Everything You Wanted to Know About Monitors
By Jay Rosen, CCEP Vice President, Business Development & Monitoring Specialist, Affiliated Monitors, Inc., USA
What is the Role of a Corporate Monitor?
Since the turn of this Century, many global corporations have settled a Foreign Corrupt Practices Act (”FCPA”) matter with either a Deferred Prosecution Agreement (“DPA”) or a Non Prosecution Agreement (“NPA”) and usually have a corporate integrity monitor assigned to their company for a period of 24 – 36 months. While many people are familiar with this occurrence in an FCPA setting, this is only one of many instances where a corporate monitor can be engaged to add value to a company that is or is not YET in trouble.
Here’s a few questions I will consider during my monitor exploration:
- Should a corporate monitorship be feared if your company is in the middle of an FCPA matter?
- How they can be leveraged to ensure that your business is operating in an ethically compliance manner.
- Can a monitor be used in a manner other than post-settlement, such as in a pro-active manner to help forestall a government enforcement action, fine or penalty?
- Finally, there is lots of talk about the alleged exorbitant costs of monitorships? Is this an urban myth or is it based on facts? If the former, what can a company do to protect itself.
A corporate monitor is an individual or team of individuals that are independent of an entity that requires corporate oversight.
The person a or group would bring to bear their compliance knowledge, training and learning to any task where a true independent is needed to assess the validity of the required criteria, as that criteria is defined in a relevant settlement document. As we discussed above, in the FCPA world that could be through a DPA, NPA or other type of agreement.
Monitors generally report to an oversight agency e.g. The department of Justice (“DoJ”), the Securities and Exchange Commission (“SEC”) or another regulator and work with a company or individual.
The specific issues to be monitored as well as how often and to whom the corporate monitoring is required is highly negotiated and will be specifically addressed in either the “Corporate Compliance Reporting” or the “Independent Compliance Monitor” section of the agreement, most often it is Attachment C.
The cost of the monitorship is borne by the company being overseen. It is a unique model that has been created where an unrelated, independent private person or entity who is still being overseen by a government agency or regulator monitoring a company but with specific terms for that third party. It is spelled out in the settlement documents referred to above.
Subject Matter Expertise
A key for a successful corporate monitorship correlates with the independent monitor’s area of subject matter expertise. Obviously first-rate knowledge of compliance and ethics is critical but as monitoring is used across multiple industries and businesses, a wider variety of technical experience is required.
Monitors have been used in health care, financial services, and police departments just to name a few. A wide variety of subject matter experts may be needed to be a part of the monitorship team to successfully complete the assignment.
What is a Post-Resolution Monitorship?
A post resolution monitorship is essentially a situation where a government agency and a private organization, it could be a corporation it could be a nonprofit organization, as a requirement of settling a dispute or a matter between those two entities; the regulator agrees they are going to use a monitor to ensure that any specific conditions of the settlement agreement are met. In most cases, an independent third-party is engaged for this purpose.
Post-resolution monitorships are well-known to the compliance community through Foreign Corrupt Practices Act (“FCPA”) enforcement actions. Surprisingly, many compliance practitioners are not aware that post-resolution monitorships are used in a much wider practice area than FCPA.
Other kinds of enforcement scenarios could involve state Attorneys Generals that perhaps are investigating and settling cases with companies involving consumer protection or even civil rights cases. State regulatory boards, medical boards and other types of licensing institutions and various states could sign agreements that require a monitor to ensure that conditions of those agreements are satisfied. Of course, there are situations where there is court ordered enforcement as a result of a court ordered settlement and a monitor is required to report to the court and both parties’ compliance with that agreement.
Surprisingly, many compliance practitioners are not aware that post-resolution monitorships are used in a much wider practice area than FCPA
Compliance with Consent Decrees
Monitorships have been employed in anti-trust scenarios to ensure compliance not with Consent Decrees but with Federal Trade Commission or Federal Communications Commission-approved merger conditions. An example would be the merger conditions between DirecTV and AT&T. In that case, the monitor was charged with reviewing and assessing compliance with certain merger conditions. There was no enforcement action and no wrongdoing, but a mutual recognition by all parties involved for the need of a truly independent third party to assess compliance with acquisition conditions.
One thing about the post-resolution monitorship is that if viewed as a tool for compliance, a wider variety of uses can be envisioned. In the FCPA world, we have seen shareholder actions brought against Boards of Directors and companies for failing in their duties to put compliance programs in place. Occasionally, these actions are resolved before the conclusion of a FCPA investigation or enforcement action.
Monitorships have been employed in anti-trust scenarios to ensure compliance not with Consent Decrees but with Federal Trade Commission or Federal Communications Commission-approved merger conditions.
When Does Post-resolution Monitorship Have the Impact of a Pre-settlement monitorship?
If you had a post-settlement monitorship for the shareholder action, both the findings of the monitor and the monitor’s report could potentially help the recalcitrant company under the FCPA Corporate Enforcement Policy. In such a scenario a post-resolution monitorship could have the impact of a pre-settlement monitorship.
Often a monitor could come in collect information on what one or both parties are doing to help facilitate a settlement. Matters such as consumer protection issues. Affiliated Monitors, Inc. (“AMI”) has performed monitorships where state agencies have investigated consumer protection and AMI would come in as a “secret shopper” to determine whether an organization is in fact doing what it is supposed to be doing.
As we have seen at AMI over the past 15 years, the number of ways [to use a monitor] is almost infinite or at the very least, limited to your imagination.
Only Scratched the Surface
So far, we have only scratched the surface of the myriad applications and uses of an independent, credible third-party to facilitate the resolution of disputes. There are also numerous ways where a third party is engaged to help a client resolve issues with a regulator. As we have seen at AMI over the past 15 years, the number of ways is almost infinite or at the very least, limited to your (or our) imagination.
The bottom line is that there is certainly no finite number of categories for the post-resolution monitorship. They can be utilized in a wide variety of ways to help facilitate not only resolution of enforcement actions but to satisfy compliance with a wider variety of cares, concerns and issues.
- Everything You Wanted to Know About Monitors-Part 4 - January 12, 2021
- Everything You Wanted to Know About Monitors-Part 3 - December 27, 2020
- Everything You Wanted to Know About Monitors-Part 2 - November 26, 2020