Do Federal Sentencing Guidelines contain valuable lessons for real estate brokers? Simply, without any cynical implications, the answer is "yes." This is not because real estate brokers are especially liable to be candidates for federal sentencing. Rather, it is because the Guidelines lay out procedures that are relevant to anyone who might be interested in establishing an ethically corporate culture, regardless of whether or not their business might be at special criminal risk.

Chapter VIII of the Federal Sentencing Guidelines Manual enumerates factors that might mitigate the punishment imposed on an offender of corporate federal regulations. It spells out certain organizational programs and procedures that, if present, would be relevant to consider. The reason these programs and procedures would count as mitigating factors in the sentencing of an offender is that they are intended to be preventive measures that an organization might take in its efforts to avoid wrongdoing.

In a word, the guidelines say this: "If you do these things, then that shows that you have been trying to prevent illegal and/or unethical behavior by your employees and/or agents. Your efforts in this regard cannot completely excuse you for such behavior by your employees or agents, but they will count as mitigating factors in determining your punishment."

The aim of the Guidelines is to provide organizations with, "… a structural foundation from which an organization may self-police its own conduct through an effective compliance and ethics program." The idea behind this is pretty simple. It is this: If an organization wishes its agents and employees to be ethical and compliant with both moral norms and civil regulations, that organization needs to adopt a set of procedures that shows its employees and agents how to behave in such a manner.

Why/how is this of relevance to real estate brokers? There are two reasons. One is simply a matter of -- shall we say? -- sincerity. Practically every real estate brokerage on the planet claims that ethics is one of its highest priorities. What do these brokerages actually do to demonstrate that such claims are in fact true? Frequently, nothing. The Guidelines present practical, doable, procedures that would give teeth to such proclamations.

Secondly, but I truly believe of considerably lower priority overall, brokerages are in fact more and more at risk of facing federal sentencing situations. We have spoken here before of the many ways in which virtually "standard" real estate practices with respect to title, mortgage, and escrow companies may be violative of federal law under the Real Estate Settlement and Procedures Act (RESPA). Moreover, it is not idle to note that the Department of Housing and Urban Development (HUD) recently announced that it had tripled its enforcement staff and doubled the budget for detecting RESPA violations.

Any broker who is concerned that his or her organization, or its agents and/or employees, might be inclined to violate federal regulations covering "kickbacks" and illegal incentives, would do well to consider instituting organizational programs, consistent with the sentencing guidelines, that aim to educate agents as to the "do's" and "don'ts" of these matters.

The Guidelines offer some straightforward and practical suggestions that any organization -- including real estate brokerages -- might employ in order both to minimize their risk and also to put into practice their claims that they intend to be ethical and honorable companies. We will look at specific suggestions of the Guidelines in the next column.

Published: June 1, 2005

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Bob Hunt is a former director of the National Association of Realtors and is author of the recently published book, "Real Estate the Ethical Way." A graduate of Princeton with a master's degree from UCLA in philosophy, Hunt has served as a U.S. Marine, Realtor association president in South Orange County, and director of the California Association of Realtors, and is an award-winning Realtor. Contact Bob at .