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Legal Update

United States Sentencing Commission Proposes Changes to Guidelines that Impact Corporate Ethics and Compliance

5 February 2010
Mayer Brown Legal Update

On January 12, 2010, the United States Sentencing Commission (USSC) voted to publish for public comment guideline amendments that include proposed changes to the “Sentencing of Organizations” chapter which applies in calculating the appropriate sentence to be rendered to corporations and other business organizations when they have violated federal law.

Corporations should be aware that among the changes, the proposed amendments will:

(1) grant courts express authority to order monitors as a condition of probation, and

(2) allow for mitigation credit when a compliance officer is put in direct reporting contact with the board of directors, even in the circumstance where high-level personnel are involved in the criminal offense.

The public has 60 days, or until March 12, 2010, to submit written comments to the proposed amendments. The USSC will hold its public hearing to discuss the proposed amendments on Thursday, March 18, 2010, in Washington, DC.

Summary of the Relevant Proposed Amendments

In addition to proposing an expansion of the offense level zones (B and C) in the guidelines to make more individuals eligible for sentences not based on incarceration, the USSC proposes some significant changes to the guidelines which could create incentives for corporations to make compliance programs the centerpiece of effective corporate crime prevention and detection. These include amending the language of the guidelines, comments and application notes to:

  • Amend the Commentary to Section 8B2.1 to clarify the remediation efforts required for an effective compliance and ethics program. These include reasonable steps to be taken by a corporation to respond after criminal conduct has been detected, such as restitution to identifiable victims. This language is consistent with the US Attorneys Manual Chapters
    9–28.300 (A)(6) and 9–28.900 (A) & (B).
  • Amend the Recommended Conditions of Probation Policy Statement to augment the conditions of probation. This will provide the court with more options for conditions, including a corporate obligation to make ongoing reporting of its financial condition, or corporate submission to unannounced examinations of its books and records by the department of probation or experts engaged by the court.
  • Permit the court to order as a condition of probation the retention of independent corporate monitors agreed to by the parties or selected by the court, and to be paid for by the organization.
  • Amend the application notes to the guidelines to clarify the expectation that high-level personnel should be “aware of the organization’s document retention policies,” and conform any policy to meet an effective compliance program to be consistent with the guidelines and to avoid any liability under the law.
  • Encourage direct reporting to the board of directors by responsible compliance personnel by permitting an organization with such a structure to benefit from a three-level mitigation of the culpability score, even if high-level personnel are involved in the criminal conduct.

The USSC will accept written comments related to the proposed amendment as published in the Federal Register until March 12, 2010. The specific question or issue for comment related to corporate sentencing is:

Should the Commission amend §8C2.5(f)(3) (Culpability Score) to allow an organization to receive the three level mitigation for an effective compliance program even when high-level personnel are involved in the offense if (A) the individual(s) with operational responsibility for compliance in the organization have direct reporting authority to the board level (e.g. an audit committee of the board); (B) the compliance program was successful in detecting the offense prior to discovery or reasonable likelihood of discovery outside of the organization; and (C) the organization promptly reported the violation to the appropriate authorities?

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