The race for the 2020 Democratic presidential nomination is approaching a record number of candidates, Each candidate will be proposing legislation and plans for the nation’s criminal justice system—something we all should study.
Take, for example, criminal justice proposals currently being advocated by one of the Democratic front-runners, Sen. Elizabeth Warren.
During her seven years in the U.S. Senate, Warren has introduced many pieces of legislation, including the Ending Too Big to Jail Act along with corresponding plans to break up big banks and corporations and place serious taxes on the wealthiest people in America. Recently, she introduced the Corporate Executive Accountability Act, redefining when a CEO can be charged with fraud. Critics of the proposed legislation say it will create a new form of mass incarceration that cannot be supported.
What Exactly Is the Corporate Executive Accountability Act?
The Corporate Executive Accountability Act says “It shall be unlawful for an executive officer of a covered corporation to negligently permit or fail to prevent” fraud and other related charges.
The word “negligently” is troubling for any criminal defense attorney.
Negligence is defined as “a failure to behave with the level of care that someone of ordinary prudence would have exercised under the same circumstances. The behavior usually consists of actions, but can also consist of omissions when there is some duty to act.”
The last sentence is important. A defendant could negligently cause harm by failing to take action.
In other words, even if a CEO were unaware of fraud happening within their company, or unaware that someone within their company is breaking the law, they could still be held criminally liable.
What Could Happen to CEOs Under Warren’s Bill?
What penalties would they face?
The senator’s legislation proposes that in addition to civil penalties and fines, CEOs could face up to one year in jail for a first conviction and up to three years in jail for a second.
The bill targets CEOs who run a company with over $1 billion in annual revenue, and would force these corporate leaders to create internal police agencies to monitor and investigate their company’s employees in order to prevent their own charges and conviction.
Will This Bill Really Cause Mass Incarceration?
A cursory examination of Sen. Warren’s proposed legislation runs counter to other criminal justice positions taken by the outspoken lawmaker. For example, the senator has said in previous speeches that the nation’s prison system is something that Americans should be ashamed of.
So why is she proposing putting more people in jail? Would this cause mass incarceration?
There are only a couple hundred businesses throughout the United States that make $1 billion or more in annual revenue. Even if you caught and jailed all of the CEOs Warren’s legislation would apply to, it would pale in comparison to the 76,000 people currently in the federal prison system for drug offenses, most of which are petty offenses.
Critics, on the other hand, charge that Warren’s legislation could create disturbing new precedent for how and when people may be found guilty for white collar crimes. The natural instinct of a criminal defense attorney is to embrace this criticism because the senator’s legislation is a radical departure from the traditional definition of criminal intent. Criminalizing a lack of knowledge by a corporate CEO that a lower level employee has engaged in fraudulent behavior is extreme, by any measure.
If you happen to be running a billion-dollar-plus company, should you worry?
It seems to us that Warren’s proposed legislation is political theatre. The senator knows the legislation will never leave a senate committee, much less being enacted by the entire body.
That being said, the proposed Warren legislation invites discussion – not just because it was introduced by a current presidential candidate, but because it should remind corporate leaders of their responsibility to take immediate action when criminal wrongdoing is discovered in their companies.
Current Fraud Laws for CEOs
Whether you own a billion-dollar business or just a small enterprise, it’s important to know when you are responsible for fraud in the United States.
Currently, fraud is defined as the “intentional deception or misrepresentation used to benefit yourself or someone else.” Intention is important; a prosecutor will have to prove that you knew you were committing fraud and that you intended to commit fraud through your actions.
There are many different types of federal fraud that a CEO or a business person can commit, including:
- Mail fraud
- Wire fraud
- Tax fraud
- Securities fraud
- Financial fraud
All of these charges are very serious, especially when they involve federal institutions or people in different states. Just last month, the President’s former campaign manager, Paul Manafort, was sentenced for various types of fraud. He will be behind bars for 47 months and have to pay $50,000 in fines. Manafort will also have to pay a whopping $24 million in restitution.
Have you been charged?
There are ways to defend against fraud, including fighting the idea that you actually intended to do it. Negligence could actually help in your case, but you will need a strong argument for this or any similar defense strategy to keep you out of prison.