Company Criminal Liability- pt. 3 of Need for General Counsel

A company can be criminally liable for employees conduct if they are acting in scope of employment, even if contrary to company express instructions

Company Counsel As Chief Compliance Advisor

Every company needs to develop a code of ethics to define the company’s values, aspirations, and conduct, combining a concern for the law with ethical behavior.  Recent studies have shown that most business managers rely on the company’s chief legal officer–whether it be a lawyer in an outside firm, an outsourced general counsel, or the in-house counsel–to enforce the code of ethics, because unless the company can meet U.S. Justice Department guidelines, the company can be held criminally liable for the acts of its directors, employees, and officers—even if they are acting opposite to express written company policy.

Thus, it is not enough to adopt a code of ethics—they also must be enforced. A company counsel’s client is the company, not any individual officer, director or employee.  Therefore, if any manager or employee is under investigation for their activities, they should retain a personal lawyer and not speak with company counsel until they have discussed the matter with personal counsel.

Most courts will hold that a company or other employer can be criminally liable for crimes committed by an employee acting within the scope of their employment, even if such activity is expressly forbidden by company policy.

Here are the U.S. Justice Department guidelines on what situations it will not prosecute a company for criminal acts:

• The company had an effective compliance program in place and diligently tried to prevent the criminal behavior;
• The acts were not committed at the instruction or with the knowledge of the board of directors or members of top management;
• The company consistently reports the criminal misconduct of its employees to the authorities;
• The company cooperates fully in the investigation and prosecution of the individuals is involved.