Posted on February 9, 2010 by Anthony Lake

Sentencing Considerations for Corporations and Organizations

            We received an excellent reader question regarding what factors do Federal courts consider in imposing punishment on corporations or organizations in criminal proceedings. Corporations of course, don’t “go to jail.” The Government does collect its $200 however, since the organization sentencing provisions of the United States Sentencing Guidelines are primarily fine-driven. And while there is a massive body of law concerning factors which must be considered in imposing sentence on individuals, caselaw relating to considerations in imposing punishment on corporations is relatively sparse.

However, areas which courts consider in sentencing corporations or organizations, and conversely areas which corporate criminal counsel may emphasize in order to attempt to mitigate the consequences to their corporate clients, may be discerned from the Guidelines themselves. In many cases, such as relating to acceptance of responsibility and role in the offense, these considerations closely parallel those for individual defendant. The questions facing a corporation at sentencing will boil down to how much will the corporation be made to pay in the form of fines and restitution, and what conditions will be imposed on the corporation.

The relevant portion of the Guidelines is Chapter Eight. Imposing a sentence on a corporation or organization in a Federal criminal case involves a complex determination by the sentencing court. In brief, the court must:

1. Determine whether any restitution, remedial orders or community service should be ordered;

2. Determine the amount of the fine, including determining the corporation’s or organization’s “culpability score”;

3. Determine whether any departures or probation is appropriate.

The Introductory Commentary to Chapter Eight states that it is designed “designed so that the sanctions imposed upon organizations and their agents, taken together, will provide just punishment, adequate deterrence, and incentives for organizations to maintain internal mechanisms for preventing, detecting, and reporting criminal conduct.” U.S.S.G., Ch. 8, Pt. A, Introductory Commentary. The sentencing provisions of Chapter Eight are intended to reflect the general principles that:

First, the court must, whenever practicable, order the organization to remedy any harm caused by the offense. The resources expended to remedy the harm should not be viewed as punishment, but rather as a means of making victims whole for the harm caused.

Second, if the organization operated primarily for a criminal purpose or primarily by criminal means, the fine should be set sufficiently high to divest the organization of all its assets.

Third, the fine range for any other organization should be based on the seriousness of the offense and the culpability of the organization. The seriousness of the offense generally will be reflected by the greatest of the pecuniary gain, the pecuniary loss, or the amount in a guideline offense level fine table. Culpability generally will be determined by six factors that the sentencing court must consider. The four factors that increase the ultimate punishment of an organization are: (i) the involvement in or tolerance of criminal activity; (ii) the prior history of the organization; (iii) the violation of an order; and (iv) the obstruction of justice. The two factors that mitigate the ultimate punishment of an organization are: (i) the existence of an effective compliance and ethics program; and (ii) self-reporting, cooperation, or acceptance of responsibility.

Fourth, probation is an appropriate sentence for an organizational defendant when needed to ensure that another sanction will be fully implemented, or to ensure that steps will be taken within the organization to reduce the likelihood of future criminal conduct.

U.S.S.G., Ch. 8, Pt. A, Introductory Commentary. The provisions are designed to offer “incentives” to corporations or other organizations to police and eliminate criminal conduct through compliance and ethics programs. U.S.S.G., Ch. 8, Pt. A, Introductory Commentary.

The Introductory Commentary to Part B of Chapter Eight states:

As a general principle, the court should require that the organization take all appropriate steps to provide compensation to victims and otherwise remedy the harm caused or threatened by the offense. A restitution order or an order of probation requiring restitution can be used to compensate identifiable victims of the offense. A remedial order or an order of probation requiring community service can be used to reduce or eliminate the harm threatened, or to repair the harm caused by the offense, when that harm or threatened harm would otherwise not be remedied.

U.S.S.G., Ch. 8, Pt. B. Guideline Section 8B1.1 requires a court to enter a restitution order for the full amount of a victim’s loss if such an order is authorized. Section 8B1.3 authorizes a court to order community service as a condition of probation “where such community service is reasonably designed to repair the harm caused by the offense.” U.S.S.G. § 8B1.3. The commentary on Section 8B1.3 notes that the community service should be “related to the purposes of sentencing.” U.S.S.G. § 8B1.3, Cmt.

