Business Crime: What to Do When the Law Pursues You
In 1997, U.S. federal agents had launched a series of no-warning searches in the largest for-profit health care provider in the United States. The chairman’s public stated government investigations are matter-of-fact in health care.
Years later, the investigation continues and most senior management has been replaced. Numerous executives have also been indicted while two are appealing for jail sentences. However, other investigations and suits were launched against the company.
Keep in mind that in the United States, such cases are becoming more and more common. Senior managers must expect to confront, at some time, a serious allegation that the company and its managers have committed a crime such as stealing, for example, that may arise in a non-business setting. However, the violation of the criminal provisions of the complex regulations is sometimes enforced. Keep in consideration that some companies avoid these regulations that deal with securities, antitrust, the environment, as well as government procurement, financial services, health care, and other aspects of the business. Along with this, criminal provisions are also invoked more than the public record suggests as many disputes with the government are officially noncriminal yet involve threatened criminal proceedings.
In years past, when a company faced an allegation of criminal activity, they had a one-dimensional strategy: to avoid guilt. Their response involved circling the wagons and opposing the government at every turn. However, now this strategy is rarely used. The reason is that companies are responding to complex considerations. This cluster comprises three key areas. The manager’s task starts with understanding each one.
Bear in consideration, the crimes are punishable. The general criminal law uses prison as well as stigma as leverage, but, for corporations, jail is impossible. Corporations can, however, be subject to substantial monetary fines. Corporations are more vulnerable to large fines because the distinction between civil and criminal enforcement has blurred.
Avoiding a Second Wave of Legal Problems
Management should act promptly in order to avoid secondary legal problems that arise from investigations. Lying with evidence is a serious offense and sometimes they are more serious than the offenses that triggered the investigation. For this purpose, criminal lawyers are good at spotting cover-ups and they respond harshly both to reinforce their powers and maintain the integrity of the process.
Who Takes Charge?
Responsibility for guiding the company from the crisis must be vested above the highest level of management for direct misfeasance of supervision. If that comprises senior management, responsibility must be placed with outside directors.
Such kinds of crises require special skills as well as indicate a management failure. However, a lawyer will have a central role because they will assess the case against the company. They also coordinate a defense to criminal, administrative, and civil threats.
Figuring Out the Problem
The company will want a formal internal investigation that needs to be done right because the overall results can get a hard look from within and outside the company. Along with this, the principle of placing responsibility above the highest level of management may be scrutinized and applies here.
The company is required to indicate what went wrong, not only legally, but operationally too. The most crucial question the company should ask is either it owns the challenged conduct of the rogue employees or not.
Once the company is successful in making its assessment of what went wrong, it tries to convince the regulators. It may have a substantial impact if not successful. Along with this, the company may also share its good-faith evaluation of the managers. It can range from backing some managers to encouraging the prosecution by disciplining some managers as well as helping them defend against criminal liability.
This article has been published in accordance with Socialnomics’ disclosure policy.