Are Policies Keyed to New Sentencing Guidelines?

Article excerpt

ON NOVEMBER 1, 1991, new federal sentencing guidelines developed by the US Sentencing Commission became effective. These guidelines include severe mandatory penalties to companies that could have prevented criminal losses by taking adequate security measures. One year later, our informal survey of 15 major companies found only one that was aware of the standards or the new emphasis on security and accountability.

While the trend in federal and state legislation toward management accountability for criminal and tortious activity is increasing, the new focus on security should be viewed as a plus by security professionals.

Security managers today face an uphill battle when they go to the company's decision makers and ask for additional security funding. Now, however, security professionals can point not only to the need to protect assets directly but also to the need to protect companies from the potential penalties under the Federal Sentencing Guidelines for Organizational Defendants.

In the past, when the activities of business were deemed to be harmful to the public, the judicial system was limited to enforcement action only against the responsible party. Under the new rules, the company itself, as opposed to only the employees directly responsible for an offense, may be indicted in the event a crime is committed. The presence of an effective security program is cited under the guidelines as a possible method of setting a lower sentence for the organization.

The impact of the federal sentencing guidelines is significant. The requirements revolve around prevention, deterrence, and reporting of criminal behavior within organizations. Most organizations with proprietary security or loss prevention departments will be able to provide many of the required services.

The guidelines govern the sentences imposed by the US district judges on corporations, partnerships, unions, and other organizations for violations of federal law and are effective for sentences imposed for unlawful acts occurring on or after November 1, 1991.

Prior to the adoption of these criteria, federal judges had wide discretion in imposing fines and in pronouncing other sentences. Although judges had long been empowered to impose heavy fines, few crimes carried mandatory monetary sanctions and even fewer posed the threat of judicial intervention into the business affairs of the company.

The push for more uniform sentencing has been driven by several factors, chief of which is a concern over an epidemic of white-collar crime. Recently, Charlie Parsons, special agent in charge of the Los Angeles Office of the FBI, told the Greater Los Angeles Chapter of the American Society for Industrial Security that last year the amount of money taken in all of the bank robberies in the United States was $73 million. During the same period, one fraud case alone was estimated to have resulted in a loss of $2.6 billion.

Government has placed much of the responsibility for controlling fraud squarely on the shoulders of American business. The federal sentencing guidelines are designed to provide "just punishment, adequate deterrence, and incentives for organizations to maintain internal mechanisms for preventing, detecting, and reporting criminal conduct" in all aspects of their activity.

The core sentencing principle followed by the sentencing commission is that the penalty should be based on "the seriousness of the offense and the culpability of the organization." The seriousness of an offense is measured in terms of its economic consequences--the monetary gain or loss resulting from wrongful conduct.

Culpability is determined by reviewing the steps taken by the organization prior to the offense to prevent and detect criminal conduct. This is where security measures become a key defense.

The level and extent of involvement in, or tolerance of, the offense by certain personnel and the organization's actions after the offense has been committed are also considered in determining culpability. …