that exists only through its employees. However, a corporation can be vicariously liable for criminal activity unless it is a limited liability corporation (LLC). For example, a corporation can be criminally liable under these circumstances: 

  • The criminal act by the employee or agent was within the "scope of employment"
  • A statute(s) defines what crimes a corporation is liable for
  • Failure to perform an affirmative duty -Corporations must perform certain duties under the law. Failure to perform such duties can result in criminal liability. For example, a corporation will be guilty of tax evasion if it doesn't pay taxes.

How Can a Corporation Be Liable for Criminal Acts?

A corporation can be held liable for the criminal acts of it's employees as long as the employees are acting within the scope of employment and their conduct benefits the corporation. A corporation cannot be imprisoned or punished like individuals. However, there are ways to punish a corporation, such as: 

  • Heavy fines
  • Loss of business license(s)
  • Regulation by government agencies

When Does an Employee Act within the Scope of Employment?

To act within the scope of his or her employment, the corporate employee must have permission or the actual authority to act on the corporations behalf. A corporate authority who is acting within his or her corporate duties and engaging in corporate activities that is related to the corporation would be acting within the scope of their employment. If there is a rational relationship between the employee's criminal act and his or her corporate duties, then the corporation will be criminally liable for the employees conduct

If a Corporation Is Criminally Liable, Are Individuals Punished? 

When a corporation is criminally liable, the responsibility also falls on individuals. The board of directors, officers, and other high-ranking officials will almost always be criminally liable as well (just look at the Enron fiasco). A individual can be held criminally liable for another employee's illegal act under the accomplice liability theory. If an individual aids, encourages, assists, or instructs another employee to commit or engage in a criminal conduct, they can also be held liable for the employee's criminal act.

Subordinates or supervisors who have a duty to look after other employees and know or should know that an employee is engaging in criminal conduct within the scope of their duties can also be held liable if they turn a blind eye and fail to take action to prevent the conduct.

What Are the Penalties for a Corporation Who Is Held Criminally Liable?

A corporate who is held criminally liable for it's employees criminal conduct may suffer financially and criminally. Everyone in the corporate entity may be held liable for the criminal activity including officers, directors, and the corporation itself. The penalties may include:

  • Revocation of corporate charter by state authorities
  • Civil penalties
  • Loss of government contracts
  • Shareholder suits
  • Permanent or temporary loss of deposit insurance, conservatorship, receivership.

How Can an Attorney Help Me?

Laws governing corporate responsibility are different in every state. Which state laws are applied depends on where the company was incorporated. An experienced business attorney can inform you of the local laws, your rights and defenses, and the best way to proceed in a criminal trial. If you were a victim of a corporation's actions, contact an experienced attorney to get compensation for your loss. 

Photo of page author Kourosh Akhbari

, LegalMatch Legal Writer

Last Modified: 04-18-2018 07:36 PM PDT

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