10 Year Anniversary Prompts Look at Compliance By Organizations

Although fewer than one percent of federal sentencing involves organizations rather than individuals, several hundred billion dollars are involved in organizational crimes compared to $4 billion in those involving individuals. This information and more is contained in a law review article written by U.S. Sentencing Commission Chair Judge Diana E. Murphy to mark the tenth anniversary of the portion of the Sentencing Guidelines that apply to organizational offenders.

"A Decade of Promoting Compliance and Ethics" will be published in the January edition of the Iowa Law Review, and a working version is available now on the Commis-sion's web site at www.ussc.gov.

Murphy cites others' research that indicates the cost of corporate financial crime ranges between $200 billion and $565 billion annually, far more than the $4 billion all the street crime in the United States is estimated to cost in any given year.

The U.S. Criminal Code provides for sanctioning persons other than individuals-a definition that includes corporations, partnerships, nonprofit entities, educational institutions, labor unions and even municipalities.

The Commission, authorized by Congress to promulgate sentencing guidelines, did not issue the organizational guidelines until May 1, 1991, exactly four years after the original set of guidelines were sent to Congress. Murphy notes that the Commission "undertook research regarding organizational sentencing practices as early as 1986" and that its years of research included "debate and input from several advisory working groups, various federal agencies, as well as from the general public."

Why have separate guidelines? "An organization represents an altogether different type of offender," Murphy writes. "The individual guidelines have been viewed by some commentators as focusing on punishment and incapacitation. They provide a method for determining the appropriate range of imprisonment in proportion to the offense. The organizational guidelines focus on providing restitution and an appropriate fine range for the offender organization, as well as an opportunity for far reaching probation provisions. Perhaps more importantly, however, these guidelines are geared toward deterrence, and they reward organizations that have in place an effective program to prevent and detect violations of law."

The guidelines require courts to ensure, if possible, that organizations remedy the harm that resulted from their criminal conduct. But they emphasize that remedies should not be viewed as punishment but instead as a means of making victims whole.

"Punishment is thus not the ultimate purpose of the organizational guidelines. If imposition of a fine would preclude an organization from making restitution or otherwise remedying the harm it caused, the fine is to be waived," Murphy writes.

The guidelines have had a deterrent effect, she wrote, and "have been credited with helping to create an entirely new job description: the Ethics and Compliance Officer."

"The Ethics Officer Association recently completed a survey indicating that the organizational guidelines influenced many corporations to adopt compliance programs," Murphy wrote. "Nearly half of those surveyed responded that the organizational guidelines had 'a lot of influence' on an organization's commitment to ethics as manifested through the adoption of a compliance program."

She adds: "The organizational guidelines have also influenced the prosecutorial policy of the Department of Justice so that an effective compliance program may defer federal prosecution or mitigate any criminal penalty. In a June 16, 1999, memorandum providing guidance to prosecutors in deciding whether to charge an organization, a number of factors are listed for consideration. The factors include the existence and adequacy of the corpor-ation's compliance program, and whether the corporation's remedial actions included any efforts to implement an effective corporate compliance program or to improve an existing one."

Murphy concludes the 30-page article with an assessment. "Some believe that the federal sentencing guidelines for organizations represent a milestone both in federal criminal law and organizational behavior. Their impact has been wide ranging. They are a real success story for the United States Sentencing Commission in its work to deter crime and to encourage compliance with the law," she writes.