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What Happens When a Company Gets Indicted?

By Jenny Tsay, Esq. | Last updated on

Like individuals, companies can be indicted if they violate criminal laws. So what happens when a corporation is criminally charged?

This has just happened to California's largest utility, Pacific Gas and Electric. The company is facing 12 federal criminal charges stemming from a 2010 gas pipeline explosion that killed eight people and leveled a suburban neighborhood. Prosecutors allege that the company didn't conduct required inspections that may have prevented the massive blast, according to the San Francisco Chronicle.

So when a company like PG&E is criminally charged, what happens next? The answer will vary by case, but here are a few common questions and answers:

How Are Criminal Charges Brought Against Corporations?

As a Justice Department memo on this very topic explains, "Corporations are 'legal persons,' capable of suing and being sued, and capable of committing crimes."

In addition, under the theory of respondeat superior, corporations may be held criminally liable for the crimes of its directors, agents, and employees. For example, if a company is under investigation for insider trading and a director orders his employees to get rid of all evidence relating to the crime and to threaten witnesses to keep quiet, then both the company and the individual employees could be charged with tampering.

Does the Defendant Corporation Get Locked Up?

While that would be quite an interesting scene, corporations as whole can't be arrested or thrown in jail.

Although the government can file criminal charges against the company as whole, only individuals who committed crimes can be locked up. So if a company is indicted but its individual executives, officers, or employees are not, then don't expect anyone to go to prison if the company is convicted.

If Companies Can't Go to Jail, Then How Are They Punished?

Companies typically receive hefty fines for a criminal conviction. The court can also place a company on some type of probation, during which time a judge would act as an overseer, according to Slate. For example, PG&E could face up to $6 million in fines and court-ordered oversight if convicted, according to the Chronicle.

How Do Victims of Corporate Crime Get Compensated?

Criminal law doesn't usually compensate victims for their injuries, but victims have the option of filing a separate civil lawsuit to seek damages for their injuries. In PG&E's case, the company has already settled civil lawsuits brought by 499 victims of the pipeline explosion for more than $560 million, the San Jose Mercury News reports.

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