Implementing a Corporate Compliance and Ethics Program: What are the Federal Sentencing Guidelines?

by Cheryl Wilson, PMP, PMI-RMP, CCEP

Organizations today are finding increasing evidence for the need to establish some level of a formal “compliance and ethics program.”  Not only will a compliance program increase how the organization is viewed both internally by its employees but it will show to external potential clients, government agencies, and regulatory bodies that an organization is serious about their ethical, legal and fiduciary responsibilities and obligations.

Last month the Post-Gazette Compliance Central told the story of how the Security & Exchange Commission (SEC) and the Department of Justice (DOJ) settled parallel criminal and civil enforcement actions against the Titan Corporation (“Titan”) under the Foreign Corrupt Practices Act (“FCPA”) leading to a $28.5 million fine and a government mandate to establish a compliance and ethics program.  Once L-3 bought Titan, they inherited this government mandated direction which formed the basis of L-3’s current Compliance and Ethics Program.

Over the next several issues of the Post-Gazette, the Compliance Central articles will cover:

  • What are the Federal Sentencing Guidelines?
  • Proposed Corporate Compliance and Ethics (C&E) Framework
  • Initial Risk Assessment to Improve your Corporate Compliance Program

The Titan Corporation was not alone, but was one of many organizations where their misconduct promulgated unethical actions leading to the increased levels of public and regulatory scrutiny of corporate governance.   This misconduct led to additional government regulators, more regulatory and sub-regulatory guidance documents, management standards, and best practice recommendations.

The Federal Sentencing Guidelines (created by the Sentencing Reform Act of 1982) are a uniform set of rules from the United States Sentencing Commission that set a sentencing or remediation policy to be implemented by organizations (and individuals) if they are convicted of serious wrong doing by the government. The US Sentencing Commission reviewed numerous crimes and developed the framework for determining the initial set of sentencing guidelines.  The guidelines and policy statements in “Chapter 8 of the Federal Sentencing Guidelines” apply to an organization convicted of wrongdoing, in addition to detailing how an organization should set up an effective compliance and ethics framework.

Once an organization makes the decision or is mandated by the government to implement a compliance program, the organization will need to determine what the program will look like, how it will function, and how it will be managed.  The organization must also decide about the intended purpose, goal, scope, and the cost of the program as well as the location of the compliance function. Compliance officials, within the pre-existing organizational structure must identified and prepared for duty. While answers to many of these questions may vary from organization to organization, the basic elements essential to a successful compliance program lie in these Sentencing Guidelines.

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