Andrew K. Jennings is an Associate Professor of Law at Emory University. This post is based on his recent article forthcoming in the Fordham Law Review.
Each year, Department of Justice (DOJ) components resolve a handful of corporate criminal cases with subsidiary-only conviction (SOC) settlements. In SOC settlements, a subsidiary pleads guilty to offenses that its parent or siblings share liability for. From 2013 to 2022, SOC settlements occurred in at least 3.3% of all federal corporate criminal resolutions, including 5.6% of cases in which prosecutors sought an entity conviction. For parent companies and their other subsidiaries, isolating conviction to one entity protects the rest of the corporate group from criminal collateral consequences. This result can be referred to as criminal entity partitioning, a subset of the entity partitioning that serves as a core function of organizational law. For prosecutors, SOC settlements allow greater flexibility in balancing between the need to avoid social cost that could result from fully prosecuting a firm’s culpable constituents (e.g., the need to avoid the “corporate death penalty”) with the need to deter and punish corporate crime, prevent recidivism, and achieve other criminal-legal ends. In other words, SOC settlements allow prosecutors to obtain entity convictions when appropriate, while avoiding the regulatory and other collateral consequences associated with parent-level convictions.
