Based on a 1909 U.S. Supreme Court decision, the standard for holding a corporation criminally responsible for the actions of its employee has been whether the employee's actions were a) taken within the scope of employment and b) for the benefit of the corporation. Critics of this standard sought to change it using a recent 2nd Circuit Court of Appeals case, but they were not successful. (U.S. vs. Ionia Management S.A., Dockets 07-59801-cr, 08-1387-cr, Decided January 20, 2009)
The M/T Kriton is an oil tanker managed by Ionia, a Liberia corporation headquartered in Greece. Ionia was charged with violating anti-pollution criminal statutes because, from January 2006 to April 2007, members of its crew deliberately discharged oily waste water into the high seas, using a "magic hose" that bypassed the ship's Oily Water Separator, then lying to the U.S. Coast Guard and falsifying records to hide the violation. Ionia was convicted, based on the actions of its employees, the ship's crew members. The penalties included a fine of $4.9 million.
Some business advocacy groups, including the U.S. Chamber of Commerce, The Association of Criminal Defense Lawyers, and The National Association of Manufacturers, argued for a different standard when holding corporations criminally liable for acts of their employees. Citing recent employment cases, state laws, and the Model Penal Code, these organizations argued (through a legal brief filed with the court) that corporations should be able to show that they had reasonable and effective policies in place to deter the conduct and the employees failed to take advantage of the policies. For example, in a sexual harassment claim, the U.S. Supreme Court has given corporations the ability to avoid liability by implementing effective anti-sexual harassment policies. But the Court of Appeals declined to change the standard for corporate criminal liability, noting that a compliance program "however extensive, does not immunize the corporation from liability when its employees, acting within the scope of their authority, fail to comply with the law." The court noted that a corporate compliance program "may be relevant to whether an employee was acting in the scope of his employment, but it is not a separate element."
Professor John Hasnas of the Georgetown University Law Center (quoted in The National Law Journal, January 21, 2009) does not agree with the Court's decision and believes the standard for corporate criminal liability should be changed. "We're talking about the situation in which a corporation is held criminally liable for the actions of even one rogue employee," said Professor Hasnas. But he also acknowledged that a change which could be perceived as giving corporations an additional defense and a way to escape criminal liability would be very difficult to make in the current climate.