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Some States Look to Increases in Fines for Corporate Crimes

© Krantz News Service, Feburary 21, 2017


A bill in the Washington State Legislature would increase the maximum fine for corporate crimes from $10,000 to $1 million.

HB 1806 is patterned after similar legislation in Colorado and may represent a pattern of states strengthening law enforcement tools against corporate wrongdoing.

A committee staff analysis states that currently prosecutors have a "disincentive" to go after corporate wrongdoers because fines are too low. "The bill sufficiently raises the fines to encourage compliance with the law and to support possible future prosecutions and convictions," the report concludes.

Two-thirds of the Democrats in the House -- and no Republicans -- signed on to the bill as co-sponsors; the bill was voted out of the House Public Safety Committee on a straight party line vote.

Washington has not raised monetary penalties for crimes committed by corporations since 1924, but a Republican amendment to address the issue simply increasing fines by the rate of inflation -- making the top fine $150,000 -- was voted down, also on a party line vote.

Committee Vice Chair Mike Pellicciotti, a sponsor of the bill, pointed out that the new standards give courts discretion. "This is not a fine that will be imposed," he said. "It is a maximum amount that a judge would exercise in his or her discretion up to in terms of what is appropriate, and I think having the high end given what the potential harm could be gives the court the discretion that would be appropriate."

Writing in Harvard's Kennedy School Review, Alexander Smith notes that more than "300,000 US regulatory provisions currently carry criminal penalties, making compliance a struggle for even the most sophisticated institutions." He writes that "(p)ublic authorities have become addicted to revenues from corporate fines...Evidence suggests like New York, for example, regularly early such funds for general expenditure...."

For corporations, the problem is staying in compliance with what are known as malum prohibitum statutes; these are defined wrongs because they are prohibited, rather than malum in se wrongs which are understood to be inherently evil.

One example of how this would play out is in the area of state data breach notification laws.

According to the Washington State Attorney General's web site, http://agportal-s3bucket.s3.amazonaws.com/uploadedfiles/Home/Safeguarding_Consumers/Data_Breach/2016%20Data%20Breach%20Report%20%282%29.pdf :

"Notification Businesses and public agencies are required to notify affected individuals when data breaches occur. At the request of the Attorney General, the Legislature updated Washington law in 2015 to reflect changes in technology. Under the revised law, notification is required when a business or public agency experiences a breach of personal information if:

- The breach is reasonably likely to subject an individual to a risk of harm;
- The information accessed during a breach was not secured; or
- The confidential process, encryption key, or other means to decipher the secured information was acquired. The notification laws, RCW 19.255.010 and RCW 42.56.590, cover "personal information."

Personal information means someone's first name or first initial and last name in combination with any of the following:

- Social Security number;
- Driver's license number or Washington identification card number; or
- Account number or credit or debit card number, in combination with any required security code, access code, or password that would permit access to an individual's account. Theft of Financial Information Washington's criminal law classifies improperly obtaining financial information as a Class C felony. Under this law, it is illegal to obtain or seek to obtain financial information that a person is not authorized to have. The law also establishes the crime of identity theft as a Class B or C felony depending on the damage caused by the theft. Under Washington law, the crime of identity theft is focused on financial information."

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