Willful Blindness and Corporate Liability

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Willful Blindness and Corporate Liability

What is Willful Blindness?

The doctrine of willful blindness is a concept in criminal law—generally in the white-collar context—that serves as a substitute for an otherwise necessary mens rea element, such as knowledge.  That is, where it exists, it imputes (or supports an inference of) knowledge to the defendant or serves as a substitute for actual knowledge.  It is, in effect, constructive knowledge.

Willful blindness is generally defined as an attempt to avoid liability for a wrongful act by intentionally failing to make reasonable inquiry when faced with the suspicion or awareness of the high likelihood of wrongdoing.  It is a deliberate attempt to keep one’s “head in the sand” when faced with information or facts that create a suspicion or awareness that there is a likelihood of wrongdoing.

The Supreme Court observed in Global-Tech Appliances, Inc. v. SEB S.A., that “[t]he traditional rationale for th[e] doctrine is that defendants who behave in [a willfully ignorant] manner are just as culpable as those who have actual knowledge.”  The Ninth Circuit, in a seminal willful blindness case, explained that “[t]he substantive justification for the rule is that deliberate ignorance and positive knowledge are equally culpable.”

Use of the doctrine in the criminal justice system is controversial and expands the scope of criminal liability.  Many have questioned the underlying normative justification for the the so-called “equal culpability thesis.” Regardless, it has been endorsed by the Supreme Court and some version of the doctrine has been employed by all of the federal courts of appeal to some degree.

How is Willful Blindness Established?

Willful blindness is established where a defendant purposefully avoided knowledge of illegal activities despite being aware of the high possibility of illegal conduct. Where it applies, the doctrine provides that an individual who deliberately ensures that they do not learn the specifics of wrongful acts, despite suspecting otherwise, is as culpable as an individual who is fully aware of the illegal activity.

A finding of willful blindness may establish the mental culpability (the “mens rea” element) required to convict a defendant of a crime. Establishing willful blindness in effect negates the defense that the defendant lacked the required intent to commit the crime. Additionally, willful blindness negates the defense that the defendant was unaware that they were committing the crime.

Corporate Liability due to Willful Blindness

Under this doctrine, a corporation can be held liable for the conscious avoidance of facts that would otherwise indicate wrongful activity. If a corporation or its agents strongly suspect that they are partaking in illegal activities yet fail to investigate, the corporation may be held liable if the circumstances demonstrate deliberate avoidance of information. Thus, a corporation cannot escape liability merely by refusing to learn of the illegal activities of its agents.

For example, in United States v. Bank of New England, N.A., the bank was convicted of numerous violations of the Currency Transaction Reporting Act. That Act requires financial institutions to report customer transactions exceeding $10,000. However, the bank failed to investigate a customer’s reportable transaction when the customer withdrew over $10,000 using multiple separate checks rather than one single check. The court found that the bank’s deliberate failure to inquire about the reportability of these transactions was due to indifference with respect to the Act, and therefore resulted in a finding of willful blindness.

Collective Knowledge

A corporation may also be held liable based upon the collective knowledge of its agents. Under this doctrine, the knowledge of several agents is combined in order to establish the collective knowledge required to impose liability on the corporation. The aggregate knowledge of the corporation’s agents prevents the corporation from avoiding liability merely by dividing the duties of its agents. Thus, a corporation may be held liable under the doctrine of collective knowledge even if no single agent of the corporation knows enough information to be held liable for the crime.