On January 31, 2014, following months of public consultation, the Sentencing Council for England and Wales (Sentencing Council) promulgated its Definitive Guideline for fraud, bribery, and money laundering offenses by corporate offenders (Guideline). Expressly noting the rarity of criminal prosecutions of corporations for financial crimes and the resulting lack of established sentencing practice, the Sentencing Council drafted the Guideline to effectuate the underlying aims of disgorging all profits from the offending organization and penalizing the entity and its shareholders in a measurable way. So entrenched are these goals that, as the Guideline itself states, “in some bad cases,” putting the offender out of business “may be an acceptable consequence.”
The Guideline will become effective on October 1, 2014, and will apply to all corporate offenders sentenced on or after that date, regardless of when the offense occurred.
The Guideline will authorize the sentencing court, when fixing the appropriate penalty for an enumerated fraud, bribery or money laundering offense, to make three independent but related calculations concerning victim compensation, confiscation and financial harm.
First, the court must consider ordering “the offender to pay compensation for any personal injury, loss or damage resulting from the offence in such an amount as the court considers appropriate.” This analysis should take into account the evidence in the case; to be recoverable, courts generally require damage or loss to be suitably documented and readily ascertainable. Moreover, the court should consider the defendant’s financial condition. Specifically, where the offender’s means are insufficient to satisfy all obligations, “priority should be given to the payment of compensation over payment of any other financial penalty.”
Second, the court must contemplate an order of confiscation if the prosecution “asks for it or the court thinks that it may be appropriate.” In the nature of disgorgement, a confiscation order directs the defendant post- conviction to surrender the amount of any benefit received from the crime. The issue of confiscation must be examined before and taken into account when assessing any other financial penalty, except for compensation.
Third, the court is required to calculate an appropriate fine. The calculation has a number of steps. Initially, the court must determine the applicable offense level (or “offence category”) by reference to “harm” and “culpability.” Harm is quantitative, representing the actual or intended financial benefit to the defendant in connection with the charged offense or, where those numbers are elusive, “the amount that the court considers was likely to be achieved in all the circumstances.” Cases of bribery or fraud “in which the true harm is to commerce or markets generally” may justify a more expansive accounting. By contrast, culpability is qualitative, requiring designation of “lesser,” “medium,” or “high” culpability based on suggested, “non exhaustive” criteria including whether the corporation abused a position of market dominance or trust; whether the offense involved obstruction of justice or official corruption; the vulnerability of any victims; the existence of previously adopted preventive measures; and the significance of the corporation’s role in cases of concerted unlawful activity.
With harm and culpability levels in hand, the court then must apply a “harm figure multiplier” to arrive at a starting point and presumptive range for any fine. Whereas no multiplier exists for an offender of “lesser” culpability, one of “medium” culpability faces a presumptive fine equaling 200% of harm, raised to 300% for an offender of “high” culpability. Considering a “non exhaustive” list of aggravating and mitigating factors, such as the presence or absence of recidivism, the court then will adjust the percentage within a specified range. As with compensation, the resulting fine must reflect the seriousness of the crime and the offender’s financial circumstances. Moreover, offenders are required to furnish three years’ worth of accounting information; failure to provide “sufficient reliable information” to the court will justify an adverse inference regarding payment ability.
Finally, the sentencing court must consider whether “further factors” warrant adjustment of the overall penalty. In other words, the court must gauge whether the individually ordered compensation, confiscation, and fine together effectuate the Guideline’s goals of disgorgement, penalization, and deterrence. Per the Guideline, “[t]he fine must be substantial enough to have a real economic impact which will bring home to both management and shareholders the need to operate within the law.” Here, the court should “step back” and consider criteria such as the offender’s prospects of future legal compliance and its ability to pay restitution to victims or to engage in charitable or public functions in light of the total penalties.
Additional consideration is afforded for substantial assistance provided to the prosecution or for acceptance of responsibility.
Comparison to U.S.S.G.
Like those devised by the United States Sentencing Commission, the Sentencing Council’s guidelines are ultimately advisory. They benefit, however, from a statutory presumption: a sentencing court “must” follow the relevant guidelines “unless the court is satisfied that it would be contrary to the interests of justice to do so.” Coroners and Justice Act, 2009, c. 1, § 125(1).
Further, there are similarities between the recently issued Guideline for fraud, bribery and money laundering offenses and the non-offense-specific U.S. guideline for organizational defendants. Both favor restitution or compensation to victims; both require calculation of offense level based on the offender’s actual or intended pecuniary gain or loss caused, subject to a culpability-driven multiplier; and both demand consideration of whether the penalties imposed adequately deny the offender all profits from the criminal enterprise.
The approaches have their differences. Most notably, the Sentencing Council appears to have eschewed the U.S. guidelines’ mechanistic style—seen in intricate and numerical offense-level and culpability calculations— in favor of a holistic approach that allows the sentencing court at each step to adjust or to dispense with a requirement if the circumstances so dictate. In this way, the Guideline seems to embody the prevailing U.S. command that a particular sentence be reasonable under all of the circumstances and in light of the goals of sentencing. See 18 U.S.C. § 3553(a). Indeed, sentencing discretion in the United States is often curtailed by statutory requirements of restitution or forfeiture in connection with fraud or money laundering offenses.
Although sentencing guidelines usually are informed by empirical data, the Sentencing Council’s Definitive Guideline for fraud, bribery and money laundering offenses by corporate offenders is clearly meant to be prescriptive.
The Guideline will become effective on October 1, 2014, when updated guidelines, including for fraud offenses, become effective for individuals. Early release of the Guideline is timed to coincide with introduction in the United Kingdom of Deferred Prosecution Agreements (DPAs) in cases involving bribery, fraud or other economic crime by corporations or partnerships. According to the Sentencing Council, although the Guideline “is not a guideline for DPAs,” which by definition involve no conviction, it “may be used to inform the level of financial penalty that forms part of a DPA.”
In cases leading to a conviction, the Guideline’s focus on comprehensive financial penalization cannot be overemphasized. Nevertheless, the Guideline’s totality of the-circumstances approach and its many opportunities for downward adjustment should allow room for effective advocacy on behalf of first-time corporate offenders with robust systems in place to prevent and detect fraudulent or otherwise illegal conduct within company ranks.