Relevant criminal risks for the management of the company
Even if 15 years will soon pass since the introduction in the Romanian judicial system of the corporate criminal liability, the investigation and litigation practice is still very much oriented towards identifying first a natural person (or more) who may have been in charge of deciding on behalf of the moral person and only later, if the case, they also charge the company for the specific crime, usually in order to be able to take seizure measures.
Thus, the criminal investigation bodies usually try to pierce the corporate veil and find the persons who are the culprits for the discovered irregularities or for the criminal behaviour of a company. In the same direction, the public opinion is usually more pleased if a natural person is convicted, probably because of the higher emotional impact of an imprisonment penalty compared to a fine which would have to be paid by the company and might be considered unsatisfactory due to its amount compared to the revenue of the company.
Especially in big corporations, the CEOs, managers and directors are highly exposed to personal criminal liability, due to the multiple decisions which are taken at the level of the company, many of which without a direct and personal analysis or even knowledge. Therefore, they might confirm and/or assume, in their name and on their behalf, a decision which leads to a criminal behaviour of the company. Corroborated with the lack of possibility to prove that they did not know about the criminal provisions or activity, this exposes the management, almost daily, to a high risk. This is why each company should take precaution measures to protect their management against possible rushed or misinformed decisions and should always consider offering them the best advice possible from the professionals, especially in legal and tax measures.
In Romania, the main accusations which are usually formulated against managers, CEOs or directors are for tax evasion, money laundering, embezzlement or misuse of funds, false statements, misusing the credit or reputation of the company, bribery or even abuse in office or fraudulent bankruptcy.
Criminal liability of legal entities
In the Romanian legal system, corporate criminal liability can incur when the crimes are committed by the representatives or the employees in the performance of the object of activity of the legal entities or in their interest or on their behalf. These cases are alternative, meaning that one of them is enough to justify a criminal accusation of the company itself. Legal literature argues that the company should not be held responsible for the actions performed by the individuals against it (even if it caused a tax evasion, for example), but this opinion is not unanimously accepted.
However, the criminal investigation bodies must prove that the legal entities have personal culpability (intent or negligence), different from and complementary to the one of the individuals. This culpability is usually proved by the lack of adequate procedures, by a certain tolerance shown to the type of behaviour in the past, by the profit obtained (or the loss prevented) by the company or the general attitude of the company, before and after the commission of the crime.
As a general mention, there are several particularities to the criminal sanctions of a moral person: the punishment can only consist of a fine (the "fine-days" system), whereas there are specific ancillary punishments (disclosure of condemnation in the media, closure of operation locations for certain periods of time, forbiddance to participate in public tenders, suspension of activity and dissolution of the company).
A very important aspect to consider is that the criminal liability of the legal entity is transferred to the legal successor, in case of a merger or acquisition. Thus, a business transfer or the insolvency procedure cannot save a company from criminal liability.
The most common crimes for which the companies are accused of in Romania are tax evasion, money laundering, false statements, failure to take labour health and safety measures, the latter usually combined with involuntary manslaughter or involuntary bodily harm (i.e. in labour accidents).
The relation between corporate liability and personal liability
As we mentioned before, the criminal liability is personal for corporate and natural persons alike and can also coexist – the Romanian Criminal Code expressly stipulates that the criminal liability of a legal entity does not exclude the criminal liability of the individual participating in the commission of the same criminal act.
However, the fundamental rule of corporate criminal liability is that an action or inaction of a natural person is always necessary for the perpetration of a crime. If the managers, officers, directors and/or employees of the company have perpetrated a crime themselves, with intent or by negligence, they will be responsible for their own action. Nevertheless, one's criminal liability does not automatically determine the other's liability, the culpability of each of them having to be proved separately (or jointly, if they are considered co-authors/participants to the same crime).
As mentioned, usually the individuals are the main subjects of criminal investigations, yet corporate criminal liability has increased in occurrence following an enhanced focus placed on asset recovery – however cynical, corporate criminal liability can better insure (from a procedural position) the State or the civil parties for the payment of the civil damages and other pecuniary obligations that might be resulting from the perpetration of crimes.
There are cases in which, based on elements of negotiated justice and on disclosures of criminal conducts performed by a legal entity and/or by an individual, either of them can obtain a total or partial immunity from criminal investigation/sanction. The cooperation can range from providing the authorities with requested information/documents and up to full admission of guilt. In all cases of admission of guilt, a Deferred Prosecution Agreement could be concluded with the prosecutor (as per the request of the defendant) or a simplified "admission of guilt" court procedure could be requested (to the court of law), which usually results in lesser punishments since sanction limits are automatically reduced by ? and punishments tend to be oriented towards a minimum, plus the highly likely benefit (if final sanction is below three years' imprisonment) of not actually doing jail time.
This possibility to disclose the criminal behaviour of others in exchange for the reduction of the penalty limits or even of immunity leads, in practice, to a possible conflict of interest between the individual and the company, once an investigation is started. This could lead to disadvantages for both, as they might play a lose-lose game, in which none of them would obtain a beneficial solution.
A possible solution: a strong compliance programme
Even in Romania the principle is and remains that "prevention is key", as the actions and strategies that can be applied are limited once an investigation is started or the accusation is formulated. At such point, all persons start to panic and act in survival mode, creating for them even higher risks that the ones to which they are already prone.
Even though compliance & regulatory is a legal branch which is usually associated with non-criminal legislation, considering such programmes to prevent criminal behaviour and liability is crucial nowadays.
There are many behaviours that can be overlooked by the company and its representatives as low risk, but they can easily generate legal threats if they are performed in an inappropriate context or are misinterpreted by the state authorities, due to a lack of clarity and coherence in their performance. In these cases, the most exposed persons are the ones that take the decisions in the company, themselves being the ones that might be held responsible for the generated behaviour, and this responsibility can easily take the form of criminal liability.
The general compliance policies that are recommended for the companies might include topics such as tax (including an audit and an internal checks & balances system); anti-bribery (which includes the offering of bonuses, commissions or other internal or external financial benefits); labour accidents; the handling of evidentiary procedures; co-operation with the criminal investigation bodies and other state authorities policy; management checks & balances; employees liability; whistleblowing (which to encourage the employees to communicate misbehaviours); IT, etc., as well as any other specific policies as per the object of activity of each company.
The present global pandemic context is the ultimate proof that precautionary measures are the most important investments that can be made by a company and by individuals alike. A complete, professional and efficient compliance programme for a company, being it a big corporation or a small enterprise, can help by offering a clear perspective on risks management, even from a criminal liability point of view. Therefore, any company that wants to protect itself and their managers, as well as any managers who want to protect themselves and the companies they lead, should take into consideration mitigating the criminal liability risks by implementing clear policies and procedures for the essential or high-risk activities of their company.