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White Collar Defense & Compliance Developments in Criminal Law, Federal Case Law and Statutory Developments

The Responsible Corporate Officers Doctrine — Powerful Tool for Prosecutors

Posted in Statutory developments

Alain Leibman writes:

I was privileged on Saturday, March 24th, to speak as part of a panel addressing the ABA Business Law Section’s annual meeting in Las Vegas, Nevada on the subject of "New and Evolving Threats from the Responsible Corporate Officers Doctrine."  The RCO doctrine permits misdemeanor prosecutions without any proof of intent whatsoever, where the defendant corporate officer holds sway over an area of corporate activity in which there has been a violation of law by someone else in the company.

The RCO doctrine began its germination in the federal Food, Drug and Cosmetic Act, where its use was approved in an 1975 Supreme Court case to charge an officer with product misbranding, even though the officer had no culpable knowledge of the offending activity.  Its use has gained steam in the last five years and the Department of Justice has employed the doctrine in seeking prosecutions of corporate officers in the environmental area, as well.

While misdemeanor prosecutions might be thought of as a low-level threat, based on the assumption that misdemeanants do not go to jail, recent developments suggest otherwise.  First, a recent series of prosecutions of officers of a medical device company in the Eastern District of Pennsylvania, in which those officers pled guilty to misdemeanor violations under the RCO doctrine, led surprisingly to significant terms of jail for each of them, albeit no more than the 12 month maximum allowable for a misdemeanor conviction.  Second, the Department of Health and Human Services has recently handed down draconian periods of exclusion for corporate officers of another health care company who had pled guilty to misdemeanor violations pursuant to the doctrine and had not received jail sentences; these exclusions from the industry for periods of 10 years and more would effectively end the careers of those officers if upheld.

In short, defense counsel and in-house counsel need to be cognizant of the dangers posed by prosecutors’ aggressive use of this vicarious criminal liability doctrine, which marks a radical departure from the usual requirements of finding criminal intent (or at least negligence in certain environmental areas) before prosecuting.

(Alain Leibman, Esq., the author of this entry and a co-author of this blog, is a partner with Fox Rothschild LLP, based in our Princeton, NJ office. A former decorated federal prosecutor, he practices both criminal defense and commercial litigation in federal and state courts)