Could Hilton switch from fluffy white robes to orange jumpsuits?
As federal grand jury is exploring whether Hilton Worldwide and some of its former executives should be charged criminally for allegedly using trade secrets and stealing documents relating to Starwood hotel’s W chain.
Approximately 30 Hilton employees and executives, including people who left Starwood for Hilton, have already been fired or placed on leave. The investigation arose out of a civil complaint Starwood filed against two of its former executives that moved to Hilton in June 2008. The complaint says the executives stole more than 100,000 electronic documents “in the clearest imaginable case of corporate espionage,” according to Peter Lattman’s examination of the case in The Wall Street Journal.
Hilton has said the suit is meritless.
Lattman examines the most interesting part of the grand jury investigation, which is the somewhat rare move of potentially bringing criminal charges against a corporation. Corporations are considered “individuals” under the eyes of the law, but cannot, of course, be hauled to jail.
WSJ: Prosecutors have exercised particular caution in pursuing criminal charges against major companies since the 2002 indictment of Arthur Andersen LLP. Criminal charges against Arthur Andersen for allegedly destroying evidence in the massive fraud case against Enron Corp. are widely regarded as having led to the big accounting firm’s demise. The Supreme Court eventually reversed the firm’s conviction on those charges, but only after the firm was disbanded.
An alternative approach that has become more common in recent years is for prosecutors to seek what is known as a deferred prosecution or nonprosecution agreement. That typically requires that a company be supervised by a federally appointed monitor and commit to reforms over a period of years.
Georgetown business school professor John Hasnas argues in a forthcoming paper that holding corporations criminally liable is “inappropriate,” in part because it advances none of the usual purposes of punishment and because it’s unnecessary to protect the public harm.
We will not know if the Hilton corporation will be criminally charged until the grand jury review is complete, but, should the Justice Department press charges, it will be interesting to see if it actually goes after the company itself or decides to prosecute only the individuals allegedly involved.
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