Corporate officers in the defense industry seeking to implement an effective ethics program may find a useful reference in the "Sentencing of Organizations" chapter of the Federal Sentencing Guidelines, amended in November 2004, and in a recent Supreme Court decision.
Any compliance and ethics program would benefit both from these guidelines and from the Federal Acquisition Regulations Responsibility provisions (FAR, Part 9).
The guidelines provide important guide-posts. In fact, the "effective program" requirements of the guidelines mirror the "present responsibility requirements of FAR Part 9 and the NDIA "Statement of Defense Industry Ethics," unveiled in November.
For several reasons, a pre-existing, effective program embodying guideline requirements may mitigate a company's legal risks. Under a worst-case scenario, a company's program may be examined by probation officers, sentencing judges, or suspension and debarment authorities when determining criminal sentences, particularly fines and conditions of probation.
Sentencing courts determine the degree of a company's culpability for misconduct. They also impose fines within a guideline-prescribed range as well as conditions of probation, so an effective program plays a major role in the sentencing. Also, for companies involved in an enforcement action or criminal investigation, a federal prosecutor, under Justice Department official guidance, will consider whether an effective program exists, refer to the guidelines, and consult relevant federal agencies, such as the Defense Department, when determining whether to prosecute a company.
In short, a pre-existing, demonstrably effective program is key to establishing present responsibility, reducing the risk of criminal investigation and prosecution, and, in a worst-case, minimizing criminal fines or probation terms.
Regardless of these legal risks, the recently amended guidelines establish the essential elements of a sound program and expressly encourage sentence mitigation for all organizations, large and small, which implement "effective compliance and ethics programs." The NDIA statement and recent guideline amendments underscore the intense focus on compliance and ethics program "best practices," both by the government and private sector.
Under the guidelines, an effective program requires due diligence in preventing and detecting misconduct, and promotes an organizational culture that compels employees to conduct the organization's business ethically.
An effective program applies rules uniformly company-wide and centralizes oversight and reporting with top-level personnel. An effective program delegates implementation to competent leaders who report to the leaders of the company who have instant decision-making authority. To ensure effectiveness, any program must be constantly monitored, audited and adjusted. …