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Does Your Business Have A Compliance Program? Can It Afford Not To Have One?


Compliance problems cost U.S. businesses billions of dollars. That’s right, billions. A compliance problem can result in crippling fines, loss of reputation, huge legal fees and often the loss of senior management. Even if never convicted, a criminal investigation and its attendant bad press can waste valuable management resources and spook creditors and customers. The existence of an effective compliance program is an important consideration for prosecutors when deciding whether to charge a company criminally and is important for judges to consider when sentencing businesses already convicted.

In recent years, the Department of Justice has ramped up its prosecution of corporations as well as their employees. Not a week goes by without another story of an American business charged with violations of the Foreign Corrupt Practices Act.

While no company can 100% guarantee that none of its employees will break the law, corporations and their executive teams can protect themselves. Having an effective corporate compliance program is a vital first step. New guidelines from the Department of Justice require government prosecutors to consider “the existence and effectiveness of {a} corporation’s pre-existing compliance program” (United States Attorney’s Manual sec. 9-28.300).

Prosecutors are also required to look at management’s complicity in the wrongdoing and the company’s remedial actions. All of these factors depend on a good compliance program. Such a program is often the difference between criminal prosecution and no further action.

It’s not just the Department of Justice that looks at compliance efforts. The Securities and Exchange Commission and other federal agencies consider them in their charging decisions. For American companies doing business abroad, the Foreign Corrupt Practices Act and the soon to be implemented, tough U.K. Bribery Act look favorably upon businesses with effective compliance efforts.

Have American businesses heeded the warning? Apparently not. According to a study quoted in Corporate Counsel, only 3 of the 1,349 businesses convicted between 1996 and 2009 had effective compliance programs. The others had no or ineffective programs. Remember, even if a business with an effective compliance program is prosecuted, judges can still use evidence of the program’s effectiveness as grounds for a downward departure from sentencing guidelines.

While it is never too late to develop or improve your program, decisions you make now can have an important impact on whether or not charges are brought. An experienced lawyer can help you establish a viable compliance program or assist without outside monitoring if that later becomes necessary.

Mahany & Ertl is a full service law firm concentrating in tax matters, asset recovery and white-collar criminal defense. The author, Brian Mahany, is a former state revenue commissioner, government agent and prosecutor. He can be contacted through his website or at directly at (414) 704-6731.

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