1. 25Byrne & PartnersISSUE 61-15ISSUE 61-1524 Byrne & Partners
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“..As a community reaches for cultural
homogeneity, it begins to signpost the major
moments of choice with dangers. The signs
say that certain types of behaviour are very
dangerous. That means that the community
has reached some (probably temporary
and fragile) consensus in condemning the
behaviour… A climate of disapproval grounds
the belief that certain deeds are dangerous1
”
“..Danger is defined to protect the public good
and the incidence of blame is a by-product of
arrangements for persuading fellow members
to contribute to it2
”.
orporate crime is now seen as
a threat to the very fabric of
western capitalist democracies.
Since the 2008 financial crisis, a
wave of public opinion has called for blame
to be apportioned within the ‘corrupt’
corporate world, and the issue has become
highly politicised. Indeed, even Russell Brand
(who purports to speak on behalf of the
ordinary non politicised people of this country)
recently asked Ed Miliband if “we [could] see
bankers going to prison for like some of the
rate rigging, the LIBOR scandal?”. If Brand
really is as apolitical as he fervently claims to
be, then corporate crime has now arguably
entered the arena of popular culture, for the
first time in history. Cleary, there is national
appetite for someone to be blamed, but
who?
Politicians and the media are of course
very fond of scapegoats. They attract
audiences’ attention and allow awkward
questions about the flaws of democratic
capitalism to be avoided. However, is blame
being apportioned appropriately against
this cultural backdrop, and are those guilty
people or entities being suitably punished?
More importantly, is at least our legislation
set up to deal with apportioning blame
appropriately? The simple answer is no.
Much of the current legislation, which purports
to protect society from corporate crime, also
requires a scapegoat. Indeed, prosecutions
of corporate entities for fraud offences in
England and Wales have historically been
somewhat hindered by the judiciary’s
reliance on the identification principle.
Under this doctrine, it must be proved by the
prosecution that the dishonest conduct in
question was committed by a directing mind
of the company. The requirement at law has
therefore been for blame to be apportioned
to a person, rather than for an assessment
of the overall conduct of the company to
be deemed sufficient3
. Notwithstanding the
anthropological difficulties underlying this
approach4
, prosecuting authorities have
been forced to look for senior heads to roll
in order to secure a corporate prosecution,
even in circumstances where the alleged
misconduct had taken place way down the
food chain (as it often does).
Indeed, in an increasingly globalised
economy dominated by international
companies, this is not just a problem in our
jurisdiction. Frustration at the inability of
existing laws to deter excessive corporate
risk-taking in the face of globalised trade
and companies has been echoed around
the world. For example, Lanny Breuer, former
head of the Criminal Division of the U.S.
Department of Justice stated in 2013:
I’ve literally had lawyers and U.S. attorneys
studying every single one of these [financial
crisis failures] with the same level of
zealousness that we have in all those other
areas they’ve looked at it. But ultimately
they have said in many of these cases that
we cannot bring a criminal case. . . . I am
personally offended by much of what I have
seen. I think there was a level of greed, a level
of excessive risk taking in this situation that I
find abominable and I find very upsetting. But
that is not what makes a criminal case. . . .
[O]ur criminal justice system is created so that
in that kind of a situation, we cannot prevail5
.
Recent Developments and the Future
Change is however seemingly afoot.
Section 7 of the Bribery Act 2010 has sought
to begin rectifying this legislative short falling,
establishing as it does a strict liability offence
for a company’s failure to prevent bribery.
No prosecution of an individual is required to
secure a corporate conviction. The provision
therefore represents a move away from the
identification doctrine; should a corporate
wish to avoid liability, it must establish that
adequate procedures had been put in
place to prevent bribery (cue more work for
lawyers).
Further Reform
David Green QC, the director of the
Serious Fraud Office has suggested that a
new offence could be introduced to hold
companies liable for failing to prevent
financial crime generally, sentiments echoed
by the former Solicitor General, Oliver Heald
QC MP.
So we may be seeing a positive shift towards
the apportionment blame to a body
corporate without the need for a head on
a stick. However, is there room for reform in
terms of how we apportion blame to (and
punish) those individuals caught up in the
very financial scandals that rock our nation’s
stability (think LIBOR, the FX affair etc)? Whilst
those who are convicted of financial crimes
must be punished, should the tax paying
public really be paying for them to spend
extended periods of time at Her Majesty’s
pleasure?
The criminal justice system has in recent
years begun to recognise that there exist
alternatives to such traditional punitive
measures as the imprisonment of individuals.
Restorative Justice6
, for example, is widely
acknowledged to provide a constructive way
of encouraging offenders to take responsibility
for their actions. It provides a channel through
which offenders can repair the harm they
have done by enabling:
“all the parties with a stake in a particular
offence (to) come together to resolve
collectively how to deal with the aftermath of
the offence and its implications for the future7
”
and boasts high levels of offender
accountability and victim satisfaction. Can
we however imagine a society that starts
to move away from a destructive culture
of blame and lends supports to more
constructive (and less expensive) channels
of reparation? To put this in context, would
the public in fact prefer to pay for 27 year
old traders to sit in prison (because they grew
up in a banking culture that trained them to
take risks), or to see them be accountable
for their actions by apologising, returning any
money they obtained from their wrongdoing
to society, and/or carrying out community
service?
One legal problem in this field lies with our
adversarial system. If one apologises, and
admits fault, one may expose oneself to ‘open
goal’ civil law suits and easy prosecution. Is
there therefore perhaps room for some kind of
privilege to be attached to admissions made
in the context of constructive restorative
justice admissions?
With the introduction of deferred prosecution
agreements, corporate entities will be able to:
• admit fault;
• implement constructive reforms; and
• pay a fine
Instead of being prosecuted, perhaps
the potential for such money generation
for society, coupled with a system which
encourages more constructive accountability
for those individuals implicated, could
provide a path towards apportioning and
administering blame more effectively in the
muddled corporate crime arena.
Here Lawyer Monthly benefits from an exclusive article
by Tom Littlechild, Solicitor at Byrne and Partners, which
looks into whether apportioning criminal blame to
individuals in the context of corporate fraud prosecutions
is appropriate.
WHO’S TO
BLAME?
C
1
Douglas. M, 2003, Collected Works, Risk and Blame, Essay in Cultural Theory, Routledge, page 27
2
Douglas. M, 2003, Collected Works, Risk and Blame, Essay in Cultural Theory, Routledge, page 6
3
The offence of corporate manslaughter provides an exception to this rule, but is not relevant to the corporate fraud landscape.
4
there have been interesting studies into how morally responsible a group should be for its collective decisions, as well as how morally responsible the group’s members should be for both personal
decisions and collective decisions (http://www.livescience.com/17419-public-assigns-blame-corporate-crime.html)
5
Lanny Breuer: Financial Fraud Has Not Gone Unpunished, Frontline interview with Lanny Breuer, head of the Criminal Division of the U.S. Department of Justice (Nov. 30, 2012), edited transcript (dated
Jan. 22, 2013; emphasis added), available at http://www.pbs.org/wgbh/pages/frontline/business-economy-financialcrisis/ untouchables/lanny-breuer-financial-fraud-has-not-gone-unpunished/
cited in [forthcoming 65 EMORY LAW JOURNAL issue no. 2 (Dec. 2015)] [4/13/15 draft] Excessive Corporate Risk-Taking and the Decline of Personal Blame1 Steven L. Schwarcz
6
See Lord Carlisle’s report on the Youth Courts Enquiry.
7
Marshall T. 1999. Restorative Justice: An Overview. Home Office London