The U.S.
Sentencing Commission (the "Sentencing Commission") is
proposing several changes to Chapter Eight of the Federal Sentencing
Guidelines Manual (the "Guidelines Manual") including,
without limitation, revisions to the guidelines for effective
compliance and ethics programs and conditions of probation for
organizations. Recently, the Sentencing Commission issued a
notice of proposed amendments and requested public comment
regarding the amendments. Here is a summary of the proposed
amendments which affect corporate compliance programs.
Summary of
Corporate Compliance Amendments.
1. The
proposed amendment changes the Commentary to §8B2.1, Effective
Compliance and Ethics Program, clarifying the remediation
efforts required to satisfy subsection (b)(7) (the seventh
requirement for an effective compliance and ethics program). The
proposed amendment adds a new application note describing the steps
to respond appropriately after criminal conduct is detected,
including remedying the harm caused to victims and payment of
restitution;
2. The
proposed amendment changes §8D1.4, Recommended Conditions of
Probation-Organizations, to augment and simplify the recommended
conditions for probation of organizations and inserts specific
language regarding the engagement of an independent, properly
qualified, corporate monitor;
3. The
proposed amendment inserts specific language requiring an
organization to submit to a reasonable number of regular or
unannounced examinations if the entity is subject to probation; and
4. Finally,
the proposed amendment contains two proposed additions to the Commentary
concerning Effective Compliance and Ethics Program. The first
amendment outlines the expectations of high-level personnel and
personnel with substantial authority. The commentary states,
such personnel "should be aware of the organization's document
retention policies and conform any document retention policy to meet
the goals of an effective compliance program under the guidelines and
to avoid any liability under the law." The other amendment
clarifies that when an organization periodically assesses the risk of
criminal conduct, the "nature and operations of the organization
with regard to particular ethics and compliance functions"
should be included among the other matters assessed. This
bracketed addition also states, as an example, that ''all employees
should be aware of the organization's document retention policy or
policies and conform any document retention policy to meet the goals
of an effective compliance program under the guidelines and to avoid
any liability under the law." Thus, high-level personnel,
personnel with substantial organizational authority, and all
employees should be aware of the organization's documentation
retention policies and conform any such policy to meet the goals of
an effective compliance program consistent with the Guidelines
Manual.
In light of
the proposed changes by the Sentencing Commission, organizational
compliance and ethics programs should be evaluated and revised to
address the following:
- Ensure high-level personnel, personnel with substantial
authority, and all employees are aware of the organization's
document retention policies;
- The compliance program should be updated to contain a
description of the actions taken by the organization following
detection of criminal conduct including the organization's
response to criminal conduct, restitution to victims or other
remedies resulting from harm caused by the criminal conduct, and
self-reporting;
- Each compliance program should include a self-assessment
and a means to modify the program as necessary to make certain
that the program is more effective; and
- The organization should consider retaining an independent
monitor to ensure adequate assessment and implementation of the
requisite modifications occurs.
Criminal Conduct by an Organization
- Probation.
Organizations may be sentenced to a term of probation for engaging in
criminal conduct and the Sentencing Commission prescribes the
circumstances under which a sentence to a term of probation is
required, addresses the length of the probation term, conditions of
probation, and violations of probation. The Sentencing
Commission is proposing revisions to the conditions of
probation. Based upon the proposed changes to the Guidelines
Manual, if your organization is subject to probation as result of
criminal conduct, the organization must:
1. develop and submit an
effective compliance and ethics program consistent with the
Guidelines Manual;
2. notify all employees and
shareholders concerning the organization's criminal behavior;
3. engage and retain an
independent corporate monitor;
4. submit periodic reports to the
reporting on the organization's financial condition, results of
business operations, and progress towards development and
implementation of an effective compliance and ethics program;
5. notify
the court immediately upon learning any material adverse change in
its business, financial conditions, commencement of bankruptcy, major
civil litigation criminal prosecution;
6. submit to a reasonable number of regular or unannounced
examinations of its books and records; and
7. make periodic payments, as
specified by the court, including restitution; fines, and any other
monetary sanctions.
The proposed notice clearly
demonstrates the federal government's attention to corporate criminal
behavior. The Sentencing Commission is revising its guidelines
and focusing its attention on corporate compliance programs that
effectively address organizational criminal behavior. Your
organization should evaluate its compliance and ethics program.
An effective compliance and ethics program should include, through
audits or otherwise, a means to detect criminal conduct and the steps
taken following discovery of such conduct, including, without
limitation, payment of restitution, self reporting, and remedying the
harm caused to victims.
If you would like assistance with
evaluating your corporate compliance, please contact Gregory W. Moore
directly at (248) 988-5842 or by email at gmoore@clarkhill.com or contact
Michael W. Matthews directly at (248) 988-5870 or by email at mmatthews@clarkhill.com.
Clark Hill's Health
Care Team can assist your organization with any one or more of the
following:
- Implementation of a Corporate
Compliance Program;
- Compliance Policies and Procedures;
- Conducting Compliance Investigations;
- Advice Regarding Potential Criminal
Conduct by an Organization;
- Self-Reporting Issues; and
- Other Risk and Compliance Concerns.
To access the
U.S. Sentencing Commission notice, click here.
