Author ORCID Identifier

0009-0003-8399-0096

Document Type

Article

Publication Date

2025

Keywords

Investors, Criminal liability, Limited-liability doctrine, Corporate wrongdoing, Criminal investment

Abstract

This Article reassesses the culpability of those who invest in law-breaking firms. Prosecutors currently treat investors as victims of corporate wrongdoing rather than as actors who might bear responsibility for it. This Article observes, though, that investment can facilitate, and even cause, illicit corporate activity. When investors intentionally contribute to those effects, substantive criminal law imposes liability on them just the same as it does on accomplices, conspirators, or principals in other contexts. Despite this formal parity, however, investor criminal liability is more a theoretical proposition than a practical reality.

This Article questions that status quo by asking whether and when culpable investors should be held criminally accountable for corporate wrongdoing. The answer, it explains, must balance the public’s interests in law compliance and capital formation. It finds individual investors in private law-breaking firms, who have at least a knowing intent, to be plausible enforcement targets. For other investors, the status quo merits keeping. Yet, if culpable investors are at realistic risk of prosecution, law-abiding investors might, even if erroneously, perceive themselves as exposed. If so, they might make fewer and less efficient investments. To address this danger, this Article calls for safe harbors to protect investors who rely on firms’ representations of having adequate corporate compliance programs or who rely on their own pre-investment investigations. These safe harbors would incent proactive compliance by firms and due diligence by investors while also distinguishing law-abiding from criminal investors.

First Page

851

Publication Title

George Washington Law Review

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