Firms offered 'carrot and stick'

December 16, 1991|By Georgia C. Marudas | Georgia C. Marudas,Evening Sun Staff

New federal sentencing guidelines for organizational crimes could give a boost to services such as Business Risks International -- Loss Management's Alertline.

The "carrot and stick" guidelines, which apply to corporations and other organizations involved in federal white-collar crimes such as fraud, anti-trust, insider trading, bid rigging and price-fixing, took effect Nov. 1.

Companies sentenced under the new guidelines face much larger fines, says Richard D. Bennett, U.S. attorney for Maryland.

"The most important aspect is that there are big incentives to adopt internal control mechanisms," he says.

"My message to Maryland corporations is to adopt internal mechanisms to show you are trying to institute internal policies," Bennett said. "It behooves executives in many corporations to take the initiative."

"The guidelines give incentives to organizations to self-police," says Paul Martin, spokesman for the U.S. Sentencing Commission. "They are not loosey-goosey guidelines."

The guidelines, he said, assume that individuals already have been sentenced, setting the stage for action against the organization.

While the guidelines require all organizations to pay restitution, the amount of the fine is based on the seriousness of the offense and the company's culpability. Companies with high culpability face much higher fines than do those judged to have effective compliance programs.

Having a compliance program on paper will not be sufficient, Martin warned. A company that did not try to vigorously enforce its program through auditing and monitoring procedures would not meet the criteria for mitigating culpability.

"A company with no compliance program or high-level involvement is really going to get hammered," he said.

Both Bennett and Martin say use of a program such as Alertline could be one way a company could implement its enforcement effort.

A. Samuel Cook, senior partner at the Baltimore law firm of Venable Baetjer & Howard, says such a service would "definitely" count.

Art Slusark, spokesman for Baltimore Gas and Electric Co., says the new guidelines have prompted the utility, which has 9,400 employees, to consider signing up with Alertline or a similar service.

Currently, Slusark says, an employee could report his suspicions to his supervisor, to the next level of management or to security.

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