How-to guide: Understanding corporate criminal liability (USA)

Introduction

This guide will assist in-house counsel and private practice lawyers in understanding corporate criminal liability. While crime and criminal liability are commonly associated with individual wrongdoers, in some circumstances, corporations and other organizations may be held criminally liable for the actions of their employees or agents.

This guide sets out an overview of corporate or organizational criminal liability and provides a summary analysis of the relevant US criminal laws and procedures. The general principles of criminal liability apply in both state and federal courts. This guide covers:

General principles of corporate criminal liability
Examples of corporate crimes
Prosecution of corporate crimes
Sentencing of corporations for white collar crimes

This guide can be used in conjunction with the following How-to guides: Understanding white collar crime and Mitigating the risk of criminal activity.

Section 1 – General principles of corporate criminal liability

Corporate criminal liability is a complex area of law that holds corporations accountable for criminal acts committed by their employees or agents. This section explores the elements that prosecutors consider when building a case against a corporation.

1.1 Application of legislation to corporations

The Dictionary Act (1 USC 1), which sets forth definitions for the United States Codes, defines ‘person’ to include ‘a corporation, company, association, firm, partnership, society, or joint stock company.’ This definition allows for many criminal statutes to apply to corporations.

Many individual criminal statutes also explicitly define a ‘person’ to include corporations, making them clearly applicable to corporate entities. Examples include the Foreign Corrupt Practices Act (15 USC section 78dd-1, et seq) and the Environmental Protection Act (42 USC section 4901, et seq).

Alternatively, under the doctrine of respondeat superior (see further section 1.2.2 below), a corporation may be held criminally liable for the illegal acts of its directors, officers, employees, and agents, if those acts are done with the intention of benefitting the corporation.

1.2 Elements of corporate crime

Every crime is composed of two elements: the actus reus, the criminal action, and the mens rea, or state of mind.

The first element of any crime is the actus reus, the Latin term for ‘guilty act.’ In the context of corporate criminal liability, this refers to the specific illegal action the corporation is alleged to have committed. Unlike individuals, corporations cannot physically commit crimes. However, they can be held liable for the actions of their employees or agents.

The second element of a crime is the mens rea. Mens rea refers to the criminal intent an actor must have to be held liable for a crime. This element presents a unique challenge in white collar crimes when corporations are involved. A corporation cannot be said to possess intent in the same way as an individual does. This raises the question of whether a corporation can be held criminally liable if it lacks mens rea. Several legal doctrines have emerged from case law and federal and state black letter law to address the mens rea dilemma in relation to corporate bodies.

1.2.1 Strict liability

Strict liability allows a corporation to be held criminally liable for certain offenses regardless of the intent or knowledge of any of the human actors. See, United States v Dotterweich, 320 US 277, 284 (1943). For example, the Food, Drug, and Cosmetic Act prohibits the introduction of adulterated or misbranded food, drugs, devices, or cosmetics into interstate commerce, see 21 USC section 331(a). The statute does not require the government to prove intent or knowledge that the law is being violated. Likewise, the Clean Water Act prohibits the discharge of pollutants (unless otherwise permitted by statute or license), regardless of intent or knowledge of the violation, see 33 USC 1311(a).

1.2.2 Imputed intent

While corporations cannot have criminal intent in the same way individuals do, the intent of the employees acting within their scope of employment can be imputed to the corporation. This means that the corporation can be held criminally liable based on the knowledge and intent of the employees or agents accused of performing the criminal acts.

Respondeat superior

Organizational liability focuses on the corporation’s own policies, procedures, and culture. Under this doctrine, a corporation can be held criminally liable for the acts of its employees if those acts were committed within the scope of their employment. See, United States v Bank of New England, NA, 821 F2d 844 (1st Cir 1987). For example, under the Racketeer Influenced and Corrupt Organizations Act (RICO) of 1970, corporations can be liable for racketeering activity if an employee uses the corporation’s resources or facilities to further the racketeering enterprise and the corporation either benefits from the activity or fails to take reasonable steps to prevent it. See, 18 USC section 1962(c).

For a finding of employer criminal liability under the doctrine of respondeat superior an employee must commit a crime:

within the scope of their employment; and
with the intent to benefit the corporation.

Scope of employment

Corporations are generally only liable for the criminal acts of their employees when those acts are committed within the scope of their employment. This means the acts must be related to the employee’s duties and performed with the intention of furthering the corporation’s business. In addition to liability for their employees, corporations can be held liable for actions taken by an agent if the agent is acting within the scope of the authority that the corporation has given the agent, with the purpose of benefiting the corporation. Agents can include directors and independent contractors. See, for example, In re Hellenic, Inc, 252 F3d 391, 395 (5th Cir 2001), a case in which the court stated that ‘[a]n agent’s knowledge is imputed to the corporation where the agent is acting within the scope of his authority and where the knowledge relates to matters within the scope of that authority.’ In United States v One Parcel of Land, 965 F2d 311, 316 (7th Cir 1992) it was held that an agent’s culpability and knowledge may only be imputed to the corporation where the agent was acting as authorized and was motivated at least in part by an ‘intent to benefit the corporation’ (citing United States v Cincotta, 689 F2d 238, 241-42 (1st Cir 1982)).

