Atrocities by juridical persons: We must charge and judge corporates as we do men

By Julius Mukono

“A corporation is a person, artificial, invisible, intangible, and existing only in the contemplation of the law. Being a mere creature of law, it possesses only those properties which the character of its creation confers upon it either expressly or as incidental to its very existence”

This statement mirrors the difficulty of prosecuting corporations, particularly on criminal charges, which is an issue that legal jurisdictions around the world have tried to address. We can all agree, however, that corporates must account for their wrongs fully. Although corporate criminal liability is still a raw section of legal jurisprudence, it is not enough excuse to let them off the hook.

For the fact that corporates are as independent as being legally recognised as juridical person, it is not in the interest of prevention to take only “the living minds” through the justice system. The juridical person must be charged and judged with the same scale of law as the human person. Corporate crimes more often than not have devastating effects on people and nations. The events in the USA and Europe in the early 1990s where corporates engaged in heinous crimes like fraud, anti-trust food and environmental hazards, tax evasion, workers’ deaths and obstruction of justice amongst others called for rapid and drastic change.

The effects of Bhopal Gas leaks in India, the Enron scandal in the US and the Golden-Berg in Kenya demonstrate that the current legal measures are not enough. There is currently the saga of Imperial and Chase banks, which seem like deliberate schemes to defraud investors. The absence of preventive measures as well as reductionist tendencies when dealing with postproduction effects of certain products is reflective of the “juridical person attitudes” on punishment available should the law be applied. It is not enough to apply administrative and civil approaches, even if it means that the directors (human persons) face jail terms. Corporates must get stiffer sentences. The law as is must be reviewed partly because the criminal justice system is silent on the crimes committed by the corporate.

Legal trajectory and the assumption of a guilty mind

Although CCL has been a subject of concern since the mid 19th Century, it has been acknowledged that a company bears no features that characterise a living person and a mind that can have knowledge or intention to be or not to be negligent. However, the corporate being a legal person and recognised in law, it has the capacity to sue and be sued in its own name hence the need to have or assume own representation. This has become a concern for many scholars, particularly because most statutes define and direct crime and the proportionate prohibition against a natural person. This aspect of law, unfortunately, establishes the platform upon which criminal liability performed by corporations is evaluated and monitored looking at the scales of justice.

Being legal persons, corporations are not configured to form mens rea, and as such their actus reus is an assist of the brains that run such institutions, despite the fact that they enjoy separate and independent legal status. The matter that is criminal liability by corporations is a growing discourse in the legal jurisprudence, particularly in Africa where corporates can be as powerful as governments. What makes criminal liability among corporations a subject of academic and legal investigation, as well as an inspiration to develop legal recourse, is the fact that corporations are considered in law as persons separate from the owners, shareholders and members under the veil of incorporation.

The case of “New York Central and Hudson River Railroad V. U.S.A” is foundational on actions against corporates’ criminality. The Defendant Corporation, New York Central & Hudson River Railroad Co. (Defendant), together with a managing agent within the corporation, were convicted of violating a federal law prohibiting the payment of rebates. Specifically, the corporation was prosecuted for the payment of rebates to the American Sugar Refining Company arising out of shipments of sugar from New York to Detroit. The Defendant was prosecuted under the “Elkins Act”, 32 Stat. 847, which held a corporation criminally liable for unlawful acts of its agents.

Travelling back to the days of “Salomon v. Salomon & Co Limited”, it is prudent to unveil corporates, specifically to understand the faces behind certain actions. Prosecution would only pass the legal test of separate corporate trials if they can allude evidence of the corporate being wired to commit crime even in the presence of the most law abiding brain or mind; otherwise right from the moment corporates are established there is a de-facto possibility, as was demonstrated by the matter in “Standard Chartered and Others v Directorate of Enforcement”, that they are configured to commit crimes and prima facie run away from prosecution. To give this debate more focus is the matter in “Macaura v. Macaura”, where the former (a real person) lost compensation from an insurance company simply because the matter at hand was a property of the insurance and not himself. The facts of the case are that a Mr Macaura owned an estate and some timber; he agreed to sell all the timber on the estate in return for the entire issued share capital of Irish Canadian Saw Mills Ltd. The timber, which amounted to almost the entire assets of the company, was then stored on the estate. On February 6, 1922, Macaura insured the timber in his own name. Two weeks later a fire destroyed all the timber on the estate, necessitating Macaura to make a claim under the insurance. In response the insurance company refused to pay arguing that Macaura had no insurable interest in the timber as the timer belonged to the company. In 1925 the issue arrived before the House of Lords who found that the timber belonged to the company and not to Macaura, even though he owned all the shares in the company; as such, Macaura had no insurable interest in the property of it. If the law separated the insurable interests between the two parties, company and the man, then it must endeavour to do the same in criminal matters. While all crimes must meet the measure of mens rea and actus reus, it is not fair to assume that the persons running the affairs of corporates are bent to subjugate the law for their own ends. This is misleading, particularly where the corporates they work for lack measures that can prevent or discourage their members or agents from mischief.

