The responsible corporate officer doctrine imposes strict liability on corporate officers based solely on their area of responsibility within the corporation, regardless of their knowledge of the underlying criminal activity or their participation in it. Anyone involved in an industry that affects public health and welfare and who does not know about the responsible corporate officer doctrine should read on.
More than 70 years ago the Supreme Court in U.S. vs. Dotterweich held that a corporate officer in an industry directly affecting the safety of the public health could be held criminally liable for a misdemeanor violation of the Federal Food, Drug, and Cosmetic Act simply by reason of his position in the corporation. The defendant in that case was not the person responsible for sending adulterated or misbranded drugs into interstate commerce; however, he was in a position to prevent or correct the activity of the corporation.
Thirty-two years later, the Supreme Court again affirmed the responsible corporate officer doctrine in U.S. vs. Parks. The Court held the Food, Drug, and Cosmetic Act punishes, “neglect where the law requires care, or inaction where it imposes a duty” regardless of the corporate officers active involvement in the activity that caused the violation. The reason for this strict liability application of the criminal law was to hold those who failed to exercise the authority or supervisory responsibility, to prevent or correct, a violation of law that directly impacted the public safety, to the “highest standard of foresight and vigilance.”
Why should anyone be concerned about cases decided so long ago? Because members of Congress have repeatedly criticized the Department of Justice over the past few years for failing to prosecute individuals who violated the Food, Drug, and Cosmetic Act. In response, the Justice Department is using the responsible corporate officer doctrine to prosecute and convict corporate executives, regardless of their active involvement in activities that violate the Food, Drug, and Cosmetic Act.
The Justice Department also has used the responsible corporate officer doctrine under the Clean Water Act and the Clean Air Act to prosecute executives for environmental crimes committed by their corporations. But prosecutions are not limited to industries regulated by the Food and Drug Administration or the Environmental Protection Agency. Any corporate officer who operates in a regulated industry is vulnerable to prosecution under the doctrine.
Particularly those industries governed by public health and welfare regulations.
These industries include pharmaceutical companies, compounding pharmacies, medical-device companies, the retail-food industry, and the agricultural sector of the food industry.
What should an executive responsible for overseeing corporate compliance with government regulations know?
First, and foremost, do not simply delegate oversight to a junior employee, or committee, and rely on an “I didn’t know” or “I didn’t do it” defense. Under the responsible corporate officer doctrine the government doesn’t have to prove that you were “conscious of wrongdoing.”
The government only needs to prove that by virtue of the area of responsibility within the corporation, a particular person had the power to prevent the activity complained of.
In today’s climate, an executive must protect himself or herself through active oversight of the company’s compliance program.
The days of protecting oneself by putting the responsibility on a subordinate and doing nothing are long behind us.
Attorney Vicki Zemp Behenna is a member of Crowe & Dunlevy’s White Collar, Compliance & Investigations, Administrative Regulatory and Healthcare practice groups.