Rule of Law: Criminal Law

Facts 1: Sophie is the president of Tasty Foods Corporation, a wholesale grocery company. An inspection by Uri, a government agent, uncovers unsanitary conditions caused by Vic, a Tasty Foods employee, in the company’s warehouse. Will, a Tasty Foods vice president, assures Uri that the situation will be corrected, but a later inspection reveals no such corrections. Sophie knows nothing about any of this.

Issue: Can Tasty Foods be convicted of a crime in these circumstances? Define, explain, and decide

Issue: Can Sophie be held personally liable? Define, explain and decide

Facts 2: Fred, a successful stockbroker, gives a lecture about investing. Some of the persons who attend the lecture form Gain & Profit, an investment club, and ask Fred to advise them. Gain & Profit allows Fred to set up an account for the club with a brokerage firm and gives Fred control of the account, but does not authorize Fred to withdraw funds for his own benefit. Fred uses the money in the Gain & Profit account to repay personal loans. Charged with embezzlement, Fred defends his actions on the ground that he intended to repay the club.

Issue: Is Fred guilty of embezzlement? Why or why not? Define, explain and decide.

A corporation may be held liable for the crime of its employee if (1) the criminal act is within the scope of the employment and the purpose of the statute defining the act as a crime is to impose liability on the corporation, (2) the crime consists of a failure to perform a specific duty imposed on corporations by law, and (3) the crime was authorized by one of the corporation's "high managerial agents." Here, all of these elements exist. The unsanitary conditions in the warehouse are within the employee's scope of employment, the crime consists of a failure to keep the warehouse clean, and the crime was authorized by a company vice president. As for the president's personal liability, if she has the authority and the responsibility to deal with the situation, she can be held personally liable. A corporate officer must have the authority and the responsibility to deal with such situations. Personal liability is imposed in these circumstances, not because the corporate officer knew about the crime or intended it, but because the officer is in a "responsible relationship" to the corporation and has the power to prevent the crime. Under this "responsible corporate officer" doctrine, a corporate officer can be held liable for an employee's violations of the law. This liability may be imposed regardless of whether the officer participated in, directed, or knew about the violation.