Elizabeth Warren’s Bill Would Punish Corporate Leaders for Wrongs They Didn’t Commit

Sen. Elizabeth Warren, D-MA: Introduced bill
to punish business executives for failing to
prevent employees from committing crimes

by Jonathan Zalewski & Jason Snead: Sen. Elizabeth Warren, D-Mass., has made every effort to rally left-wing populists to her cause—from promising to cancel student loan debt to breaking up big tech companies.

But one of her latest efforts highlights a problem that continues to plague our society: the politicization of the criminal law.

On April 3, Warren introduced the Corporate Executive Accountability Act. The bill would make it a federal crime, punishable by a year’s imprisonment for a first offense, for corporate executives and anyone else in a position of “responsibility and authority” to “negligently”—that is, by accident—“permit or fail to prevent” employee violations of any federal or state criminal law.

So, if a low-level employee defrauds a customer, Warren wants to hold the company’s CEO personally and criminally liable, even if the CEO had no knowledge of the employee’s crime.

It’s bad enough that Warren wants to lock someone up for someone else’s crime, but it gets worse.

Warren is so eager to jail businessmen that she wants to do so even if no crime was committed at all.

She defines “violation[s] of law” to include violations of civil law that “affects the health, safety, finances, or personal data” of 1% of either the U.S. population or the population of any state. The bill places no limits on what “affects” means, so it appears Warren would be comfortable sending people to prison for almost anything, even if the underlying conduct is not criminal.

Under her proposal, deferred or non-prosecution agreements (which may or may not include an admission of criminal wrongdoing) or settlements in civil cases against companies could form the legal basis for sending people to prison. It should be noted that in many of these instances, corporations have not been found by a court to be criminally guilty of or civilly liable for alleged wrongdoing.

It’s no secret that Warren has repeatedly called for the imprisoning of big American bank CEOs and wants to break up any company she deems too big, but the Corporate Executive Accountability Act would reach well beyond Wall Street and Silicon Valley.

The bill applies to corporations that earn more than $1 billion in annual revenue, which would cover “[r]oughly 2,000 U.S. companies, employing nearly one-third of all workers,” as John Wood with the Chamber of Commerce recently noted in The Wall Street Journal.

It would also affect far more than just “corporate executives.” Regulations define “executive officers” to mean a “president, any vice president … [and] any other officer who performs a policy making function.” Warren’s bill would expressly make leaders outside of that broad category liable, meaning she is potentially sweeping far lower in corporate hierarchies than the “fat cat” CEOs she frequently vilifies.

Warren’s proposal is, thankfully, unlikely to become law, but it reveals her willingness to inappropriately co-opt the criminal law to score easy political points with constituents.

Unfortunately, she is not alone. In recent decades, the misuse of the criminal law has become all too common for our country’s lawmakers. Since 1970, Congress has enacted more than half of the 4,500 criminal laws in existence today.

As former Attorney General Edwin Meese III has explained, the growing number of federal crimes is largely the result of political pressure, as politicians don’t want to be seen as “soft on crime.”

Politicians also know that “feel good” legislation—like the Corporate Executive Accountability Act—gives the public a sense that “something is being done” about something they do not like, even if that thing shouldn’t be a crime in the first place.

And although the number of crimes alone is staggering enough, the type of conduct that these laws prohibit is even more eye-opening.

Anglo-American law has a long history of using the criminal code to condemn only those acts which are inherently immoral and wrongful, like arson, murder, and robbery.

But, unlike those crimes, federal criminal law today makes crimes out of seemingly innocent or accidental conduct—behavior which, at worst, warrants a civil fine.

The Corporate Executive Accountability Act is of this same ilk.

Corporate executives are not above the law, but this bill goes further than ensuring “executive accountability.” It would impose harsh criminal penalties on corporate executives who, out of mere negligence (not malicious intent), fail to prevent the unlawful actions of their employees.

As Wood, himself a former U.S. attorney, wrote in his Wall Street Journal piece:
I am all for prosecuting executives who knowingly engage in misconduct. But negligence is an extremely low standard normally reserved for civil enforcement and tort law. It means that a violation should have been avoided through greater care but was accidental. By definition, negligent executives are unaware of any wrongdoing.We agree that this is a radical proposal. There are signs that even Warren herself recognizes this fact, which is why she limited it to leaders in billion-dollar corporations.

After all, if Warren’s genuine aim is corporate responsibility—and not merely locking up millionaire CEOs—shouldn’t she be applying these standards fairly and evenly to every business, large or small? Warren seems to understand that even the most progressive voters sour on the “lock ‘em up” strategy when the cops stop going after big banks and big tech, and start arresting mom and pop.

In addition to worsening America’s over criminalization problem, the net effect is that entrepreneurs will spend a lot less time innovating and a lot more time looking over their shoulders and micro-managing their employees.

The opportunity costs of all that risk-aversion will be significant, and Americans will see fewer jobs created, fewer life-changing products and services brought to market, and a less vibrant economy overall.

Warren’s proposal is an extreme example of the policy ramifications of liberals’ collective leftward lurch. It may prove popular with a progressive—and increasingly, socialist—base, but mainstream Americans should be alarmed by Warren’s vision of an anti-business police state.
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Jonathan Zalewski (@JMZalewski) is a visiting legal fellow and Koch associate at The Heritage Foundation. Jason Snead (@jasonwsnead) s a senior policy analyst in The Heritage Foundation's Edwin Meese III Center for Legal and Judicial Studies.

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