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Corporate Crime's Dead Giveaway: Ignoring Trouble Until Too Late

Corporations that police their own legal and ethical behavior were far less likely to be criminally prosecuted over the three decades since federal sentencing guidelines took effect, the U.S. Sentencing Commission found in a new study of compliance programs among defendants.

"Since fiscal year 1992, the overwhelming majority of organizational offenders (89.6%) did not have any compliance and ethics program," the Commission found, using the term for criminal defendants that includes corporations, non-profits and other organizations.

Only 11 of the nearly 5,000 "organizational offenders" sentenced in that 30-year span received a sentencing-score reduction for having an effective compliance and ethics program. On the flip side, 58 percent of defendants saw their "culpability score" increased for their involvement in or tolerance of criminal activity and few saw their score decreased for self-reporting criminal behavior before they got caught.

Over that 30-year period, federal courts imposed nearly $33 billion in fines on corporate defendants. The average fine was more than $9 million, although that appears to be heavily skewed by gigantic fines, since the median amount was $100,000.

"The organizational sentencing guidelines have wielded significant influence on corporate America," the report found. "Chapter Eight was designed to incentivize corporate self-policing through its 'carrot and stick' philosophy and it has 'catalyzed vigorous efforts by companies to promote ethical performance and reduce organizational misconduct.' Thirty years have elapsed since their original promulgation and the hallmarks for an effective compliance and ethics program found in the guidelines continue to set the gold standard for designing and evaluating effective compliance and ethics programs."

The most common crimes corporations were sentenced for were fraud (30 percent) and environmental offenses (24 percent), followed by antitrust (8 percent), food and drug violations (nearly 7 percent), money laundering (6 percent) and import and export crimes (5 percent).


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