House Bill Would Make It Harder To Prosecute White-Collar Crime

CEOs could be off the hook for even gross negligence.
Jessica Marcotte via Getty Images

WASHINGTON -- House Republicans on Monday unveiled legislation that would decriminalize a broad swath of corporate malfeasance, a move that injects white-collar crime issues into the thus-far bipartisan agenda on criminal justice reform.

The public debate over criminal justice reform has focused on reducing severe sentences for nonviolent drug offenses. But some influential conservative voices, including the billionaire Koch brothers and the Heritage Foundation, have quietly advocated for curbing prosecution of corporate offenses as well.

The House bill would eliminate a host of white-collar crimes where the damaging acts are merely reckless, negligent or grossly negligent. If enacted, it would make it more difficult for federal authorities to pursue executive wrongdoing, from financial fraud to environmental pollution.

Department of Justice spokesman Peter Carr blasted the legislation in a statement provided to HuffPost, saying it "would create confusion and needless litigation, and significantly weaken, often unintentionally, countless federal statutes," including "those that play an important role in protecting the public welfare ... protecting consumers from unsafe food and medicine."

The House Judiciary Committee will begin marking up its criminal justice reform package, including the latest bill, on Wednesday. Chairman Bob Goodlatte (R-Va.) and Rep. John Conyers (D-Mich.), the panel's top-ranking Democrat, have been working on bipartisan legislation for months.

In October, the Senate Judiciary Committee approved related reform legislation that does not include language to limit white-collar crime prosecutions, although Sen. Orrin Hatch (R-Utah) had pressed for its inclusion.

"These are not esoteric matters," said Robert Weissman, president of the consumer advocacy group Public Citizen. "There is absolutely no reason for the otherwise laudable criminal justice reform bill to contain any measure to weaken already feeble standards for corporate criminal prosecution."

Hatch and other supporters of white-collar decriminalization efforts have pushed for "mens rea" reform -- a reference to the legal standard of intent which a defendant must have in order to be convicted of a crime. While current law allows corporate crime prosecutions of high-level managers based on negligent or reckless behavior, the House legislation would require many such offenses to be "knowing" crimes, in which executives were explicitly aware of the activity being conducted by other employees. In some cases, prosecutors would also have to prove that the executives knew that the activity was illegal.

"The House language violates the basic precept that 'ignorance of the law is no defense,'" Weissman said in a written statement.

Large, complex corporations can diffuse responsibility for illegal activity, which can make it difficult for prosecutors to prove that executives knowingly and willfully violated the law. CEOs can also pressure lower-level employees to violate the law without explicitly telling them to do so -- by, say, demanding profits or other results that are impossible to reach without breaking the law. Under current law, prosecutors can bring cases on the grounds that such behavior by executives is criminally reckless or negligent, even if they cannot prove the CEO was actually aware that underlings were breaking the law to meet impossible metrics.

In practice, however, corporate crime prosecutions are already relatively rare and frequently skip over executives and other top managers. "When employees are charged, it's often lower-level employees," University of Virginia law professor Brandon Garrett told HuffPost Live in September. "More the pawns than the kingpins."

The Justice Department has been heavily criticized for its weak enforcement against corporate crimes during the Obama years. No Wall Street executives were charged for the misconduct that caused the 2008 financial crisis.

Under the House bill, high-level corporate wrongdoers would have even less to worry about.

Zach Carter is The Huffington Post's senior political economy reporter and a co-host of the HuffPost Politics podcast "So That Happened." Listen to the latest episode here:

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