Corporate benefit

The employee's illegal act, even if ultimately unsuccessful or detrimental to the corporation, must have been motivated, at least in part, by a desire to benefit the employer. The benefit doesn't have to be direct financial gain; it could be to gain a competitive advantage, cut costs, or achieve a corporate objective. See, United States v Agosto-Vega, 617 F3d 541, 552-53 (1st Cir 2010) and United States v Ionia Mgmt SA, 555 F3d 303, 309-10 (2d Cir 2009).

If the criminal acts were designed to benefit the corporation, criminal liability may attach even if the corporation has not actually received a benefit. See, Standard Oil Co of Texas v United States, 307 F2d 120, 128 (5th Cir 1962). Moreover, criminal liability will attach to the corporation even if the employee’s actions were designed to benefit the corporation and the employee. See, United States v Oceanic Illsabe Ltd, 889 F3d 178, 195 (4th Cir 2018) and United States v Potter, 463 F3d 9, 25 (1st Cir 2006).

1.2.3 Collective knowledge

For many crimes, the requisite mens rea is knowledge. For example, it is unlawful to engage in the international transportation or transmission of funds:

with the intent to promote a predicate offense;
knowing that the purpose is to conceal laundering of the funds and knowing that the funds are the proceeds of a predicate offense; or
knowing that the purpose is to avoid reporting requirements and knowing that the funds are the proceeds of a predicate offense. See, 18 USC 1956(a)(2).

In a corporation, however, knowledge may be ‘spread thin.’ Different employees or agents will know some of the relevant facts, but no one of them may know the ‘entire picture.’

The collective knowledge doctrine provides that prosecutors do not need to find a single employee with all the relevant knowledge to hold a corporation criminally liable. Instead, prosecutors can attribute to a corporation anything known by any and all of its employees. For example, in United States v Bank of New England, NA, above, a bank was charged with knowingly violating the Currency Transaction Reporting Act (31 USC 5322) by failing to report cash transfers in excess of $10,000. Individual employees of the bank separately cashed checks for the same customer. That customer simultaneously presented to a teller between two and four counter checks, none of which individually amounted to $10,000. Each check was recorded separately as an ‘item’ on the bank’s settlement sheets. Once the checks were processed, the customer would receive in a single transfer from the teller, one lump sum of cash which always amounted to over $10,000. Another employee of the bank knew about the reporting requirements but did not know about the check-cashing transactions. All of the individual employees of the bank were acquitted of violations of the Currency Transaction Reporting Act because none of them knew both the legal limits and that the transactions exceeded the limits. If the doctrine of respondeat superior applied, the bank should also have been acquitted; however, the First Circuit Court of Appeals upheld the bank’s conviction using the theory of collective knowledge of the employees. While no single employee had sufficient knowledge to support a conviction, all of them taken together had the collective knowledge of the unlawful transactions.

1.3 Personal liability

The existence of corporate criminal liability does not shield employees or agents—including directors and officers—from individual accountability for their own criminal conduct. They remain subject to personal prosecution for their involvement in illegal activities, even when these actions are undertaken on a corporation's behalf. A foundational precedent for this principle is United States v Wise, 370 US 405, 409 (1962), where the Supreme Court held that both a corporation and its corporate officer could be charged with criminal antitrust violations. The Court reasoned that, absent a clear legislative intent to the contrary, criminal statutes are presumed to apply broadly to all individuals, including those operating within a corporate structure. This principle continues to be a cornerstone of federal enforcement, with the Department of Justice frequently emphasizing the importance of holding individuals accountable to deter corporate misconduct and promote a culture of compliance.

1.4 Constitutional limitations

Most constitutional protections afforded to individual criminal defendants also apply to corporations. For example, corporations have a right to due process, equal protection, and a fair trial.

Notably, corporations do not have privileges under the Fifth or Sixth Amendments. Corporations cannot invoke the Fifth Amendment privilege against self-incrimination, as they lack the individual right against self-incrimination. In addition, corporations do not have a Sixth Amendment right to indictment by a grand jury.

Section 2 – Examples of corporate crimes

This section gives examples of various types of corporate crimes, ranging from fraud and record falsification to infringement of intellectual property and anticompetitive practices.

