Once there was a clear distinction between corporate law and criminal law, with few exceptions that operated illegally. Upon the enactment of the United States Sentencing Commission, especially it’s Sentencing Guidelines; federal law concerning sentencing was drastically changed. While the Sentencing Guidelines first applied only to individuals, in 1991 the Commission enacted a set of guidelines that subjected corporations to the rules.
The purpose behind the guidelines was to actively recruit corporations to monitor and police white collar crime. The guidelines define a good corporate citizen as one who makes effective efforts to deter corporate crime, as well as one who promptly reports failures of those efforts to authorities. By assuring that these two standards are upheld, corporate counsel can effectively minimize the firm’s legal exposure at any given time. However, failure to ensure a company’s “good corporate citizen” standing can result in severe penalties, harsher than ever before in our country’s history.
Sentencing guidelines were heavily influenced by the optimal penalties theory. Under this theory, a corporation would not break the law as a rational actor unless it was reasonable to expect a profit. The expected profit is the amount of profit times the probability of getting caught. The expected liability is the penalty times the probability of getting caught. If the expected liability exceeds the expected profit, then the corporation will not break the law. The penalties are optimal because if lower they would not deter crime, and if higher would discourage legitimate business.
The creation and maintenance of an effective compliance program is a basic responsibility of a public corporation. Consider the following opinion of the Court of Chancery of Delaware:
“The Guidelines offer powerful incentives for corporations today to have in place compliance programs to detect violations of law, promptly report violations to appropriate public officials when discovered, and to take prompt, voluntary remedial efforts…
“…any rational person attempting in good faith to meet an organizational governance responsibility would be bound to take into account the development of the guidelines and the enhanced penalties and opportunities for reduced sanctions that it offers.”
If you find yourself facing criminal charges, it is important to find an experienced white collar attorney to represent you. The attorneys of Parkman White, LLP have a history of success in the court room and are ready to represent clients nationwide.