The amendments to the Sentencing Guidelines for Organizations that went into effect on November 1, 2010, include new criteria for receiving downward departures for having an effective compliance program. One amendment eliminates what was previously an automatic bar to favorable consideration under the Guidelines if high-level personnel were involved in the conduct under review.64 Prior to the offense, if high-level personnel participated in, condoned, or willfully ignored the offense, the organization could not receive credit despite having an effective compliance program at the time of the offense. Now, however, there are certain circumstances under which the actions of high-level corporate personnel with respect to the offense no longer serve as an automatic bar to a compliance credit.65
The amended Guidelines provide that, in addition to having an effective compliance and ethics program at the time of the offense, corporations must meet the following four additional conditions in order to receive a reduction of their culpability score: (1) those with operational responsibility for the compliance and ethics program must report directly to the governing authority or its subgroup, such as an audit committee or the board of directors; (2) the compliance and ethics program must detect the offense before its discovery outside the organization or before such discovery was reasonably likely; (3) the organization must promptly report the offense to the proper governmental authorities; and (4) no person with operational responsibility for the implementation of the compliance program must have participated in, condoned, or willfully ignored the violation.66 In clarifying the first requirement, the Commentary on the Guidelines notes that a person has “direct reporting obligations” to the governing authority or a suitable subgroup if that person possesses express authority to communicate to that authority (1) promptly on any criminal conduct or potential criminal conduct, and (2) at least annually on the implementation and effectiveness of the compliance and ethics program.67
The amendments also add a new Application Note which addresses one of the Guidelines’ previously designated seven components of an effective compliance and ethics program; namely, that, as soon as criminal conduct is suspected or detected, the organization must take reasonable steps to respond appropriately and to prevent similar criminal conduct in the future.68 Among other examples of an “appropriate response,” the Application Note highlights remedying the conduct’s harm through restitution to victims, self-reporting the conduct to the government, and cooperating with the authorities.69 Notably, the Application Note also suggests that, to prevent further similar criminal conduct, a company may decide to use an outside professional advisor to assure adequate assessment and implementation of modifications to an existing ethics and compliance program.70
These recent changes appear to shift the prosecutor’s potential inquiry from the conduct of a particular organization’s high-level personnel to the effectiveness of a compliance and ethics program when determining the appropriate steps to take when faced with an organization whose personnel might have violated the law. Corporate officers with compliance and legal responsibilities would be well-advised to study what the amendments consider reasonable steps that an organization must take to respond appropriately to criminal conduct and prevent similar criminal conduct in the future, and would be further well-advised to tailor their compliance and ethics programs to the criteria enunciated in these amendments.
Such precautions could positively impact a Guidelines calculation, and might, in appropriate circumstances, influence a prosecutor’s decision on whether to bring charges against an organization at all.