Crimes that can be committed by corporations include:

Fraud – numerous types of fraud crimes apply to corporations, including mail fraud, wire fraud, bank fraud, healthcare fraud, and securities fraud. Examples include the Mail Fraud Act (18 USC 1341), the Wire Fraud Act (18 USC 1343), and the False Claims Act (31 USC 3729).
Falsifying records – corporations can be liable for falsifying corporate records, financial statements, or other documents. For example, the Sarbanes-Oxley Act, 18 USC 1519 prohibits altering, destroying, or concealing documents with the intent to defraud.
Intellectual property crimes – corporations can be criminally liable for copyright infringement, selling counterfeit goods, and economic espionage.
Immigration related offenses, including employing persons unlawfully in the United States (8 USC 1324).

For further information, see How-to guide: Understanding white collar crime.

In addition, corporations can be liable for conspiring with competitors to fix prices, allocate markets, or rig bids. The Sherman Antitrust Act, 15 USC sections 1–7, makes it a criminal offense for competitors to agree to fix prices, allocate markets, or to restrict outbidding.

State antitrust or restraint of trade laws may also carry criminal penalties. For example, Alabama Code section 8-10-3 makes it illegal for any person or corporation to ‘restrain or attempt to restrain, the freedom of trade or production, or [to] monopolize, or attempt to monopolize the production, control, or sale of any commodity or the prosecution, management, or control of any kind, class, or description of business.’ A violation of the law is a misdemeanor, punishable by a fine of ‘not less than $500 nor more than $2,000 for each offense.’ Michigan antitrust law, Mich Comp Laws Ann 445.772, declares any ‘contract, combination, or conspiracy’ that is ‘in restraint of, or to monopolize, trade or commerce in a relevant market’ to be unlawful. A person ‘other than an individual’ who violates the law is guilty of a misdemeanor, punishable by a fine of not more than $1 million. See, Mich Comp Laws Ann 445.779.

For further information, see How-to guides: Understanding antitrust and unfair trade practices law and your organization’s compliance obligations, How to build a culture of antitrust law compliance and How to identify and manage antitrust and unfair trade practice risk and Checklist: Antitrust compliance.

2.1 Conspiracy

2.1.1 Liability for conspiracy to commit crimes

Corporations can be liable for conspiracy to commit a crime, even if the underlying crime is never actually committed. A corporation can be held liable if there is an agreement between two or more parties to commit a crime that is imputable to the corporation, followed by one or more parties taking an overt act in furtherance of the conspiracy. See, for example, 18 USC 371 (a federal statute making it a crime to ‘conspire either to commit any offense against the United States, or to defraud the United States’); California Penal Code 182 (making it a crime to, among other things ‘conspire . . . [t]o commit any crime’).

2.1.2 Foreseeable crimes committed by co-conspirators

A corporation can be liable for foreseeable crimes committed by its co-conspirators in furtherance of a conspiracy, even if the corporation did not explicitly authorize or ratify those crimes. See, Pinkerton v United States, 328 US 640 (1946), which held that a co-conspirator is liable for the substantive crimes committed by other members of the conspiracy, so long as those crimes are committed in furtherance of the conspiracy and were reasonably foreseeable as a necessary or natural consequence of the unlawful agreement. When applied to corporate liability, this means that if an employee, acting within the scope of their employment and with an intent to benefit the corporation, enters into a criminal conspiracy, the corporation itself can then be held responsible not only for the conspiracy itself but also for other crimes committed by any co-conspirator, provided those crimes meet the Pinkerton foreseeability standard. This doctrine significantly broadens the scope of potential corporate criminal liability, making it imperative for organizations to implement robust compliance programs designed to prevent employees from engaging in, or contributing to, any form of criminal conspiracy.

Section 3 – Prosecution of corporate crimes

This section explores prosecutorial discretion, where factors like individual accountability and corporate harm are weighed before pursuing charges. It also examines alternatives to prosecution, such as deferred prosecution agreements, that provide corporations with a path to avoid criminal charges under certain conditions.

3.1 Prosecutorial discretion

Prosecutors have wide discretion to decide whether to charge a crime. Section 9-27.220 of the Department of Justice’s Principles of Federal Prosecution of Business Organizations outlines factors that federal prosecutors consider when deciding whether to charge a corporation with a crime. These factors prioritize holding the individuals who are responsible for the crime accountable, minimizing corporate collateral damage (such as loss of jobs), and encouraging corporate compliance programs.

3.2 Alternatives to prosecution

Deferred prosecution agreements and non-prosecution agreements are agreements with prosecutors where corporations avoid criminal charges in exchange for cooperation, remediation, and compliance measures. The government is more likely to consider such agreements when prosecuting the corporation would cause significant collateral consequences – that is, where prosecuting the corporation would cause:

substantial consequences to a corporation’s employees, investors, pensioners, and customers, many of whom may, depending on the size and nature of the corporation and their role in its operations, have played no role in the criminal conduct, have been unaware of it, have been unable to prevent it, or have been victimized by it.

