FCPA Sentencing Guidelines
The purpose of the Organizational Sentencing Guidelines is to deter corporate crime and ensure “just punishment”. The Guidelines are based on a formula that provides the basis for the magnitude of the fine and is described in full in the US Sentencing Commission’s (USSC) Chapter 8 - Sentencing of Organizations. The decision on the eventual magnitude of the fine is divided into several stages.
First up are the
Offense Level
and
Base Fine
. The offense level is determined by how serious the offense is. The more serious the offense, the more points an organisation will accrue. The offense level is then applied to the base fine table. The base fine seeks to measure “the seriousness of the offence”. The base fine is the greatest of:
-
The amount based on the Offense Level from the Offense Level Fine Table
-
The pecuniary loss from the offense
-
The pecuniary gain to the organisation from the offense.
In circumstances where it is difficult to work out the pecuniary loss or gain, an estimate is used. This was the case in the Siemens case where the bribery was spread over countless contracts and hundreds of bank accounts.
The second stage is the
Culpability Score
. Each company starts off with a base score of 5 upon which further additions are made. The first addition, common to all companies, is for the number of employees the company has, from a maximum of 5 points to a minimum of 1 extra point. The next possible addition is for prior history – has the company been adjudicated for a similar offense in the past 10 years (add 1 point) or 5 years (add 2 points). Points can also be added for violating an order and for obstructing justice but none of these penalties were applied to a company in the dataset.
Companies can also be rewarded for various reasons. Firstly, if they have an effective compliance programme, however, no company sentenced under the FCPA has received credit for this. Furthermore, to emphasis how rare it is to receive credit for an effective compliance programme, since 1996, only three out of 1,393 companies sentenced by the DOJ for all corporate offences have received credit (Martin, McConnell & Simon, 2011). Companies can be rewarded for self-reporting, cooperating and accepting responsibility.
-
Self-reporting results in a 5-point reduction in the culpability score.
-
Fully cooperating results in a 2-point reduction in the culpability score.
-
While, only accepting responsibility, results in a 1-point reduction in the culpability score.
Companies will only receive one of these reductions. The culpability score is multiplied by the minimum and maximum multipliers; producing a guideline fine range.
Once the guideline fine range has been produced, the next task for prosecutors is to
determine the fine within this range
. Prosecutors are a given a list of 11 factors that they should consider. The majority of these factors seem to be a regurgitation of factors that should already have been considered when forming the offense level, the base fine and the culpability score.
The final stage allows prosecutors to consider factors that have thus far “may not have been adequately taken into consideration by the guidelines” and thereby give prosecutors
the chance to reward companies with a departure from the guideline range
. This section provides a list of factors that may constitute grounds for departure. The most important factors relevant to the FCPA and to this paper are Substantial Assistance to Authorities - Organizations, Remedial Costs that Greatly Exceed Gain and Mandatory Programs to Prevent and Detect Violations of Law. These three factors cover cooperation, remedial costs and pervasiveness/severity of the corruption within the firm. The importance of cooperating and offering “substantial assistance” cannot be ignored. A company that cooperates not only reduces its culpability score, but can also receive a departure from the guideline fine. This underscores the importance of companies cooperating significantly, to the fullest extent possible and in a timely fashion.
