In our exchange about the Andersen case (Gordon then Larry), Larry Ribstein chided me for missing the big picture. In addition to our public exchange, we had an email exchange on the real lesson that we should learn from Andersen. In Larry's view, Andersen now stands as a symbol of the folly of corporate criminal liability. I agree that Andersen has symbolic value, but I would define it slightly differently than Larry.

Some people have been framing the question in terms of Andersen's "vindication," though I have never seen Larry take this tack. Christine doesn't go that far, either, but challenges Steve Bainbridge's point that Andersen's collapse was just desserts because it was a rotten egg anyway. (This reminds me of reactions to the realization we wouldn't find WMDs in Iraq, but that's another story.) Let's make this simple: the vindication angle is misguided. The obvious point here is that the Supreme Court did not exonerate Andersen of wrongdoing, but held that the jury instruction under which it was convicted was infirm. Moreover, as noted by Steve Bainbridge, Enron was not Andersen's only troubled client. "Vindication" obviously overshoots the mark.

If not vindication, then what? Larry emphasizes the fact that Andersen was a unanimous  decision, and I agree that this could be an effort to signal the Court's disapproval with the DOJ for bringing this case. But for Larry, this is about more than one prosecution, it is about the senselessness of corporate criminal liability. In his initial reaction to the decision, Larry wrote: "this is yet another nail in the coffin of the misbegotten idea that corporate criminal liability is the way to better markets." The big lesson from Andersen for Larry, therefore, is that the government should not use criminal law as a corporate governance mechanism.

When I first posted on this case, I observed, "Although the resolution of these issues will have important legal consequences, the case is more important for symbolic reasons." I still think that was right, and I understand Larry to be advocating for a particular symbolic interpretation of the case. Is he right? I just looked at the opinion again, and nothing in the Court's decision would lead me to read the case as an overarching condemnation of corporate criminal liability.

If I read Andersen partly as a symbolic gesture by the Court, I would read it more as a condemnation of the post-Enron regulatory ferver than as a general repudiation of corporate criminal liability. The government's case against Andersen was not extremely strong (though I think it's possible that Andersen would have been convicted even under the stricter jury instruction mandated by the Court), and the Court's message seemed to be: you need more than that for a criminal conviction!

The difference between my view and Larry's view has to do with the future of corporate criminal liability as a means of corporate governance regulation. Larry would rely primarily on markets supplemented by the threat of civil liability. I remain open to the possibility that corporate criminal liability can be useful.

I notice that Tom Kirkendall at Houston's Clear Thinkers has posted again today on Andersen, and he embraces a Ribsteinesque approach. He writes,

[T]he government's prosecution of Andersen did not deter professionals from helping their clients engage in risky transactions. That is why such deterrence should be left to the markets, which are much better than the government at efficiently sorting out the type of risk that is good from that which is not.

In response to such reasoning, I wrote:

In my view, it is not enough to say that criminal law isn't good at policing agency costs. The question inevitably follows: compared to what? In this case, the issue is whether the threat of criminal sanctions can accomplish something that is not accomplished by markets or the threat of civil liability. In my view, the jury is still out.

Comparative institutional analysis simply is not as easy as Kirkendall implies. The fact is that no mechanism will completely "deter professionals from helping their clients engage in risky transactions." We are choosing among imperfect options, and as the complexity of the task increases, all of the options find deterrence correspondingly more difficult. For a more sophisticated analysis of the tradeoffs, see -- guess who? -- Larry Ribstein!

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