The most prominent theory of U.S. corporate criminal liability is respondeat superior, the American legal doctrine where a corporation is liable for the criminal acts of its employees. Under respondeat superior, two elements must be present:
See New York Cent. & Hudson R.R. Co. v. United States, 212 U.S. 481, 494–95 (1909); Wood v. Holiday Inns, Inc., 508 F.2d 167, 174 (5th Cir. 1975).
The scope of authority requirement generally is met when the employee has actual or apparent authority to engage in the type of act that gives rise to liability. Actual authority, also called express authority, arises when a corporation, through its words or actions, objectively leads its employee to reasonably believe that he or she may act on behalf of the corporation. Restatement (Third) of Agency § 2.01. Apparent authority is the authority that outsiders would normally assume the employee to have, judging from his or her position within the corporation and the circumstances surrounding his or her past conduct. See, e.g., United States v. Bi- Co Pavers, Inc., 741 F.2d 730, 737 (5th Cir. 1984).
An action falls within the scope of employment if the conduct: (1) is of the kind the employee was employed to perform; (2) occurred within the time and space limits of the employee’s employment; and (3) was triggered at least in part by a purpose to serve the employment. Spencer v. Assurance Co. of Am., 39 F.3d 1146, 1150 (11th Cir. 1994).
For the corporate benefit element to be met, an employee must be motivated at least in part by a desire to serve the corporation. See, e.g., United States v. Demauro, 581 F.2d 50, 54 & n. 3 (2d Cir. 1978). The key question is what the employee intended. So long as at least one of the employee’s intentions was to benefit the corporation, the corporate benefit element is met. See, e.g., Standard Oil Co. of Texas v. United States, 307 F.2d 120, 128–29 (5th Cir. 1962).
By way of example, a corporate employee who is robbing banks during his lunch break is not conduct that would inure to the benefit of the company. On the other hand, an employee who is illegally negotiating on behalf of his/her employer with a vendor for better terms than competitors’ terms, is acting within his scope of authority and on behalf of his employer. If done improperly, if not illegally, and without authorization by and contrary to corporate policies and procedures, the corporation may well be criminally liable based upon the employee’s conduct and face huge fines under the federal sentencing guidelines.
As set forth in Title 18, U.S.C. § 201, “bribery” is generally defined as directly or indirectly, corruptly giving, offering or promising, anything of value to a public official or his designated representative. As far as the U.S. Foreign Corrupt Practices Act statute is concerned (Title 15, U.S.C. §§ 78dd-1, et seq.) (see Paragraph 28a), the “FCPA” statute expressly focuses on public officials. If there is no allegation involving a ‘public official’, neither the Federal Bribery Statute nor the FCPA will apply under these circumstances.
However, there are a myriad of U.S. federal statutes, such as Mail and Wire Fraud (18 U.S.C. §§ 1341 and 1343) and Honest Services Fraud (18 U.S.C. § 1346) that are key here. These are often used to address commercial bribery (bribery involving no public official in a commercial transaction).
The wire fraud statute requires that: a) the employee voluntarily and intentionally devise a scheme to defraud another out of money; b) with the intent to defraud; c) with reasonable certainty that wire communications (faxes, internet, phone) would be used; d) in interstate (within the U.S.) or foreign commerce. See United States Department of Justice Manual, § 941, citing court decisions from across the United States.
The punishment for such conduct is a maximum imprisonment of up to 20 years. Fines, specifically, depend on the dollar value of the fraud and run from $8,500.00 USD to $150,000,000.00 USD (one hundred fifty million dollars), depending on multiple factors.
In 1998, U.S. Congress expanded the definition of “scheme to defraud” to include “depriving another of the INTANGIBLE RIGHTS OF HONEST SERVICES”, 18 U.S.C. § 1346 [Emphasis added], beyond the basic U.S. wire fraud statute.
In U.S. v. Poirer, 321 F.3d 1024 (11 Cir. 2003), two defendants were indicted for corrupting the process by which Fulton County selected an underwriter for a bond refunding project. Defendant, deVegta was hired by the County to serve as an independent financial adviser. Poirer was a partner with the Lizard firm that was ultimately awarded the underwriting contract.
