Garoupa, Nuno --- "The economics of business crime" [2004] ELECD 83; in Sjögren, Hans; Skogh, Göran (eds), "New Perspectives on Economic Crime" (Edward Elgar Publishing, 2004)

Book Title: New Perspectives on Economic Crime

Editor(s): Sjögren, Hans; Skogh, Göran

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843766452

Section: Chapter 2

Section Title: The economics of business crime

Author(s): Garoupa, Nuno

Number of pages: 15

Extract:

2. The economics of business crime
Nuno Garoupa

INTRODUCTION

Recent developments in business and corporate crimes have sparked new
debate on the efficiency of different legal policies, including corporate
criminal liability and effective deterrence of business crime. After a series of
prominent cases in the 1990s (for example the collapse of Barings, the Drexel
affair), governments became increasingly concerned about internal control
mechanisms and the growing incidence of large-scale frauds. The imposition
of criminal penalties on senior management and on corporations was
considered. Nevertheless, in most European countries, corporate criminal
liability was not introduced and most reforms were aimed at directors and
employees, but not at corporations as legal entities. In some particular cases,
as in the EU Money Laundering Directive (1991), the directors become
criminally liable rather than the corporation when employees engage in money
laundering.
In the USA, but not generally in Europe, firms are criminally liable for
crimes committed by their employees within the scope of the firm and to its
benefit. The nature of corporate crime comprises essentially fraud (usually
against the government), environmental violations, and antitrust violations
(Cohen, 1996).
The recent scandals in the USA (for example accounting frauds by
WorldCom, Adelphia Communications, Xerox, the collapse of Enron and
Enron's auditors, Andersen) have reopened the debate on the use of corporate
criminal liability in achieving efficient deterrence.1 In fact, given the different
legal policies applicable to corporations in the USA and in Europe, an
interesting empirical open question is how different European ...