Pardoning Corporations (Apropos President Trump's Pardon of BitMEX)

The Hill (Kimberly Wehle) reported yesterday:

On Friday, Trump issued full and unconditional pardons to four individuals and a related cryptocurrency exchange, BitMEX.

BitMEX solicits and takes orders for trades in derivatives tied to the value of cryptocurrencies, including Bitcoin. Last summer, BitMEX entered a guilty plea in a Manhattan federal court for violating the Bank Secrecy Act for having operated without a legitimate anti-money laundering program. Prior to August 2020, customers could register to trade with BitMEX anonymously, providing only verified email addresses.

As it happens, there's a forthcoming Comment by Brandon Stras in the University of Chicago Law Review on "Pardoning Corporations." The Abstract:

Though the Pardon Clause could be interpreted to include or exclude corporate offenses, overlooked history suggests the broader interpretation is the more plausible one. The Clause codified a power that had existed for centuries in England. And corporations were often pardoned at common law—including the Massachusetts Bay Company. This tradition lasted for hundreds of years, and it is the backdrop against which the Framers drafted the Pardon Clause. Even following the Founding, people continued to understand that the pardon power stretched to corporations. Since that time, however, institutional memory has faded.

The President could condition forgiveness on corporate compliance programs or on donations to his political campaign. He could offer pardons to foreign companies to sweeten relations with other countries. He could effectively abolish corporate criminal liability during his terms, at least at the federal level, even for prosecutions initiated by independent agencies. He could pardon his own companies to protect them from prosecution. Or he might even pardon companies that bribed him. Given the sweeping pardon power in Article II, all these decisions fall within the President's discretion. He does not even need to wait for a company to apply.

Some of these consequences are startling, but Congress can limit the pardon power's effects in two ways. First, Congress can refuse to appropriate refunds of pardoned fines. At the time of writing, Congress has not appropriated such refunds for individuals or companies. That decision denies people reprieve from the most common, and often most consequential, punishments imposed on companies. Second, Congress can repeal statutes that impose corporate criminal liability and replace them with unpardonable civil infractions, depriving the President of offenses to pardon.

Some state constitutions might also include a power to pardon companies. Though this account is more tentative, some attorneys could be more effective advocates if they encouraged their corporate clients to apply for pardons. Federal juries convict around 100 companies per year; states impose the rest of the corporate criminal liability. In most states, there is little authority one way or the other, which creates opportunities for good lawyering. This is important because, even if the President never pardons a company again, some state governments might consider doing so. Alaska's Governor already did, and that pardon is unlikely to be alone forever.

Here's a bit about the pre-Revolutionary history of pardons of corporations in England and the American Colonies:

The story begins in 1461. As King Edward IV prepared to take the throne, he believed that his predecessors were illegitimate. Still, few had the appetite to govern as if their reigns did not happen. So Parliament ratified previous executive acts. Included were pardons to "to any Body or Persons Corporate." Going forward, such pardons had "Force" as if "granted by any King in this Realm lawfully reigning." Parliament would write general pardons with similar language for the next two hundred years.

General pardons were an important political tool. They pardoned anyone, or anything, that could have committed a list of crimes. With general pardons, kings could "present themselves as merciful despite an increasingly severe set of laws." The broader public understood general pardons as tokens of goodwill from the Crown and "elements of festivity" during celebratory times. And "the political and religious elite" extracted general pardons as a reward "for various forms of cooperation" with the King.

Take King Charles II, who had to secure support of the "governing elite" after Oliver Cromwell's reign and the English Civil War. Charles II promised that, if he became King, he would offer a general pardon.  As King, he kept that promise, and Parliament enacted the Oblivion Act of 1660. The Oblivion Act made the King's pardon "good and effectual in the law" to all his subjects and "Bodyes Corporate." It excluded no "Bodyes in any manner of wise corporated," listing "Citties Burroughs Shires Ridings Hundreds Lathes Rapes Wappentakes Townes Villages Hamlets and Tythings." Notice the general terms. If any of the entities had committed offenses, they were pardoned.

Cities might feel like an odd fit for the modern pardon power. Today, juries vote to convict companies of crimes, yet "would never dream of punishing a city." At the time, though, there was no legal distinction between municipalities and for-profit companies. Both were corporations. Some of that came down to process. All corporations were born the same ways. They might have pursued different goals, but the law treated them similarly. "In the eye of the law a corporation was a corporation—that was all there was to it."