In exchange for deVegta’s covert assistance ensuring that the Lizard firm was selected by providing confidential information, Poirer paid deVegta $40,000. through an intermediary.
In addition to wire and mail fraud, “Honest Services Fraud” was also charged (18 USC § 1346). Citing the U.S. Supreme Court decision of Carpenter v. U.S., 484 U.S. 19 (1987), penned even before the Federal Honest Services statute existed, the Supreme Court held the “fraudulent misappropriation of pre-publication Wall Street Journal Articles” violated the company’s right to honest and faithful service.
Theft of trade secrets, or receipt of stolen trade secrets, knowing they were unlawfully obtained, is a violation of U.S. law, punishable by up to 10 years and a fine of up to $5,000,000. or three times the value of the trade secrets in question, whichever is greater. Trade secret infringement is called misappropriation. It occurs when someone improperly acquires a trade secret (defined as information that confers a competitive economic advantage over competitors that is the subject of reasonable efforts to keep secret or improperly discloses same). USTA, 17 USC §§ 101-810.
Conspiracy in the United States is merely an agreement to commit an unlawful act with one overt act taken in furtherance of that agreement.
When all corporate conduct occurs overseas, some nexus to United States must exist.
A collaborative effort with any U.S. company, such as a joint working project or presentation, combining foreign and U.S. corporations, allows U.S. law enforcement jurisdiction to review this transaction and enforce any appropriate U.S. laws. In so doing, the overseas conduct of the employee creates U.S. corporate liability notwithstanding that the conduct took place overseas. See International Shoe Co. v. State of Washington, 326 U.S. 310 (1945). The “Long Arm” laws of the U.S. allow for U.S. jurisdiction whenever an act that occurs abroad produces “effects” in the U.S., regardless of whether the actor has U.S. citizenship or residency, and regardless of whether the act complies with the laws of the situs where it occurred. See also, Ministry of Foreign Affairs of the People’s Republic of China – “The U.S. Willful Practice of Long-arm Jurisdiction and its Perils” 2023-02-03. Indeed, the Federal Bureau of Investigation (FBI) have legal attaché offices in over 180 countries to enforce violations of U.S. laws on an international level. See FBI International Operations.
A sufficient nexus to the United States is well established under these circumstances. See, United States v Gasperine; 160-cr-0441 (NGG), citing to U.S. v. Yousef, 327 F.3rd 56, 86 (2d Cir. 2003). The use of the wires (internet) to further a scheme to defraud involving overseas honest services fraud, 18 USC § 1346, survives a motion to dismiss, based upon extraterritorial application of U.S. anti- fraud statutes. U.S. v. Full Play Groups, 15-CR-5-252 (PICC), (FIFA), citing to U.S. v. Napout, (Napout III), 963 F 3rd 163, 170 (2d Cir. 2020); Bascunan v. Elsaca, 927 F.3d 108 (2 Cir. 2019).
There is no clear indication of how remedial action by a corporation upon discovering an employee’s criminal actions will affect the corporation’s potential criminal liability. It is safe to say, however, that it is an important factor to be considered. For example, the U.S. Department of Justice publishes Principles of Federal Prosecution as part of its U.S. Attorney’s Manual to guide prosecutors in exercising their broad charging discretion in deciding whether and how to investigate misconduct, who to charge, and with what crime. Whether a corporation took remedial actions is one of the key factors a prosecutor must consider in determining whether and how to charge an organization being investigated for misconduct. USAM Principles of Federal Prosecution, § 9-27.230. See also, Federal Sentencing Guidelines, section 8B2.1.
Counsel would strongly urge every corporation, particularly with overseas activities, to be in the 21st Century of compliance. For example, there are many programs, such as ACAMS (Anti-Money Laundering) and KYC (Know Your Customer) that will assist every corporation’s compliance policies. Chapter 8 of the Federal Sentencing Guidelines, entitled Sentencing of Organizations, provides guidance to federal judges in sentencing organizations for violations of U.S. laws. Turning specifically to Section 8B2.1, at pages 517-522, there is an entire section dedicated to compliance and ethics programs. The intent is to promote corporate compliance with U.S. laws and mitigate corporate punishment.
"*" indicates required fields