By: Cydney Posner
Yesterday, the U.S. Sentencing Commission issued a press release announcing that it has voted unanimously to amend the existing organizational guidelines to make more stringent the guidelines’ criteria for effective compliance and ethics programs. Companies that satisfy the guidelines may benefit from reduced criminal penalties, while failure to satisfy guidelines can result in higher penalties. In particular, ethics and compliance programs are considered fundamental to the guidelines, which mandate high fines for organizations that have no meaningful programs to prevent and detect criminal conduct.
Current sentencing guidelines preclude mitigation of sentencing if companies fail to timely self-report criminal misconduct to the authorities or if management tolerates or is involved in illegal activities. Other adverse considerations would include failure to follow applicable government regulations and industry standards and recurrence of similar misconduct.
The amendments impose greater responsibility on boards of directors and executives for the oversight and management of compliance programs, requiring that directors and executives take active leadership roles in the content and operation of compliance and ethics programs. The amendments require companies to demonstrate that they have identified areas of risk where criminal violations may occur, trained high-level officials as well as employees in relevant legal standards and obligations, given their compliance officers sufficient authority and resources to carry out their responsibilities and promoted an "organizational culture that encourages a commitment to compliance with the law and ethical conduct by exercising due diligence in meeting the criteria." The Commission also determined that there may be limited situations where an organization may need to waive its attorney-client privilege to qualify for a full, potential fine reduction.
The new amendments to the sentencing guidelines will be submitted to Congress by May 1, 2004, and will take effect November 1, 2004, unless Congress disapproves them during a six-month review period.