Convicted Corporations Aren't Really Bad Boys
In their White-Collar Crime column, Robert J. Anello and Richard F. Albert write: Insofar as corporate entities cannot be jailed, "bad boy" provisions imposed after a felony conviction normally impose collateral consequences that have a significant impact on large corporations. The recent plea deals in the Forex investigations demonstrate the lengths the government will go to avoid a repeat of the 2002 Arthur Andersen debacle, and highlight just why criminal law concepts designed to punish human beings are ill-suited to corporate beings.
June 01, 2015 at 07:22 PM
12 minute read
In 2002, Arthur Andersen went from a thriving, respected “Big Five” accounting firm that employed over 100,000 people worldwide to a defunct entity that surrendered its license to practice accounting after being convicted of obstruction of justice in the investigation of its client Enron. In the wake of Andersen's collapse and its short-lived criminal conviction, the government wisely became wary of bringing criminal cases against large corporations because of the collateral damage such cases could cause, commonly referred to as the “Andersen effect.” Criminal indictments in such cases were considered the equivalent of the “corporate death penalty.”1
In a 2005 New York Times op-ed article, Joseph A. Grundfest, a professor at Stanford Law School and former commissioner of the Securities and Exchange Commission, wrote that “Andersen's demise did serve as a stern reminder to corporate America that prosecutors can bring down or cripple many of America's leading corporations simply by indicting them on sufficiently serious charges. No trial is necessary.”2
Apparently the government has overcome its fear. On May 20, 2015, four major international banks—Citigroup, JPMorgan Chase, Barclays, and Royal Bank of Scotland—pleaded guilty to the manipulation of foreign exchange rates (Forex).3 Another international financial institution, UBS, which previously had entered into a non-prosecution agreement in connection with the manipulation of London Interbank Offered Rate (LIBOR), admitted to breaching that agreement by participating in the Forex misconduct. Its prior agreement was torn up and the bank entered a guilty plea for its LIBOR conduct.4
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