The Proposed Amendment to the Sentencing Guidelines

On April 30, 2004, the United States Sentencing Commission submitted to Congress an amendment to the existing Organizational Sentencing Guidelines (the “Guidelines”) that will change the way corporations create and manage compliance programs. As part of the Commission’s multi-year review of the effectiveness of the Guidelines and its ongoing response to the Sarbanes-Oxley Act, the amendment modifies and strengthens existing provisions that set forth seven minimum requirements for a corporate compliance program to be considered effective and to be deemed a significant mitigating factor in sentencing a corporate defendant. In addition to setting forth new requirements for an effective compliance and ethics program, the amendment provides guidance for the implementation of such a program. This amendment becomes effective on November 1, 2004.

Under the current Guidelines, the existence of an effective compliance program has often reduced the culpability of a business organization and the corresponding fine it pays when convicted of a crime. In many situations, the government has declined to prosecute an organization when the organization has been able to show that it had compliance safeguards in place designed to prevent, deter, and detect wrongdoing, even though the criminal act occurred.

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