United States: Defining A Legitimate Scope For The Federalization Of Business Crime

Last Updated: July 21 2015
Article by George J. Terwilliger III

Having repeatedly criticized the "over-criminalization" of otherwise legitimate business activity at the hands of Congress and national-level enforcement agencies, I may seem an unlikely choice for defending an important role for the federal government in addressing crime.

But, I am happy to take the opportunity to underscore the importance of adopting a more balanced approach to questions concerning the federalization of the criminal arena.

It bears emphasizing at the outset what I take to be common ground in today's essays: there is no federal police power.

To quote Chief Justice Marshall in McCulloch v. Maryland, because the federal government "is acknowledged by all, to be one of enumerated powers," it "can exercise only the powers granted to it."

The Constitution thus "withhold[s] from Congress a plenary police power that would authorize enactment of every type of legislation," the Supreme Court made clear in United States v. Lopez.

It likewise withholds from the national executive a wide-ranging authority to pursue policy objectives untethered to legitimate exercises of federal power. Thus, for example, despite their considerable authority, FBI investigators are "special agents" because their jurisdiction is specialized and limited, not general.

That, however, may be where many other scholars and I part ways in certain respects. I believe that the federal government can, consistent with these constitutional constraints, play a productive role in establishing and enforcing criminal prohibitions in three interrelated areas.

First, the primary place for federal criminal law in the business context concerns the protection and preservation of the means and instrumentalities of commerce.

Markets encumbered by fraud, deceit, and other forms of traditionally criminal conduct are not free, and free markets are essential to the nation's economic fitness and, at bottom, our liberty.

In furtherance of this traditional function, federal criminal laws have been enacted to protect critical economic infrastructure, including financial institutions, communications, transportation, and markets themselves.

And every day, the importance of internet integrity to commerce becomes more obvious, as does the federal government's crucial role in battling web-enabled crime.

Second, the federal government has a legitimate part to play in combatting criminal organizations and conduct that span local and national borders.

This includes pursuing and prosecuting complex crime syndicates, drug cartels, and other forms of criminal associations and activity that fall beyond the reach of state law enforcement agencies hampered by jurisdictional limitations.

The criminal component of the Racketeer Influenced and Corrupt Organizations Act provides an apt example in this area.

Last but by no means least, federal law-enforcement agencies hold a critical responsibility for supporting the national government's core function of securing the homeland—nowadays, in particular, from terroristic extremist groups.

To be sure, addressing national security threats is primarily the duty of the American military and intelligence communities.

But because law-enforcement agencies work to maintain domestic peace on a day-to-day basis, it is proper—indeed, imperative—to regard them as occupying an important position in a comprehensive counter-terrorism program, the success or failure of which can have significant economic impact.

Unfortunately, I must agree with many observers that federal criminal policy has become unmoored from any self-restrained respect for a limited governmental role.

Instead, it has embraced a philosophy that business activity should be constrained by a burgeoning array of highly technical regulatory standards—and, more recently, the use of criminal laws of both specific and general application to convert what amount to regulatory transgressions into actual crimes.

Particularly worrisome is the conversion of statutes meant to protect and promote commerce into weapons used to bludgeon companies ill-positioned to fight criminal allegations in court into accepting politically convenient settlements.

This paradigm shift produces insidious consequences. Rather than promoting the free flow of commerce that the founding generation sought to foster, federal authority today too often inhibits economic growth through a stagnating collection of intricate regulations and the chilling effects caused by wielding criminal sanctions to enforce them.

Level-headed and constitutionally minded business and political leaders should work to turn the tide of ever-expanding criminal liability for normal commercial conduct.

But, at the same time, we must remember not to throw the baby out with the bathwater. The scope of legitimate federal concern with business activity, though limited, is both real and critical to our nation's well-being.

Mr. Terwilliger gratefully acknowledges the assistance of Katherine Mims Crocker in the preparation of this article.

Originally published in The Washington Times

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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