NYU’S Arlen Says Organizational Sentencing Guidelines Have Failed
26 Corporate Crime Reporter 6, February 3, 2012

The Organizational Sentencing Guidelines have failed to deter corporate crime and should be reformed.

That’s according to NYU Law Professor Jennifer Arlen writing in the current issue of the University of Miami Law Review.

The article is titled – The Failure of the Organizational Sentencing Guidelines.

“To deter corporate crime, corporate sanctions must be structured to induce large corporations to help federal prosecutors detect and punish corporate crime,” Arlen writes. “Specifically, firms must be encouraged to detect and report wrongdoing, and to cooperate with the government’s effort to identify and sanction the individuals responsible for the crime. Firms
will not engage in these activities unless they face lower expected sanctions if they detect, report, and cooperate than if they do not.”

Arlen concludes that the guidelines do not achieve this objective.

“Although the Organizational Sentencing Guidelines offer sanction mitigation to firms that adopt effective compliance programs, self-report, and cooperate, these provisions offer too little mitigation to encourage firms to detect, report, and cooperate,” Arlen writes.

“Indeed, the Guidelines’ mitigation provisions are particularly inadequate in the very circumstances where corporate detection and investigation is most important – in cases involving crimes committed by managers of large firms.”

“As a result, U.S. efforts to deter corporate crime are undermined by adherence to the Organizational Sentencing Guidelines. This may partly explain why the Department of Justice adopted an alternative strategy for encouraging corporate reporting and cooperation, one that differs materially from the Organizational Guidelines.”

“To help deter corporate crime, the Sentencing Commission should reform the Guidelines, “ she concludes.

Arlen says the Department of Justice no longer relies primarily on the incentives provided by the Organizational Guidelines to induce corporate policing.

“Approximately eight years after the adoption of the Organizational Guidelines, the Department formally adopted a policy designed to provide firms with far greater incentives to engage in effective policing than is offered by the Guidelines.”

“Specifically, in 1999, then-Deputy Attorney General Eric Holder issued a memorandum to prosecutors detailing the factors they should consider when deciding whether to indict a corporation for its employees’ crimes.”

“These guidelines encouraged prosecutors not to prosecute firms that engage in specified good corporate conduct, even when firms could be held criminally liable through respondeat superior and would have been fined under the Organizational Guidelines.”

“Following the Holder Memo, prosecutors increasingly have chosen not to prosecute firms if the crime occurred despite effective corporate policing, especially if the firm reported the crime and cooperated.”

“Firms exempt from criminal prosecution still are subject to penalties – including remediation and forfeiture – which often are imposed through deferred or non-prosecution agreements.

“Yet the magnitude of mitigation produced by the decision not to convict – in concert with the monetary penalty reduction – is enormous. The Department’s policy favoring non-prosecution of firms that undertake effective policing – especially cooperation – provides stronger incentive for firms to adopt effective compliance programs, self-report, and fully cooperate than is produced by the Organizational Sentencing Guidelines.”

“Moreover, an increasing number of federal prosecutors are addressing compliance failures through a combination of smaller penalties, direct mandates, and monitoring, as opposed to relying primarily on the threat of substantial sanctions for non-compliance.”

“The Department’s non-prosecution policy provides some evidence that federal enforcement officials have decided that they need to provide stronger incentives to induce corporate policing than those provided by the Guidelines.”

“Nevertheless, the Organizational Guidelines – and their defects – are still important because the Guidelines continue to determine the sanctions imposed on many firms even when the firm engaged in some effective policing. This is because many U.S. Attorneys continue to convict firms even when the firm had an effective compliance program, fully cooperated, or undertook other policing measures,” she writes.




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