This is the boot camp school formerly known as Lambda School, that came under a lot of fire in the past for these types of practices, and other issues.
This is one of those situations lending support to the corporate death penalty. Allowing name changes like Worldcom, Spectrum, and so on to write off some liabilities while operating as if nothing happened.
This is a silly idea lobbyists love because it sidesteps the actual corporate-destruction mechanism: liquidation to pay massive fines, license revocation and/or personal liability for senior management.
Consider even the penalties here, which effectively ban Allred and Lambda from doing business. If you corporate death’d them, the contracts and assets would still exist. Allred would be unpunished. Everything would go back to shareholders who were presumably fine with the status quo, and would be fine putting them into a new entity that Allred could manage. Okay, so you cancel the contracts. Now the janitor who hasn’t been paid in two months is screwed. Okay, so you exempt employees. Allred’s an employee! Exempt him? What do you even pay the janitor with? Okay, exempt some assets. How many? How do you choose who must keep paying versus who is let off? Maybe pro rata? Who will administer all this? Et cetera, et cetera.
Contrast that to a massive fine. Company goes Chapter 7 and into a deep body of law that has experience dealing with the above. (Ideally paired with a license revocation from any lending for Allred and the entity, in case they try to Chapter 11.) Shareholders are wiped and free to pursue Allred. Allred and Lambda are neutralised.
Everyone I know who speaks about a corporate death penalty includes liquidation to pay pack victims. I've never heard someone argue for the corporate death penalty without "liquidation" and "license revocation and/or personal liability for senior management."
The difference between this and a big fine:
* Lots of big fines aren't big enough to actually kill companies that deserve it,
* Fines tend to go to the government, while companies that deserve a "death penalty" often have victims who could use that money,
* Bankruptcy doesn't prevent people from starting another company, or board members who failed at oversight to join another board.
> Lots of big fines aren't big enough to actually kill companies that deserve it
Neither is a corporate death penalty. You’re just shuffling around assets and making work for lawyers.
> companies that deserve a "death penalty" often have victims who could use that money
Why the extra steps?
The closest we have to a death penalty is license revocation, e.g. Arthur Anderson [1]. Victims got screwed. Taking it further and the death penalty analogy seems appropriate--death penalties aren't about restitution. They’re an instrument of retribution.
> Bankruptcy doesn't prevent people from starting another company, or board members who failed at oversight to join another board
Neither does a corporate death penalty. That’s what bans are for.
Corporate death penalty is a gift to corporate America. It sets activists running in circles over a stupid idea that represents simpler, precedents punishments with the ambiguous baggage of extra steps.
> If you corporate death’d them, the contracts and assets would still exist. Allred would be unpunished. Everything would go back to shareholders who were presumably fine with the status quo, and would be fine putting them into a new entity that Allred could manage.
This is wrong for a variety of reasons:
(1) The corporate death penalty is proposed as an additional remedy, not an alternative remedy, to personal liability for officers, etc. (in fact, many corporate death penalty proposals would make additional personal penalties for corporate officers available as a part of that on top of any that would be available independently of the corporate death penalty for their actions, e.g., in one proposal for a federal charter revocation law, “The statute should specify that, for a period of five to ten years, the directors of the condemned corporation could serve on the same corporate board together only when they are a minority, ensuring that that set of directors would not form a majority of the board of another corporation. Similarly, key senior officers should be prohibited from working together for five to ten years. In addition, no director or officer could serve on the board or work for any corporation affiliated with the parent corporation of the convicted corporation. Courts must be empowered to issue injunctions to enforce these rules, preventing reconstitution of substantially the same corporation under another name.” [0])
(2) Corporate death penalty proposals tend to include proposals for how dissolved corporations are to be wound down that address the concerns you address (like a bankruptcy, these would be generally be administered by courts, probably most normally the court issuing the penalty.) From the same proposal, “The dissolution of the corporation should impose the harshest penalty on the corporate entity itself, directors, and officers, while only damaging shareholders-who have less control over corporate misconduct-to the extent necessary to incentivize them to take an interest in the corporation’s criminal misconduct. […] the penalty should dissolve the corporation with as little impact on innocent parties–employees, consumers, suppliers, and the larger economy-as possible.” [1] The proposal goes on to propose that an corporation subject to the corporate death penalty should have a court appointed “czar” take over management of its assets (similar, in a way, to a bankruptcy trustee), operating them and preparing and organizing them for sale (by default, by auction, but by other means where appropriate), with a specified distribution of the proceeds: “The statute should specify that revenues from the sale of the corporation’s assets first pay court costs and the costs of the czar’s operation during dissolution. Next, nonmanagement employees of the corporation that have clearly suffered harm due to the dissolution, such as being rendered unemployed, should be compensated through a one-time stipend. Finally, the balance should be distributed among the shareholders. In this way, the affairs of the corporation could be wrapped up in an orderly and just way that would protect innocent parties while only causing minimal harm to shareholders.” [2]
(3) As with personal sanctions, the corporate death penalty is proposed in addition to, not in replacement for, criminal fines and restitution, and civil damages that may be available. The key difference between corporate death penalty and bankruptcy is that the corporate death penalty can punish directors and officers, and it de-institutionalizes the firm in much the same way as bankruptcy, but it does so even if the amount of the monetary penalties would not render the corporation insolvent.
