Recent developments in federal criminal law may have a significant impact on the charging and sentencing of business organizations.

One important development was the recent U.S. Supreme Court decisions in United States v. Booker and United States v. Fan Fan. These decisions make clear that the sentencing guidelines long considered to be "mandatory" are now to be considered as "advisory."

While the guidelines status as advisory-only is clear, it is far less clear precisely how much weight courts will give the guidelines when sentencing business organizations and white collar offenders.

Although the exact application of the sentencing guidelines by the courts may be in a state of flux, the Department of Justice's policy toward the guidelines is not. As recently as Jan. 28, Deputy Attorney General, James B. Comey circulated a memorandum to all federal prosecutors emphasizing that in the wake of Booker all federal prosecutors "must remain focused on our principles and our mission, which are clear and enduring."

The memorandum continues:

"First, we must do everything in our power to ensure that sentences carry out the fundamental purposes of sentencing. Those purposes, as articulated by Congress in the Sentencing Reform Act are to reflect the seriousness of the offense, to promote respect for the law, to provide just punishment, to afford deterrence, to protect the public, and to offer opportunities for rehabilitation to the defendant.

Second, we must take all steps necessary to ensure adherence to the Sentencing Guidelines. One of the fundamental imperatives of the federal sentencing system is to avoid unwarranted disparity among similarly situated defendants.

The Guidelines have helped to ensure consistent, fair, determinate and proportional punishment. They have also contributed to historic declines in crime. We must do our part to ensure that the Guidelines continue to set the standard for federal sentencing."

Given the Justice Department's policy, business organizations and corporate leaders to be on the safe side should assume that the application of the sentencing guidelines will likely remain an important aspect of the federal sentencing process. The content of the guidelines will continue to matter greatly to individual and corporate criminal defendants.

Both the recent amendments to the corporate sentencing guidelines as well as the prosecution guideline memoranda from the Department of Justice make it clear that business organizations, both large and small, need to adopt and implement effective compliance and business ethics programs in order to minimize the risk of a federal investigation and possible prosecution.

In making a decision to charge a corporation, a prosecutor generally has wide latitude in determining when, whom, how and even whether to prosecute for violations of Federal Criminal law. By being aware of the significant factors prosecutors consider in reaching a decision as to the proper treatment of a corporate target and, more importantly, by taking effective steps to implement an effective compliance program, business organizations can safely navigate the as yet uncharted waters of the new sentencing guidelines era.

Business organizations should pay special attention to a second recent important development in federal criminal law, namely, the revised sentencing guidelines for corporations and other business organizations which became effective late last year. These guidelines set forth how a business organization may lessen its criminal exposure in the event that it is convicted of a crime.

An earlier memorandum prepared by then Deputy Attorney General Larry D. Thompson explains the factors that federal prosecutors should consider when determining whether to seek criminal charges against a business organization.

Importantly, there are significant areas of overlap between the factors that prosecutors consider when making charging decisions concerning corporate offenders and those factors listed in the amended sentencing guidelines that courts should consider when imposing a criminal sentence.

Generally speaking, the following factors will be considered (to varying degrees) at both the charging stage and the sentencing stage of a criminal prosecution of a business organization:

1. The nature and seriousness of the offense, including the risk of harm to the public, and applicable policies and priorities, if any, governing the prosecution of corporations for particular categories of crime;

2. The pervasiveness of wrongdoing within the corporation, including the complicity in, or condonation of, the wrongdoing by corporate management;

3. The corporation's history of similar conduct, including prior criminal, civil, and regulatory enforcement actions against it;

4. The corporation's timely and voluntary disclosure of wrongdoing and its willingness to cooperate in the investigation of its agents, including, if necessary, the waiver of corporate attorney-client and work product protection;

5. The existence and adequacy of the corporation's compliance program;

6. The corporation's remedial actions - including any efforts to implement an effective corporate compliance program or to improve an existing one - to replace responsible management, to discipline or terminate wrongdoers, to pay restitution, and to cooperate with the relevant government agencies;

7. The collateral consequences, including disproportionate harm to shareholders, pension holders and employees not proven personally culpable and impact on the public arising from the prosecution;

8. The adequacy of the prosecution of individuals responsible for the corporation's malfeasance; and

9. The adequacy of remedies such as civil or regulatory enforcement actions.

The Thompson memorandum makes clear that the above-listed factors are intended to be illustrative of those that should be considered, and they are not intended to be a complete or exhaustive list.

In order to safeguard your company you need to be keenly aware of those factors that are almost always given careful scrutiny by federal prosecutors and by federal courts at the time of sentencing.

Pervasiveness of wrongdoing within the corporation. A corporation can only act through natural persons, and it is therefore held responsible for the acts of such persons fairly attributable to it. Charging a corporation for relatively minor misconduct may occur where the wrongdoing was pervasive and was undertaken by a large number of employees or by all of the employees in a particular role within the corporation.

Usually, however, at both the charging and sentencing stages of a criminal prosecution, the government's focus is upon the role of the business organization's management. Along these lines, the commentary to the Sentencing Guidelines provides: "Pervasiveness [is] case specific and it [will] depend on the number and degree of responsibility of individuals [with] substantial authority who participated in, condoned, or were willfully ignorant of the offense. Fewer individuals need to be involved for a finding of pervasiveness if those individuals exercised a relatively high degree of authority, pervasiveness can occur either within an organization as a whole or within a unit of an organization.

The corporation's past history. A corporation, like a natural person, is expected to learn from its mistakes. Both the guidelines and the Thompson memorandum suggest that a history of similar conduct may be probative of a corporate culture that encouraged or at least condoned misconduct.

Criminal prosecution of a corporation is more likely where the corporation previously had been subject to a non-criminal guidance, warnings, or sanctions, or previous criminal charges, and yet it either had not taken adequate action to prevent future unlawful conduct or had continued to engage in the conduct in spite of the warnings and enforcement actions taken against it.

Corporate compliance programs. Compliance programs are established by corporate management to prevent and to detect misconduct and to ensure that corporate activities are conducted in accordance with the applicable criminal and civil laws, rules and regulations.

While the Department of Justice encourages corporate self-policing, the existence of a corporate compliance program is not sufficient, in and of itself, to justify not charging a corporation for criminal conduct undertaken by its officers, directors, employees or agents. Indeed the government believes that the commission of crimes despite the existence of a corporate compliance program may suggest that the business organization is not adequately enforcing the program.

From the Department's perspective, the critical factors in evaluating a compliance program are whether the program is adequately designed for maximum effectiveness in preventing and detecting wrongdoing by employees, and whether corporate management is enforcing the program or is tacitly encouraging or pressuring employees to engage in misconduct to achieve business objectives.

Federal prosecutors are urged to determine whether a corporation's compliance program is merely a "paper program" or whether it was designed and implemented in an effective matter.

Cooperation and voluntary disclosure. Finally, a corporation's timely and voluntary disclosure of wrongdoing and its willingness to cooperate with the government may be relevant factors in determining whether a corporation is criminally charged.

In this regard, a prosecutor may consider the corporation's willingness to identify the culprits within the corporation (including senior executives), to make witnesses available, and to disclose the complete results of its internal investigation.

One controversial factor the government may consider in assessing the adequacy of a corporation's cooperation is the completeness of its disclosure including, if necessary, a waiver of the attorney-client and work product protections, both with respect to its internal investigation and with respect to communications between specific officers, directors, employees and counsel.