By Jeffrey M. Kaplan and Rebecca Walker
In April, the U.S. Sentencing Commission approved changes to the compliance-and-ethics-program related provisions of the Federal Sentencing Guidelines for Organizations. Absent Congressional action to the contrary (which is quite unlikely), the changes will go into effect in early November. The changes are noteworthy in two respects bearing on FCPA compliance programs, as we will explore in this and a soon-to-follow post.
First, the current Guidelines provide that, following the discovery of criminal conduct, a company should, among other things, make “any necessary modifications to the organization’s compliance and ethics program.” A new commentary to that provision specifies that this includes “assessing the compliance and ethics program and making modifications necessary to ensure the program is effective … and may include the use of an outside professional advisor to ensure adequate assessment and implementation of any modifications.”
While not addressed to any one area of law, this provision may have particular importance to FCPA compliance, given that both the Department of Justice and SEC have real expertise in reviewing FCPA programs (much more so than with most other risk areas). This expertise makes it more likely that government officials will be able to detect when a company has failed to implement appropriate program modifications. Indeed, in some FCPA enforcement actions, the government seems to have credited companies for conducting post-violations assessments (in particular, using outside resources) See e.g., http://www.sec.gov/litigation/admin/2007/34-55281.pdf , par. 11.
While every violation should trigger a program assessment of some kind, not all can or should result in “the use of an outside professional advisor to ensure adequate assessment and implementation of any modifications.” In determining when to seek such assistance, companies may wish to consider:
- The seriousness/severity of the violation.
- The magnitude and complexity of the contemplated program modifications, as bearing on the need for an outside advisor’s expertise.
- The extent to which implementation of modifications seem likely to meet resistance within a company, as bearing on the need for an independent party to ensure that the modifications indeed take place.
- Our next post will discuss the Guidelines modification concerning reporting to the board of directors on compliance.
Jeffrey M. Kaplan and Rebecca Walker are partners at Kaplan & Walker LLP. They are currently writing a chapter for the BNA/ACC Compliance Manual on Compliance with the Foreign Corrupt Practices Act. He can be reached at [email protected]. Rebecca Walker’s book, Conflicts of Interest in Business and the Professions: Law and Compliance, is available here. She can be reached at [email protected].