Calling for "vigorous enforcement of the criminal laws against corporate wrongdoers," U.S. Deputy Attorney General Eric Holder issued a 15-page memo earlier this year advising federal prosecutors on when to bring criminal charges against corporations.

The June 16 memo, "Federal Prosecutions of Corporations," "provides guidance as to what factors should generally inform a prosecutor in making the decision whether to charge a corporation in a particular case."

"The idea is that these guidelines would then be utilized as an informative guide for federal prosecutors," says Assistant Attorney General for the Criminal Division James Robinson. "And we will assess through the course of the next year how they are working, whether they ought to be modified in any fashion."

The memo begins with a general principle that "corporations should not be treated leniently because of their artificial nature nor should they be subjected to harsher treatment."

"Vigorous enforcement of the criminal laws against corporate wrongdoers, where appropriate, results in great benefits for law enforcement and the public, particularly in the area of white collar crime," the memo states. "Indicting corporations for wrongdoing enables the government to address and be a force for positive change of corporate culture, alter corporate behavior and prevent, discover and punish white collar crime."

The bulk of the memo discusses in detail eight factors that a prosecutor should consider in deciding whether or not to prosecute a corporation:

• the nature and seriousness of the offense, including the risk of harm to the public;

• the pervasiveness of wrongdoing within the corporation, including the complicity in, or condonation of, the wrongdoing by corporate management;

• the corporation's history of similar conduct, including prior criminal, civil and regulatory enforcement actions against it;

• the corporation's timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents, including, if necessary, the waiver of the corporate attorney-client and work product privileges;

• the existence and adequacy of the corporation's compliance program;

• the corporation's remedial actions, including any efforts to implement an effective corporate compliance program or to improve an existing one, to replace responsible management, to discipline or terminate wrongdoers, to pay restitution and to cooperate with the relevant government agencies;

• collateral consequences, including disproportionate harm to shareholders and employees not proven personally culpable; and

• the adequacy of non-criminal remedies, such as civil or regulatory enforcement actions.

In the area of cooperation, the memo says, "In gauging the extent of the corporation's cooperation, the prosecutor may consider the corporation's willingness to identify the culprits within the corporation, including senior executives, to make witnesses available, to disclose the complete results of its internal investigation and to waive the attorney-client and work product privileges."

But it also argues that "a corporation should not be able to escape liability merely by offering up its directors, officers, employees or agents in lieu of its own prosecution."

"It is not intended," says Robinson, "that you can trade off either way: trade off individuals for a corporate pass, or trade off a corporation plea for individual passes. That is not considered an appropriate trade off to be made."

Instead, Holder's memo says, prosecutors should consider a corporation's willingness to cooperate as merely "one relevant factor, one that needs to be considered in conjunction with the other factors, particularly those relating to the corporation's past history and the role of management in the wrongdoing."

Perhaps the most controversial section of the memo deals with collateral consequences, which puts forth the general principle that "prosecutors may consider the collateral consequences of a corporate criminal conviction in determining whether to charge the corporation with a criminal offense."

"Virtually every conviction of a corporation, like virtually every conviction of an individual, will have an impact on innocent third parties, and the mere existence of such an effect is not sufficient to preclude prosecution of the corporation," the memo states.

"In evaluating the severity of collateral consequences, various factors already discussed, such as the pervasiveness of the criminal conduct and the adequacy of the corporation's compliance programs, should also be considered in determining the weight to be given to this factor."

"For instance, the balance may tip in favor of prosecuting corporations in situations where the scope of the misconduct in a case is widespread and sustained within a corporate division (or spread throughout pockets of the corporate organization). In such case, the possible unfairness of visiting punishment for the corporation's crimes upon shareholders may be of much less concern where those shareholders have substantially profited, even unknowingly, from widespread or pervasive criminal activity."

Robinson says that the collateral consequence factor will not improperly protect corporations.

"The more this is aberrational conduct by a rogue employee," he says, "which is being done despite the very best efforts at the highest levels of a corporation to prevent the corporation from engaging in criminal activity — that's the setting in which perhaps some of these collateral consequences might become more appropriate for consideration."

— Russell Mokhiber