FCPAméricas Blog

Corporate Criminal Liability in the United States: What your Latin America personnel needs to know

Author: Carlos Ayres

FCPACorporateCriminaLiabilityIn the vast majority of Latin American countries, there is no corporate criminal liability. Criminal liability is personal, meaning that only an individual directly involved with the crime can be held liable for the illicit act, even if the act is committed on behalf of the legal entity. But with the growing criminal enforcement of the FCPA against non-U.S. entities, Latin American staff needs to understand corporate criminal liability – a foreign concept that can seem strange to those not familiar with it.

This post seeks to help FCPA compliance officers explain to their personnel in Latin America how companies can be held criminally liable in the Unites States. It also seeks to inform Latin American companies making investments or beginning operations in the Unites States of a risk they may not have been alerted to.

In the United States, the concept of corporate criminal liability has existed for over a century. In 1909, the Supreme Court, when deciding the case New York Central & Hudson River Railroad v. United States, authorized the application of criminal sanctions to corporations for the first time. This allowed authorities to hold companies liable for the acts of their agents, including the employees and the third parties acting on their behalf.

In Latin America, however, that notion is quite different. Just a few countries have adopted this kind of liability and its applicability is limited to a few crimes. In Brazil, for example, there is corporate criminal liability just for environmental-related offenses. The concept is relatively new. Criminal liability was introduced by the Brazilian Constitution of 1988 and instituted only ten years later. Similarly, in Chile, the country passed a law only in 2009 that holds legal persons criminally liable for certain crimes such as money laundering, the financing of terrorism, and bribery.

In the United States, corporations may be held criminally liable under the doctrine of respondeat superior for a broad range of crimes and for the acts of agents. Agents may be their employees or any other third party, regardless of name or title. For liability to arise, the agent must be acting (i) within the scope of their authority; and (ii) on behalf of the company.

Within the scope of the agent`s authority. This element is met, as ruled by the Supreme Court of Massachusetts in Commonwealth v. Beneficial Finance Co., if the company has placed “the agent in a position where he has enough authority and responsibility to act for and on behalf of the corporation in handling the particular corporate business, operation or project in which he was engaged at the time he committed the criminal act … this standard does not depend upon the responsibility or authority, which the agent has with respect to the entire corporate business, but only to his position with relation to the particular business in which he was serving the corporation.” Under this concept, the company can be held liable regardless of the hierarchical position or level of responsibility of the agent in the company, as long as he or she was acting within the scope of authority.

This element does not require the agent to have the authorization of the company to commit the wrongdoing. Thus, when a salesperson makes his or her own decision to offer a bribe to a foreign official in exchange for a contract for the company, he or she is deemed to have acted within the scope of his or her authority.

In fact, corporations may be held liable for the conduct of their employees, even if such employees act against the instructions provided by the company. In United States v. Hilton Hotels Corp., the hotel was criminally convicted for the conduct of one of its employees that was expressly contrary to the company’s policies. When deciding the case, the U.S. Court of Appeals ruled that: “A corporation is responsible for acts and statements of its agents, done or made within the scope of their employment, even though their conduct may be contrary to their instruction or contrary to the corporation’s stated policies.”

On behalf of the company. The corporation may be held liable, even if it only partially or indirectly benefits from the conduct. Moreover, even if the agent’s main intention is to achieve a personal benefit, the corporation may be held liable if it also benefits from the agent’s conduct. As pointed out by Professor Julie R. O`Sullivan in her book Federal White Collar Crime, the system is so strict that in certain cases “the corporation may look more like a victim than a truly culpable actor.”

Finally, it is important to note that, different from Latin American countries, prosecutors in the United States have much discretion in deciding whether or not to bring an enforcement action in situations where the evidence would authorize it. In this context, the existence of a robust compliance program is certainly an important factor that allows companies to mitigate criminal risks. The Morgan Stanley case, described here, is a good example.

The opinions expressed in this post are those of the author in his or her individual capacity, and do not necessarily represent the views of anyone else, including the entities with which the author is affiliated, the author`s employers, other contributors, FCPAméricas, or its advertisers. The information in the FCPAméricas blog is intended for public discussion and educational purposes only. It is not intended to provide legal advice to its readers and does not create an attorney-client relationship. It does not seek to describe or convey the quality of legal services. FCPAméricas encourages readers to seek qualified legal counsel regarding anti-corruption laws or any other legal issue. FCPAméricas gives permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author and to FCPAméricas LLC.

© 2013 FCPAméricas, LLC

Carlos Henrique da Silva Ayres

Post authored by Carlos Henrique da Silva Ayres, FCPAméricas Contributor

Categories: Enforcement, English, FCPA

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