Organizational Sentencing

Article excerpt

I. INTRODUCTION II. GUIDELINES PROVISIONS: OFFENSES COVERED AND SANCTIONS PERMITTED

A. Remedial Measures

B. Probation

C. Imposition of Fines

1. Base Offense Level

2. Base Fine

3. Culpability

a. Calculation

b. Corporate Cooperation

c. Corporate Compliance Programs

4. Multipliers

5. Disgorgement

6. Implementation

7. Departures III. PROPOSED AMENDMENTS

I. INTRODUCTION

Corporate self-policing, which began in the United States with securities regulation in the 1930's, reached a new level on November 1, 1991. On that date the Federal Sentencing Guidelines for Organizations ("Guidelines") went into effect.(1) Along with a few other industrial nations, the United States holds corporations and other organizations vicariously liable for criminal offenses committed by their agents.2 This article describes the Guidelines' provisions, including the steps a corporation may take to limit its potential criminal liability.

Under federal law, a company is indictable for any crime committed for its benefit by any employee acting in the scope of employment.(3) Thus, "[a]s the civil doctrine of respondeat superior becomes the standard for corporate criminal liability," the number of corporate indictees is rising significantly.(4) The cost of corporate criminal misconduct increased substantially with the promulgation of the Guidelines for organizational defendants. These "guidelines" are a set of rules that require courts to sentence convicted organizational defendants in much the same systematic way they sentence individual defendants.(5)

While the Guidelines have been enforced against different types of corporations--including government contractors, financial institutions, and health care entities--they have been applied primarily to small closely held corporations, and in a small number of cases.(6) The Guidelines define "organization" as "a person other than an individual."(7) Thus the term includes corporations, partnerships, associations, joint-stock companies, unions, trusts, pension funds, governments and their political subdivisions, as well as unincorporated and non-profit organizations.(8) This article uses "corporation" interchangeably with "organization," because, as the United States Sentencing Commission data reveals, primarily corporations have thus far been sentenced under the Guidelines.(9)

The Sentencing Commission designed the Organizational Guidelines so as to create powerful incentives for companies to implement effective means of preventing, detecting, and reporting violations of the law.(10) These incentives were cast in classic carrot-and-stick form: heavy fines and other sanctions that can be mitigated by effective compliance programs.(11)

There have been no reported judicial decisions thus far directly addressing the Organizational Guidelines.(12) One commentator presumes this is due to all such cases having been resolved by plea agreements or guilty pleas.(13)

II. GUIDELINES PROVISIONS: OFFENSES COVERED AND SANCTIONS PERMITTED

The Organizational Guidelines apply to Certain federal felonies and class A misdemeanors, including most of those crimes committed in a corporate context, such as fraud, theft, tax violations and antitrust offenses.(14) Among the few areas not covered are: (1) environmental crimes, (2) food, drug and agricultural offenses, (3) export control violations, and (4) obstruction of justice.(15)

The Guidelines prescribe three types of sanctions for convicted organizations. First, whenever practicable, the court must order the organization to remedy any harm caused by the offense, either through restitution or other means.(16) Second, probation may be used to "ensure that another sanction will be fully implemented, or to ensure that steps will be taken within the organization to reduce the likelihood of future criminal conduct."(17)

Finally, the Guidelines authorize the more conventional sanction of fines. …