U.S. Sentencing Guidelines
Overview
The Sentencing Guidelines for Organizational Defendants went into effect on November 1, 1991, as Chapter 8 of the Federal Sentencing Guidelines Manual (which can be found; [1] here. They prescribe a sentencing framework for corporations based on the seriousness of the offense.
Contractors are not required to follow sentencing guidelines, however, the guidelines give corporations the ability to substantially reduce fine levels based upon steps taken by corporations "to prevent an offense" as well as the response by the corporation after it becomes aware of an offense.
The guideline requirements focus on details of an effective program to prevent and detect violations of law. There are 7 minimum criteria for an effective compliance program. They are (as found in [2] ):
Effective Compliance and Ethics Program
Subsection (a)
To have an effective compliance and ethics program, for purposes of subsection (f) of §8C2.5 (Culpability Score) and subsection (b)(1) of §8D1.4 (Recommended Conditions of Probation - Organizations), an organization shall—
- (1)exercise due diligence to prevent and detect criminal conduct; and
- (2)otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.
Such compliance and ethics program shall be reasonably designed, implemented, and enforced so that the program is generally effective in preventing and detecting criminal conduct. The failure to prevent or detect the instant offense does not necessarily mean that the program is not generally effective in preventing and detecting criminal conduct.
Minimum Requirements
Subsection (b)
Due diligence and the promotion of an organizational culture that encourages ethical conduct and a commitment to compliance with the law within the meaning of subsection (a) minimally require the following:
(1)The organization shall establish standards and procedures to prevent and detect criminal conduct.
(2)*(A)The organization's governing authority shall be knowledgeable about the content and operation of the compliance and ethics program and shall exercise reasonable oversight with respect to the implementation and effectiveness of the compliance and ethics program.
- (B)High-level personnel of the organization shall ensure that the organization has an effective compliance and ethics program, as described in this guideline. Specific individual(s) within high-level personnel shall be assigned overall responsibility for the compliance and ethics program.
- (C) Specific individual(s) within the organization shall be delegated day-to-day operational responsibility for the compliance and ethics program. Individual(s) with operational responsibility shall report periodically to high-level personnel and, as appropriate, to the governing authority, or an appropriate subgroup of the governing authority, on the effectiveness of the compliance and ethics program. To carry out such operational responsibility, such individual(s) shall be given adequate resources, appropriate authority, and direct access to the governing authority or an appropriate subgroup of the governing authority.
(3) The organization shall use reasonable efforts not to include within the substantial authority personnel of the organization any individual whom the organization knew, or should have known through the exercise of due diligence, has engaged in illegal activities or other conduct inconsistent with an effective compliance and ethics program.
(4)*(A)The organization shall take reasonable steps to communicate periodically and in a practical manner its standards and procedures, and other aspects of the compliance and ethics program, to the individuals referred to in subparagraph (B) by conducting effective training programs and otherwise disseminating information appropriate to such individuals' respective roles and responsibilities.
- (B) The individuals referred to in subparagraph (A) are the members of the governing authority, high-level personnel, substantial authority personnel, the organization's employees, and, as appropriate, the organization's agents.
(5) The organization shall take reasonable steps—
- (A) to ensure that the organization's compliance and ethics program is followed, including monitoring and auditing to detect criminal conduct;
- (B) to evaluate periodically the effectiveness of the organization's compliance and ethics program; and
- (C) to have and publicize a system, which may include mechanisms that allow for anonymity or confidentiality, whereby the organization's employees and agents may report or seek guidance regarding potential or actual criminal conduct without fear of retaliation.
(6) The organization's compliance and ethics program shall be promoted and enforced consistently throughout the organization through:
- (A) appropriate incentives to perform in accordance with the compliance and ethics program; and
- (B) appropriate disciplinary measures for engaging in criminal conduct and for failing to take reasonable steps to prevent or detect criminal conduct.
(7) After criminal conduct has been detected, the organization shall take reasonable steps to respond appropriately to the criminal conduct and to prevent further similar criminal conduct, including making any necessary modifications to the organization's compliance and ethics program.
Periodically Assess the Risk
Subsection (c)
In implementing subsection (b), the organization shall periodically assess the risk of criminal conduct and shall take appropriate steps to design, implement, or modify each requirement set forth in subsection (b) to reduce the risk of criminal conduct identified through this process.