Privately-held Lindsey Manufacturing is the only corporation to ever face a full jury trial for alleged FCPA offenses.
It lost at trial but eventually won a dismissal because of prosecutorial misconduct.
A jury trial, though, means jury instructions. And the instructions Judge Howard Matz gave the jury teach a critical lesson about corporate liability for FCPA offenses. His instructions reflect the American legal doctrine of respondeat superior.
Respondeat superior makes corporations responsible for crimes committed by agents or employees when they’re acting at least in part for the benefit of their employer or principal.
Because of respondeat superior, there’s no good-faith or compliance defense for companies accused of FCPA offenses. So for purposes of ultimate criminal responsibility, compliance programs don’t matter.
The DOJ can and does consider compliance programs when deciding whether to charge a company or bring an enforcement action. And the DOJ can and does consider a compliance program when negotiating penalties a corporate defendant should pay to resolve FCPA offenses.
But all that is within the discretion of the DOJ. Companies can’t win if an employee or agent committed an FCPA offense. There’s no defense. So the DOJ holds all the cards.
Don’t blame the DOJ for respondeat superior. It was the courts that created the American version of respondeat superior, through a series of cases across circuits and eras. The U.S. Attorney’s Manual has a good recap of the legal authorities here.
The DOJ, like the rest of us, has to live with respondeat superior. So it uses its discretion to soften the impact of the doctrine and encourage compliance. That’s partly what the Pilot Program is about. Companies that have effective compliance programs are far less likely to be prosecuted than those without effective compliance programs.
The U.S. Sentencing Guidelines also attempt to reward companies that have effective compliance programs, and punish them for not having one. But there’s nothing in the Sentencing Guidelines that would stop a conviction based on respondeat superior. At trial, in front a federal judge or jury, there’s no discretion when it comes to corporate liability. Respondeat superior takes over.
It automatically imposes criminal responsibility on corporate defendants, even if there was a compliance program, even a wonderful compliance program.
Here’s how the U.S. Sentencing Commission described respondeat superior in its May 2004 release:
Criminal liability can attach to an organization whenever an employee of the organization commits an act within the apparent scope of his or her employment, even if the employee acted directly contrary to company policy and instructions. An entire organization, despite its best efforts to prevent wrongdoing in its ranks, can still be held criminally liable for any of its employees’ illegal actions.
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This is how Judge Howard Matz instructed the jury in the case against Lindsey Manufacturing. The company was on trial in 2011, along with its CEO Keith Lindsey and CFO Steve Lee.
Lindsey Manufacturing Company is a corporation. A corporation may be found guilty of an offense. A corporation acts only through its agents and employees, that is , those officers, agents, employees, or other persons authorized or employed to act for it.
To sustain the charge of conspiracy to violate the Foreign Corrupt Practices Act (“FCPA”) or violation of the FCPA against Lindsey Manufacturing Company, the government must prove the following propositions:
First, the offense charged was committed by one or more agents or employees of Lindsey Manufacturing Company;
Second, in committing the offense, the agent or employee intended, at least in part, to benefit Lindsey Manufacturing Company; and
Third, the acts by the agent or employee were committed within the authority or scope of his employment.
For an act to be within the authority of an agent or the scope of the employment of an employee, it must deal with a matter whose performance is generally entrusted to the agent or employee by Lindsey Manufacturing Company.
It is not necessary that the particular act was itself authorized or directed by Lindsey Manufacturing Company.
If an agent or an employee was acting within the authority or scope of his employment, Lindsey Manufacturing Company is not relieved of its responsibility because the act was illegal.
Richard L. Cassin is the publisher and editor of the FCPA Blog.