The Market for Corporate Criminals

This Article identifies problems and opportunities at the intersection of mergers and acquisitions (M&A) and corporate crime and compliance. In M&A, criminal successor liability is of particular importance, because it is quantitatively less predictable and qualitatively more threatening to buyers than successor liability in tort or contract. Private successor liability requires a buyer to bear bounded economic costs, which can in turn be reallocated to sellers via the contracting process. Criminal successor liability, however, threatens a buyer with non-indemnifiable and potentially ruinous punishment for another firm’s wrongful acts.

This threat may inhibit the marketability of businesses that have criminal exposure, creating social cost in the form of inefficient allocations of corporate control. Such a result would be unfortunate because M&A could instead be a lever for promoting compliance. Yet criminal successor liability undermines this possibility and, in turn, the public’s interest in compliance. To countervail these problems, this Article proposes new prosecutorial policies that, through better- targeted sanctions and compliance-enhancing mergers, would promote M&A markets, deter corporate crime, and foster corporate reform.