Blue-Ribbon Report Says Corporate Ethics Would Improve with Changes to Sentencing Guidelines Implementation

To Mark Milestone for Groundbreaking Law, ERC Advisory Group Calls for Greater Consistency by Enforcement Agencies

Arlington, VA - More consistent promotion and recognition of compliance and ethics programs by the U.S. enforcement community would incentivize businesses to invest more fully in self-policing efforts against corporate crime. That is just one of the findings from a new report released today by the Ethics Resource Center. The Federal Sentencing Guidelines for Organizations at Twenty Years is the work of an independent advisory group over the past year to commemorate the 20th anniversary of the Guidelines. To see the report, go to http://fsgo.ethics.org.

The report states that the FSGO have achieved significant success by stimulating the development of strong compliance and ethics programs across corporate America.  But it also warned that these gains could be at risk because corporate compliance efforts and the array of enforcement policies created by different enforcement agencies "are not working together in the most effective and self-sustaining ways."

The ERC Advisory Group includes a blue-ribbon panel of former law enforcement officials, judges, prosecutors, academics, and compliance/ethics practitioners.  The Advisory Group was formed in April 2011.  To see biographies on the ERC advisory group, go to http://fsgo.ethics.org/Bios.

The ERC brought together the 21-person Advisory Group in April 2011.  They have spent a year reviewing, discussing, and writing the report.  On November 1, 2011 – the 20th anniversary of the promulgation of the Guidelines - the Advisory Group posted a discussion draft on the report for public comment.  Those comments have been reviewed and many of the suggestions were utilized for the final report.  Today’s release of the final report comes on Law Day, as well as the 21st anniversary of the day the FSGO was first put to Congress for approval.

The U.S. Sentencing Commission (USSC) developed the FSGO in an attempt to ensure uniformity in sentencing when organizations violated federal law.  Before the Guidelines, sentencing was sole discretion of individual judges, and sentences often varied widely for the same violations.   The Commission also aimed to promote corporate ethics initiatives by reducing sentences for organizations that had implemented effective ethics programs and were working hard to prevent misconduct by their employees.

"The FSGO have successfully encouraged most companies to make ethical conduct a priority," ERC President and Advisory Group Co-chair Patricia Harned said.  "But the Advisory Group believes we can do better still with some key adjustments in government policies and private sector practices."

The ERC Advisory Group identified four key challenges to the FSGO's continuing effectiveness and provided more than a dozen recommendations designed to improve its implementation and provide stronger support for corporate ethics programs.

The Advisory Group noted that criminal cases involving large companies are almost always "detoured around judges" by plea agreements, thus escaping the reward for meaningful compliance efforts promised under the FSGO.  The group lamented a lack of consistency in government's consideration of private sector compliance programs; said compliance programs often fall short because some sections of the FSGO lack clarity or are underemphasized; and worried that too many businesses take a "check the box" approach to ethics.

Recommendations included a call on the USSC to renew focus on the FSGO and work for continuous improvement; a challenge to the U.S. Department of Justice to properly credit effective compliance and ethics programs (ECEPs) when considering prosecution and settlement decisions, and establish greater internal consistency in its treatment of ECEPs; a summons to the President and Congress to work for uniformity across government in addressing ECEPs in enforcement actions; and a recommendation to private companies to weave ethics into their daily operations and ensure internal compliance and ethics officers operate with the authority, autonomy and resources necessary to be effective.

"We cannot be complacent about corporate ethics" said Advisory Group co-chair Win Swenson, founding partner of Compliance Systems Legal Group and a former Deputy General Counsel of the Sentencing Commission.  "The recommendations in this report are designed to address vulnerabilities by strengthening the commitment of government to the consistent application of the standards it has helped to create."

What is the FSGO?

At the direction of Congress in 1991, the USSC drafted the FSGO with the intent to govern the sentencing of organizations convicted of federal crimes. They were designed to ensure consistency in sentencing and also encourage businesses to establish ECEPs to help "prevent and detect organizational wrongdoing." Under the FSGO, organizations with compliance/ethics programs meeting defined standards earn credit toward reduced penalties if employees engage in wrongdoing - but organizations with substandard programs receive far tougher penalties. The FSGO's "carrot and stick" provides incentives for organizations to devote more resources to compliance/ethics and accord a high priority to the development of an ethical culture.

The FSGO empowered judges to consider the existence and effectiveness of ECEPs during sentencing. The guidelines have also provided a framework for taking account of ECEPs in prosecutors' decisions about bringing charges and entering settlement talks.