Follow Up: Corporate Monitors

Kelley Drye Client Advisory

As a follow-up to a client advisory on corporate criminal liability, the United States Court of Appeals for the Second Circuit has just decided United States v. Ionia Management S.A., 07-5801-CR (1/20/09). In Ionia, the Court was given the opportunity to revisit and reconsider the wisdom of the prevailing law concerning the breadth of corporate criminal liability, namely that corporations can be criminally liable for the acts of its employee, regardless of the employer’s station in the company, so long as the conduct was within the scope of employment and for the benefit of the employer, even if contrary to the employer’s instructions or policies. Sadly, the Court declined the opportunity and actually treated the topic in an off-hand manner, hardly discussing the reasonable proposals that the corporate employee should be one having supervisory or management responsibilities in order to bind the corporation to criminal culpability, and that preventive policies in effect should provide an affirmative defense.

Ionia managed the M/T Kriton, a 600-foot oil tanker sailing under the Bahamian flag. Ionia was incorporated in Liberia and headquartered in Greece. While delivering petroleum products at ports on the east coast of the United States, the Kriton’s engine room crew, directed by the Chief Engineer, discharged oily waste water in violation of the Act to Prevent Pollution on Ships (“APPS”) (33 USC §§ 1901-1912) by failing to maintain” an oil record book (“ORB”) as mandated by 33 CFR § 151.25. The Court devoted most of its opinion to discussing whether the word maintain” obligated the Kriton to only keep possession of an ORB (as Ionia claimed) or if maintain” meant that the ORB had to be kept accurately (as the government alleged).

The Court accepted the government’s position. The Court’s extended discussion would be of interest to maritime and international practice attorneys, but the built-up anticipation awaiting the Court’s decision had to do with what it might say about Ionia’s criminal liability for the actions of non-managerial, non-supervisory employees. In just over a page, the Court brushed off the challenge, relying on sparse precedent without any analytic elaboration. So, if there is going to be any re-evaluation of this doctrine, it will have to come from an unlikely granting of certiorari in this case or from some other criminal case where a corporation makes the rare choice to fight the government.