            Guidelines Section 8B2.1 describes an “effective compliance and ethics program.” It states that, in order to have an effective compliance and ethics program, a corporation or organization must:

1. Exercise due diligence to prevent and detect criminal conduct and establish standards and procedures to prevent and

detect criminal conduct;

2. “[P]romote an organizational culture that encourages ethical conduct and a commitment to compliance with the law”;

3. Ensure that the corporation’s or organization’s governing authority is knowledgeable about the compliance and ethics program and that specific individuals have day-to-day responsibility for the program; and

4. Take reasonable steps to ensure that the compliance and ethics program is followed, enforced and evaluated.

            A critical provision is Guidelines Section 8C2.5, which governs determination of a corporation’s “culpability score.” That section provides for a base score of 5 points with increases or decreases to the level for:

1. Condoning, tolerating or “willful ignorance” of criminal activity by corporate governing authorities or high-level personnel;

2. Any prior history of misconduct;

3. Any violation of orders or obstruction of justice; and/or

4. Self-reporting, cooperation and acceptance of responsibility.

With regard to a decrease in culpability level for cooperation, the Application Notes state that:

[C]ooperation must be both timely and thorough. To be timely, the cooperation must begin essentially at the same time as the organization is officially notified of a criminal investigation. To be thorough, the cooperation should include the disclosure of all pertinent information known by the organization. A prime test of whether the organization has disclosed all pertinent information is whether the information is sufficient for law enforcement personnel to identify the nature and extent of the offense and the individual(s) responsible for the criminal conduct.

U.S.S.G. § 8C2.5, Note 12.

            Another vital provision is Guideline Section 8C2.8—the corporate equivalent of Code Section 3553(a) which courts must consider in sentencing individuals. Section 8C2.8 provides:

(a) In determining the amount of the fine within the applicable guideline range, the court should consider:

(1) the need for the sentence to reflect the seriousness of the offense, promote respect for the law, provide just punishment, afford adequate deterrence, and protect the public from further crimes of the organization;

(2) the organization’s role in the offense;

(3) any collateral consequences of conviction, including civil obligations arising from the organization’s conduct;

(4) any nonpecuniary loss caused or threatened by the offense;

(5) whether the offense involved a vulnerable victim;

(6) any prior criminal record of an individual within high-level personnel of the organization or high-level personnel of a unit of the organization who participated in, condoned, or was willfully ignorant of the criminal conduct;

(7) any prior civil or criminal misconduct by the organization other than that counted under §8C2.5(c);

(8) any culpability score under §8C2.5 (Culpability Score) higher than 10 or lower than 0;

(9) partial but incomplete satisfaction of the conditions for one or more of the mitigating or aggravating factors set forth in §8C2.5 (Culpability Score);

(10) any factor listed in 18 U.S.C. § 3572(a); and

(11) whether the organization failed to have, at the time of the instant offense, an effective compliance and ethics program within the meaning of §8B2.1 (Effective Compliance and Ethics Program).

(b) In addition, the court may consider the relative importance of any factor used to determine the range, including the pecuniary loss caused by the offense, the pecuniary gain from the offense, any specific offense characteristic used to determine the offense level, and any aggravating or mitigating factor used to determine the culpability score.

U.S.S.G. § 8C2.8. The Application Notes to Section 8C2.8 further state, in relevant part, “[i]f punitive collateral sanctions have been or will be imposed on the organization, this may provide a basis for a lower fine within the guideline fine range.” U.S.S.G. § 8C2.8, Note 2.

            Finally, Part C of Chapter Eight provides for departures from a sentence/fine if a court finds “that there exists an aggravating or mitigating circumstance of a kind, or to a degree, not adequately taken into consideration by the Sentencing Commission in formulating the guidelines that should result in a sentence different from that described.” U.S.S.G., Ch. 8, Pt. C, Introductory Commentary. The relevant potential grounds for upward or downward departures are:

1. Substantial assistance to authorities under Section 8C4.1;

2. Risk of death or bodily injury under Section 8C4.2;

3. Threat to the environment under Section 8C4.4;

4. Threat to a market under Section 8C4.5;

5. Public entity (ground for downward departure) under Section 8C4.7;

6. If members or beneficiaries of the corporation or organization are also victims (ground for downward departure) under Section 8C4.8;

7. Whether the remedial costs exceed the gain from the offense under Section 8C4.9; and

8. Mandatory programs to detect and prevent violations of the law under Section 8C4.10.

            From this maze of Guidelines, the following potential points can be derived for corporate criminal counsel to potentially argue in favor of a low or lesser punishment or fine, departure or for mitigation generally:

