Better Internal Compliance Could Mean Reduced Penalties, Fines

This story is a couple of weeks old, but is worth mentioning. Companies who put specific plans in place to improve compliance and reduce white collar crime will be viewed more favorably should they ultimately face trouble.

In yet another decision aimed at encouraging companies to focus on prevention and full disclosure in the face of investigations, the U.S. Sentencing Commission recently put forth a proposal that “would reduce fines and penalties even if company officers were involved in the criminal activity…if they meet standards for tackling white-collar crime at their companies.”

Here are a few resources with more on this story:

Plan Would Soften White-Collar Fines — (Wall Street Journal)

William Sessions III, chairman of the U.S. Sentencing Commission, an independent federal agency whose rulings are influential, said Thursday that direct communication between compliance officers and the board of directors is crucial because it would raise the matter to the highest levels of the company.

Changing how corporations are handled in criminal cases is one of the commission’s priorities this session, and the proposal tackles a controversial area of law. After the corporate accounting scandals in the early 2000s, the Department of Justice prosecuted a number of companies, including Enron’s accountant, Andersen LLP. The conviction, though overturned later by the Supreme Court, put the company out of business, resulting in thousands of jobs lost.

Federal Agency Proposes Reduced Criminal Penalties for Corporations — (WSJ Law Blog)

And when DOJ used its ability to charge corporations to demand all sorts of cooperation from them, it came under fire by defense lawyers and judges, leading the agency to soften its approach.

Enter the U.S. Sentencing Commission, which last week included a proposal in this 78-page document to reduce exposure by organizations whose employees engage in criminal behavior.

For any of you who don’t work in the criminal justice system, the commission’s main task is to issue guidelines that help federal judges during sentencing.

Given that judges don’t often oversee prosecutions of major companies, we’re not exactly sure how many big cases the change would effect in the future. Still, many smaller companies face prosecution all the time.

Tackling White Collar Crime with Internal Compliance Programs — (IT Business Edge)

With the changes and the resulting sentencing credit, which will mean reduced fines, the Commission hopes to help companies that were “trying to obey the law even when their officers had not done so.” It’s a means of “circumventing the people responsible for the illegal act,” Sessions says. Observers also note that the new system will be better for the shareholders who, up to now, essentially have been punished both by the loss incurred in the fraud and by the fines resulting from the fraud.

Tags: Compliance, internal compliance, U.S. Sentencing Commission