Corporate Compliance Programs: The Benefits Extend Far Beyond The Criminal Prosecution Context

Co-written by Christopher Myers

Since the implementation in 1991 of Federal Sentencing

Guidelines for organizations, there has been much discussion concerning the

impact of a voluntary corporate compliance program on sentencing, especially in

the setting of fine amounts. While the existence of an "effective"

corporate compliance program provides an express mitigating factor under the

Guidelines, the usefulness of a compliance program goes far beyond the fine

reduction mechanism under the Guidelines.

A compliance program can be the catalyst for: avoiding

criminal conduct by the corporation; dissuading prosecutorial authorities from

pursuing criminal charges; limiting or preventing findings of liability at

trial; as well as establishing a less onerous sentence should there be a finding

of guilt. A voluntarily established program can also be an effective tool in

preventing and defending potential civil liability after the threat of criminal

liability has been eliminated. The following discussion illustrates a few of the

benefits potentially flowing from establishing and maintaining an effective

compliance program.

Benefits under the Sentencing Guidelines

The most obvious benefit to establishing a voluntary

compliance program under the Federal Sentencing Guidelines is that the existence

of an "effective" program permits a three level reduction in the

corporation's "culpability" score. The "culpability score"

is correlated to a set of minimum and maximum dollar amount multipliers that

establish the range of potential fines. The three level reduction accorded for a

compliance program reduces the fine amount attributable to the corporations

"culpability" by up to 60% for the minimum multiplier and 120% for the

maximum multiplier.

There are several additional benefits to consider under the

Guidelines, however. An effective compliance program may form the basis for

further reductions in penalties under various subparts of the Guidelines. For

example, an established program may permit the corporation to avoid a period of

probation altogether. If certain other factors are met, such as the payment

before sentencing of restitution and fines, the court need not impose a period

of probation under Guidelines section 8D1.1, if the corporation has a compliance

program.

In addition, an effective program may help the corporation to

discover the problem, self-report violations, cooperate with the government in

its investigation, and accept responsibility for the misconduct, thereby making

the corporation eligible for a further reduction of five levels from the

culpability score under Guidelines section 8C2.5(g). This reduction, coupled

with the three level reduction for the program, effectively reduces the fine

amount attributable to the corporation's "culpability" by up to 160%

for the minimum multiplier and 320% for the maximum multiplier. Further, if no

high level employee was involved in the misconduct, the existence of the

compliance...