  1. Any compliance and ethics programs instituted or proposed by the corporation either before or following the alleged conduct;
  2. Any actions the corporation has taken to remedy any harm from the alleged conduct, including:
    1. Restitution to any victims;
    2. Institution or proposal of a compliance and ethics program;
    3. Any other efforts the corporation has made to detect or prevent criminal activity, or to detect or prevent any recurrence of the alleged conduct;
  3. The corporation’s service to the community before or following the alleged conduct;
  4. Whether the corporation reported the alleged conduct to law enforcement;
  5. Whether the corporation cooperated and/or rendered substantial assistance to the Government, and the degree of such cooperation and/or assistance;
  6. Whether the alleged conduct constituted a distinct, isolated instance, as opposed to demonstrating that the corporation had an alleged criminal purpose;
  7. The relative position of the individuals involved in, or having knowledge of, the alleged conduct—i.e. whether governing or high level officers or lower level personnel;
  8. Whether the corporation has any history of similar conducts;
  9. The seriousness of the alleged conduct, including whether it resulted in any physical harm, threat to any market, third party, etc.;
  10. The corporation’s role in the alleged conduct, including whether the corporation or its officers, members or employees were also victims of the alleged conduct;
  11. The lack of likelihood of recurrence of the alleged conduct;
  12. The corporation’s efforts to investigate the alleged conduct and actions against culpable individuals;
  13. Whether the alleged conduct resulted in collateral consequences to the corporation, including costs from investigation, civil lawsuits relating to the alleged conduct, etc.; and
  14. Whether the gains from the alleged conduct were outweighed by the costs incurred by the corporation in responding to and remedying the alleged conduct.

These points may also furnish useful guidelines or tips for corporate officers or members and counsel in attempting to devise appropriate responses in the event of notice of alleged wrongdoing and/or a criminal investigation.
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Posted on April 15, 2009 by Anthony Lake

Summary of Substantial Eleventh Circuit Criminal Decisions Through April 8

            Resuming Federal Criminal Defense Blog’s pledge to keep readers informed regarding substantial decisions in the Eleventh Circuit Court of Appeals (and the Court certainly keeps us busy), we take this opportunity to catch up. Following is a summary of substantial decisions from the end of March through April 8.

“Violent Felonies” Under the Armed Career Criminal Act, 18 U.S.C. § 924: In U.S. v. Townsley, No. 08-13517, 2009 WL 929986, (11th Cir., Apr. 08, 2009) (per curiam; unpublished), the Court reversed the defendant’s conviction, holding that the district court erred in counting the defendant’s three previous convictions for carrying a concealed firearm, in violation of Fla. Stat. § 790.01(2), as “violent felonies” pursuant to the Armed Career Criminal Act (“ACCA”), 18 U.S.C. § 924(e)(1), following its decision U.S. v. Archer, 531 F.3d 1347 (11th Cir. 2008), id. at *3.

Sentence Not “Too Lenient”: The Court affirmed the defendant’s sentence for pedophilia in the published opinion U.S. v. Irey, No. 08-10997, 2009 WL 806860, (11th Cir., Mar. 30, 2009), rejecting the government’s argument that the defendant’s sentence was “too lenient” and therefore unreasonable, id. at *4. Reaffirming earlier holdings that an appellate court must not substitute its judgment for that of the sentencing court, id. at *2 (citing U.S. v. Melvin, 187 F.3d 1316, 1323 (11th Cir.1999); Williams v. U.S., 503 U.S. 193, 204, 112 S.Ct. 1112 (1992)), the opinion, authored by Chief Circuit Judge Edmondson, contains potentially useful language for the practitioner regarding the gravity of punishment and a defendant’s characteristics:

       We appreciate that some people may feel that no sentence would be too harsh for this crime. But that is not the law. And courts never should see the imprisonment in this country of a person for 17-1/2 years as light punishment: although even longer terms of imprisonment can be lawfully imposed in cases, this many years is a substantial portion of a human life-and no serious person should regard it as a trifle.

      Furthermore, when the defendant is 50 at the time the sentence is imposed, the consequences must be seen as severe. Moreover, upon Defendant’s release from imprisonment, he will not be free in the way that most Americans are free. He will be subject to rigorous conditions of supervised release by federal authorities. Given the terms of his sentence, never will Defendant be a truly free man again.

Id. at *4.

