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September 24, 2015


Yesterday I learned that the CEO of Volkswagen has resigned as a result of emissions cheating on its Diesel vehicles sold all over the world, that its stock has taken a multi-billion dollar hit on international stock markets, that several class action suits have been filed against the company, and that governments all over the world have yet to assess fines and other levies against the company based on the vehicles the company sold in their jurisdiction(s) under their laws and regulations. My preliminary opinion is that the “company” is not liable for such wrong-doing and only secondarily liable for the damage done by its agents who committed the crime. How can this be? Read on.

What I did not see yesterday was what I haven’t seen with our big banks, i.e., criminal indictments against the CEO and other Volkswagen executives for commission of crimes. “Banks” and “car companies” don’t do anything; people do. It is people who cheat on emissions, not corporations that build cars. It is people who bribe Chinese officials, not Wall Street banking corporations; and it is people who had ought to go to jail and pay fines for their and not the car company’s and banking corporation’s crimes. Let’s flesh this out with a background tutorial.

Corporations are pieces of paper (corporate charters, typically in Delaware), just lying in some state government vault, passive and inert. They do nothing. Lawyer talk: When we say that people act for corporations, such acts do not include transfer of a form of vicarious criminal liability. The so-called veil of “corporate non-liability” is only applicable to acts done within the scope of one’s authority, and the commission of a criminal act or acts clearly falls beyond such scope. You cannot delegate authority you do not have, and no person or entity can delegate authority to commit a crime (a so-called ultra vires act aka “beyond the power”).

It therefore follows that when a CEO or other corporate executive commits a crime (ostensibly in the name of the corporation he/she represents), he/she is or should be on his/her own. The corporation they represent did not authorize him/her to commit a crime because it couldn’t commit an ultra vires act.  It is the criminals who should go to jail and the corporation he/she represents should only be liable to pay the remainder of a fine after the criminals’ resources are exhausted, and even then not on grounds of liability as a wrong-doer but on the theory of third party unjust enrichment (an equitable remedy). The “company” did nothing wrong legally but cannot be allowed to profit even so since it stands to be enriched at the expense of those wronged, hence the equitable remedy. End of tutorial.

I think Volkswagen will survive but that its immediate future looks grim. Of course, if our regulators hang a chump change fine on the company for knowingly skirting our emissions laws and regulations and eschew even a criminal investigation, and if regulators elsewhere similarly react, then perhaps Volkswagen’s future will not look so grim – and why shouldn’t our regulators here back off just as they do with our Wall Street banks when caught with their illegal pants down? After all, the CEO of JP Morgan Chase not only did not resign after his bank knowingly and willfully violated the Foreign Corrupt Practices Act a few years ago;  the board instead  gave him a raise for his adroit handling of the fallout from the bank’s bribing of Chinese officials in return for their lucrative banking business in China in a deal where the bank upon being caught paid a chump change fine and the CEO and his board walked (immunity to arrest and imprisonment for admitted criminal acts apparently being another executive perk and one of the advantages of laboring for an institution that is both too big to either fail or manage except that it is neither but rather Wall Street myth repeated endlessly and falsely in an artful propaganda campaign that would make Goebbels proud).

In view of my above brief analysis, I have a few questions: How did the CEO’s bank (JP Morgan Chase) “knowingly and willfully” violate the Foreign Corrupt Practices Act – a felony? JP Morgan Chase, his “bank,” is a banking corporation based in Delaware, as are 57 per cent of all publicly-held American corporations. Are you and I supposed to indulge in the fantasy that a piece of paper in Delaware criminally conspired to bribe Chinese officials in Beijing in return for lucrative banking contracts? Lets’ go further with this fantasy: Was the agreement in Mandarin or Delawarese? If not in writing, a handshake? (Pieces of paper don’t talk and have no hands.) Rather than leave a written record or a record of a handshake for possible later investigation, did the conspiring parties just leave it as an oral understanding. (Pieces of paper don’t talk.) Ridiculous fantasy? Of course, but no more fantastical than the idea that “the bank” should be punished for someone else’s crime that the bank did not and could not authorize, a legal fiction that should be abolished either by case law or statute, preferably the latter.

Recently I also read that the CEO of United Airlines, Jeff Simisek, had resigned amid a federal corruption investigation; I don’t know the details yet but his resignation tells me there may be some substance to the investigation. I also don’t know what the terms were of the resignation by the Volkswagen CEO, but the terms of Simisek’s resignation include an exit package worth $21 million in cash and stock, plus free first-class flights for life and his company car along with free lifetime parking at airports in Chicago and Houston. That sounds good to me for a man who takes a powder when the heat’s on. We will know more, presumably, as the investigation continues, unless big airlines as well as big banks retreat to the familiar cover of being “too big to fail” and/or “too big to manage.” I suppose Billy’s neighborhood lemonade stand will be next to assert such immunity under some obtuse theory when accused of using rotten lemons by regulators from the Board of Health. Where does this libertarian fantasy end?

Other potpourri: Hewlett Packard will cut 30,000 jobs as it splits into two separate businesses. Such layoffs (along with increased automation and ADDITION of staff in India and Costa Rica) will save $2.7 billion annually. Excuse my cynicism, but I think the split is a PR cover for outsourcing and I am also wondering what the “exit packages” (aka golden parachutes in Simisek’s case where he is voluntarily leaving) amount to for those 30,000 former wage slaves who are being shown the door in their walk to a new door – that of the unemployment agency. My guess? Zilch! Clean out your desk!

In sum, I thinks that labor and consumers and indeed all those who breathe air are getting the short end of the stick when we allow those corporations and those who control them who –  among other things, control our wages, our legislative systems, our (monopolized) market pricing and even the air we breathe – presume to control our lives when it had ought to be the other way around, i.e., that we the people should rather regulate their excesses (some even criminal but unprosecuted) via enforcing  our laws made by our and not their (bought and corrupt) representatives (who should be removed at the earliest electoral opportunity). In the bigger picture and to wax philosophical, let’s remember that this is our country, not theirs, our market, not theirs; indeed our lives, not theirs.

We must resist the corporate takeover of America. Our democracy (or what is left of it) hangs in the balance, without which there is no America, no “shining city on the hill,” but rather only a den of the greedy and grasping. That is not what Washington, Jefferson and Madison had in mind – nor I.   GERALD  E

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