Vol. 4, No. 2, Pg. 29. Corporate Punishment: The New Federal Sentencing Guidelines for Organizations.

• Author: By Justin A. Thornton and Harry J. Stathopoulos

South Carolina Lawyer

1992.

Vol. 4, No. 2, Pg. 29.

Corporate Punishment: The New Federal Sentencing Guidelines for Organizations

29Corporate Punishment: The New Federal Sentencing Guidelines for OrganizationsBy Justin A. Thornton and Harry J. StathopoulosA new day has dawned for companies convicted of federal crimes. The United States Sentencing Commission's sentencing guidelines for organizations went into effect on November 1, 1991. New Chapter Eight to the Sentencing Guidelines (the Guidelines), entitled "Sentencing of Organizations," introduces far-reaching changes in federal criminal law for corporate misconduct. Under the complex Guidelines, corporations and other organizations face the imposition of criminal fines independent of and in addition to paying restitution to victims, organizational probation, community service, special assessments, forfeitures, costs and remedial sanctions such as product recalls and environmental clean-up orders.

The broad scope of the Guidelines is evident from the description of an "organization," which is defined s "a person other than an individual" and includes corporations, partnerships, associations, joint-stock companies, unions, trusts, pension funds, unincorporated organizations, governments and political subdivisions thereof, and nonprofit organizations. U.S.S.G. § 8A1.1, Comment. (n.1). The Guidelines apply to felony and Class A misdemeanor offenses which include, for example, violations in such diverse areas as antitrust, securities, tax, employment, commercial bribery, health care, agriculture, food and drug and money laundering.

The calculation of a fine range under the Guidelines is not applicable to environmental and certain other offenses, although the present Guidelines suggest that if the offense presents a threat to the environment, the court may consider an upward departure from the calculated guideline fine range. U.S.S.G. § 8C4.4, p.s. The United States Sentencing Commission (the Commission) intends to promulgate new guidelines for fine ranges for environmental offenses next year with an effective date of November 1, 1993.

This article will present an overview of the operation of the Guidelines, including practical suggestions of steps an organizationshould take now to address the Guidelines' application, with an emphasis on internal compliance programs.

Organizational Sentencing Guidelines

The Introductory Commentary to the Guidelines reflects the Sentencing Commission's clear intent to encourage organizations to take preventive measures before the occurrence of any criminal conduct, to report criminal conduct that is detected and to cooperate in the investigation of such conduct. See 18 U.S.C. App. 4, Chapter Eight, Introductory Commentary.

30The stated purpose of the Guidelines is to impose sanctions on organizations and their agents in a manner that "will provide just punishment, adequate deterrence, and incentives for organizations to maintain internal mechanisms for preventing, detecting, and reporting criminal conduct.

The Guidelines provide three primary sanctions:

* restitution or remedial sanctions, or both,

* fines and

* probation.

Following the imposition of restitution, the Guidelines' unquestionable focus is on the pecuniary punishment of organizations, as evidenced by the complex and lengthy procedure for determining criminal fines. See U.S.S.G. Chapter Eight, Part C.

Remedial Sanctions

Restitution is mandated by the Guidelines to compensate identifiable victims of the crime. U.S.S.G. § 8B1.1. To the extent restitution is incomplete, the Guidelines permit the federal courts to use other remedial sanctions to remedy past harm and to prevent future harm caused by the offense. U.S.S.G. § 8B1.2.

The court may coordinate remedial sanctions with actions taken by regulatory agencies. For example, assume that a regulatory agency has taken admiinistrative action against a manufacturer, requiring production and distribution to cease because of documented cases where the manufacturer's product has caused debilitating side effects.

Assuming further that the manufacturer admits it was aware of the adverse side effects caused by its product, a federal judge...