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Introduction
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| 1 Introduction Anthony S. Barkow and Rachel E. Barkow The simple account of America’s system of separated powers has legislators responsible for making laws, the executive branch (and prosecutors within it) charged with enforcing the laws, and judges with the power to adjudicate any disputes by declaring what the law commands. Two aspects of our modern government that have disrupted this paradigm—judicial and agency policymaking—have become scholarly obsessions. But there is another, equally strong challenge to the traditional separation-of-powers framework that has received far less attention: prosecutors who regulate. The constitutionally limited role of the prosecutor is to “take care that the laws be faithfully executed”—that is, to enforce the policies laid down in laws enacted by the legislature. Whether this was ever true, it is certainly not the case today that prosecutors are merely enforcing preestablished rules. Armed with expansive criminal codes and broadly worded statutes, plus the ability to threaten harsh and often mandatory sentences, prosecutors have so much leverage in negotiations with defendants that they have, for all practical purposes , taken on the role of adjudicator as well. The prosecutor alone sometimes decides a defendant’s liability and sentence. This adjudicative authority gives prosecutors leverage to engage in lawmaking power as well. Because criminal laws themselves are broad, power is delegated to prosecutors to define what those laws mean, establish what conduct within the broad parameters of the law they wish to target, and dictate how that conduct should be punished. This power is akin to that of administrative agencies to define the meaning of regulatory statutes.1 One could argue, however, that, despite its scope, this kind of regulatory power is inherent in executive power. The power to charge will necessarily include some policymaking given the necessary breadth in the way laws are written. But prosecutorial regulatory power has gone further than the incidental power to regulate that comes with enforcement discretion. In the area of corporate crime in particular, prosecutors have gone beyond law interpretation and the pursuit of punishment for what they believe to be past violations 2 | Anthony S. Barkow and Rachel E. Barkow of existing criminal laws. In this context, prosecutorial goals are sometimes more grand, with prosecutors seeking to reform the way companies do business going forward. As with prosecutions against individuals, prosecutors gain this power because of their ability to exact a high price if a defendant opts to exercise its trial rights. Indeed, with companies, the threat is even more pronounced . First, American law embraces the doctrine of respondeat superior, under which corporations may be criminally liable for the actions of lowlevel employees taken in the course of their employment, even where these actions contravened stated company policy and, in some states, did not actually benefit the corporation. Second, a firm’s success—particularly in financerelated industries in which integrity is important—is often dependent on the strength of its reputation. Thus, when a firm is implicated in criminal wrongdoing, it stands to lose far more than a monetary fine: the mere fact of indictment may cause a loss of consumer and investor confidence, resulting in collateral losses to the firm far outweighing its legal liability and without regard for the ultimate verdict. No other case demonstrates these collateral effects as well as the prosecution of the accounting firm Arthur Andersen LLP. While the Securities and Exchange Commission (“SEC”) was investigating Enron, Andersen employees shredded documents pertaining to Andersen’s audit of Enron’s books. After reportedly refusing to enter into an agreement with prosecutors ,2 Andersen was indicted in federal court for obstruction of justice. The indictment badly damaged Andersen’s reputation, causing many clients to abandon the firm, and its eventual conviction led to the loss of its auditing license. Although a unanimous Supreme Court later overturned the conviction , the original indictment and conviction had already crippled Andersen beyond recovery and resulted in the loss of 75,000 jobs.3 Andersen’s fate can never be far from the minds of prosecutors and corporations accused of criminal wrongdoing. Many firms have taken away the lesson that avoiding criminal charges and the disastrous collateral consequences they bring is worth just about any price exacted by prosecutors. Prosecutors, for their part, would prefer to avoid the hard choice of either letting companies off the hook or indicting them when it could mean another Andersenlike collapse and substantial harm to innocent shareholders and employees. Thus we have entered a new era in which prosecutors...