Sponsored briefing: Prosecuting corporations in Romania

Ovidiu Budusan discusses corporate prosecutions in Romania

As early as 2006, the Romanian legislators adopted the view that, similar to individuals, corporations have a distinct, if collective state of mind that is similarly capable of committing crimes, and regulated the criminal liability of corporations. Since then, corporate prosecutions are nothing new to the country, but remain a matter of controversy, as the metaphorical gun is held by the government to the head of businesses, shareholders, board members, CEOs, CFOs – and the list of acronyms may go on and on.

A first issue resides in the general manner in which corporate criminal liability is contemplated in Romania, where, if any connection to a business exists, a corporation may be held liable under criminal law for any offence committed by a corporate agent, no matter where said agent belongs in the corporate hierarchy, from the highest to the lowest levels, and irrespective of the specific type of crime (eg, tax, environmental, corruption, embezzlement, theft, as well as harassment, manslaughter or even DUI).

Another, and perhaps, the most important, is the lack of any statutory standards distinguishing between individual and corporate guilt, correlated further with lack of any official guidelines for prosecution to use in deciding whether to charge corporations for crimes.

Finally, there are no statutory defences available to corporations, such as adequate procedures to prevent associated persons from committing crimes, or that they paid compensation for the losses caused by the offence.

Absent are any criteria on the nature and seriousness of the offence, or the pervasiveness of wrongdoing within the corporation, or even on adequacy of non-criminal remedies, in the context where criminal liability should normally amount to a last resort, charging a corporation with crimes remains, rather informally, a matter of prosecutorial discretion.

From a strict legal and procedural perspective, prosecution should not be able to decide whether to file charges against a suspected corporate offender based on other criteria than those applicable to individuals (eg, existence of sufficient evidence of wrongdoing, accountability and intent).

In practice, however, other factors may shape the charging decision, including opportunity reasons, such as size, economic power, status, nationality, and, last but not least, investigation strategy.

While, in theory, the privilege against self-incrimination is recognised, no exception exists for data, documents or information that might be used as evidence against the very same corporation in the future, other than the attorney-client privilege.

Axiomatically, corporations are, as a rule, a focal point of white-collar investigations. Romanian law obliges companies (and individuals) to make any information, data or documents of a potentially probative nature available to prosecution upon request, whether or not they are included in the investigation in any capacity.

Also, the corporation itself may be largely ignorant about the facts, or about its own potential exposure, as internal investigations take place after the alleged conduct occurred, when the employees involved may have left the company, or, alternatively, may not be truthful, or critical facts may require specific pieces of evidence, beyond the company’s abilities to collect. Finally, companies need to limit their financial exposure, and may opt to pay compensation for damages, even before the investigation is final, and guilt conclusively established.

As such, companies may be tempted to co-operate in the investigation, even to an extent that may prove strategically unwise and hurt the company’s chances of defending itself if charged.

Once indicted, however, corporations tend to use the full range of the procedural rights to defence and counsel, and often mount a sound defence, so as to (at least) mitigate their legal exposure, and may become largely inconvenient for prosecution.

Prosecution may thus use the flows in the law and make the tactical decision of keeping the company in limbo, under the implied menace of potential charges, so that it co-operates to the satisfaction of the state in the investigation, but without any assurances that an indictment may be ultimately avoided.

Seeing how prosecutors are, ultimately, agents of the state, the same intrinsic flaws in the national rules on corporate prosecution gave way to the temptation to abuse the criminal justice system, and prosecute what should normally amount to business disputes that may arise between a company and the state (eg, tax fraud/tax evasion cases, privatisation cases etc.). Recent Romanian caselaw holds notorious examples of high-stakes criminal investigations and prosecutions, over a range of industries, from energy to pharmaceutical, media or real estate, where state agencies focused their entire arsenal on particular corporations, over extended periods of time, sometimes decades, for (at least part of) the charges to be eventually dropped.

It is equally true, however, that typically, defendants face harassed, overworked law-enforcement agents, left to decide whether to indict, in the context where a corporate indictment is subject to publicity under Romanian law, and amounts an economic punishment enforced before the company is even found guilty, if not to a capital sentence, particularly for smaller businesses.

In the context where facts are often incomplete, and the potential final exposure of the company remains uncertain, the defence lawyer must consider how to best handle the situation, and work with alternative scenarios. A white-collar defence team must theorise both an eventual confirmation of guilt, and identify the available mitigating circumstances, as well as the alternative, namely, that the investigation may not conclusively establish guilt, and strive to identify the issues that may damage a company’s ability to defend itself against unfounded charges in the future.