Without underestimating responses tried globally by different jurisdictions that are both preventive and reactive, particularly in Europe and the Americas, locally there is need to pursue a mechanism that address actions from the legal and human person. There is untold fear that punishing corporates does suffocate the environment for investments. However, of what good is it if the corporates exploit this gap to the advantage of founders and main shareholders? Adopting a system that is not only rehabilitative but which promotes reasonable retribution and predictability would reduce societal apprehension. It is not the sanity of the corporate world that these laws must address but that of ordinary citizens who seem left out by the judicial processes employed to solve corporate crimes. It is important that criminal justice lenses, rather than administrative and civil descriptions, strictly define crimes by corporates.

In order to have a codified, comprehensive and impressive law that deals with corporate criminal liability, there is need to define crimes that are commonly occasioned. Secondly there is urgency in consolidating all thematic wrongs in to one criminal law to address corporate crimes. Thematic distinguishing of wrongs tends to reduce the weight of crimes committed. A crime in mining, forestry, financial circles and environment should be able to have a common course and attract similar punishment.

Punishing the corporate

Vicarious liability, strict liability and imputed liability become lame if its austerity is left to human person. The concept of corporate criminal liability must be included in a reformed penal code, together with penal codes or systems. In this context therefore, there is an urgent need to consolidate the various theories in to a comprehensive legal document, which should as well address the menace with the might it deserves. Reading from the matter in “Garcia vs. Coffman”, legal logic demands that the principle of alter ego can be used to remedy the situation and discourage corporates from mischief, separate from the owners or managers.

In the foregoing, the following can be tried to scale down the degree of corporate criminal liability in Kenya. Kenya must run away from the identification theory and adapt the organisational liability model. This can be borrowed from practice in Canada and Australia where culpability can be assigned to prevent intentionally structured crime by corporates. This increases compliance among the corporates, and puts them into the criminal justice system.

Change punishment mechanisms

There is need to avoid sentencing that only prescribes monetary penalties, particularly considering the magnitude of corporate crimes. In this regard, lessons can be borrowed from the United Sates Sentencing Commission Guidelines that stipulate, under Chapter 8, the aim of the various sanctions as being remedial to the harm occasioned on the society.

Specifically, the guidelines focus on the divesture of profits obtained though the criminal act by the corporate and other measures that make crime quite expensive and unrewarding. Particularly the punishment should be able to include wind-ups, reduced trading space, like deregistration from stock exchange, and suspension from local and international markets.

Deterrent measures

Corporate wrongs first must be removed from the civil and administrative definitions. There is need to upgrade the judicial remedial measures that are deterrent. One of such instruments currently in the country is the New Company Act (2015). However, what is of essence is a responsive policy framework that is sensitive to the least and biggest corporate crimes. This trajectory should be able to have in place remedies that are geared towards enhancing justice on tenets of public accountability. These tenets may include acts like public apologies, probationary periods to allow compliance, road maps to remedy internal structures that abet crime(s), proportional compensatory measures equivalent to wrongs done and corporate social responsibility that constantly lets the public aware of the possible crime(s) by the corporates.

In consideration of all the tried measures, codification of various laws must be sought to address corporate crimes from common platform. This is to avoid situations where there is lack of specialisation amongst government or state prosecutors who attend to corporate crimes, hence allowing for formation of special courts to try corporate crimes away from “human courts” and allows criminal cases concerning corporates to be tried in the same courts like normal “human crimes.” It would be interesting to have a Corporate Crime Procedure Code, Corporate Liability Act and a reformed penal code that can try and borrow from the Manslaughter Act in the UK.