Abstract

The Federal Sentencing Guidelines for Organizations have had a significant impact on the way organizations conduct business. These guidelines have been codified in Chapter 8 of the United States Sentencing Commission Guidelines Manual (also referred to as the Federal Sentencing Guidelines for Organizations, hereinafter FSGO or Chapter 8) and are considered the gold standard for evaluating internal corporate compliance programs. The Chapter 8 guidelines offer a carrot and stick approach regarding compliance and ethics programs. Organizations that have effective compliance and ethics programs, cooperate with government investigations, and accept responsibility can reduce their potential federal criminal fines by up to 95%. Organizations that tolerate, encourage or condone illegal behavior, do not cooperate and do not accept responsibility may have these same fines multiplied by a factor of four. This makes the potential, bottom line impact of compliance and ethics programs an 80:1 swing in what a company may have to pay in federal fines, depending on whether it had good ethics and compliance programs, or bad ethics and compliance programs. In the words of a leading securities law commentator, a general counsel who fails to implement an effective compliance program is guilty of 'professional malpractice.'.