Beware of rotten apples
For at least 20 years, the white- collar criminal defense bar has advised companies to adopt "corporate compliance plans" as a way to insulate themselves from potential liability for the criminal acts of their employees.
For at least 20 years, the white- collar criminal defense bar has advised
companies to adopt "corporate compliance plans" as a way to insulate themselves
from potential liability for the criminal acts of their employees.
The plans typically establish detailed compliance standards and procedures
to be followed by company employees, delegate oversight responsibilities
to senior officials, require a level of employee screening, establish training
programs, adopt monitoring and reporting systems, mandate disciplinary mechanisms,
and require an appropriate corporate response to any impropriety that might
be uncovered.
In 1991, the newly adopted U.S. Sentencing Guidelines boosted the importance
of having such a corporate compliance program by identifying a company's
adoption of a compliance plan as a mitigating factor that can reduce a company's
penalty for criminal malfeasance.
However, the case law in this area shows that a company's adoption of
such promises to behave as good corporate citizens may not protect them
from responsibility for their employees' actions, even when the misbehaving
employees are acting contrary to the company's policies. For example, in
United States v. Basic Construction Co., a company was found guilty of
bid-rigging based in part on jury instructions that "a corporation may be
responsible for the action of its agents done or made within the scope of
their authority, even though the conduct of the agents may be contrary to
the corporation's actual instructions or contrary to the corporation's stated
position."
Similarly, in United States v. Beusch, a company was convicted of bank
law violations even though the malfeasant employee was acting contrary to
company policies.
More recently, the Justice Department adopted new policies for bringing
criminal charges against corporations, which de-emphasize the importance
of corporate compliance programs. According to Justice, "the existence of
a compliance program is not sufficient, in and of itself, to justify not
charging a corporation for criminal conduct undertaken by its officers,
directors, employees or agents. Indeed, the commission of such crimes in
the face of a compliance program may suggest...corporate management is not
adequately enforcing its program."
Furthermore, the sentencing commission may consider adopting more stringent
guidelines for determining the adequacy of compliance programs used to mitigate
companies' responsibility for their employees' actions.
Apparently, the adoption of a compliance program will not be of much
value to a company. To ensure that it will get the benefit of having a program,
the company must take additional steps to ensure that its policies are implemented
effectively.Peckinpaugh is corporate counsel for DynCorp, Reston, Va. This column discusses
legal topics of general interest only and is not intended to provide legal
advice. Should you have a specific question or legal problem, consult an
attorney.
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