Presentence Reports: The Court in U.S. v. Martinez, No. 08-14926, 2009 WL 839093 (11th Cir., Apr. 01, 2009) (per curiam; unpublished) observed that Federal Rule of Criminal Procedure 32(i)(1)(A) requires a district court to verify at sentencing “that the defendant and the defendant’s attorney have read and discussed the presentence report and any addendum to the report,” id. at *2 (quoting Fed.R.Crim.P. 32(i)(1)(A)), while Rule 32(i)(4)(A)(ii) requires the district court to “address the defendant personally… in order to permit the defendant to speak or present any information to mitigate the sentence,” id. (quoting Fed.R.Crim.P. 32(i)(4)(A)(ii)). The Court held that the drafters of Rule 32 “did not intend to impose a requirement that the district court personally address the defendant when inquiring whether he and his attorney have read and discussed the PSI.” Id. (citing U.S. v. Aleman, 832 F.2d 142, 144 (11th Cir. 1987)). The Court also rejected the defendant’s argument that the district court failed to properly address his statement at sentencing that he wished to “go to trial.” Id. at *4.

Government’s Breach of Plea Agreements: “‘Efforts by the Government to provide relevant factual information or to correct misstatements are not tantamount to taking a position on the sentence and will not violate [a] plea agreement.’” U.S. v. Matisas Mesa, No. 08-14134, 08-14130, 2009 WL 868012, *2 (11th Cir., Apr. 02, 2009) (quoting U.S. v. Block, 660 F.2d 1086, 1090-91 (5th Cir. Unit B Nov. 1981)). “‘A prosecutor has a duty to insure that the court has complete and accurate information concerning the defendant...’” Id. (quoting Block, at 1091). Thus, the government’s informing the sentencing court of the defendants’ inconsistent statements in Matisas Mesa, which resulted in the court’s denial of safety-valve treatment pursuant to U.S.S.G. § 5C1.2(a)(5), was held by the Court not to violate the defendants’ plea agreement in which the government agreed to recommend safety-valve treatment. Id.

Booker is a Two-Way Street: In U.S. v. Beasley, No. 08-14977, 2009 WL 905103 (11th Cir., 2009) (per curiam; unpublished), the Eleventh Circuit held that, even if the sentencing court did not use evidence of three uncharged bank robberies in which the defendant was implicated as “relevant conduct” to enhance his sentence pursuant to U.S.S.G. § 1B1.3, “§ 1B1.3 did not limit the court's discretion to consider the robberies under [18 U.S.C.] § 3661 and [18 U.S.C. §] 3553(a),” id. at *2, in departing upward from the Guidelines range, id. at *2.

Hearsay (Not): In U.S. v. Jiminez, No. 08-14192, 2009 WL 921437, (11th Cir., Apr. 07, 2009), the Eleventh Circuit affirmed the defendant’s conviction on various charges concerning manufacture and distribution of marijuana plants, holding in the process that the district court’s admission of testimony by a police detective regarding a statement by a non-testifying witness that the defendant was involved in a marijuana growing operation was not inadmissible hearsay, finding that the statement was not hearsay since it was not admitted to prove the truth of the matter asserted, but only the fact that it was made, pursuant to Federal Rule of Evidence 801(c), id. at *5.

 “National Standard of Care” and “Red Flags” in Prescription Prosecution: When a doctor is prosecuted under the Controlled Substances Act (“CSA”), 21 U.S.C. § 841 for prescribing drugs to patients, he or she must show that they acted in good faith and for a legitimate medical purpose. See U.S. v. Johnston, No. 08-14594, 2009 WL 806740, *4 (11th Cir., Mar. 30, 2009) (per curiam; unpublished) (citing U.S. v. Merrill, 513 F.3d 1293, 1301-02 (11th Cir. 2008)). In Johnston, the district court instructed the jury that it should apply a “national” standard of care in determining whether there was a legitimate medical purpose for the defendant physician’s prescriptions. Id.  The defendant argued on appeal that Florida’s standard of care should govern. Id. The Eleventh Circuit held that the defendant had invited the error by previously arguing that jury must find that she acted “outside the course/scope of professional practice, not in accordance with a standard of medical practice generally recognized and acted in the U.S.” id., in order to convict her, id. (Emphasis in original). The Court affirmed the defendant’s conviction, also holding that admission of testimony from witnesses for the government regarding “red flags” for detecting drug abuse in patients was not plain error and was admissible pursuant to Fed.R.Evid. (“Rule”) 702. Id. at *6.

Fear, Loathing and Interstate Extortion: A feud between German immigrants resulted in charges of conspiracy and extortion in violation of the Hobbs Act, 18 U.S.C. § 1951, and the Travel Act, 18 U.S.C. § 1952, in U.S. v. Bornscheuer, NO. 07-10009, 06-14607, 2009 WL 814587 (11th Cir., Mar. 31, 2009). The Eleventh Circuit affirmed the defendants’ convictions, simultaneously reaffirming its holding in U.S. v. Grassi, 783 F.2d 1572 (11th Cir. 1986) that a component of extortion for the purposes of the Hobbs Act is the victim’s fearful state of mind, and that “fear” is “‘a state of anxious concern, alarm or apprehension of harm and it includes fear of economic loss as well as fear of physical violence.’” Id. at *6 (quoting Grassi, at 1577).

