I. INTRODUCTION: SCOPE AND PURPOSE OF THE ORGANIZATIONAL GUIDELINES
In the United States, organizations are held vicariously liable(1) for criminal offenses committed by their agents.(2) The validity of corporate criminal prosecution was recognized by the United States Supreme Court as early as 1909(3) while corporate self-policing dates back to the advent of securities regulation in the 1930s.(4) Originally, however, the United States Sentencing Guidelines ("Guidelines") which the U.S. Sentencing Commission ("Commission") enacted in 1987 did not include standards for sentencing corporations.(5) Four years later, the Commission amended the Guidelines to include Chapter Eight, Sentencing of Organizations, which became effective November 1, 1991.(6)
Part I of this Article discusses the background, scope, and purpose of the organizational guidelines. Part II outlines the provisions in Chapter Eight, which include: (1) mechanisms, consisting of restitution, remedial measures, and community service, to remedy harm caused by an organization; (2) probation. ranging from the requirement that no further crimes be committed during the prohibition term to the issuance of surprise audits and periodic reports; and (3) the imposition of monetary fines, largely determined by calculating the base level, base fine, and culpability factor. Part II also discusses the structure and implications of compliance programs,(7) designed to enable organizations to reduce potential liability by self-policing.(8) Part III discusses recently enacted and proposed amendments to Chapter Eight of the Guidelines. Part Iv discusses a significant recent development: the use of corporate compliance programs to determine whether directors can be held personally liable for corporate wrongdoing.
Under the American system of federal law, "a company is indictable for any crime committed for its benefit by any employee acting" within the scope of his or her employment.(9) The number of indicted corporations has risen significantly " [a]s the civil doctrine of respondeat superior becomes the standard for corporate criminal liability."(10) In addition, the promulgation of the Guidelines for organizational defendants increased the cost of corporate criminal misconduct.(11) The Guidelines require courts to sentence convicted organizational defendants in a systematic manner similar to the sentencing of individual defendants.(12)
While the Guidelines have been enforced against a number of different types of corporations, including government contractors, financial institutions, and health care entities, most defendants have been small, closely-held organizations.(13) The Guidelines define an "organization" as "a person other than an individual."(14) Thus the term encompasses corporations, partnerships, associations, joint-stock companies, unions, trusts, pension funds, governments and their political subdivisions, as well as unincorporated and non-profit organizations.(15)
The Commission designed the Organizational Guidelines to create powerful incentives for companies to implement effective means of preventing, detecting, and reporting violations of the law.(16) The incentives are cast in classic carrot-and-stick form: effective compliance programs are suggested as means to mitigate heavy fines and other severe sanctions.(17)
While several court decisions bear on the authority of Organizational Guidelines,(18) a cohesive body of case law addressing their application does not yet exist.(19) One commentator presumes the paucity of case law is due to the high percentage of cases which have been resolved by plea agreements or guilt), pleas.(20) Another attributes it to the ordinary time lag between criminal conduct and prosecution: the Guidelines do not apply in a large number of recent cases because the relevant crimes occurred before the Guidelines went into effect on November 1, 1991.(21)