Corporate criminal records through company changes, and collateral effects of corporate convictions

Factual Questions
1

In the US, a corporation can go through changes in ownership by transfer of its stock, can be bought outright and become a subsidiary, can be reincorporated in a different jurisdiction, can be spun off, can spin off a subsidiary, can merge, undergo a change in management, etc., with or without a major change in corporate culture.

A major corporation in the US can be the end result of many mergers of several, if not dozens, of predecessor institutions.

In the US, a corporation can be convicted of a crime, separate and apart from convictions of stockholders, managers, and employees.

How does it work when a corporation has a criminal record and then undergoes changes?

(This is hypothetical) E.g. suppose it were discovered through researching newly-digitized records that one of the predecessor companies of a major corporation (say, IBM or something) was convicted of involuntary manslaughter in 1850 after they hired unqualified stagecoach drivers, at least one of whom then proceeded to lose control of the horses, who ended up trampling a pedestrian to death. Are there rules that would be followed to determine whether that conviction now attaches to IBM, making IBM a corporate ex-con?

And on a separate note, do corporate convictions carry collateral consequences (such as inability to possess a firearm, or sex offender registration)? E.g. if a corporation is convicted of a felony, does that mean that it can no longer employ armed security guards? Or, imagine this:

“Welcome to the employee orientation for Excite Adult Video, Inc. The first thing you need to know is that in 2005, the company was convicted of possessing child pornography, and is a registered sex offender. You must help make sure that we stay in compliance, so make sure that the “DANGER: Sex Offender Lives Here” sign is visible outside all company facilities, make sure that all computer account credentials are sent to the local PD, and that all facilities stay locked, with no public access, on Halloween.”

2

I don’t know about the first part of your question (which is very interesting) but I can answer the second part: One of the consequences is that convicted felons can not hold various federal and stat licenses. When Arthur Andersen, the accounting firm, was convicted of felonies, it lost it’s accounting license, rendering the firm effectively dead.

3

Bump, Inc.

4

To get some juices flowing, under the hypothetical situation with IBM above, it would seem unequitable to attach the conviction to IBM, since the practical connections between the IBM of today and that company long ago are tenuous. On the other hand, if the conviction is somehow severed by the corporate changes, it would seem like a crafty attorney could have a field day coming up with “reorganization plans” to free corporations from their convictions.

Chairman of the Board of a NY corp: “Good morning, gentlemen. I just got off the phone with our attorney, and he came up with a plan to get rid of our recent conviction. What’s going to happen is that my mom is going to start up a holding company, and we will sell the company to her holding company on credit. Then, all managers will be laid off for one week, then rehired with different titles. Then, we will go across the river to NJ where we will start up a new company, which will then buy the old company from my mom on credit, after which both debts will be cancelled. Then, all assets and employees will be transferred from the old company, now a wholly-owned subsidiary, to the new company, and we will officially close the subsidiary’s operations and list it as defunct, and take over it’s trademark name as the new name of our company. Then, we will emerge free of a criminal record and will be able to hold licences and government contracts again.”

5

The simplest answer is that companies cannot be criminally convicted. Individual officers of the company can be, but not the company itself. Therefore, the question doesn’t have a meaningful answer.

6

Note that schemes like this could be proposed to escape any debt. State law usually has rules about when successor liability attaches to a new corporation, and these rules will generally apply to corporate criminal liability in some fashion.

You’re a hundred years behind the times, I’m afraid. :wink:

7

See Arthur Andersen LLP v. United States, cited by friedo. The company was charged and convicted of obstruction of justice. That conviction was ultimately set aside by the Supreme Court, but on the basis of an error in the judge’s instructions to the jury, not on any principle of corporate immunity from criminal charges.

8

This is completely wrong. See post #2.

9

Point taken.

To go back to the OP, there is no such offence as corporate manslaughter in the U.S., although England and Wales now have such an offence.

The question of whether corporations can be tried for offences against a person has been debated in U.S. for 150 years, with courts coming down on all sides.

An excellent article on the history of such cases can be found in Can a Corporation Commit Manslaughter? Recent Developments in the United Kingdom and the United States, By Laurel J Harbour.

And this paragraph is especially relevant:

10

I don’t see why criminal penalties could not apply to a corporation. If the appropriate penalty for a real person were X years in prison, then sentence the corporation to cease trading for X years.

11

Back in the Middle Ages, some European jurisdictions would occasionally impose criminal liability on animals. You’ll occasionally see accounts of some town hanging a pig, for instance.

12

An example of the concept of deodand. Last used in England in 1841 against a railway, according to the wiki article, leading to the Fatal Accidents Act.

13

How did they get the evidence for the conviction? Did somebody squeal?

14

You don’t need to go too far into hypotheticals. This issue has cropped up recently with companies whose corporate ancestors failed to pay life insurance claims to Holocaust victims’ heirs or were involved in the slave trade.

15

Do you have any idea how easy it is to take down a coroporation and resurrect it under another name?

If anything came up like this the corporation would dissolve and re-invent itself under another name.

No company would ever worry about such a thing as if the restrictions are too much, they simply go bankrupt, dissolve and then come back under a brand new company

If two companies merge and it was going to be a potential issue, the companies would not merge, The lawyers and accountants would find another way to do it. It doesn’t even have to be a real issue, it could be a POTENTIAL issue.

I think the question is very interesting in theory. In real life, I can see anyone with any potential or real issues, continuing the company. After all you can BUY a name. The way AT&T was broken up and SBC eventually bought a lot of the baby bells then bought AT&T and resumed the name. AT&T today is not the same AT&T of the late 70s/early 80s.