Incentivizing innovation involves risk. Entrepreneurs typically set up corporations or limited liability companies to insure they are not personally liable for debts should the venture fail. In 2019, the failure rate for startups was about 90%. At that time research indicated that 21.5% of startups fail within the first year, 50% fail before they are five years old, and a whopping 70% fail by their 10th year.
If the company is unable to pay its creditors, unpaid creditors can seek payment by a variety of means. Under certain circumstances, a court can ignore the form of a company and hold executives, directors, shareholders and members personally liable for fraudulent conduct. When courts lift or pierce what is referred to as the corporate veil, individuals within the company can be held criminally liable for its debt.
It should be noted that the corporate veil is seldom lifted in the absence of fraud. And such fraud is almost always limited to questions about money. In June of 2020, the Wall Street Journal reported how PG&E Corporation became one of the few U.S. corporations to be convicted of homicide-related charges. In the Superior Court of California’s Butte County, where the 2018 Camp Fire razed the town of Paradise. The utility plead guilty to 84 counts of manslaughter.
The deadliest and most destructive wildfire in California history claimed more than 18,800 structures, including 13,696 single-family homes and 528 businesses. Judge Michael Deems did not lift the corporate veil to incarcerate executives or officers of the company for what was widely held to be criminal negligence. The hearing, which was streamed across the Internet, was meant to serve as public chastisement of a company derided for its greed and stockholder-first corporate culture.
A grand jury report berated PG&E accusing it of a “callous disregard” for public safety, failure to heed warnings about its aging power lines and refusal to learn from previous mistakes. The 92-page report also said, and I quote: “Through a corporate culture of elevating profits over safety by taking shortcuts in the safe delivery of an extremely dangerous product – high-voltage electricity – PG&E certainly led otherwise good people down an ultimately destructive path,”
Butte County District Attorney Mike Ramsey said at a news conference that he hoped the guilty pleas would send a message to other companies in the United States. Unfortunately, the message it sends reinforces the United States Supreme Court’s sociopathic notion of corporate personhood, one in which the actual persons making life and death decisions with depraved indifference, are shielded from the kind of criminal penalties non-privileged citizens often face. While Ramsey described the culture of negligence that included badly overlooking maintenance and training, he said that during the investigation “it became clear that profit was a driving force.”
This was nothing new. In 2010, a high-pressure PG&E natural gas transmission pipeline segment in San Bruno ruptured. The explosion, in a residential neighborhood called Crestmoor, claimed eight lives while an entire block was destroyed. Authorities blamed the explosion on the company’s failure to properly maintain its gas lines. California regulators determined that in the years before that fire, PG&E had taken in revenue of hundreds of millions more dollars than what was authorized by the state while it had significantly underspent on maintenance and infrastructure needs.
According to Subsidy Tracker, PG&E Corporation also received state and local subsidies of $1,513,416 since 2012. It has received federal grants and allocated tax credits of $216,946,462 since fiscal year 2000. Notably, PG&E spent $5.3 million on state and local political campaigns in 2017 and 2018.
The recent Perdue Pharma opioid case demonstrates that individual corporate policy makers are routinely shielded from the consequence for their reckless indifference to the plight of those adversely affected. The Constitution of the United States, in its Preamble, requires our legislators, executives and judges to “provide for the common defense.” By any reasonable interpretation, this should include protections from the criminally insane, the deaths and injuries that are the result and due to the fault of the person wielding the knife, shooting the gun, driving the car, or implementing the policy.
Shielding an individual bad actor behind the corporate veil is routine in American jurisprudence. Certain Justices, masquerading as originalists and textualists, are fond of saying that the authorities of the government are limited to the powers enumerated in Article 1, Section 8 of the United States Constitution. Such pretenders give themselves a pass on the obligations conferred by the Overarching Principles, the Mission Statement, and the Cardinal Precepts as articulated and delineated in the constitution’s Preamble. The contempt they have habitually shown for the most fundamental rights of We the People, is hard to ignore.
There is an engraving over the doors to the Supreme Court building. It reads: Equal Justice Under Law. When the justices began their flirtation with a corporate personhood, they conferred superior rights upon corporate executives. Most of the distortions within our constitutionally grounded democratic republic are directly traceable to the Court’s consistent failure to hold the man behind the curtain accountable.