Corporate – White Collar Crime Sentences May be changed. New Guidelines on Prison Alternatives Approved

April 27, 2010

While on one hand I expect a bit of an outcry from the public that, at times, seems to have a taste for blood, the alternative prison sentence possibilities that have been approved are long over due.  Yes…White Collar Crime does create victims and the pain that people feel at the hand of a fraudster is very real, however, the real travesty is that many who have committed white collar crimes and have the ability to work (in some capacity) to make restitution, are disallowed that due to the practicality of an active prison sentence.

The information is listed below in blue:

After considerable public input, the U.S. Sentencing Commission recently voted to send Congress amendments to the federal sentencing guidelines that, among other changes, would increase the availability of alternatives to prison and would alter the sentencing of corporate offenders.

Although the sentencing guidelines are no longer mandatory, judges continue to look to them on a regular basis in determining appropriate punishment.

Under the alternatives-to-prison proposal, courts could depart from the guidelines when an offender’s criminal activity was related to drug or alcohol abuse or significant mental illness and when sentencing options, such as home or community confinement or intermittent confinement, would serve a specific treatment purpose. The commission also recommends that courts consider the effectiveness of residential treatment programs as part of their decision to impose community confinement.

By adjusting offense levels, the proposed amendments would make more offenders eligible for alternative sentencing options, such as split sentences (half in prison, half in alternative), home or community confinement.

“The commission has heard from virtually every sector of the criminal justice community that there is a great need for alternatives to incarceration,” said Chairman William Sessions III in an April 19 statement. “Providing flexibility in sentencing for certain low-level, non-violent offenders helps lower recidivism, is cost effective, and protects the public.” Sessions called the changes a “very modest step” in the right direction.

The commission also has proposed changes on the sentencing of organizations. Most importantly for corporations, a larger number of offending organizations would be eligible for a credit for having an effective ethics and compliance program.

In a firm memo discussing the proposed changes, Gibson, Dunn & Crutcher noted that a number of groups had urged the commission to eliminate the “absolute bar” to getting that credit if “high-level personnel” had participated in, condoned, or were willfully ignorant of the offense. The term “high-level personnel” is defined to include a director, an executive officer, and “an individual in charge of a major business or functional unit of the organization.”

Although no statistics are available, the law firm noted that the per se disqualification applies to several convicted corporations annually. David Debold, of counsel to Gibson Dunn, is co-chair of the Sentencing Commission’s Practitioners Advisory Group.

The commission eliminated the per se bar but attached certain conditions for the credit to apply, the most important of which is that “the individual or individuals with operational responsibility for the compliance and ethics program … have direct reporting obligations to the governing authority or an appropriate subgroup thereof (for example, an audit committee of the board of directors).”

The change, according to Gibson Dunn, would expand the direct reporting required between the person with day-to-day responsibility for compliance—often the general counsel—and the members of the board.

In other changes, it would be appropriate to consider such factors as an offender’s age, physical, mental and emotion conditions, and military service—currently considered “not ordinarily relevant”—in determining whether to sentence outside the guidelines. However, the factors in the particular case would have to be relevant to an unusual degree and distinguish the case from the typical case.

“Through this amendment, the commission is providing the criminal justice system, and particularly judges, with the information they have long sought,” said Sessions. “The more information we can provide on the use of specific offender characteristics during the sentencing process, the more consistency and uniformity will result and the more justice will be served.”

Another amendment responds to the Matthew Shepard and James Byrd Jr. Hate Crimes Prevention Act of 2009 by broadening the guideline for offenses involving individual rights to include the new hate crime offense. The act makes it unlawful to willfully cause bodily injury to a person because of the person’s race, color, religion, national origin, gender, sexual orientation, gender identity, or disability. The act also made it unlawful to attack a U.S. serviceman on account of his service, and the sentencing amendment would incorporate this new offense. The commission also expanded the definition of a hate crime in its penalty enhancement for hate crimes to include victims who were targeted because of their “gender identity.”

The amendments must be submitted to Congress by May 1 and will become effective Nov. 1 unless Congress rejects them.

For those who are active readers of this blog, I would suspect that many attorneys representing those who have been convicted of white collar crime will be either working to postpone their sentence or looking for alternative sentencing options which it appears will be available later this year.

I would love to hear your comments on whether you agree or disagree with this new approach to sentencing.


Which Cities Top The List For Corporate Crime? Business Ethics Speaker Chuck Gallagher Comments

December 4, 2007

The Corporate Crime Reporter, a print weekly legal newsletter based in Washington, D.C., released a report on November 27th, 2007 naming Washington, New York, Los Angeles, Philadelphia, Boston and Newark are the corporate crime capitals of the United States.

“Every year, the FBI releases its Crime in the United States report,” said Russell Mokhiber, editor of Corporate Crime Reporter. “This report is misnamed. It is actually a report on street crime in the United States. It ignores corporate crime. So, while the Crime in the United States report documents rape, robbery, murder, robbery and assault – it ignores health care fraud, bribery, environmental crimes, and other major corporate crime prosecutions.”

“We believe that America deserves to know not only where most of the street crime is – but also where most of the corporate crime is being prosecuted,” Mokhiber said.

The Corporate Crime Reporter conducted a survey of 2006 prosecutions, settlements and sentences and the results identified the top six corporate crime capitals of the US.

“These are the cities where most of the corporate crimes are being prosecuted,” Mokhiber said. “New York is an obvious hub – that’s where Wall Street is and that’s where the money is. Washington is also an obvious contender – corporations rip off the government and government prosecutors act to recover the defrauded funds.”

“Federal prosecutors in Boston have developed perhaps the premiere health care fraud prosecution team in the country – outside of Washington,” Mokhiber said. “The U.S. Attorneys’ offices in Los Angeles and Philadelphia have both developed white collar and corporate crime expertise.”

Several interesting facts arose from the study. What is most obvious is that corporate crime is centered in our largest cities and money hubs. It would be no surprise that New York, Los Angeles and Washington are there based on their sheer size and the consolidation of business and power. What I don’t see is a relationship between number of cases (prosecuted or settled) and size of the location. It would be interesting to see the top areas as a percentage not just by number.

Another issue is location and interest of federal prosecutors. As stated in the report, Mokhiber acknowledges that Boston and Washington focus on health care fraud while L.A. and Philly have developed white collar expertise. Again, is crime in these cities higher or is it that the prosecution effort is more focused?

Chuck Gallagher - The Ethics Expert

As a business ethics speaker, I know, from presentations nationwide, that issues with ethics breeches and crime don’t seem to be strongly centered in one geographic region or another. I fully recognize that larger metropolitan areas have more, just by the sheer numbers, but where people are gathered, when the components for crime exist (need, opportunity and rationalization) – there will be crime.

Do you believe that crime is centered in these cities (predominately) or do you think that corporate crime is alive and well where you are. Feel free to respond with your thoughts.