The Criminalization of American Business What do Bank of America, Citigroup, JPMorgan Chase, and Goldman Sachs have in common?  All paid hefty fines for purportedly misleading investors about mortgage-backed securities.  In fact, these companies paid the government a total of $50 billion in fines.  The payments were made in lieu of criminal prosecutions. Today, several hundred thousand federal rules that apply to businesses carry some form of criminal penalty.  That is in addition to more than four thousand federal laws, many of which carry criminal sanctions for their violation.  From 2000 to 2019, about 3,200 corporations either were convicted or pleaded guilty to violating federal statutes or rules. Criminal Convictions The first successful criminal conviction in a federal court against a company—the New York Central and Hudson River Railroad—was upheld by the Supreme Court in 1909 (the violation: cutting prices).  Many other successful convictions followed. One landmark case developed the aggregation test , now called the Doctrine of Collective Knowledge.  This test aggregates the omissions and acts of two or more persons in a corporation, thereby constructing an actus reus and a mens rea out of the conduct and knowledge of several individuals. Not all government attempts at applying criminal law to corporations survive.  Courts have sometimes found insufficient evidence to show that a company acted with specific intent to commit a crime.  Often, however, companies choose to reach settlement agreements with the government rather than fight criminal indictments. Many Pay Substantial Fines in Lieu of Prosecution More than four hundred corporations reached so-called non-prosecution agreements with the government from 2000 to the beginning of 2019.  These agreements typically involve multimillion- or multibillion-dollar fines.  This number does not include fines paid to the Environmental Protection Agency or to the Fish and Wildlife Service. According to law professors Margaret Lemos and Max Minzner, “Public enforcers often seek large monetary awards for self-interested reasons divorced from the public interest and deterrents.  The incentives are strongest when enforcement agencies are permitted to retain all or some of the proceeds of enforcement.” Questions Presented 1)Why might a corporation’s managers agree to pay a large fine rather than to be indicted and proceed to trial? 2)How does a manager determine the optimal amount of legal research to undertake to prevent her or his company from violating the many thousands of federal regulations? .

1. The Criminalization of American Business
What do Bank of America, Citigroup, JPMorgan Chase, and
Goldman Sachs have in common? All paid hefty fines for
purportedly misleading investors about mortgage-backed
securities. In fact, these companies paid the government a total
of $50 billion in fines. The payments were made in lieu of
criminal prosecutions.
Today, several hundred thousand federal rules that apply to
businesses carry some form of criminal penalty. That is in
addition to more than four thousand federal laws, many of
which carry criminal sanctions for their violation. From 2000
to 2019, about 3,200 corporations either were convicted or
pleaded guilty to violating federal statutes or rules.
Criminal Convictions
The first successful criminal conviction in a federal court
against a company—the New York Central and Hudson River
Railroad—was upheld by the Supreme Court in 1909 (the
violation: cutting prices). Many other successful convictions
followed.
One landmark case developed the
aggregation test
, now called the Doctrine of Collective Knowledge. This test
aggregates the omissions and acts of two or more persons in a
corporation, thereby constructing an
actus reus
and a
mens rea
out of the conduct and knowledge of several individuals.

2. Not all government attempts at applying criminal law to
corporations survive. Courts have sometimes found insufficient
evidence to show that a company acted with specific intent to
commit a crime. Often, however, companies choose to reach
settlement agreements with the government rather than fight
criminal indictments.
Many Pay Substantial Fines in Lieu of Prosecution
More than four hundred corporations reached so-called non-
prosecution agreements with the government from 2000 to the
beginning of 2019. These agreements typically involve
multimillion- or multibillion-dollar fines. This number does not
include fines paid to the Environmental Protection Agency or to
the Fish and Wildlife Service.
According to law professors Margaret Lemos and Max Minzner,
“Public enforcers often seek large monetary awards for self-
interested reasons divorced from the public interest and
deterrents. The incentives are strongest when enforcement
agencies are permitted to retain all or some of the proceeds of
enforcement.”
Questions Presented
1)Why might a corporation’s managers agree to pay a large fine
rather than to be indicted and proceed to trial?
2)How does a manager determine the optimal amount of legal
research to undertake to prevent her or his company from
violating the many thousands of federal regulations?