3 Strikes And You're Out - Of Business

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Borrowing from a popular punishment for multiple street crimes, California consumer activists are trying to create a three-strikes-and-you're-out law for corporations.

"If this is good enough for individual felons in California, it's certainly appropriate for the Enrons of the world," says Carmen Balber, a consumer advocate for the Foundation for Taxpayer and Consumer Rights.

The foundation and several other consumer groups, as well as organizations representing environmentalists, labor unions, seniors and trial lawyers, are backing a bill that would bar a corporation from doing business in California if it is convicted of three felonies in a 10-year period.

The measure, by Sen. Gloria Romero, D-Los Angeles, takes its name from the state's three strikes law, which provides sentences of 25 years to life in prison for individuals with two prior violent or serious felonies who are convicted of a third felony.

Supporters say it would be the toughest corporate crime law in the country. Critics say it's among legislation that makes California look inhospitable to business.

"Is this bill going to determine the business climate of California?" asks Fred Main, the California Chamber of Commerce's senior vice president and general counsel. "No, but it's part of a broad pattern of bills that are meant to make business and corporations in particular out to be villains, which we reject."

The bill covers corporations, nonprofit mutual benefit organizations, business partnerships and limited liability companies convicted of violating fraud, tax, bribery, extortion, consumer and environmental protection, civil rights, labor, employment, antitrust, political campaign or finance laws.

A first or second offense would require the company to disclose the violation on the Internet and in full-page ads in the largest newspaper in the state, the Los Angeles Times, and in the largest paper in other California cities where it does business.

A third offense within the same 10-year period would bar the company from doing intrastate business in California.

"If we get to the point where a corporation repeatedly violated California and federal law ... and continues to act that way, then we say this company is costing more than it's worth," Balber said.

The first two convictions could take place anywhere in the country. The third would have to be in a state or federal court in California. Bill supporters say that would create a nexus to the state.

A conviction of a wholly owned subsidiary would count against the parent company.

The bill was approved last week by the Senate Judiciary Committee and is awaiting a vote in the Appropriations Committee, the last stop before reaching the full Senate.

Bill supporters say they know of only one corporation, Teledyne, that has been convicted of three felonies in a 10-year period. But several others have had two felonies in that time span.

Balber says she sees a corporate three-strikes law functioning mainly as a deterrent that would result in few third strikes. Fines sometimes aren't enough to prevent corporate crimes but public embarrassment and banishment would, she says.

"You can't imprison a corporation. This is the next best thing."


By Steve Lawrence
  • Francie Grace

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