june, 2020

versão em português

What is your opinion on compliance programs spread around the world from the North American experience?

I think everyone agrees that effective compliance programs are the best way to prevent corporate crime.  The most important thing we haven’t figured out yet is how to get corporations to implement effective compliance.  In the United States, we use a carrot-and-stick approach.

For the carrot, compliance programs provide two legal benefits to corporations: 1) prosecutors have discretion to consider compliance as one factor in deciding whether and how to charge corporations suspected of crime, and 2) corporations convicted of crime receive a modest advantage at sentencing if they had an effective compliance program.  These two benefits seem to be sufficient to get corporations to spend money on compliance, but they are not enough to get corporations to take compliance seriously.  Corporations seem more focused on compliance superficial ‘window dressing’ (which may be sufficient to secure the two legal benefits) rather than truly effective reform (which would prevent misconduct).

For the stick, the United States primarily focuses on fines.  Fining corporations that commit crime, the thought goes, will incentivize them to implement compliance programs to prevent crime in the first place.  There are three problems with this logic.  First, corporate crime can be very profitable and hard to detect.  This means that fines must be very high to serve as an effective deterrent.  However, the maximum possible fine is the value of the corporation’s assets, and that is likely still too low.  Second, there is a fundamental misalignment between corporate fines and the effect we want them to have.  Corporate fines impact the incentives shareholders by reducing the value of the corporation.  But to get compliance reform, we need to impact the incentives of the corporate insiders who are in a position to make change on the ground.  In other words, corporate fines place a burden on the on the wrong party.  Third, we all speak as though fines will incentivize corporations to prevent crime by implementing compliance.  But fines really incentivize corporations not to get caught for committing crime.  Of course, they can do this by investing in effective compliance to prevent crime.  But they can also do this by investing in effective concealment to prevent crime from being detected.  The latter option, which corporations surely choose sometimes, only exacerbates the underlying challenges of corporate criminal law.

The carrot-and-stick approach can work, but we need juicier carrots and bigger sticks.  One juicier carrot would be to guarantee that corporations receive total forgiveness if they had an effective compliance in place when they commit a crime.  Scholars have been proposing such a ‘compliance defense’ for decades.  That forward-looking incentive would surely stimulate more sincere interest in effective compliance.  I have recently proposed an even more ambitious backward-looking incentive: corporations should receive immunity from liability if, after they detect criminal conduct internally, they proactively reform any compliance vulnerability that permitted the misconduct.  This would give corporations more effective incentives to monitor themselves and self-initiate reform.

As to bigger sticks, the law needs a more direct response when it encounters corporate crime.  Corporate fines target the wrong people’s incentives (shareholders rather than executives) and give the wrong incentives (to conceal rather than reform).  If compliance reform is what criminal law ultimately wants, then it should abandon fines and impose compliance reforms directly through invasive intervention after conviction.

What is your point of view about the US Prosecutor’s Office effectiveness on dealing with corporate crimes?

As I have said, I believe that corporate criminal sanctions should be primarily directed toward improving corporate compliance.  United States prosecutors have largely failed in the pursuit of that goal, despite professing an interest in corporate reform.  I would even say that prosecutors have impeded true corporate reform.

Prosecutors have positioned themselves as the frontline (and often the only) agents of corporate reform in the criminal justice system.  Most large corporations receive deferred prosecution agreements (or sometimes non-prosecution agreements) when they are suspected of criminal misconduct.  These agreements leave prosecutors in control and often require corporations to implement compliance reforms.  This is problematic for several reasons:

Expertise: Prosecutors are not compliance experts.  They have displayed very little understanding of what effective compliance looks like.  Compliance is a science.  It is a field of study.  It is an area of expertise.  And it is simply not part of the background most prosecutors have.  While it does help that prosecutors often hire corporate monitors to help implement compliance reform, prosecutors have no way of knowing whether the corporate monitor is successful.  The monitors may submit periodic reports to prosecutors, but prosecutors lack the expertise to evaluate them.  There is also little reason to think that the monitors’ reports are totally objective since they are effectively a monitor’s self-evaluation.

Record-Keeping:  Prosecutors do not build the kind of basic data record we need to improve our understanding of effective compliance and how to implement it.  Prosecutors and corporations are under no obligation to make deferred prosecution agreements publicly available.  Some are even kept totally secret.  For those agreements that are publicly available, the monitors’ reports generated under the agreement typically remain secret.  This is important because, without access to those reports, the public has no way of knowing what specific reforms a corporation implemented.  This means the public cannot oversee the validity of the reforms or learn from the successes and failures of attempts to reform the largest corporate criminals.  It might help the situation if prosecutors kept their own internal records.  However, a Government Accountability Office audit of federal prosecutors’ use of deferred prosecution agreements concluded: “The [Department of Justice] cannot evaluate and demonstrate the extent to which [deferred prosecution agreements and non-prosecution agreements] . . . contribute to the department’s efforts to combat corporate crime because it has no measures to assess their effectiveness.”

