Reforming corporate fraud regulation in the UK: a model of manifest liability.

Abstract

Under the common law ‘identification principle’ criminal fault can only be attributed to a corporation if a sufficiently senior individual, typically a director, is guilty of the offence in question. This is problematic in itself given the typically complex and decentralised organisational structures of large companies. However, it is particularly ill-suited to address instances of pervasive and systemic corporate fraud, such as may have been evidenced in the recent widespread mis-selling scandals. In response to the difficulties associated with the ‘identification principle’, various alternative approaches have been mooted. Whilst the realist nature of organisations is now widely acknowledged, proposals for reform implicitly perceive the need to prove criminal mens rea as problematic and therefore construct an altogether different basis of fault, such as negligence or the ‘failure to prevent’ model. However, whereas the negligence-type model fails to express adequately the deceptive nature of fraud, the ‘failure to prevent’ construct is equally ill-suited in that fraud is peculiar, it is not an activity in itself but the way in which an activity is performed. This thesis makes an original contribution to knowledge by identifying the legal principles and evidential mechanisms through which mens rea can be attributed directly to an organisation such that a corporate prosecution under the Fraud Act 2006 can be sustained without the need to identify individual criminality. Further, the proposed return to a manifest approach to fault attribution does not disturb the actus reus / mens rea construct of criminality and neuro-scientific advances made in relation to mirror neurons provide a radical new understanding of how fault can be ascertained in both individual and collective action. Accordingly, the perception that the manifest approach to fault is incompatible with the subjectivist ideology of the criminal law melts away with exciting implications for a theory of corporate criminality generally.