I’d go so far as to say that the officers should be barred from working in the same industry for a couple of years. Long enough that whatever edge they had is eroded by time. It might be extreme, but adding a “curse” aspect to officers’ careers would act as an additional deterrent.
> officers should be barred from working in the same industry for a couple of years
"The Bureau’s order permanently bans BloomTech from all consumer-lending activities and bans Allred from any student-lending activities for ten years" [1].
> corporate death penalty is proposed as an additional remedy, not an alternative remedy
Corporal death penalties aren't an additional remedy--they're the ultimate remedy. The branding sucks.
> to personal liability for officers
Just do this. Why the extra steps?
> Corporate death penalty proposals tend to include proposals for how dissolved corporations are to be wound down that address the concerns you address
So does bankruptcy, a precedented mechanism.
> the penalty should dissolve the corporation with as little impact on innocent parties–employees, consumers, suppliers, and the larger economy-as possible
How? You're putting their employer, vendor, customer and taxpayer out of business. (If not, what are we talking about?)
> but it does so even if the amount of the monetary penalties would not render the corporation insolvent
Increase the fine.
More pointedly: if you can't justify a fine or penalty more than the company is worth, maybe--on the net--they shouldn't be poofed?
Criminal companies should take every opportunity to shift debate around fines, penalties, license revocation and personal responsibility to one about a corproate death penalties. You get the baggage of the corporal death penalty for free with a heaping spoonful of ambiguity. While everyone debates what common punishments this Rude Goldberg replaces, you can slink away. Worst case: if they do enact it, it's so novel and convoluted you can probably buy a decade of appeals before you have to give up the assets.
Fines are money. Charters paperwork. We're currently seeing a charter revocation example in the Trump fraud trials [1]. It is by far the least meaningful part of the penalty. Could Trump trade the fine for the revocation, he would take it--anyone would.
Or you could just toss people in jail. This case is clearly wire fraud if the company knowing provided fraudulent hiring rates to get people to pay money for a service.
Because of diffusion of responsibility, wherein the person taking the fall was only one of perhaps three dozen individuals who collaborated to make the relevant business decisions.
If you to set the precedent of consolidating the consequences and doling them out to the relevant executive officer you’ll end up with c-suite executives around the country throwing their personal and corporate influence into getting that precedent neutralized.
How doed charging executives in addition to fining a company an amount that puts the card company into unresolvable bankruptcy lead to "diffusion of responsibility"?
Yeah, rich CEOs and investors are opposed to taking any responsibility for their actions, but that doesn't we shouldn't try to hold them responsible.
It doesn’t lead to a diffusion of responsibility, the diffusion exists independently by nature of how a business operates.
A CEO will green light high level strategic direction, but the crimes described here could easily emerge from the implementation of that directive at lower levels of the company. “Plausible deniability”
I mean, I agree with the sentiment but good luck codifying that in a law that won’t be abused to convict innocent people who were convenient patsies while letting guilty ones walk free due to the “subjective” nature.
As far as my cursory glance at wikipedia has informed me, the act itself works around the “plausible deniability” by requiring certain disclosures containing factual information be signed off by key executive staff rendering it impossible for them to say “I didn’t know!” with regards to specific material information.
The blanket concept of holding executive staff accountable for the wrongdoings of the company would mean a lot more disclosures, forms, sign offs, etc. for “any” eventuality that would render the position pointless as they wouldn’t have any time to actually do anything useful.
Because at the end of the day how do you prove that joe schmoe CEO actually fostered a culture that resulted in criminal acts? This isn’t even mentioning the individuals who were actually involved and directly culpable.
I worked for a recruiting firm in the past (first job out of college) that changed its name every 5-8 years. After I'd been there 2ish years I finally got an answer WHY they did that. Basically, they would build up a bad reputation and the easiest way to get rid of it was to just change names. Most companies that disliked them wouldnt associated the old name with the new name.
Shockingly it worked. Some companies that would have never worked with "oldCompanyName" were happy clients of "newCompanyName".
Letters in foreign languages seem capable of enough distinctiveness to be registered trademarks to me, like Alpha Security, Delta Airlines, Kappa clothing.
This is the school to coordinated with /r/learnprogramming to advertise and trick people in to registering, and when called on their bad practices, worked with the sub to ban users.
The sub continued to deny a connection to the school, but I still don’t believe it.
Previous trouble they've been in:
https://dfpi.ca.gov/2021/04/26/lambda-school-reaches-settlem...
https://techcrunch.com/2021/05/13/lambda-school-lawsuits/