On April 30, 2004, the United States Sentencing Commission formally presented amendments to the Organizational Sentencing Guidelines (the "Guidelines") that are used to direct judges in determining penalties for corporate criminal law violations, including criminal antitrust offenses. The amendments include significant changes to the federal sentencing Guidelines for organizations, which include corporations, partnerships, associations, joint stock companies, unions, trusts, pension funds, unincorporated organizations, governments, and non-profit entities. If the amendments to the Guidelines become effective, organizations including companies and trade associations, will be required to re-assess the sufficiency of their antitrust and other compliance programs. As the amendments relate to corporate antitrust policies, organizations will be expected to provide more oversight and involvement by key decision-makers in creating and maintaining the programs that help employees identify and prevent the occurrence of federal antitrust law violations.
The changes provide more precise standards for creating effective corporate compliance and ethics programs, which are essential for any organization seeking to mitigate its punishment for a corporate criminal offense. The amendments will take effect November 1, 2004 unless Congress acts to modify or disapprove them. In light of the amendments, corporate counsel should review and update their corporate compliance programs and policies to ensure compliance with the Organizational Sentencing Guidelines.
The current Guidelines provide for mitigation of an organization's culpability for corporate criminal conduct by employees, if the organization has an "effective program to prevent and detect violation of the law". The Commission's recent amendments replace the existing vague "effective program" language with specific criteria and more rigorous standards that an organization must follow. At a minimum, the promotion of an organizational culture that encourages ethical conduct requires compliance with the following seven requirements: First, the organization should establish standards and procedures to prevent and detect criminal conduct. Second, the amendments make boards of directors and company executives more responsible for the oversight and management of compliance programs. In essence, this means that members of boards of directors and high level executives must take an active leadership role in establishing the content and operation of the compliance program. In addition, compliance and ethics officers and individuals with day-to-day responsibility for the program must have sufficient authority and resources to carry out their responsibilities as well as direct access to members of the board and high level personnel. Third, the organization should take reasonable steps to prevent any individual whom the organization knew or should have known was involved in past illegal activities from having any substantial authority. Fourth, the organization should conduct effective training programs regarding the relevant legal standards and obligations for members of the board of directors, high level executives, lower level employees, and agents of the company. Fifth, the organization should take periodic steps to ensure that the program is followed, including monitoring and auditing to detect criminal conduct; to evaluate the effectiveness of the program; and to publicize a system, which includes mechanisms that allow employees and agents to report or seek guidance regarding potential or actual criminal conduct without fear of retaliation. Sixth, the program should be promoted and enforced consistently through appropriate incentives to perform in accordance with the program and appropriate disciplinary measures for engaging in criminal conduct and for failing to take reasonable steps to prevent or detect criminal conduct. Seventh, the organization should take reasonable steps to respond appropriately and to prevent further criminal conduct once criminal conduct has been detected.
Under the amendments, most organizations would no longer receive any sentencing reduction for having a corporate compliance program unless the program meets all seven criteria. For example, all organizations would be required to perform periodic assessments of the risk that criminal conduct will occur within the organization. In the internal antitrust compliance context, this most likely means that key individuals must become more involved in education, monitoring, and enforcement of policies designed to prevent price-fixing, market allocation, and other antitrust violations. The organization must consider the nature and seriousness of potential criminal conduct, the likelihood that the conduct would occur based on the nature of the organization's business, and the prior history of the organization. To that end, it might be advisable for organizations to conduct compliance audits on potential risk areas, such as antitrust, and to ensure that compliance training materials clearly inform employees in a manner that gives them options when confronted with possible antitrust violations.
Given that eligibility for mitigation can have a significant impact on the reduction of criminal penalties imposed on an organization, corporate counsel and executives should review and update their corporate compliance programs to ensure that their programs comply fully with the Sentencing Commission's new requirements.
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