By Bryan D. Daly and Peter Morris
On May 3, 2010, the United States Sentencing Commission issued amendments to the Sentencing Guidelines that will become effective November 1, 2010. As the amendments relate to government contractors, the relevant Guidelines concern the organizational guidelines. In sum, the changes are to compliance and ethics programs. The changes expand the ability of an organization to obtain the three point reduction in the offense level calculation for having an effective compliance and ethics program and provide a more detailed explanation of what constitutes an appropriate response to criminal conduct as part of an effective compliance program. Most significantly, the amendments require that the (1) compliance/ethics officer have “direct reporting obligations” to the Board of Directors or subgroup thereof, and (2) organization promptly report offenses to the government. These changes raise potentially troubling issues concerning the (1) relationship between the compliance/ethics officer, the general counsel and others in executive management, (2) privileged nature of internal investigations, and (3) ability to conduct internal investigations at the direction of the general counsel.
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