ORGANIZATIONAL%20SENTENCING%20GUIDELINES

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ORGANIZATIONAL SENTENCING GUIDELINES
THE HONORABLE RUBEN J. CASTILLO VICE-CHAIR, U.S.
SENTENCING COMMISSION
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CHAPTER EIGHT OVERVIEW
UNITED STATES SENTENCING COMMISSION GUIDELINES
MANUAL
FINE CALCULATIONS
INCENTIVE STRUCTURE
DETERRENCE
COMPLIANCE PRINCIPLES
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What Is An Organization? - 8A1.1 n.1

• A person other than an individual
• 18 U.S.C. 18

State and local governments
Trade associations and unions
Non profit organizations
Pension funds trusts
Corporations and
Partnerships
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POLICY OF DETERRENCE
Carrot and Stick Operation of the Criminal
Penalty Structure

• Encourage partnership in crime control
• Reward self-policing, self-reporting, and
  voluntary disclosure

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BASE FINE CALCULATION FOR ORGANIZATIONS
GREATEST OF
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SARBANES OXLEY ACT AMENDMENTS AFFECT CHAPTER
EIGHT FINE TABLE

• Effective Date January 25, 2003
• Substantial penalty increase for
• fraud-related offense conduct in Chapter Two
  (individual defendants)
• Direct effect on calculation of base fine for
  organizations under Chapter Eight
• See Commission Report to Congress
• http//www.ussc.gov

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PENALTY INCREASE ILLUSTRATION

• Publicly-traded company convicted of securities
  fraud
• gt 250 victims
• 1.2 million loss caused

Twelve fold increase in base fine
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Fine Range - 8C2.7 8A1.1 n.2
x
Fine Range

BASE FINE
MULTIPLIERS Minimum Maximum
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Determining Culpability Score - 8C2.5
5 POINTS

• Base Culpability Score
• AGGRAVATING FACTORS
• Level of Authority (Size)
• Prior History
• Violation of an Order
• Obstruction of Justice
• MITIGATING FACTORS
• Effective Program to Prevent Detect Violations
• Self Reporting, Cooperation Acceptance of
  Responsibility

5,4,3
2 or 1
2 OR 1
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-3
-5,-2 or -1
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IMPACT OF COMPLIANCE PROGRAMS 8C2.5(f) Seven
Minimum Steps - 8A1.1 n.3(k) 1-7

• Compliance standards
• High-level oversight
• Careful delegation of authority
• Effective communication
• Monitoring and audits
• Consistent discipline
• Process modifications

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INCENTIVE STRUCTURE WHATS IT WORTH?
40,000,000
10,000,000
10
500,000
5
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PROBATION REQUIRED 8D1.1

• Ensure compliance with restitution
• Safeguard organizations ability to pay
  penalties
• No compliance program, and over 50 employees
• Prior violations for similar offenses within 5
  years
• High level participation in wrongdoing
• Prevent future criminal conduct
• If a fine not imposed
• Accomplish the statutory purposes of sentencing

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USSC - - AHEAD OF THE CURVE
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AD HOC ADVISORY GROUP

• Appointed January 2002 10th Anniversary of
  Organizational Guidelines
• 18-month term
• 16 members with diverse expertise
• Mandate
• Assess criteria for effective compliance
  programs

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EXTENSIVE SOLICITATION OF PUBLIC VIEWS

• Request for Comment March 19, 2002
  August 21, 2002
• Public Hearing November 14, 2002
• Preliminary Report March 2003
• Final Report October 2003
• See http www.ussc.gov /Organizational
  Guideline Section
• for all comment, witness testimony and
  transcripts

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KEY ISSUES UNDER CONSIDERATION

• Leadership
• Accountability and Corporate Governance
• Administration of Compliance Programs
• Confidentiality, Internal Reporting
• Whistleblowing
• Cooperation and Waiver of Privileges
• Methods for increasing incentives for compliance

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EXAMPLE OF ISSUES RAISED AT HEARING

• Emphasize tone at the top.
• Require assessment, auditing monitoring of
  ethics/compliance programs.
• Clarify training methods frequency.
• Square Guideline self-reporting policy with
  confidentiality specter of third-party
  litigation.
• Re-visit application to small businesses.

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LEGISLATIVE HARBINGER OF CHANGE?

• . . . The Chapter 8 Guidelines relating to
  Sentencing Organizations for criminal conduct are
  outdated and do not sufficiently deter
  organizational or corporate misconduct.
• . . . Requires complete review of the Chapter 8
  corporate misconduct guidelines, which are
  outdated and need to be toughened to deter
  corporate crime.
• --- S. 2010, Judiciary Committee Report
  regarding proposed Sarbanes Oxley
  legislation, May 6, 2002
• General Directive in Sarbanes Oxley Act for
  Commission to
• assess and amend Chapter Eight as
  appropriate
• 
  

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