There’s a lot of confusion among both the general public and business owners about the distinction between individual criminal charges and corporate criminal activity. When it comes to businesses that have violated the law, many people are unaware of what consequences occur. Most corporations have legal obligations to their employees, to their shareholders and to their customers. These responsibilities leave room for potential illegal behaviour on behalf of the corporations.
Unlike individuals, a business cannot be incarcerated, which means that the form of punishment can vary greatly, fines being the most common, in addition to the loss of business licenses and regulation by government agencies.
However, for certain crimes, such as corporate fraud or negligence, executives or corporate officers can face criminal penalties.
What is a Criminal Charge?
The Mesa criminal defense lawyer Jackson White describes criminal charges as a term that is used to describe a range of different crimes, ranging from shoplifting, domestic violence, drink driving, possession of narcotics, hit and run, fraud, armed robbery, among many others. This suggests that criminal charges are more suited to the individual instead of the corporation, with the standout exception of fraud.
The vast range of criminal charges can be divided into ‘four primary categories: personal crimes, property crimes, inchoate crimes, statutory crimes and financial crimes.’ Personal crimes are those that result in the physical or mental harm of another. Property crimes involve interference with someone else’s property, for example, theft.
Inchoate crimes refer to those that began and weren’t completed. Inchoate crimes can include the above categories, specifically referring to the crimes specifically prohibited by a statue.
Lastly, the term ‘financial crime’ can include deception or fraud for financial gain. These can include blackmail, embezzlement, money laundering, tax evasion and cybercrime. When it comes to financial criminal crimes, confusion can arise, as the punishment for an individual differs from that of a corporation.
What is Corporate Fraud?
Fraud can be defined as ‘making material misrepresentations or using deception for the purpose of financial gain.’ When a corporation commits fraud, there is the opportunity for those affected parties to sue the business at court. This allows the individual to gain financial compensation in addition to punitive damages.
In more extreme circumstances, it is possible for a district attorney or attorney general to bring criminal charges against the corporations, that are brought upon those felt most responsible for the crime.
What are the consequences of Securities Fraud?
Securities fraud, a crime often referred to as investment fraud, ‘is a type of serious white-collar crime that can be committed in a variety of forms but primarily involves misrepresenting information investors use to make decisions’. A securities fraud can be committed by an individual such as a trader, who has been involved in insider trading, or by cooperation, for example, an investment bank.
The consequences of securities fraud changed in 2002 when the Sarbanes-Oxley Act came through. This act means that corporations can face very serious penalties for committing this type of crime. The act brings particular consequences to individuals who provide inaccurate information on companies financial records, specifically, corporate financial officers and chief executive officers. For the most cases, these individuals can face up to 10 years in prison and $1 million fine.
So what are the most common penalties corporations can face?
When a corporation is in violation of the law, the most common consequence is the imposition of fines or punitive damages. The amount that is paid in damages is usually decided by a judge, jury, or state attorney general. Depending on the crime committed, a corporation can be responsible for paying restitution to those who have suffered financial harm as a result of the corporation. Some corporations may face injunctions, which are court orders that make certain behaviours illegal.
What about Prison Sentences?
For corporations that have been judged to be in intentional violation of the law, liability may go beyond imposing penalties on the corporation’. Depending on their involvement in the crime, shareholders, directors, and officers among other employees can face the consequences of illegal behaviour.
The style by which those involved are prosecuted depends on the specific case at hand. It is possible for parties to be prosecuted individually, and it can be held as a collective trial. There is also a tactic by which those accused prove that the owners and operators of the corporation should be held responsible for its actions.