Friday, November 5, 2004

Investigations May Mean Dismissing of Executives

It is becoming more common for companies to dismiss individuals who may be subjects of investigations. The NYTImes reports today that Ace, Ltd., "subject of the New York attorney general's investigation into bid-rigging and price-fixing in the insurance industry" is dismissing two executives.  The NYTimes also notes that Marsh & McLennan "dismissed four executives who were suspended last month soon after Mr. Spitzer filed a civil lawsuit accusing Marsh of cheating its customers through bid-rigging and through steering business to the highest-paying insurers."  (see also Wall Street Journal).

In the federal system, the dismissal of employees may be important to demonstrate that the company has a "effective compliance and ethics program," a  criteria for federal sentencing under the guidelines for the Sentencing of Organizations.  The "effective compliance and ethics program guidelines provide that:

" 6) The organization’s compliance and ethics program shall be promoted and enforced consistently throughout the organization through (A) appropriate incentives to perform in accordance with the compliance and ethics program; and (B) appropriate disciplinary measures for engaging in criminal conduct and for failing to take reasonable steps to prevent or detect criminal conduct."

Although the investigation here is not federal, and the guidelines may be questionable because of pending cases Post-Blakely, demonstrating a satisfactory compliance program may benefit a company from possible future criminal ramifications.


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