Ateneo Law Entrance Exam Reviewer

Topics: Internal control, Internal audit, Compliance and ethics program Pages: 46 (9067 words) Published: February 28, 2014
Corporate Compliance Answer Book.book Page 29 Thursday, June 17, 2010 4:20 PM

2
Implementation of Effective
Compliance and Ethics
Programs and the Federal
Sentencing Guidelines
Steven D. Gordon*

How should a company go about designing and implementing
a compliance program? While other chapters address the
specifics of compliance programs in particular industries, this chapter considers issues relating to designing and implementing compliance and ethics programs generally. The biggest influence on the design and implementation of a

compliance program is guidance from the U.S. Sentencing
Commission contained in the Federal Sentencing Guidelines
that apply to companies convicted of federal criminal offenses. The Sentencing Guidelines set standards that have become the

* The author wishes to acknowledge Jennifer Dure, Michael Manthei, Christopher A. Myers, and Jonathan Strouse for their contributions to this chapter.

29

Corporate Compliance Answer Book.book Page 30 Thursday, June 17, 2010 4:20 PM

Q 2.1

CORPORATE COMPLIANCE ANSWER BOOK

norm for virtually all companies, even though relatively few will ever be prosecuted or convicted. In fact, the most useful benefit from using the Guidelines to design and implement a
compliance and ethics program is that it can help companies
avoid investigations and convictions in the first place.
In addition to complying with the Sentencing Guidelines, if the company is publicly held, it must comply with the SarbanesOxley Act of 2002. And if the company is a federal government contractor or subcontractor, the Federal Acquisition Regulation (FAR) comes into play. Other compliance requirements apply to other industries. Fortunately, these various guidelines and requirements do not conflict and, instead, tend to complement each other.

Sentencing Guidelines Basics.............................................................. 30 Components of an Effective Compliance Program ................................ 32 Designing and Implementing a Compliance Program ........................... 34 Relevant Factors and Considerations....................................... 34 Requirements; Risk Areas....................................................... 35 Code of Conduct................................................................... 41 Compliance Program Administration................................................... 44 Training................................................................................ 50 Audits .................................................................................. 52 Reporting Systems/Whistleblowing/Non-Retaliation................ 54 Rewards/Discipline ............................................................... 56

Sentencing Guidelines Basics
Q 2.1

What are the Federal Sentencing Guidelines?

Since 1991, the sentencing of corporations and other business entities convicted of federal criminal offenses has been governed by the Federal Sentencing Guidelines (“Sentencing Guidelines”), established by the U.S. Sentencing Commission. These Sentencing Guidelines were mandatory, but in 2005, the Supreme Court ruled that it is 30

Corporate Compliance Answer Book.book Page 31 Thursday, June 17, 2010 4:20 PM

Compliance Programs & U.S. Sentencing Guidelines

Q 2.2.1

unconstitutional to apply them in mandatory form. The Court left them intact as voluntary guideposts that federal courts should consult but are not bound to follow.1
In addition to providing guidance on how convicted companies should be sentenced, the Sentencing Guidelines also contain detailed guidance from the Sentencing Commission on what it means to have an “effective” compliance and ethics program. This guidance, contained in chapter eight of the Guidelines Manual, 2 is used by hundreds of companies to design and implement their compliance programs and is also the standard used by many government agencies to evaluate company compliance and ethics...
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