Proposed CEAA - Bending the Space-Time Continuum to Find Criminal Culpability of Corporate Executives

By Joel Schwartz, Nicci Warr and Bill Thomson

Two core principles of American criminal liability are: (1) a crime does not occur unless the accused has both criminal intent (mens rea) and commits a criminal act (actus reus); and (2) the intent and the act must occur at the same time.1 Many commentators have decried the "responsible corporate officer" or "Park" doctrine—which creates criminal liability for corporate executives working in the FDA space when a crime is committed on their watch and they were in a position to do something about it—on the grounds that it is a strict liability crime or, as courts have interpreted it, requires only a negligence standard of mens rea.

This week, Senator Elizabeth Warren introduced the Corporate Executive Accountability Act (CEAA). As written, under the CEAA a corporate executive cannot know he is committing a crime at the time it is happening, and may not know for years after. This is troubling as a matter of law, and it also poses a risk of bad practice for criminal practitioners on both the prosecution and defense side.

The Park Doctrine and the FDCA 

The Food Drug and Cosmetic Act (FDCA) criminalizes certain violations of the Act.3 As the Supreme Court has noted, the Act does not require “consciousness of wrongdoing” to assign criminal liability. See United States v. Park.2 In other words, it is a strict liability statute. Individuals who take part in the prohibited actions—such as introducing adulterated or misbranded food or drugs into interstate commerce—can be found guilty without any showing of mens rea.

The “responsible corporate officer” doctrine—also called the Park doctrine—holds corporate officers in positions of authority to be criminally liable for violations of the FDCA without regard to their involvement with or awareness of the alleged violation. According to the Supreme Court in Park, where a statute does not require a showing of consciousness of wrongdoing, an omission or failure to act where the individual had the power to prevent the alleged violation “is a sufficient basis for a responsible corporate agent’s liability.”4 For such statutes (like the FDCA), “the Government establishes a prima facie case when it introduces evidence sufficient to warrant a finding by the trier of the facts that the defendant had, by reason of his position in the corporation, responsibility and authority either to prevent in the first instance or promptly to correct the violation complained of, and that he failed to do so.”5 The Park doctrine thus allows corporate executives who were not personally involved in the prohibited actions to be found criminally liable on a negligence standard.6

CEAA Applies Park to Any Crime, and Then Takes it Further

The CEAA makes it a federal misdemeanor for an executive officer of a corporation that generates more than $1 billion in annual revenue to negligently permit or fail to prevent or remedy violations of law. "Violations" are defined as any criminal violation of federal or state law that results in a conviction, deferred prosecution agreement or non-prosecution agreement for the corporation. “Violations” also include any civil violation of federal or state law that affects the health, safety, finances, or personal data of a sufficient number of people and results in a finding of liability or a settlement agreement with the corresponding government entity. Finally, “violations” include any violation of civil or criminal law (state or federal) where the corporation is found guilty or enters a settlement agreement and the alleged acts occurred while the corporation “was operating under a civil or criminal judgment of any court, a deferred prosecution or non-prosecution agreement, or settlement with any State or Federal agency relating to a different criminal or civil violation.”

On the one hand, the CEAA might merit praise for making explicit on its face what the courts have had to interpret into the Park doctrine. Specifically, the statute requires on its face a finding beyond a reasonable doubt that the corporate executive acted negligently. Putting this language into the statute avoids criticisms that courts are overreaching or legislating by judicially finding a mens rea threshold that Congress did not impose.

On the other hand, is the proposition that the corporate executive's potential criminal liability is made contingent on a completely separate act that is unrelated to the underlying alleged violation—e.g., the conviction or settlement of the corporation. It is not unusual for a corporation to "throw an individual under the bus" by revealing the findings of an internal investigation to the government in exchange for a better outcome for the company. But it is a wholly different animal to make the charging and disposition of another entity a necessary element of the corporate executive's crime.

This is not a situation akin to a "felon in possession" charge, where an accused's own prior acts (previously committing a felony) puts him in jeopardy of a new conviction. Rather, it is the acts of another—the company, the prosecutor, and potentially a jury—conducted months or even years later—that completes the executive's crime. Nor is this a conspiracy charge, where different members agree to commit different acts (all of which may not occur at the same time) to pursue the same criminal goal. There is no agreement here by the executive that the corporation plead guilty, enter a DPA, etc., to achieve a common unlawful end. So the mental state of the company cannot be attributed to the executive.7

Since no "guilty mind" can be attributed to the executive at the time that this "element" of his crime is committed, there is no contemporaneity of criminal intent and unlawful act. Hence, under basic principles of criminal jurisprudence, there can be no crime by the executive. Moreover, the act of the corporation, e.g., pleading guilty, is not one that is within the ambit or purview of his job as corporate executive.8 He has neither control over nor responsibility for this element – i.e., it is not a crime the corporate executive can choose (or not) to commit. This is the sort of vicarious liability that critics of the Park doctrine fear. That is, the CEAA takes Park even further by applying it to a wide swath of state and federal laws. And the law creates necessary complications and potential due process issues by hinging criminal liability on the acts of others that take place long after the alleged underlying violation.

