Last summer when Conglomerate hosted the Enron Forum, John Kroger, a law professor at Lewis & Clark and former Enron prosecutor, defended the convictions of Lay and Skilling on this blog.  In ramping up productivity on an article that will go out next month on the disconnects between criminal prosecutions and private litigation over corporate misconduct, I ran across Professor Kroger's article Enron, Fraud and Securities Reform:  An Enron Prosecutor's Perspective, 76 U. Colo. L. Rev. 57 (2005).  The article provides a detailed overview of some of the transactions at the heart of the Enron investigation, but also offers suggestion for further reforms.  One suggestion that caught my eye was one to criminalize negligent corporate behavior by corporate executives.

By analogizing to several California state laws that criminalize negligent behavior (mostly relating to environmental activities) and the Clean Water Act, Professor Kroger proposes "that Congress pass a new federal criminal statute making it a misdemeanor, punishable by up to one year in jail, for any person to negligently make any untrue statement of material fact about a publicly traded company's operations, performance, or financial condition, or to negligently omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading."  (p. 129-31)

I find it hard to imagine a world in which negligent statements or nonstatements would send someone to jail even though the same statements, without some other indicia of scienter, would not even subject an individual to private litigation past a motion to dismiss.  Likewise, merely negligent behavior in corporate decisionmaking is protected by the business judgment rule.  I doubt that supporters of this proposition would also support abrogation by statute of the business judgment rule and repeal of the PSLRA. 

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