“Why is the United States Sentencing Commission involved in compliance and ethics?” & Three Questions with Tom Fox

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This is part of a continuing series called Sentencing Commission Confidential. Let’s take a look at the history and operation of the sentencing guidelines and in particular chapter 8 of the sentencing guidelines that have to do with organizations. Let’s go back in time to 1984, this was before the United States Sentencing Commission. In 1984, there was a bipartisan movement in Congress to reform overall federal sentencing practices. If you remember the 80’s, you might remember parachute pants, Michael Jacksons’ “Thriller” and let’s not forget Ivan Boesky and Michael Milken,  junk bond kings—insider traders. We are all too familiar with corporate scandals that have happened over the last twenty years. Let’s remember, at that time compliance and ethics as a profession wasn’t even a glimmer in the eye of anyone. There were no compliance and ethics officers, no dedicated compliance and ethics professional organizations, no professional field of study, with the exception of the highly regulated industry of finance. There was very little talk about corporate culture and certainly not in relation to how affected ethical behavior and compliance. These were the years of the original Gordon Gekko and introduced into that mixture was the ongoing sentencing reform effort that was underway in Congress at the time. This resulted in the Sentencing Reform Act and this act was primarily concerned with reforming the sentencing of individuals in federal court. It did this in broad strokes by eliminating parole and creating a determinant sentencing regime. This meant that the sentence announced by the judge should be very close to the sentence actually served. The hope was to create more transparency in the sentencing system and reduce disparities in sentencing that happened regionally across the United States. Congress wanted to alleviate scenarios where somebody charged with exactly the same offense in Massachusetts would not necessarily receive the same sentence as somebody charged with that sentence in Florida. In order to accomplish these goals the Sentencing Commission was created by the Sentencing Reform Act. The commission is an independent agency with seven voting members, both judges and and non—judges. Its role is to develop sentencing guidelines for use by federal courts in the United States to study and research sentencing issues. It collects all sentencing information and helps to educate about this topic. Importantly, Congress mandated that the Sentencing Commission consider guidelines for organizations in the new regime. So the Sentencing Commission took up creating organizational sentencing guidelines that would allow federal judges to sentence organizations that have been convicted of federal offenses. These initial organizational guidelines came into effect 25 years ago—in 1991, Happy Silver Anniversary to the Sentencing Guidelines!  A guiding principle behind these new guidelines was to provide a foundation for an organization to self-police its own conduct through effective compliance and ethics programs. Although that exact terminology wasn’t used in the original guidelines and they’ve gone through iterations since then, the genesis was there in 1991. It meant to encourage compliance through this framework of principles. The idea was to reward and incentivize organizations to create effective compliance programs by mitigating their punishment in the case of a criminal violation. Basically, the organization gets credit for cooperation and for having a program. The sentencing guidelines talk about compliance and ethics because it’s the carrot that leads to mitigation for organizations that might be charged with offenses in federal court. The seven hallmarks of an effective program were developed to be applied by organizations that found themselves in the situation. After twenty five years those standards have developed into the basis for compliance programs for everyone whether they’re facing criminal charges or not. The guidelines have become what they are simply because they were first and twenty five years on they still remain the basis for any effective program.

The Upshot

The Sentencing Commission is involved in compliance and ethics not only to determine the result of a criminal conviction for an organization, but to set standards, actionable standards for all organizations. The reason the commission is involved may be an accident of history, but the commission has taken its role very seriously and has put together a scalable set of standards for ethics and compliance program that all organizations can use to be more effective.

Three Questions with Tom Fox.

Tom Fox was a recent recipient of the 12th Annual International Compliance & Ethics Award 

If you a question you want answered on the podcast be sure to submit it on ComplianceBeat.com or reach out below. 

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