What was once thought of as a "bad management decision" can now land executives in jail.
THE PICTURES OF ALLEN ANDRE'S last shift are not a pretty sight.
At 10 p.m. on July 22, 1985, Andre, an employee of the Reliance Steel & Aluminum Co. plant in Vernon, Calif., was feeding coiled sheet steel into a slitting machine when his hand got caught in the recoil roller. The 24-year-old Andre, who was that day operating the machine for the first time and who had been left by his supervisor to do so unattended, was inserting cardboard into the recoiler when the tip of one glove wandered astray. In an instant, most of his torso disappeared into the slitter. A co-worker lunged for the "stop" button, but by then it was far too late. Wrapped in the recoiler with about a dozen sheets of steel on top of him, Andre's body had effectively been turned two-dimensional, squashed flat as a highway squirrel.
Pictures of Andre and other workers killed on the job sit in the file drawer of a County of Los Angeles district attorney, Environmental Crimes/OSHA Division. Their presence in a state prosecutor's case file is significant. In another era, evidence such as this might have been introduced in a range of civil court actions against the company itself -- worker's compensation claims, Occupational Safety and Health-Administration citations, lawsuits on behalf of the decedent's family. Fines and penalties might have been imposed. But nobody would have been talking about sending company officials to jail.
Times have changed, though. From New York to California, state attorneys, operating against a backdrop of sharply rising accident statistics, declining OSHA investigations, and toughening workers' right-to-know laws, have begun relabeling what were once classified "regulatory infractions" or "poor business judgments" as criminally liable acts (see box, "The Corporate Blotter," page 50). Nearly half the states already have some sort of corporate criminal-liability law on the books, and a House subcommittee has been considering a bill that could put executives behind bars for concealing workplace hazards from their employees. While the transgressions of Ivan Boesky and Dennis Levine dominate the "corporate crime" headlines, a portfolio of workplace death cases -- many involving common-law charges of second-degree manslaughter or worse -- are setting legal precedents that redefine how the criminal justice system looks at the free enterprise system.
"We're not talking here about 'white-collar' crime, where the agent primarily benefits himself," says William Maakestad, an associate professor of management at Western Illinois University and an expert on corporate criminal liability. "This [area of the law] involves crimes [committed] during the ordinary course of doing business, where the motive is primarily greed or desperation, and the beneficiary, if there is one, is the company, not the individual. In that regard, a lot of these cases are no different from such common street crimes as assault."
A lot of these cases also suggest that small companies are generically more vulnerable to criminal prosecution than their larger counterparts. Big companies may complain about overregulation, but most can afford the kind of safety measures the regulators require. In the event of a serious accident, multiple layers of authority can make it difficult for prosecutors to prove that upper management knew what was going on. Not so for small companies. For many, cutting corners here and there often saves enough dollars to keep them in business. When something does go wrong, having fewer layers of management to sort through makes it easier for prosecutors to prove that top executives knew or should have known about unsafe conditions.
"So far, anyway," Maakestad says, "when you talk about 'workplace intent' crimes, you're mostly talking about small to midsize companies. These changes affect all companies, though, regardless of size. What we're seeing is nothing less than a redefinition of what's morally acceptable business behavior."
Like other reform movements, the push for corporate criminal accountability represents a confluence of several streams. One factor is the increase in workplace "accidents" registered in the mid-1980s. After four straight years of gradual decline, according to studies by the U.S. Bureau of Labor Statistics, the rates of job-related injuries and fatalities climbed 12% and 14%, respectively, since 1983. And these are only the reported cases; since 1980, documented violations of federal record-keeping statutes are also up a whopping 74%. Another factor is the Reagan Administration's gutting of the federal safety inspection effort, a vaccum into which state prosecutors are not adverse to rush. Safety inspections are down 40% since 1981.
"It's obvious that the regulatory process hasn't done the job," avers John Lynch, head deputy of Los Angeles's Environmental Crimes/OSHA Division. "When human life can be reduced to 'the cost of doing business,' something's got to give. And believe me, one company officer spending two days in jail is worth any fine you can impose [against the organization]. When you lock that cell door, word gets around an industry real fast."
The third overriding issue is the evolution of the law itself. Prior to this century, common law exempted companies from criminal sanctions for two basic reasons: because they had no "mind," companies could not harbor what the law defined as "intent" to commit crimes; and because they had no "body," they could not be jailed for crimes allegedly committed. Not until 1909, in fact, did the U.S. Supreme Court hold that corporations could be held liable, as individuals can be, for crimes involving "intent." And not until a series of cases in the mid-'70s was that principle enlarged in ways that removed the shield of immunity from company executives. In 1975, for instance, the high court ruled in United States v. Park that an executive could be held criminally culpable even if he had ordered the correction of a long-standing infraction.
