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CORPORATE COMPLIANCE PROGRAMS TO DETECT AND PREVENT CRIME ARE MORE IMPORTANT THAN EVERby Michael J. Norton What, you are wondering, is an article on federal criminal sentencing doing in our firm's staid newsletter. The answer is that, in this age of complex "white collar criminal" investigations and prosecutions of conduct by formerly respected companies and corporate executives from Wall Street to board rooms in Colorado, it is more important than ever for our corporate clients to be mindful of the need to implement "effective compliance program" to prevent and detect violations of federal criminal laws. The existence of such an effective compliance program can mitigate the potential fine range for an organization's violation of federal criminal laws by up to 95 percent. This is so even though the United States Supreme Court, in two well-publicized recent cases entitled United States v. Booker and United States v. Fanfan, held that the current mandatory Federal Sentencing Guidelines violated the U.S. Constitution's Sixth Amendment guarantee of a right to trial by jury on grounds the Guidelines empowered judges to enhance sentences beyond the maximum sentence supported by the facts found by a jury or admitted to by a defendant. The Supreme Court declared, as a result, that the Guidelines were only advisory and that a trial judge, in imposing a sentence deemed "reasonable," could consider the Guidelines and other relevant sentencing considerations, including the avoidance of sentencing disparities, the provision of restitution, and the imposition of sentences that reflect the seriousness of the offense, respect for the law, and just punishment. Although the Guidelines are likely to be followed in imposing federal sentences, those judges who consider the Guidelines to be too harsh or too lenient likely will depart from the recommended Guideline range and impose sentences that are deemed "reasonable." In the wake of corporate scandals in recent years and legislation, e.g., the Sarbanes-Oxley Act of 2002, enacted to provide for greater corporate director and executive officer accountability, the part of the Guidelines applicable to public and private corporations and non-profit organizations has, in recent years, been amended to encourage companies to develop and implement "effective" compliance and ethics programs to prevent and detect violations of the law. An effective program is one whereby a company exercises due diligence to prevent and detect criminal conduct and promotes an organizational culture that encourages ethical conduce and a commitment to compliance with the law. So, since the Guidelines are now advisory, not mandatory, just what does the Supreme Court's Booker/Fanfan decisions do to the concept of Guideline approved compliance and ethics programs? The answer is that these decisions make such programs more important than ever. Now, even though a federal judge may depart from the Organizational Sentencing Guidelines, a company with a strong and effective compliance and ethics program will likely be treated even more favorably as a sentencing judge considers the program in determining what fine to impose on the company for a violation of federal criminal laws. Importantly, smaller companies with limited resources may be able to more effectively argue for mitigation credit even if the program is not as "effective" as would be expected of larger companies. No one likes to be "caught" having violated the law. It makes sense, however, for a company to self-police the conduct of its employees by being able to identify, assess, and correct compliance problems before the problems are discovered by regulators or federal criminal investigative agencies. Such compliance and ethics programs are sound risk management tools that most companies should have in place. Moreover, even if regulators pursue civil remedies against a company, the existence of such a program may serve to convince federal prosecutors not to prosecute and may result in reduced civil penalties or elimination of administrative actions. For example, the U. S. Securities and Exchange Commission has established prosecutorial guidelines for leniency where a company has an effective compliance program. The bottom line is that, notwithstanding the Supreme Court's Booker/Fanfan decisions, effective compliance and ethics programs are important to protect the value of a business and may, just may, keep a corporate executive our of federal prison. Michael J. Norton is a senior member of the law firm. Mr. Norton's practice areas include complex civil litigation and white collar criminal defense, real estate law, including real estate broker and licensing law, and wills, trusts, and estate planning. For more information contact Michael J. Norton at 303.796.2626 or mjnorton@bfw-law.com. |