Legal Updates

A company accused of criminal actions but goes under rehabilitation may receive a reduced penalty

July 22, 2020

Companies were indicted for publishing false reports in the amounts of millions of ILS in their books. Following an overall change in the companies’ management, the companies pleaded guilty and the new management infused funds for the companies’ rehabilitation. As part of a plea bargain brought for the Court’s approval, it was agreed that the companies will pay a fine of only ILS 100,000.
The Court held that the plea bargain should be approved, especially considering the progressive rehabilitation proceedings that were taken by the companies. The Israeli Penal Code allows deviation from the penalty range set for a defendant for reasons of rehabilitation. In the case of a company, such consideration is a central one, especially when the company has been rehabilitated prior to the legal proceedings or when there is a real chance of its future rehabilitation. That is due to a number of reasons: First, the only penalty which may currently be imposed on a company is a fine; Second, rehabilitation may lead to organizational change and a culture of compliance with the law and thus may help fight corporate corruption. Third, the effectiveness of companies’ rehabilitation is greater than in the case of a flesh-and-blood human being, because a company is a legal entity that may be changed completely, in the sense that all officers may be replaced and compliance procedures may be implemented, etc. For this reason, the confidence in a company’s willingness to rehabilitate is relatively higher. In examining company’s chances of rehabilitation, one must consider the degree of failure, lapse of time from the offense and the cooperation with the law authorities. Here, with the replacement of the management the companies have in fact rehabilitated prior to their sentence, inter alia by taking responsibility for the offenses and infusing a lot of funds to the companies. Thus, it seems that the plea bargain is proportionate and just under the circumstances, and thus should be approved.