ESSAY ON CORPORATE CRIMINAL COMPLIANCE
Preventive Law like Preventive Medicine can take many shapes and forms and while it
may be difficult to prove nobody doubts the value of either. Because of my prosecution
background (District Attorney and United States Attorney) I have been interested in the
increasing criminalization of American business and when coupled with the dramatic penalties
(up to $290 million in fines) provided under the relatively new Sentencing Guidelines for
Organizations ("Guidelines"), I have, consequently, focused on corporate criminal compliance as
an area of interest in preventive law.
A corporation is liable for any illegal act committed by an employee which has the actual
or intended effect of benefitting the company. However, the act must be within the scope of the
employee's actual or apparent authority.
The company will generally be liable even if it had a strict policy against such acts or
made efforts to prevent them. An effective company policy may, however, be introduced to
mitigate the punishment or reduce the charges against the corporation.
The Guidelines provide for the substantial reduction of fines for corporations that have
implemented effective programs to prevent and detect violations of the law. The Guidelines
further mandate that the corporation use "due diligence" in seeking to prevent and detect criminal
conduct by its employees.
The following seven minimum steps are required for due diligence:
- •Policies defining standards and procedures to be followed by the corporations'
agents and employees (possibly written in a Corporate Code of Business
- •Assign specific high-level personnel who have ultimate responsibility to ensure
- •Use due care not to delegate significant discretionary authority to persons whom
the corporation knew or should have known had a propensity to engage in illegal
- •Communicate standards and procedures to all agents and employees and require
participation in training programs.
- •Take reasonable steps to achieve compliance by use of monitoring and auditing
systems and by implementing and publicizing a reporting system where
employees can report criminal conduct without fear of retribution (Hotline or
- •Consistently enforce standards through appropriate discipline ranging from
dismissal to reprimand.
- •After detection of an offense, the corporation must have taken all reasonable steps
to appropriately respond to this offense and to prevent further similar offenses -
including modifying its program and appropriate discipline for the individuals
responsible for the offense and those who failed to detect it.
Because of the many complexities and the wide-ranging ramifications of the Guidelines, a
corporation (or any organization) should review its potential criminal exposure against its current
policies, procedures and compliance plans in order to determine if it at least complies with these
seven minimum "due diligence" steps. Compliance with these seven steps can do more than
lessen potential criminal fines -- compliance can prevent the criminal conduct in the first place!