Under the responsible-corporate-officer doctrine, a corporate officer faces criminal liability based solely on the officer’s position of authority within the company. See United States v. Dotterweich, 320 U.S. 277 (1943); United States v. Park, 421 U.S. 658 (1975). But prosecutions under this theory have been limited to violations of “‘public welfare’ or ‘regulatory statutes’ that encompass a strict liability standard” and that typically involve misdemeanor offenses. 1 Treatise on the Law of Corporations § 8:22 (3d ed.). Outside this limited context, individual criminal liability is otherwise almost always based on individual conduct or concerted criminal activity prosecuted as conspiracy or aiding and abetting.
However, the SEC’s recent administrative charges against SAC Capital Advisors’ owner, Steven A. Cohen, for failing to supervise two employees who engaged in insider trading may portend an effort by prosecutors to target corporate officers on the basis of supervisory liability beyond the narrow class of public-welfare statutes that have supported prosecutions up to this point. In particular, prosecutors may seek to craft such a theory of criminal liability based on conscious avoidance, a well-established criminal-law concept. While such an effort should fail for the reasons described below, it is nevertheless prudent to think about the possibility of such a theory of criminal prosecution and ways to combat it.