In order to assist your Capstone employer with their focus on legal influences on business ethics, you will determine how these concepts apply to corporate fraud and the U.S Court system. As part of your process, note that when a defendant is found guilty in Federal Court, the judge will impose a sentence using the Federal Sentencing Guidelines provided by the U.S. Sentencing Commission. The guidelines provide the judge with prison time ranges (e.g. 5-10 years) and other factors that they can consider along with the facts of the case. View this video About the U.S. Sentencing Commission (Time: 3:08, closed captions available from Amara), to learn about this independent agency of the Judicial branch of the U.S. government.

The first seven chapters of the Federal Sentencing Guidelines apply to individuals. Chapter 8 is entitled "Sentencing of Organizations" and applies to organizations and their agents. Chapter 8 provides incentives for organizations to "maintain internal mechanisms for preventing, detecting, and reporting criminal conduct." Stated another way, an organization may receive a reduced sentence if it can prove that it has an ethics program in place which meets seven standards prescribed by the court.

Next, view this Association of Fraud Examiners video,Tone at the Top According to a Fraudster (5:55, closed captions available from Amara), to learn about Walter Pavlo, an employee who worked for MCI Worldcom, a company that committed accounting fraud in billions of dollars and eventually went bankrupt (company was discussed in Module 3). Based on the culture at his employer, Walter created a scheme with a friend who did not work for the company and embezzled thousands of dollars from MCI Worldcom. He speaks about the factors which lead him to act in the way that he did.

Respond to the following questions:

1. Describe the relationship between Walter Pavlo and MCI Worldcom. Do you think that the corporate culture at his employer was responsible for Walter's actions? Also, how confident are you in Walter's view on the accountability under the Sarbanes-Oxley Act? Support your response.
2. Review this document which provides An Overview of the Organizational Guidelines. First, list each of the seven key criteria for establishing an effective ethics program provided in this document (e.g. oversight..., due care..., etc.). Next, discuss how each criterion could have been met by MCI Worldcom in order to create an effective ethics program. Do you believe that the existence of an effective ethics program based on these criteria would have deterred Walter from acting unethically if one had been in place at that time? Support your response.