404(b): In the process of affirming the defendant’s conviction and sentence for possession of a firearm by a convicted felon and possession with intent to distribute crack cocaine and marijuana in  U.S. v. Mobley, No. 08-14449, 2009 WL 914121 (11th Cir., Apr. 07, 2009) (per curiam; unpublished), the Court held that the district court did not abuse its discretion in admitting the defendant’s six-and nine-year-old drug convictions under Federal Rule of Evidence 404(b), since the convictions “were probative of his knowledge of possession, and intent to distribute, crack cocaine and marijuana,” id. at *4.

Criminal History: Prior convictions will be counted separately for the purposes of determining a defendant’s criminal history pursuant to U.S.S.G. § 4A1.2 if the convictions were separated by an intervening arrest. See U.S. v. Mann, No. 08-13716, 2009 WL 931685, *1 (11th Cir., Apr. 08, 2009) (quoting U.S. v. Hunter, 323 F.3d 1314, 1322-23 (11th Cir. 2003)).

Stop, Frisk, Arrest, Convict, Affirm: Where police received a 911 call for assistance and the defendant appeared from behind a house that was not his and attempted to run away when the officers sought to question him as to whether he was armed, finding that a reasonable officer would have believed that the defendant was armed dangerous and would be justified in frisking the defendant, affirming the defendant’s conviction for being a felon in possession of a firearm and the district court’s denial of his motion to suppress. See U.S. v. Hudnell, No. 08-13499, 2009 WL 903467, *2 (11th Cir., Apr. 06, 2009)).

Collateral Estoppel of Habeas Petition: The defendant in U.S. v. Greenwood, No. 07-11592, 2009 WL 839115, (11th Cir., Apr. 01, 2009) filed several habeas petitions seeking to have the Bureau of Prisons recalculate his sentence to account for his “good time” credits, id. at *1. The Eleventh Circuit held that the defendant’s petition was procedurally barred by collateral estoppel because the issue of his good time credits had been resolved in previous petitions. Id. at *3 (citing Citibank, N.A. v. Data Lease Fin. Corp., 904 F.2d 1498, 1501 (11th Cir. 1990)).

Affirmances of Reductions to Crack Cocaine Sentences, or Denials of Motions to Reduce: U.S. v. Jackson, No. 08-11295, 2009 WL 826833 (11th Cir., Mar. 31, 2009) (per curiam; unpublished); U.S. v. Jiles, No. 08-15792, 2009 WL 839089 (11th Cir., Apr. 01, 2009) (per curiam; unpublished); U.S. v. Blythe, No. 08-12469, 2009 WL 865079 (11th Cir., Apr. 02, 2009) (per curiam; unpublished); U.S. v. Hardy, No. 08-13769, 2009 WL 905101 (11th Cir., Apr. 06, 2009) (per curiam; unpublished); U.S. v. Cantrell, No. 08-12837, 2009 WL 913895, (11th Cir., Apr. 07, 2009) (per curiam; unpublished); U.S. v. Williams, No. 08-14512, 2009 WL 928931 (11th Cir., Apr. 08, 2009) (per curiam; unpublished).

Evidence Sufficient to Support Convictions: U.S. v. Jenkins, No. 08-13877, 2009 WL 865214 (11th Cir., Apr. 02, 2009) (attempted transfer of obscene material to a minor, in violation of 18 U.S.C. § 1470); U.S. v. Schmitz, NO. 08-13648, 2009 WL 903458 (11th Cir., Apr. 06, 2009) (use of an interstate facility to attempt to entice a juvenile to engage in a sexual act, in violation of 18 U.S.C. § 2422(b)); U.S. v. Ferroni-Carli, No. 07-15831, 2009 WL 913538 (11th Cir., Apr. 07, 2009) (falsely pretending or assuming to be a duly accredited foreign diplomat, in violation of 18 U.S.C. § 915); U.S. v. Blango, No. 08-10137, 2009 WL 921275 (11th Cir., Apr. 07, 2009) (armed bank robbery and using a firearm during a crime of violence).

Sentences Affirmed under Booker: U.S. v. Williams, No. 08-10185, 2009 WL 817498 (11th Cir., Mar. 31) (per curiam; unpublished); U.S. v. Centella, No. 08-15016, 2009 WL 903436, (11th Cir., Apr. 06, 2009) (per curiam; unpublished).
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