Incentives:  Prosecutors do not have the personal incentives to ensure effective corporate reform.  Prosecutors are human beings who are looking for personal recognition, reputation, and promotion within their department.  What this means is that they want to get headlines, process cases, and not have to hunker down on any individual matter.  Headlines involving large dollar fines grab more attention than careful and detailed programs of reform.

In your opinion, how can Academia and Criminological Research help in corporate crime prevention?

Every discipline has something important to contribute.  I particularly enjoy reading economic and behavioral analyses of the causes of corporate crime.  My own contributions tend to be more abstract.  One thing legal theorists can offer are new conceptual tools for reframing old problems.  In my own work, I have suggested that thinking about corporate criminogenesis in characterological terms can give new perspective on what we are trying to achieve with corporate criminal law and how to achieve it.

Is it possible to think of sanctioning and regulatory models that would guarantee deterrence, retribution, and rehabilitation of companies?

The only sure guarantee is that whatever we’re doing presently in the United States is not achieving any of those three goals.  I think we also need to be prepared to confront the possibility that deterrence and retribution may be impossible to achieve in the corporate context.  Retributivists want corporations to suffer their just desserts.  The trouble is corporations don’t experience suffering. Deterrence theorists want to alter corporate incentives so that criminal conduct becomes unappealingly costly.  However, just as corporations can’t suffer, they also don’t really have their own incentives.  The individuals who act on behalf of corporations have incentives, and one way to deter corporate misconduct would be to target those.  But corporate punishment cannot be the way to do it. Whatever benefits an employee may gain from misconduct will more often than not outweigh the fractional share he experiences of any corporate-level sanction.

What proposals would be needed to reform the current sanctioning model?

If corporate deterrence and retribution are unattainable, then we need to seriously reconsider what we’re trying to achieve with corporate criminal law and how to achieve it.  I have argued, for example, that we should abandon criminal fines against corporations.  Corporate fines make the wrong individuals suffer and affect the wrong incentives.  Instead, we should focus on what we can achieve with respect to corporate criminals: reforming them, and incapacitating their ability to do harm until reformed.  Achieving both of those requires more interventionist policies and more collaboration among a broader range of criminal justice authorities, including prosecutors, judges, regulators, and corporate monitors.  The present approach in the U.S., which is prosecutor-led and relatively hands-off, is not up to the task.

I believe there are two models that could serve as helpful guides for redesigning how we sanction corporations.  One is probation, where judges release convicted criminals to the general public but impose various restrictions and require detailed rehabilitative programs.  Judges have very broad discretion, in consultation with relevant experts, to set detailed terms of probation.  Effective probation involves collaboration among many parties, including the defendant, the judge, the prosecutor, the probation officer, employers, and social workers.  United States law explicitly opens the possibility of imposing probation on convicted corporations.

A second model for reforming how we sanction corporate crime would emphasize treatment rather than punishment.  When a court acquits a criminal defendant who successfully raises an insanity defense, the defendant is typically transferred to a non-punitive mental health facility for treatment until he no longer poses a danger.  I have recently argued in favor of extending the insanity defense to corporations in certain contexts, and using compliance ‘treatment’ as a tool for reform.  By imposing various limitations on corporate operations, courts could neutralize the danger corporations pose while compulsory reforms are administered.  Like the probation model (and unlike the present U.S. approach to sanctioning corporations), this would also require collaboration among a diverse set of parties, including the defendant (who must implement the reforms), compliance experts (who specify the reforms), and the judge (who must certify when the defendant no longer poses a danger).

What suggestions would you give to those interested in studying and researching corporate crime in Brazil and South America?

I think international dialogue, like this interview with PCJM, is critical.  We’re all trying to figure out how best to address corporate crime, and no country has found a good solution yet.  Some of the problems are problems we all share.  For example, I asked a Brazilian student of mine to investigate how Brazil handles crime committed by non-profit corporations.  Brazil apparently takes an approach similar to the United States, and I think both are troublesome.  But there are other problems where one country may have innovations that could solve persistent challenges somewhere else.  Rather than reinventing the wheel in such cases, we should borrow insight from each other.  That is only possible if we’re in dialogue with each other.  Get in touch!