Surprisingly, the most common federal crime committed by an “organizational offender” in Fiscal Year (FY) 2015 was environmental, according to a recent report from the United States Sentencing Commission. The average fine for an organizational offender was almost $23 million. Let’s take a closer look at the report and draw a couple of takeaway points for environment, health, and safety (EHS) managers.
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The Commission is an independent agency in the judicial branch that monitors federal sentencing. The report is based a review of 181 organizations the Commission studied that were convicted of a federal offense in FY 2015. This was an increase of 11.7% from FY 2014.
What’s an ‘Organizational Offender’?
According to the Commission’s sentencing guidelines, an organization is any entity other than an individual. The term includes corporations, partnerships, associations, joint-stock companies, unions, trusts, pension funds, unincorporated organizations, governments and political subdivisions, and nonprofits.
Most of the organizations were owned by private entities, including closely-held or private corporations (46.5%), limited liability companies (27.5%), and sole proprietorships (11.3%). Only a small minority (3.5%) were publically traded corporations.
The majority—almost 70%—of the organizational offenders in FY 2015 employed fewer than 50 people. Almost 11% employed 1,000 workers or more.
Since organizations cannot be imprisoned, sentences include fines, restitution, money forfeiture, probation, development of a compliance-type program, or any combination thereof.
What About the People?
Even though organizations can’t be put in prison, nearly 60% of the organizational cases in FY 2015 involved a related individual who was convicted separately.
One-half of the individuals who were convicted with their organizations were not considered to be “high-level officials.” High-level officials are those individuals who have substantial control over the organization or who have a substantial role in the making of policy within the organization. Owners made up almost 20% of the individuals convicted, while managers/supervisors comprised 9%.
The Crimes
The most common offenses committed by 181 organizations were related to:
- Environment (33.2%)
- Fraud (21.0%)
- Food and drug (12.2%)
Of the types of environmental offenses:
- 70% were water related,
- 16.7% were wildlife related,
- 8.3% were hazardous material related, and
- 5% were air related.
The Punishments
Since organizations cannot be imprisoned, the Commission’s organizational sentencing guidelines are meant to punish and deter. Therefore, punishments escalate with the severity of the crime.
In FY 2015, according to the Commission’s report, the punishments for organizational offenders ran the gamut:
- 76.8% of the organizations were sentenced to probation.
- 28.2% were ordered to develop a compliance and ethics program.
- 79% were ordered to pay a fine, restitution, or both. The average fine amount was nearly $23 million. The average restitution amount was $19.5 million.
- Nearly 20% of the organizational offenders were ordered to forfeit money at an average amount of $4.5 million.
The Takeaways
Although the Commission’s report is primarily about organizations, it is important for EHS managers to note that:
- One-third of the total crimes in the report were related to the environment.
- 70% of those crimes had to do with water discharges.
However, the biggest takeaway is that the individuals who were convicted separately from the organization were not considered to be high-level officials—9% were managers or supervisors. So, nearly 60% of the people convicted in relation to an organizational crime in FY 2015 were on the level of EHS managers or someone working under them.