CEAA Makes for Bad Criminal Practice

As drafted, the CEAA has a number of practical implications that are problematic. First, by tying the criminal liability of an executive officer to a conviction or settlement of the corporation, the CEAA is taking away discretion from line prosecutors about how best to charge and prosecute their cases. The “Yates Memo” issued by the Department of Justice in the fall of 2015 stated that prosecutors should focus on individuals from the inception of the investigation. If the criminal act of the executive is not “complete” until the corporation is found guilty or enters a settlement agreement, this will hinder the ability of prosecutors to work the investigation in the manner they deem most appropriate.

Indeed, even if there is a non-prosecution agreement (NPA) for the corporation, problems abound for the prosecutor. For, in deciding whether to offer an NPA, a prosecutor is supposed to assess whether the cooperation provided by the recipient of the NPA is vital to pursue a conviction of someone who has greater relative culpability.9 In the case of the CEAA, there is created a perverse incentive for the government to forego the felony prosecution of a company whose behavior (or the behavior of the main actors) was, say, reckless (or greater), in order to pursue the misdemeanor prosecution of someone who acted negligently.

Second, the CEAA raises a number of complicated legal issues. For instance, when does the statute of limitations start to run for the “negligence crimes” given that the crime is not “complete” until months or years after the underlying alleged violation? Does a “violation” of civil law include instances where the underlying alleged violation of state or federal law occurred while the corporation was “operating” under a civil judgment for money damages? Not only are these questions difficult to answer, but the answers themselves may raise additional legal questions and problems.

Finally, by tying executive criminal liability to the conviction or settlement of the corporation, the CEAA is actually working against the stated policy goals of its sponsor. If a company goes to trial and wins, its executives cannot be prosecuted under the CEAA. Although it may seem unlikely that an executive would be found guilty when the corporation was not, that is the exact scenario that occurred in one of the cases on which the Supreme Court’s Park decision was based. In United States v. Dotterweich,10 prosecutors brought charges against a pharmaceutical company and its president for alleged violations of the FDCA. The jury found the corporation not guilty, but found the president guilty. If the goal of the CEAA is to make it easier to prosecute executives—as the sponsor of the bill has stated—then hinging executive criminal liability on the outcome of the corporation’s liability is a strange manner to achieve that goal.

  1. See United States v. Apfelbaum, 445 U.S. 115, 131 (1980) (“In the criminal law, both a culpable mens rea and a criminal actus reus are generally required for an offense to occur.”); 1 Wayne R. LaFave, Substantive Criminal Law 6.3(a) (3d. ed. 2018) (“[I]t is a basic premise of Anglo-American criminal law that the physical conduct and criminal mind must concur.”); United States v. Bailey, 444 U.S. 394, 402, 100 S. Ct. 624, 630–31, 62 L. Ed. 2d 575 (1980) (“Criminal liability is normally based upon the concurrence of two factors, ‘an evil-meaning mind and an evil-doing hand.”).
  2. See 21 U.S.C. § 333(a).
  3. 421 U.S. 658, 670–71 (1975).
  4. Park, 421 U.S. at 670.
  5. Id. at 673–74.
  6. See, g., Park, 421 U.S. at 679 (Stewart, J. dissenting); United States v. DeCoster, 828 F.3d 626, 636-37 (8th Cir. 2016) (Gruender, J., concurring) (Park requires a finding of negligence, else it would improperly render defendant "vicariously liable for violations of others").
  7. Smith v. United States, 568 U.S. 106 (2013) (“meeting of the minds … constitutes the conspiracy”); United States v. Johnson, 789 F.3d 934, 940 n.1 (9th Cir. 2015) (“The essence of a conspiracy is a ‘meeting of the minds’.”).
  8. See LaFave, supra, § 6.3(a); United States v. Schwarte, 645 F.3d 1022, 1032 (8th Cir. 2011) (requiring that a defendant’s mens rea must “actuate” the actus reus).
  9. See Justice Manual, Principles of Federal Prosecution, § 9-27.620
  10. 320 U.S. 277 (1943)
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