Recent amendments to the U.S. sentencing guidelines for effective compliance and ethics programs.

• Author: Frongillo, Thomas C.
• Position: Conning the IADC Newsletters

This article originally appeared in the August 2010 White Collar Defense & Investigations Committee Newsletter.

On April 7, 2010, the United States Sentencing Commission approved significant changes to Chapter 8 of the Federal Sentencing Guidelines, which applies to organizations convicted of criminal offenses. In particular, these amendments affect the requirements for establishing an "effective compliance program"--a means of mitigating institutional punishment in the wake of criminal conduct. Barring rejection or changes from Congress, the amendments take effect automatically on November 1, 2010.

One important change expands an organization's eligibility for a reduced sentence if it has an effective compliance and ethics program in place at the time an offense occurs. Additional amendments clarify what constitutes an appropriate response to criminal conduct as part of an effective compliance program. And, notably, the Commission rejected controversial proposals regarding independent monitors and document retention policies that some had argued would prevent flexibility in tailoring context-appropriate compliance programs and responses. On balance, the amendments reflect a give-and-take approach designed to encourage better internal and external reporting of suspected criminal conduct as a means of detecting and deterring crime, especially at the executive level.

Understanding the new Guidelines is critical not only for corporations facing criminal prosecution, but also for those seeking to avoid it. The United States Attorney considers the existence and effectiveness of compliance programs in determining whether to file charges, and the new amendments reflect the importance of independent and autonomous compliance officers to federal prosecutors and government agencies. Indeed, as Acting Deputy Attorney General Gary G. Grindler recently emphasized, "[t]hese amendments reinforce the point that having a robust compliance program is critical not only to preventing misconduct in the first place, but also [to] how your organization will be treated in the event criminal conduct does take place." Additionally, effective compliance and ethics programs may reduce exposure to liability if civil litigation occurs. Corporations should therefore reassess their compliance programs in light of the new Guidelines to improve both their ability to comply with the law and, in the event of a violation, respond efficiently and effectively with appropriate, remedial measures.

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