United States Supreme Court Hears Challenges to Federal Sentencing Guidelines
Businesses often turn to the United States Sentencing Guidelines for guidance in designing effective corporate compliance and ethics programs. The relevant parts of the guidelines, known as the Organizational Sentencing Guidelines, include detailed criteria for effective corporate compliance and ethics programs. In addition to governing sentencing decisions, those criteria influence many prosecutorial decisions, and they provide an authoritative standard for evaluating compliance programs.
On October 4, 2004, the United States Supreme Court heard argument in two cases challenging the constitutionality of the federal sentencing guidelines, United States v. Booker (No. 04-104), and United States v. Fanfan (No. 04-105). In light of recent Court decisions, most commentators expect the Supreme Court to strike down at least parts of the federal sentencing guidelines. Some wonder about the impact of such a decision on the Organizational Sentencing Guidelines. In particular, does this mean that businesses should disregard the Organizational Sentencing Guidelines when designing their compliance and ethics programs?
The short answer is no. The Organizational Sentencing Guidelines will almost certainly remain relevant for the foreseeable future. As an initial matter, the decisions in Booker and Fanfan may not apply directly to the Organizational Sentencing Guidelines since the cases involve individuals and not organizations. This may give rise to grounds for distinguishing any decision in those cases. For example, the issue in Booker and Fanfan is whether the sentencing guidelines deprived the defendant of the right to trial by jury. Some commentators question whether an organization has a Constitutional right to a jury trial and suggest that this may distinguish the Organizational Sentencing Guidelines and allow them to survive even if the Court strikes down >other parts of the guidelines.
But regardless of how the Supreme Court rules, there will continue to be good reasons for companies to conform their compliance and ethics programs to the guidelines. Many government agencies have adopted policies that incorporate the Organizational Sentencing Guidelines criteria for compliance and ethics programs or that are modeled upon them. Moreover, the Sentencing Commission recently amended the guidelines to reflect current best practices for designing corporate compliance and ethics programs. The amended guidelines (which in the absence of further Congressional action become effective on November 1, 2004) can provide a persuasive standard for evaluating corporate compliance and ethics programs. Thus there are many situations where the Organizational Sentencing Guidelines will remain relevant. Some examples:
- The Department of Justice considers the existence of an effective compliance and ethics program in the all important decision of whether to charge a business with federal crimes. DOJ has not adopted its own formal guidelines for corporate compliance programs. It relies instead on the criteria in the Organizational Sentencing Guidelines. Striking down the Organizational Sentencing Guidelines would have no direct impact on the DOJ policy. Until something else comes along, DOJ is likely to continue to look to the Organizational Sentencing Guidelines when deciding whether to charge a business with a federal crime.
- The Securities and Exchange Commission, the Environmental Protection Agency and the Department of Health and Human Services have all promised to consider the existence of an effective compliance and ethics program in making decisions in connection with administrative investigations and proceedings. Other government officials may have discretion that can be influenced by showing that a company has established an effective compliance program. All are likely to continue to look to the Organizational Sentencing Guidelines as the most persuasive standard for evaluating such programs.
- A compliance and ethics program that conforms to the Organizational Sentencing Guidelines provides tangible evidence that directors and officers are carrying out their fiduciary duties to protect corporate assets and monitor the business. Courts have often relied on the Organizational Sentencing Guidelines in evaluating the responsibilities of directors in this area. A company or directors defending their compliance efforts may well find the Organizational Sentencing Guidelines to provide a useful standard.
Regardless of how the Supreme Court rules, corporate compliance programs will remain an essential tool for protecting businesses from criminal liability. At least until something new comes along, businesses should continue to look to the Organizational Sentencing Guidelines for guidance when implementing or revising their compliance and ethics programs.
For a discussion of the sentencing guidelines and the essential elements of a corporate compliance and ethics program, see Shelter from the Storm: Designing Effective Compliance and Ethics Programs to Protect Businesses from Criminal Liability, available at http://www.digestiblelaw.com/files/upload/DesigningEffectiveCompliance.pdf.