Considerable Incentive for Corporations to Revise Their Internal Compliance Programs
The U.S. Sentencing Commission (the “Commission”) may soon provide corporations considerable incentive to revise their internal compliance programs if proposed changes to the U.S. Sentencing Guidelines (“Guidelines”) are approved this April. The Commission has indicated that one of its priorities this session is to address the way corporations are handled in criminal cases. The Commission announced recently that corporations facing criminal prosecution may receive reduced penalties if they establish appropriate internal compliance programs, principally including a compliance officer with direct access and reporting authority to the board of directors. A departure from current Guidelines, the new Guidelines would make available to corporations a three-point penalty reduction for an effective compliance program even when high-level personnel are involved in the criminal offense.
The Commission issued for public comment proposed standards that would amend Guideline §8C2.5(f)(3) to allow corporations a three-point penalty reduction if corporations establish an “effective compliance program,” even when high-level corporate personnel are involved in wrongdoing. If approved, the compliance program must have three principal elements: (1) the corporate compliance officer or person responsible for compliance in the corporation must have “direct reporting authority to the board of directors (e.g. an audit committee of the board)”; (2) the compliance program must be successful in “detecting the offense prior to discovery or reasonable likelihood of discovery” outside of the corporation; and (3) the corporation must promptly report the “violation to the appropriate authorities.” William Sessions III, current chairman of the Commission, recently said that direct communication between boards of directors and compliance officers is essential to effective corporate compliance programs.
The current Guidelines provide for the three-point penalty reduction in substantially more limited circumstances. The Guidelines currently prohibit the penalty reduction if an individual “participated in, condoned, or was willfully ignorant of the offense,” and the person was either (1) within high-level personnel of the corporation, (2) within high-level personnel of a unit of the corporation where the unit had 200 or more employees, or (3) assigned either oversight or day-to-day responsibility for the corporation’s compliance and ethics program. Further, the current Guidelines contain a rebuttable presumption that the corporation failed to maintain an effective compliance and ethics program if an “individual within high-level personnel of a small organization [or] within substantial authority personnel, but not within high-level personnel, of any organization, participated in, condoned, or was willfully ignorant of the offense.”
The Department of Justice is reviewing the proposal but has so far not issued a comment. The proposal, currently open for public comment, will go to a hearing on March 18, with an expected vote on all Commission proposals and amendments in April.
Baker Botts will issue additional updates as this matter develops.
|
