Corporate lawyers reject calls for 'death penalty' in white collar crimes

Proposals to impose a 'corporate death sentence' against businesses that break the law have been rejected by corporate lawyers.

During a debate run by Thomson Reuters legal business, 63 per cent of in-house counsel and lawyers from leading City firms voted against the motion 'creating a Corporate Death Penalty would stop companies from breaking the law'. By comparison 26 per cent of lawyers voted in favour of the statement.

In a lively discussion, a distinguished panel of speakers argued whether the threat of wiping out shareholders, and replacing the board of directors, would be enough of a deterrent to curb corporate misbehaviour; and, furthermore, would such action be counterproductive by causing collateral damage to innocent employees and suppliers?

In addition, the panel considered what action would get company boards to sit up and take notice of concerns over economic crime, and questioned whether competition between regulators to impose supersized fines has had a positive effect.

Speakers in favour of the motion included Channel 4 News' economics editor Paul Mason, and the former CEO of the Olympus Corporation Michael Woodford.

Woodford, perhaps best known as a whistleblower and leading witness in a Serious Fraud Office (SFO) prosecution of Olympus and its UK subsidiary Gyrus, said that more action needed to be taken to hold directors accountable for corporate wrongdoing. Woodford said that his experience had taught him how quickly fellow directors will move to avoid taking responsibility for dealing with economic crime when it is discovered.

The former Olympus chief sounded the alarm in 2011 over a £1.1bn fraud at the Japanese camera and optical instruments company. However, during the Thomson Reuters debate, Woodford said that he was cautious of the amount of value that would be destroyed and the disruption that would be imposed on an economy if one of the UK's largest businesses was shut overnight.

Speakers against the motion included the former banker, and now senior lecturer at Cass Business School, Peter Hahn, as well as the former principal legal adviser to the Director of Public Prosecutions (DPP) Alison Levitt QC, now a partner and head of business crime at Mishcon de Reya.

Levitt argued that the likelihood of being caught would have a more significant deterrent effect than the severity of the punishment. In addition, she said that the victims of white collar crime should be given the legal right to a full and proper investigation. This highlights the suggestion that the police and SFO are often criticised for failing to fully investigate complex white collar crimes due to budgetary constraints.

Levitt also said that the introduction of vicarious liability of directors for the misbehaviour of their staff would have more of an impact on the attitudes of boards than a corporate death sentence. She suggested that this is currently the direction in which legislation is moving, with proposals to create a new law criminalising the failure to prevent an economic crime.

John van der Luit-Drummond is deputy editor for Solicitors Journal
john.vanderluit@solicitorsjournal.co.uk | @JvdLD