Drifting Down the Dnieper with Prince Potemkin: Some Skeptical Reflections about the Place of Compliance Programs in Federal Criminal Sentencing

Abstract:     
This Article explains how the federal organizational sentencing guidelines work and how they have created incentives for businesses to set up compliance programs. It then considers the paucity of evidence that compliance programs actually prevent the occurrence of corporate crime. It also questions whether investments in compliance programs make sense even for companies caught in a federal criminal investigation. There is little evidence that compliance programs have any significant effect on the likelihood that federal prosecutors will file criminal charges in the first instance. Even more surprisingly, examination of U.S. Sentencing Commission statistics reveals that the compliance program movement seems to have had almost no effect on the size of corporate penalties levied in federal criminal cases. For example, despite the fact that compliance programs are promoted as a method of reducing potentially onerous federal criminal fines, only three organizations have ever received a fine reduction for having an effective compliance program. The Article offers some explanations of why compliance programs continue to proliferate despite the lack of evidence that they work to prevent crime or to reduce corporate criminal penalties, and concludes by wondering if the speculative benefits of the compliance movement may be outweighed by its cost.

Keywords: Criminal law, corporate law, white collar crime, Sarbanes-Oxley Act, federal sentencing guidelines, organizational sentencing guidelines, United States Sentencing Guidelines

JEL Classifications: K10, K14

Accepted Paper Series