Increased Criminalization of Business Practices No Bonus For Investors

That’s the general thesis of a very interesting article in the Winter 2008 issue of The City Journal. The criminalization of bad business decisions, previously dealt with in civil courts through claims for civil fraud or other liability theories, has been a troubling trend since the spectacular collapse of Enron. If recent reports concerning the conduct of the Justice Department’s Enron Task Force in the prosecution of Ken Lay and Jeff Skilling, Enron’s former chairman and CEO, respectively, turn out o be true, it would appear, in fact, that the zeal for imposing criminal liability on businessmen with poor judgment has gone beyond zealous into the realm of unseemly and, perhaps, unethical. And, if the author of the City Journal article is correct, all to the detriment of the shareholders. It is, perhaps, time to rethink the way our legal system deals with business failures.