America inherited corporate law from the English. Even at the Founding, for-profit companies were rare. Corporate law was still "mostly a matter of municipalities, charities, and churches."  These entities are the best analogies available. Given that the Founding generation would not have distinguished municipalities from for-profit companies, pardons of the former clarify whether that generation would have accepted pardons of the latter….

Back to the reign of King Charles II. The next relevant event was twenty years later in his reign. The King was less popular than he had previously been. To consolidate control, he threatened to seize municipal corporations from their officials. His "aim was to control the personnel and therefore the government of the borough and city corporations." With a grip on local government, he could rig "the election of Members of Parliament" and direct national policy.

London was the most important city to control. And it had defied the King's orders by illegally taxing a market that was supposed to be free and circulating seditious petitions. Though city officials committed the crimes, the Crown saw an opportunity and issued a writ to seize the city itself.

Most cities would have buckled under the threat. "Out of over 240 boroughs and other corporations" threatened with seizure "between 1680 and October 1688, only London defended its case up to final judgement." So began The City of London Case.

At trial, London argued that the case had "no defendant" because a corporation could not "sue and be sued." Nor could a city be punished. The city asked, "will the political body be suspended by its neck?" Or must the citizens "hang up the Common Seal?" London instructed the court to prosecute city citizens, who were potentially "liable in their several private capabilities." …

The court inferred from the Oblivion Act of 1660 that cities could commit crimes. If "bodies politic" can "be pardoned," they must be able to commit crimes. Exhibit A was "the general article of pardon," the Oblivion Act of 1660, under which "corporations" had been "pardoned all crimes and offenses." That pardon would be pointless if cities had not already committed offenses. This opinion is the first time a court acknowledged the pardon of a corporation. It shows that English courts accepted that use of the pardon power as part of their law.

London took the opinion at its word and requested clemency. The King conditionally pardoned London: either permit the Crown to veto some of London's elected officials, or lose the charter. Under this deal, the King could effectively control the city without taking its charter. After debate, London's government ultimately refused the to accept the pardon. With the King's conditions refused, London lost its charter. In short order, "the majority of the boroughs and cities in England and Wales hastily capitulated and were induced to surrender theirs." London's experience confirmed that the King could, in fact, pardon corporations. It was no longer a hypothetical listed in acts of Parliament. …

Back in North America, the Massachusetts Bay Company had its own problems. In the 1630s, the Crown sued the company for "[il]legally transferr[ing]" its government to the people inhabiting the colony. The lawsuit ended with a "default judgment ordering the charter to be 'Seized into the King's hands.'" But the colony never handed over its charter. Massachusetts evaded enforcement long enough for the Oblivion Act of 1660 to pardon its crimes, along with all other corporations.

To make that fact clear, Parliament reaffirmed one year later that "no Charter of any Corporation" could be seized for "any act or thing done" before Parliament's first day. Not only were corporations forgiven, but the King also could not seize them for their offenses. Based on these laws, the colony believed it had been pardoned. So Massachusetts asked the King whether he had intended to forgive it, and King Charles II "responded affirmatively, asking in return only that the company stop hanging Quakers." …

Not much later, American treatises noted that the pardon power applies to corporations. Joseph K. Angell and Samuel Ames wrote that the King could "pardon the default" of a "corporation." Theirs was "the first American legal treatise dedicated to corporate law" and "the standard work on corporate law" when it was published. And Joel Prentiss Bishop wrote that "a county," even though it is not "deemed a private person" like "a private corporation," can have penalties "divested by the executive pardon" in an "influential" criminal law treatise, taking it for granted that a private corporation could be pardoned….

And here's more on the one post-Revolutionary pardon the author uncovered:

Whitewater [Engineering Company] convicted in Alaska for the criminally negligent homicide of Gary Stone. Then it applied for a pardon, and state politicians got the ball rolling. One politician wrote to Governor Murkowski that the criminal penalties were "excessive" for "a tragic accident" and "[i]f ever compassion and common sense should prevail, this is such a case.  Another warned that the conviction sends a "chilling message" to companies across the state.  Neither told the Governor that the company owed the state around $250,000.

The Governor pardoned Whitewater with just four days remaining in his term. Though the pardon was unpopular, no one challenged its constitutionality. Everyone seemed to think Alaska law empowered the Governor to make this kind of decision. …