See, US Department of Justice Manual, section 9-28.200, 9-28.1100 for more information.

3.2.1 Deferred prosecution agreements

A deferred prosecution agreement ‘is typically predicated upon the filing of a formal charging document by the government, and the agreement is filed with the appropriate court.’ See, Department of Justice, Criminal Resource Manual section 163, footnote 2.

For example, in 2020, the Department of Justice entered a deferred prosecution agreement with JPMorgan Chase & Co due to JPMorgan’s involvement in schemes to defraud involving unlawful trading activity in the markets for precious metals and US Treasury futures contracts. JPMorgan agreed to pay $920 million in criminal monetary penalties, disgorgement, and victim compensation.

3.2.2 Non-prosecution agreements

Non-prosecution agreements are similar to deferred prosecution agreements except that ‘formal charges are not filed and the agreement is maintained by the parties rather than being filed with a court.’ See, Department of Justice, Criminal Resource Manual section 163, footnote 2.

For example, in 2023, the Department of Justice entered a non-prosecution agreement with Albemarle Corporation, where the government agreed not to criminally prosecute Albemarle for an unlawful bribery scheme. Factors that the government considered when agreeing to the non-prosecution agreement included the company’s voluntary disclosure, cooperation with the government’s investigation, internal investigation of the matter, decision to terminate the employees involved in the misconduct, strengthening of its anti-corruption compliance program, and payment of a nearly $1 billion criminal penalty.

Section 4 – Sentencing of corporates for white collar crimes

4.1 Sentencing Guidelines

The US Sentencing Guidelines are federal guidelines for sentencing corporations convicted of crimes. These guidelines consider factors such as the corporation’s size, the nature of the offense, the corporation’s history of compliance, and the corporation’s compliance with the authorities.

4.2 Particular sentences for corporations

4.2.1 Fines

Amounts can be based on factors like the size of the organization, the severity of the offense, and the profits gained from the crime. See, US Sentencing Guidelines, section 8C1.1, et seq.

4.2.2 Restitution

Corporations may be ordered to compensate individuals or entities harmed by their criminal conduct. See, for example, 18 USC sections 2248, 2259, 2264, 2327, 3663, and 3663A.

4.2.3 Confiscation/forfeiture of profits

The government can seize assets gained from criminal activity, including profits, property, and equipment. See, 18 U.S. Code section 982.

4.2.4 Probation – period of monitoring

Corporations may be placed under court supervision for a designated period and may have to implement reforms and report on compliance progress. See, US Sentencing Guidelines, section 8D1.1.

4.2.5 Debarment from government contracting

Corporations may be excluded from government contracts; for example, the Department of Justice Manual, section 9-28.1100 states that:

'where the top layers of the corporation's management or the shareholders of a closely-held corporation were engaged in or aware of the wrongdoing, and the conduct at issue was accepted as a way of doing business for an extended period, debarment may be deemed not collateral, but a direct and entirely appropriate consequence of the corporation’s wrongdoing'.

This can be a significant financial penalty for corporations that rely on such contracts.

4.3 Mitigation of sentence

The Sentencing Guidelines set out the presumptive sentence to be imposed on a defendant convicted of a crime. In some circumstances, the court will depart from the sentence given in the Guidelines and impose a lesser penalty if there are certain mitigating factors.

4.3.1 Remediation

Demonstrating genuine remorse and actively repairing the harm caused by the corporation’s misconduct can positively affect a corporation’s criminal sentence. The US Department of Justice Manual section 9-28.1000 provides the following factors to decide whether the corporation has meaningfully remediated:

whether the corporation appropriately disciplined wrongdoers;
whether the corporation has made efforts to pay restitution in advance of a court order; and
whether the corporation has made efforts to improve its corporate compliance program.

4.3.2 Compliance program

A robust compliance program serves as a proactive shield, minimizing the risk of future criminal activity and showcasing the corporation’s commitment to ethical conduct. The US Department of Justice’s Evaluation of Corporate Compliance Programs sets out key elements that prosecutors will consider when evaluating a compliance program:

whether the program is designed to detect and prevent the types of misconduct most likely to occur in the corporation’s business and related regulatory environment;
whether the corporation has a code of conduct that states the corporation’s commitment to fully complying with relevant federal laws;
whether the corporation has established policies and procedures to incorporate the culture of compliance into day-to-day operations, including through periodic training and certification;
whether the program has an efficient and trustworthy mechanism through which employees can anonymously or confidentially report allegations of a breach of the corporation’s code of conduct, company policies, or misconduct;
whether the corporation has an effective complaint-handling process;
whether the compliance program has sufficient resources to function effectively; and
whether the compliance program is subject to regular testing, review, and revision.