After publishing proposed amendments for public comment earlier this year and assessing public input, the United States Sentencing Commission voted recently to change certain provisions in Chapter Eight of the Federal Sentencing Guidelines regarding the sentencing of organizations. So long as Congress does not take any action, the changes will become effective November 1, 2010.
One amendment clarifies how to respond appropriately to criminal conduct and to prevent further similar criminal conduct after criminal conduct has been detected. The amendment provides that an organization should take reasonable steps to remedy the harm resulting from the criminal conduct through means such as providing restitution to victims or self-reporting and cooperation with authorities. The changes further provide that an organization should assess the compliance and ethics program and make modifications necessary to ensure the program is effective, potentially through the use of an outside professional advisor to ensure adequate assessment and implementation of any modifications.
Another amendment seeks to eliminate the current automatic bar to compliance credit due to involvement of high-level personnel by creating a limited exception allowing an organization to receive a decrease of the culpability score for an effective compliance and ethics program if the organization meets four criteria: (1) the individual or individuals with operational responsibility for the compliance and ethics program have direct reporting obligations to the organization’s governing authority or appropriate subgroup (such as an audit committee of the board of directors); (2) the compliance and ethics program detected the offense before discovery outside the organization or before such discovery was reasonably likely; (3) the organization promptly reported the offense to the appropriate governmental authorities; and (4) no individual with operational responsibility for the compliance and ethics program participated in, condoned, or was willfully ignorant of the offense.
These changes are in response to concerns that a general prohibition based on actions of high-level personnel operates too broadly, and that providing an exception to that general prohibition in appropriate cases would encourage internal and external reporting of criminal conduct. The amendment also adds an application note that provides that an individual has “direct reporting obligations” if the individual has express authority to communicate personally to the governing authority “promptly on any matter involving criminal conduct or potential criminal conduct” and “no less than annually on the implementation and effectiveness of the compliance and ethics program.” This application note responds to concerns about challenges operational compliance personnel may face when seeking to report criminal conduct to the governing authority of an organization and encourages compliance and ethics policies that provide operational compliance personnel with access to the governing authority when necessary.
Lastly, an amendment augments and simplifies the recommended conditions of probation for organizations by removing the distinction between conditions of probation imposed solely to enforce a monetary penalty and conditions of probation imposed for any other reason so that all conditional probation terms are available for consideration by the court in determining an appropriate sentence.
Notably, the Sentencing Commission decided not to incorporate proposed language published for public comment requiring that senior personnel understand the company’s document retention policies.
Provided Congress does not prevent these amendments from taking effect on November 1, 2010, organizations may benefit from structuring their compliance and ethics programs to conform with these modifications relating to steps taken in response to criminal conduct as well as enhancing the effectiveness of compliance and ethics programs in terms of reporting and detecting offenses.